India. Into whats going on in the markets. It is a negative day. Sentiment dictated in part due to what happened on wall street worried the nikkei up 1 . Hang seng 2 down. Awaitross the board as we the fed, the gdp numbers, we have a lot of moving parts. The pmi numbers, slight increase. Optimistic about what will happen in the next quarter, the current quarter. Part of that optimism down. Apple this is part of the apple supply chain in this part of the world. Lg display, nearly 8 down. Optimism being shared. Pegatron up by 7. 2 . Samsung electronics for different reasons, down 2. 8 . At one state, it was the lowest level in three months. The Earnings Call does not exude confidence, saying the current trade war was producing all sorts of imbalances and uncertainty, which has made people delay buying chips. The margins on chips are also narrowing. Lets look at pmi. It was showing a little bit of an uptick from the previous month. These Large Companies seeing what is going on. Large company pmi. The mediumsize intercourse. White is Small Company pmi. It was still showing contraction. Thats currently the position we do have. Lets find out what is going on with the latest from the american president. David we were talking about dinner, jazz, and an angry tweet. President trump lashing out at china as trade talks resume in shanghai. He is bashing beijing for what buyalls an unwillingness to American Farm products, saying china continues to rip off the u. S. He is warning china wants a deal, but he has the final say. China is dying to make a deal with me. Whether or not i will do it, it is up to me, not them. Rishaad lets go to Tom Mackenzie in shenzhen. Do Donald Trumps tweets throw something in the works for these trade talks . Were expectations so low in the first place that they dont matter . Tom we have seen this movie before from trump, throwing a tweet or commentary curveball into the mix. I dont know if it impacts what will happen behind closed doors in shanghai in the guest house. Those talks are underway between lighthizer and mnuchin, the treasury secretary and trade official from the u. S. On the chinese side, the vice premier and the commerce team. Er and their those conversations will continue. They had dinner last night at a hotel. Of course, the gap between the sides is wide. We had commentary saying the u. S. Needs to make concessions that both sides need to come together in order to forge some kind of an agreement on forward. The u. S. , President Trump says he wants a good deal or no deal at all. His Officials Say they want the deep, structural changes, the enforced mechanism around intellectual property. A more balanced trading relationship. The chinese want to have tariffs removed completely. They want a twosided deal. They want less onerous demands, in terms of agricultural purchases from the u. S. These are the issues that will be negotiated during these talks. We have had this positioning from the u. S. And china leading up to these talks. The u. S. Putting the pressure on by opening up this investigation into chinas government status. China on the flipside pushing against the u. S. In terms of its involvement in hong kong protests. That is where the tension lies buried that is where the tension lies. The positive outcome for many analysts will have to do with these talks continuing in washington, d. C. After this week. Yvonne you have been search engine, covering huaweis earnings, reporting quite a slowdown in the Second Quarter as it deals with the u. S. Blacklist. You spoke to the chairman. What was his first ever tv interview. What did he have to say about the impact of these trade actions on huawei . He was quite frank about the fact that these actions by the u. S. , including the companiesng of u. S. From selling their chip components and software to huawei. That was the most dangerous thing that huawei faces. It is having a drag on the business. Overall, 2019 growth should top 2018 growth, which is an achievement, given the ban in the u. S. , the Pressure Campaign from the u. S. To block huawei globally. If you look at the Consumer Division, which provides more than 50 of the companys revenues, they turned out about 18 million smartphones, but if you cant get new smartphones with Android Google operating systems, they expect International Sales to weaken on the back of that. This is the chairman talking about the android implications, the lack of access to android and what it means to their smartphone business. U. S. Dont know when the will make the decision on android and when the decision will come. We have to make preparations for our products. We will evaluate our strategy for the overseas market. If we are not able to use android with new smartphones, we have the ability to develop our own operating system and ecosystem to become the basis for our services to the customers. Still does not have access to those key supplies. They confirmed that to us yesterday. The Consumer Division will face pressure if they do not get access to android operating systems when they launched their new smartphone toward the end of this year. In terms of five d, they signed 5g, they signed 50 contracts. The network is holding up well, they shifted their supply chain to ensure they have the chips and components to keep that part of the business growing. They are less concerned about that now. Theyre consumed about the consumer business, though. Rishaad thanks. Lets move on to the first word news with the possibility of a hard brexit growing and reverberating across currency markets. Here is su keenan in new york. Su starting with the u. K. Sterling continues its bad run. Falling a fourth day on growing u. K. Is aboutthe to crash out of the European Union at the end of october. Prime minister Boris Johnson suggested there may be no new talks for brussels. He says it is in europes hands whether the u. K. Leaves without an agreement. He reiterated he does not want a no deal brexit, but warned the current accord is not acceptable. Eu, it isp to the their court if they want us to do this. Determined toare do it, they wont take us seriously in the course of negotiations. Su the tensions in the mideast. British oil giant bp is avoiding sending ships through the strait of hormuz from fear they can be seized by iran. Month, a bp tanker had to abandon plans to load ui crude and took shelter off the coast of saudi arabia, because they feared the vessel can be a target. A british warship had to intervene to ensure the tankers safe departure from the persian gulf. Saudi oil exports to japan slumped to the lowest in 17 years since china took record volumes from the kingdom to replace lost supply from iran. Japan received around 25 Million Barrels in june. It is filling the void by turning to the uae, which has now become japan s biggest supplier for the first time in four years. Shipments from elan fell to zero after u. S. Waivers expired in may. Thee was more attention on streets of hong kong on tuesday night. Hundreds of protesters gathered as the local media said 44 people were being charged with rioting after clashes on sunday. Chief executive carrie lam painted a bleak picture of hong kongs economy, saying there is no room for optimism in the Second Quarter and the entire year. Hours a day, on air and at the top on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan, this is bloomberg. Rishaad still ahead, bank of japan is in wait and see mood. It is ready to ease if the economy weakens. What it means for the currencies. The former japanese Prime Minister joins us later in the show. David next, we are looking at earnings. A tale of two tech giants, samsung and apple relying less on smart phones. We have a look at their new respective growth drivers, next. This is bloomberg. Yvonne lets take a look at the apple suppliers in asia. Mixed when it comes to reaction of the earnings we got. There were a lot of bright spots when it came to the forecast for apples guidance. China was also less bad. There is the shift away from the dependence on hardware. Thats probably we see the links of pegatron. Samsung also out with their earnings. There are getting to a special load, close to 3 . Lg display also down. Not looking good. David that is a bit crazy. Rishaad 8 for pegatron. It is all down to apple. Up 4 . Selina wang is here with us. What did we learn from what apple said . Particularly the sustainability . Two point at the chart you saw earlier. It is not all negative. Even though they had big growth in services, it is still tied to sales of the iphone, the app store, music, services, they do not matter if people are not buying iphones. It may not continue in the long run. In terms of china, tim cook was confident it is a sustainable improvement. It was much better than than expected, considering the slowdown. Tim cook pointed out the Chinese Government economic stimulus that helped, as well as chinese buyers buying into more of the ecosystem. They have been reducing prices in china to compete with cheaper rivals. Even then, they are still losing market shares to the likes of huawei, even though they have been doubling down as they have been battered abroad. David samsung is another company with a lot of revenue streams. 80 . How did they do in that business . Selina the numbers have been a big story when it comes to samsung. The whole industry has been battered by the declines in prices, as well as the slowing demands. Layers have been buying less, as well as the slowing smartphone demand. Samsung issued positives for the second half of the year. They expect demand to pick up, the Data Center Players to start repurchases. Investors are still really concerned about the geopolitical overhang. One of the Biggest Challenges is the u. S. china trade war dragging down on global growth, chip demand. You also have the japan and south korea dispute, which is a big risk to samsung. They have had enough inventory to deal with this in the shortterm, but if it drags out in the long run, there is a big question as to what their options are for other suppliers. They may have a hard time replacing japanese lines. Yvonne stay with us, we will have more. Lets bring in our next guest from San Francisco, king lip, baker avenue Asset Management partner and chief strategist. Great to have you on apple earning day. Your take on apple . It seems the guidance was strong. King overall, we thought it was a good quarter. I think investors were perhaps expecting worse, which is why i believe the shares are rallying after hours. What is clear to me, it was not the same Growth Company it was before. Investors get excited at 1 revenue growth. It is not a robust, doubledigit revenue we saw before. That being said, there is plenty of catalysts and things the company can improve on. I think there is more upside. Yvonne we saw a lot of questions from analysts about the growth from china being sustainable when they have huawei, geopolitical uncertainties, may be increasing and patriotism. What do you think . King it will be a tough environment for apple. They have to be that much more competitive versus huawei and xiaomi. They have had to do a lot of performance promotional activity. That is true in the u. S. , as well. We see significant discounts on iphones, ipads to drive promotional activity and sales. It will be a much tougher spot for apple going forward. The good thing going for apple is the brand premium is there. The apple quality is there. Despite the tough slog, ultimately, the brand wins out for apple. To the they are so tied iphone, they have to look for life after the iphone. Products universe of they have, a wearables, major services, app store, apple pay, apple news, all work best with the iphone itself. How did they shift . This will be key for them, this is tim cooks challenge. King apple right now is a company in transition. They are figuring out how to leverage their iphones that they have sold around the world. They have a lot of leverage. There is roughly almost one billion iphones out there. There is a lot of platform for them to work on. I do believe the catalyst would be the Services Business going forward, specifically we are most excited about things like apple pay. You have the apple credit card launching here in a couple of weeks. We think that is going to be a big driver of future revenues. Apple has done a good job figuring out how to leverage those iphones. I think they need to execute on that in the moment. About apple is trading at 18 times earnings. Do you think moving forward, because it will become a Different Company, maybe a fiveyear window, does the market attach a different multiple to the stocks because it will become a Different Company . King i think you are right. It will not have the same multiple as before. Apple never really has traded that high, the high multiple levels it has before. It always traded at reasonable valuations. When we do our calculation, we think apple is worth 28 per share on a relatively conservative growth rates for its earnings. Implied, nearly a 30 appreciation from the levels. We think it is achievable, especially if they are able to leverage off their ecosystem. While we think multiples should come down, if they can execute, it is likely they will keep the same multiples as in the past. Yvonne if there is any kind of risk to the stock, im guessing its the fact that President Trump the u. S. And china trade spat, there might be something looming for apple. How does the Company Weather through those tariffs . King i think it will be challenging for them to raise prices. Especially if the tariffs do come true. We are looking at between 20 or 30 more. Maybe a little bit more. It is around that area. Discount theiro phones. They have had promotional activity. They may have to eat some of the promotional activity, some of those tariffs. I dont think they can pass that on 100 to the consumers. If we do see tariffs go through, i would not be surprised to see their margins go down. Selina shifting gears towards samsung, we have not heard a lot of clarity on what they are going to do if the japankorea spat continues. What can they do to minimize stocking up . King i think they are in a tough slog. The memory business is doing well. Although i think it is still behind microns memory business. They have had a trip up of their Affordable Phone foldable phone. Samsung can do what it can in terms of, relying on its current stockpiles of inventory. But eventually, it is going to war willish a trade not escalate between japan and korea. That is why at the moment, we are not excited about the stock. Earnings are now down 50 from one year ago. Even with the strength in memory, im not surprised to see the stock is down over 4 today. Rishaad thanks very much for that. King lip, baker ave Asset Management, partner chief strategist. Yen volatility ahead of the fed decision. Concern heading for the worst monthly drop since february. More ahead with eisuke sakakibara. David a cloud gathering over hong kong. The observatory is considering issuing a warning. It could come as early as new and. You understand why. Gdpsacross these markets, coming out. We are talking about japan and a lot of other market movers. It is a busy day. This is bloomberg. Rishaad we are back. This is a look at the business flash headlines. First quarter profits falling. Bad loan costs increase. In income sliding 5 . The equivalent to one billion u. S. Dollars in the june period from one year ago. That accounts from is one third of their fullyear forecast, which is seen as solid. Low Interest Rates have hit low profitability. Quarter profits missed the lowest estimate. 10 . Still positive it can beat its fullyear forecast. They say game sales are still growing. Almost 100 million of Foreign Exchange losses. Sony cutting its fullyear revenue outlook, saying sales for televisions and smartphones are declining faster than originally thought. The sales target is the equivalent of 79 billion, almost 2 billion less than april. The profit outlook is unchanged. Higher investments into games, as well. Markets at the moment selina markets at the moment, a lot of red on the board. Earnings certainly in full source. Looking ahead to the fed. Were watching some of these Chinese Developers and automakers. They are all dropping steeply at the moment. Afterward, we got this meeting in china yesterday. They did have a tougher stance when it came to the Housing Market. Some analysts say the policy done when it came to the Housing Market will hurt, which affects auto demand. We see the likes of japan down 3. 5 . The likes of Country Garden also down more than 2 in hong kong. Take a look at the hsi, the hang seng. Msci hong kong down six days in a row on the route we have been seeing. Perhaps a lot to do with the political situation here. Hang seng in the are in the red. The worstperforming are developers. We will take this out more in a bit. This is bloomberg. Nuven it is 10 29 a. M. In hong kong, im su keenan with the first word headlines. U. S. China trade talks are back underway after a twomonth hiatus with an official dining in shanghai ahead of an informal discussion. President trump again lashed out at china, saying they dont live up to their word, saying that theres been a promise to buy more u. S. Farm produce but there is no apparent progress. It ended up by writing they just dont come through. Urging. , meanwhile, is japan and korea to resolve their trade differences among fears that their sprout spiral out of control. Theu. S. Is calling for standstill agreement to give tokyo and seoul time to negotiate a wider deal. This comes after weeks of comparative silence from wa