Negotiators are coming out and saying china is a problem. Resident negotiators with no deal odds rising. The timing is a hint there may be a willingness to talk. Rosalind another round of earnings reports sends signals about the Global Economy. Xiaomi is facing headwinds on a number of macroeconomic fronts. Certainly in europe, there is no question we are seeing , weakening. Rosalind Federal Reserve chairman jay powell speaks at jackson hole. And bloomberg gets exclusive insight. We are at a sort of equilibrium right now, and i would be happy to leave rates here. We have to be careful not to ease too much when we do not have significant problems. Lower rates will stimulate our economy somewhat. I dont see this as the end of a ratecutting cycle. I think right now we are where we need to be. Rosalind it is all straight ahead on bloomberg best. Hello and welcome. I am rosalind chin. This is bloomberg best. Your weekly review of the most important Business News and analysis around the world. Lets start with a day by day look at the top headlines. On monday, markets responded positively to news that seems to imply an easing of u. S. China trade tensions. Vonnie the Commerce Department announcing the u. S. Will review the huawei waiver for 90 days, so companies can continue to do business. They have 90 days for a limited part of their business. This extends a 90 day reprieve that applied to existing u. S. Customers of huawei, particularly those who run Rural Networks that depend on huawei equipment. Some suppliers to huaweis handset business. We are looking at google and its android software. This allows google to keep updating huawei phones with new security patches. This is a limited move. We need to be careful about over interpreting this. There is still very much a crackdown happening on huawei. In fact, the department of commerce added 46 new huawei subsidiaries to its blacklist today, but at least a temporary retrieve for some u. S. Customers and limited suppliers. Matt germany could spend 50 billion euros in an economic crisis. That is according to the finance minister olaf schultz, who has put a number and on a possible fiscal stimulus for the first time. Fears of a recession pushing berlin to consider suspending its balanced budget policy. That is what germany spent in the last crisis. We now have the firepower to use that money. Because we have been lowering our debt to below 60 . We heard from the bundesbank today that a recession is entirely feasible with a contraction in the Third Quarter a possibility. We also hear from people familiar that the government is looking at potential measures for a stimulus package. So we are focused, and the government does have the money. It is running a surplus. Its debt burden is down to 6 gdp and declining. That is a lot better than its peers. So if it does decide to spending is needed, the cash can be found. Afternoon, this Prime MinisterGiuseppe Conte announced he is going to resign. Sharply attacking matteo salvini, who was sitting next to him. Salvini, of the league, of course, calling the decision to spark a political crisis irresponsible, motivated by personal ambition. Is goingminister conte to resign to president mattarella in a couple of hours. He is going to hand his resignation to the president. Tomorrow, likely tomorrow morning he will start with the party. What is next . We will have to see if there is a chance to form an alternative majority in the new government. If he does not see those chances, it will go to the next election. If he sees any possibility, he will name a new Prime Minister, ask him to form a government and talk in the parliament. Manus the fivestar movement and the Democratic Party are holding talks over a possible coalition. What are the possibilities they Work Together . They do have some common ground. The idea being floated is a limited program focusing on areas where interests do meet. Ecology, civil rights. There is the possibility for common ground. It is an open question whether they can bridge over there many differences. Fed unity appears to be fraying ahead of the annual gathering of central bankers in jackson hole. Policymakers viewed the 25 basis point cut and insurance move, but argued if it would lower rates and how much. That sent ripples through the bond market. What did you take away . Michael it appears to ratify what they did. If they want to do it again in september, the conditions they were talking about, uncertainty over trade issues, that sort of thing still remains. Business caution about spending. We dont know how they are going to react if we see the consumer side of the ledger come in strong. Jobs have been strong and so has retail spending. If that continues and if inflation ticks up a bit, do they want to pause and wait and in and wait and see if something september more is needed . That is still a possibility. We will get a better idea friday after jay powell speaks on friday. Alix china hits back at the u. S. With tariffs on 75 billion in imports. That will take place in two stages. One is september 1 and one is december 15, echoing the tariffs that were going to be put on chinese imported goods. Into the u. S. Are the retaliatory tariffs spinning out of control, or is this a measured response from china . Well, i think it is a measured response. But it is a sign of how things are escalating, continuing the theme of the summer. As we have seen today, both sides just keep slapping tariffs on each other. And the heat is rising. Vonnie we are counting down to those headlines from the Federal Reserve chair at jackson hole. Fed chair powell about to give his speech behind closed the doors. Michael mckee has a copy of his remarks. Lets get to our economic and foreignpolicy correspondent. Michael the fed chair does not go beyond his oftrepeated promise to act as appropriate to sustain the expansion, even though he says trade policy is a worrisome thing for the u. S. Economy right now. From his remarks, the most important effects are felt with uncertain lags of a year or more, the committee must look through what may be passing developments and focus on things that seem to affect the outlook over time or pose a risk of material risk of doing so. We will act as appropriate to sustain the expansion. Does the promise to act as appropriate me walet wall streets test of being dovish enough . Vonnie two major stories hitting the economy and markets. Jackson hole and trade. First two trade, President Trump saying he will respond to china slapping another 75 billion in tariffs on u. S. Goods. This is threatening the stability of Financial Markets in the u. S. The only incumbent president s not getting reelected presided over recession. That was carver, hoover, and i forget the third. I think trump knows he has to rectify the situation. Things are weakening. He needs to do whatever he can to stimulate the economy. Kevin the president tweeting out, my only question is who is our bigger enemy, jay powell or president xi . He has made a calculation he is going to double down on attacks on attacks in Central Banks. I think the reaction back and variouseaction to the back and forth this morning has been instructive. You saw stocks fall after headlines china was going to retaliate and raise tariffs on u. S. Imports. And after that, jay powells speech pledging to act as appropriate and hinting at more easing was enough to push stocks up. And so then of course President Trump came out and gave us more trade developments to digest. Now stocks are back down. Emily trump said he is going to respond and he has. On twitter, we have a series of four tweeze. He said for many years, china and many other countries have been taking advantage of the u. S. On trade, intellectual property theft, and much more. Our country has been losing hundreds of billions of dollars a year to china with no end in sight. Sadly, past administrations have allowed china to get so far ahead of trade, it has become a burden to the american taxpayer. As president i can no longer , allow this to happen. In the spirit of achieving fair trade we must balance this , unfair trade relationship. China should not have put new products, u. S. politically motivated . In parentheses. In parentheses. Starting october 1, the 250 billion of goods currently being taxed at 25 will be taxed at 30 . Additionally, the remaining 300 billion of goods being taxed at 10 will now be taxed at 15 . Rosalind still ahead, as we review the week, much more from a busy week of fed speak. The men and women who make Monetary Policy talk frankly about the path ahead. Also earnings reports made , headlines, with investors paying attention to the forward outlook. There was a flexible way we were able to use our cash. We were ready for whatever the world might throw at us. Rosalind this is bloomberg. Rosalind this is bloomberg best. I am rosalind chin. Even as earnings season winds down, there is plenty to ponder. Lets begin with a round up of the key players in chinas tech sector. Starting with xiaomi. The profit missed estimates as the Company Fights to maintain its position in a shrinking smartphone market. What caused the miss . Can we blame this on the trade war, too . They are facing headwinds in a number of macroeconomic fronts. They are seeing pressure on their overall smartphone sales. They do get most of their revenue from the lower margin sales. They are trying to expand into businesses like selling ads. Online content like games and music, and also sells other connected devices. But we have not seen sales take off enough to offset sales in other areas. Investors have not seen a lot of promise in new areas to induce growth. The connected device unit did grow with the sale of tvs. The biggest searched engine in china, baidu beat rivals estimates there putting out. Where were the bright spots . Basically numbers offered investors some reassurance, at least for now. It is able to grow its business in the face of a broader Macro Economic slowdown, but also send off essentially a challenge from upandcoming rivals. Also, existing incumbents like tencent. The worlds biggest miner warned growth in china and trade tensions are the key risks to raw material prices. Despite this, the hp bulletin boosted their pay off to a record earning. With our strong balance sheet, the way we are able to use our cash, we are ready for whatever the world might throw at us. We can profit from a downturn but we can also throw off a lot more cash potentially in an upturn. Is the dividend sustainable . Andrew we dont have a progressive dividend. Quite early in my tenure, we changed it to a flexible dividend. It is based on a pare ratio of 50 on underlying earnings. It will go up and down, depending on how markets perform. It is one of the tools we have to sail through what might be choppier waters in the future in the way you have described. That is why we are comfortable paying this dividend today. Australias biggest gold producer closed with its best profit in years. They reported fullyear earnings up 22 , to 561 million. A record output from its mine. Our priority is to get the best shareholder returns. We focus on where we can add strength in m a. Looking at new projects. Also, keeping in mind returning shareholder funds to the shareholder. We increased our dividends by 19 . We are well placed now. Our methodology has stood up well over the last five years. We just intended to continue the focus we have had. We are talking steel, the company came out with earnings, giving the green light to a 700 million expansion of its northstar steel mill. That is in ohio. That will boost capacity 40 . The Company Posted underlying profits, 966 million australian dollars. Which, actually, as we mentioned earlier, is higher than the highest estimate. There is growing concern about a potential global recession. What are the markets telling you . It is a mixed story. And the u. S. , the economy is still ok. Automobile construction remains strong. We have seen some price softening in the Southeast Asian market in recent times, but the chinese economy is strong. A lot being consumed internally. Here in australia, a slight softening in residential activity. But from our point of view just , a moderate softening from High Historical levels. Generally the regions we operate in, asia, australia, and north america, the markets are ok. Harold stores kohls and t. J. Maxx both reporting earnings. Estimates,alysts sending shares slipping, signaling there may be more retail woes ahead. This quarter, inventories are building up and they are not selling as much merchandise. The real trouble spot was their home goods chain. Basically, they had not great merchandise selection in that chain. The good news is, because of the way that inventory model works, they turn it quickly. When they land on the wrong product, they are usually able to work through it pretty quickly. Kohls, that topline number was pretty grisly, and a decline in sales. We do see some early promise from this new initiative. Accepting returns of amazon purchases. It shows the importance for stores thinking creatively to of how to address foot traffic. Kohls are something of a leader. Vonnie shares at target a record. Posted strong earnings in a gain of more than 3 in comp earnings. They have that old target feeling back. Third quarter they have done exceptionally well. Comps up 3. 4 . Traffic higher. The ceo continuing to help. They have brought brands into the target stores, across that you can only get there, across different sections including kids, food, apparel, furniture. Redesigned the store. Consumers are really liking that. Second, the delivery strategy, fulfillment strategy is really working to bring down margins and drive more traffic the store. The turnaround showing up in a big way. Lets have a look at qantas. Earnings were out and the company says the Leisure Travel market has actually weakened. Demand from corporate customers on the business side is also flat. Pessimistic comments as the airline reported lower fullyear profit, which by the way, also missed estimates. You say you have seen demands for flights to hong kong drop by about 10 . Does that continue, do you think . Do you expect to see further weakness . How long will that continue . We expect this will continue over the next couple of months. We have the flexibility of moving to slightly smaller aircraft. Essentially the same aircraft, same product with less seats. We are going to do that over the next few months to take 7 capacity out. Anticipations this will continue for the next few months. Rosalind welcome back to bloomberg best. I am rosalind chin. The Federal Reserve was a focus of constant attention this week in the lead up to chairman Jerome Powells remarks at the annual symposium. On monday, President Donald Trump urge the central bank to cut Interest Rates by at least 100 basis points, saying such a cut would aid the Global Economy as well as the u. S. The boston fed president Eric Rosengren was one of two members who voted against the cut in july. He explained his dissent in an exclusive interview with kathleen hays. Mr. Rosengren it was tied to the fact that Economic Conditions are still pretty good. 3. 7 unemployment is still a very good rate. Inflation is a little bit low. The core measure is 1. 6 . If you take out some of the outliers using the dallas trim mean, then it is closer to 2 . In fact, it is exactly 2 . My own view was we have to be careful not to ease too much when we do not have significant problems. And so the focus is not to do something that affects the Exchange Rate or something that necessarily takes care of the world economy. We are supposed to focus on unemployment and inflation in the united states, and so i think we are in a good spot right now. There are costs to easing when we do not need to ease. Kathleen what is the cost . Mr. Rosengren there are several costs. You cause people to buy houses and cars earlier than they otherwise would. You make a temporal substitution. You make an investment now because Interest Rates are temporarily low. And so you make expenditures you might not otherwise have made. When we lower Interest Rates, we make the cost of debt lower. That means that households and firms are more likely to be leveraged. If we do that before we have problems, then we are in significantly worse shape. We have to think about the Financial Stability characteristics. How much do we want households and firms to be leveraged whenever we have a significant downturn . Kathleen as you look ahead to the september meeting, you are a voting member, the question of cutting rates again, it will be on the table. Are you watching the consumer very closely, then, as something that would tilt you not toward waiting to see but saying, no, i agree i am on board . ,it is time to cut rates and cut them again. Mr. Rosengren i am watching a number of things. Consumer confidence is a little weaker. That is something i am paying attention to. The retail sales number was quite strong. That would indicate that if that continues, we will have enough consumption it is going to bolster gdp. Im going to Pay Attention to geopolitical concerns. Brexit coming up in october. There are clearly problems in hong kong that could spill over in a broader sense into international markets. So there are plenty of things to be worried about. I think we cannot be determining Monetary Policy too far in advance. Forecasters still expect we will get reasonable growth over the second half of the year. Yes, bond rates are low but it think it is reflective of the Global Conditions, and Global Conditions are weak. Im not saying there are not circumstances in which i would be willing to ease.