Admits damage. Bying their sales will fall half. Shery lets get a quick check of the markets close. We saw tech stocks weighing on the markets. Chipmakers tumbled the most in a month. The paying back some of its decline. Index. G on the we saw them trimming their sales forecast. We also had solid retail sales data, not to mention manufacturing numbers, undermining the case for a more dovish fed. Ups see how we are shaping for the asian markets. Sophie the headwinds are gathering for markets around trade and geopolitics. Awi stocks are said to snap bourdais rise for softer gdp growth from new zealand. We will have very little data to distract. Major weak is a spot. Huawei is reportedly basing for a seat dropping global phone shipment. They want to reduce chip orders. Checking in on commodities and oil, we are making a firm start to the week. Take a look. Adding about 2 10 of 1 after sliding last week 2 . Clocking a fourth weekly advance pushing above 1350 two a high. Higher, and ity could widen the deficit over the mediumterm. That could be supporting. Have the protest to consider. Out a modest eked close despite a three day drop at the end of a choppy week of trade. The quiddity conditions tightened. Leader carriegs lam has made a rare apology after hundreds of thousands of protesters took to the street for a second sunday in a row. The government suspended the bill on saturday, but that did not stop more protests. Claimed 2 Million People took part and said there were many protesters around the official route. At the site. S what is happening now . Moving here. S are we saw police into this area. It is one of the major arteries that they have blocked overnight after the protest yesterday, a showing a stunning show of defiance. They are telling the media to clear off the streets. We are seeing the press gathering together. We see some of the media working with us to tell us whether to go next where to go next. They are telling protesters to leave, which we heard could be a new police tactic. They have not been doing much. We have seen protesters, some of which have left. Some were told to wake up and get ready. We still see a pretty heavy presence of testers in the last couple of hours. After that overnight march yesterday, which we were talking about, that stunning show of defiance of 2 Million People, which is double what they saw in the previous marches. The governor said it was 338,000. They were calculating a little more on some of these major arteries. But we have been hearing is that they are not going to back down just yet. Only arrie lam did is half measure. They are calling for a full withdrawal and for carrie lam to step down. Going to try to be launch this extradition bill or will she hear the protesters call for her to resign . Yvonne we did hear from carrie lam in that press conference and they did not get rate a timetable on when they could be launching this extradition bill. It looks like we will see it this year. Some members have raised this issue over the weekend saying the suspension could be equivalent to a withdrawal. Close to the end of the session. These bills take months, if not years to go through a security panel. Time is ticking. Some watchers say this could be a facesaving option to back down. They are not completely looking very weak. Paul we do have a statement from the Chinese Foreign minister. The government expresses there were sport their support for the decision and they will continue their support for carrie lam and special Administrative Region in accordance with the law. It is very hard to see her hanging on. Time. A matter of a second term seems out of the question, doesnt it . Questionslot of remain, is there a better alternative . Is there someone who could replace her . Beijing, it is hard to say. We have been here, politically speaking. We mentioned about g20 and this adds another headache ahead of that meeting. We heard that perhaps President Trump once to bring the issue during these talks, if they happen. If welly comes down to hear any political moves from these leaders in the coming weeks, but for now, we have heard that it is how it is at the moment. The meantime, protesters are saying it still is not enough. Much more to come on the hong kong demonstrations and the fallout. We will be speaking to guess with a range of views across the extradition bill. You can get more on the protest in todays edition of daybreak. Go to dayb on your terminal, also available on mobile. Now to first word news with su keenan. Su we start with iran, expected to further retreat from its obligations under the nuclear deal, later monday. This admitted rising tensions. The government in tehran has already increased the rate at noth is increasing, but outside the limit. Its nuclearting obligations. To saudi arabia, the country has joined the u. S. And accusing iran of attacking oil tankers. Said thece conference said we need to the crown prince said we need to take a firm stance against iran. I van denies any involvement in the attacks. We had and washington have not provided any motives as to who was behind the attacks. Leaving tens of millions of people without much a city in south america on sunday. The unidentified issue at the shared power grid shutting down. Shops closed, Public Transportation was halted and hospitals struggling to operate with emergency generators. They had argentina has investigated the cause and is not ruling out a cyberattack. The forerunner to be next Prime Minister was absent. Worse johnson came under criticism as he declined to take part in a televised debate featuring the other candidates. A second vote is scheduled this week on tuesday. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan. This is bloomberg. President trump to push jinpingeting with xi later this month. The figure is downplaying the prospect of any breakthrough. Wilbur ross told the wall street journal that the best he expects is an agreement to resume talks. Joining us now is ross. Basically talking about talking. About how much the trade talks have been over the past six weeks now, an agreement to resume talks would be a big deal. Wilbur ross is suggesting talks between President Trump and president xi jinping. Top talks were at their peak, it was never really about then nailing down specific details and getting into the nittygritty. It was more about a signing ceremony. If they can agree that the talks should resume and come up with a timetable, that would be a pretty positive thing. It could be 10 minutes, 10 weeks or 10 months, but sooner or end wheny war will there are people at a negotiating table. Paul we have some tariffs hearings coming up. Similarwill probably be to hearings that we have had over the past year or so. All theys of hearings speak and the start of next week. Individuals,ut 320 groups and companies scheduled to speak. Thatwill essentially say is disrupted to supply chains and threatening 300 billion additional tariffs. Talking about mobile phones, laptops, consumer goods. You will see a lot of Shoe Companies and furniture companies, Technology Companies getting up to speak at the hearing. Just saying this is bad for our business. That by the time hearings are up, President Trump will be getting on the plane for the g20 meeting, making it an interesting seven days. One thing also on the trade , u. S. Trade representative Robert Lighthizer has a hearing up in the senate. He will speak about President Trumps trade agenda. There will be a lot to talk about and it will be interesting to see if he gets a good reception or criticism from lawmakers, especially republicans. Thank you for joining us. Still ahead, huawei is preparing for cell phone sales to plunge. Shery plus here what the manager has to say. This is bloomberg. Paul this is daybreak asia. Im paul allen in sydney. Shery im shery ahn in new york. The latest round of earnings and oil. Oil prices are more likely to fall to 40 then to redound to 60. Su keenan enjoys as now. Joins us now. Su going a bit negative. We had them close lower on the backs of those those sales number. Lets go to the snapshot. We have heard from Goldman Sachs , which believes that the fed will not be moving towards changing its statement just yet. Take a look at the snapshot. To be undernue pressure because of the u. S. China trade conflict. Earnings continue to be projected as low, going forward. We had getting to the tail end of the earnings parade. The big Software Companies and a lot of other Software Company will be coming out with numbers. Very interested to see how they will be doing. Take a look at some of the other numbers in focus. Amazon coming into the grocery space will be of interest. Tmobile is shedding a lot of assets to be in better position for approval. There are lots of companies jockeying for those assets. Down for a third week. Into the 52 to 53 range. There is a view that there could be oil going back to 40 before it goes back to 60. The pressure oil has been under has to do with supply, rather the tensions in the mideast. Shery when it comes to the bond market, some people are cautioning rates to slow down ahead of a big meat. May notthat the fed give a clear dovish signal as expected. Pricing in too much nearterm. Mark, great to have you with us. We are seeing the bond market and many economists banking on more easing and 2019. Pretty solid in the retail numbers. Has the treasury market gotten ahead of itself . Think that is the case. For a long time, we have been predicting lower Interest Rates, concerned about the feds activity. We find ourselves in a peculiar position. I think you are quite right. Expectations have come to the point where there are multiple easing being priced in. Think that is the right direction, but we doubt that we will see it as early as this week or july. Later in the year is more probable. Shery will receive the fed come out with a patient stance or will be see them drop this commentary . Have think more of what we been hearing recently. There is room for surprise, but the way that we think the Federal Reserve and chairman powell are beating the data, they want to be patient. The data is mixed. Another important reason is what we have been talking about consistently. What might come of trade as we get into the latter part of this month, we probably want to wait and see the outcome of those negotiations. That much ofll be a disappointment to the market. Might may believe that it be a little bit too soon. Paul trade is casting a long shadow at the moment. Have a look at this chart. Things are beginning to lose momentum in china. Also for the forecast. Industrial output, the weakest since 2002. This is all getting very real for china. Is the fear, certainly. We find ourselves worrying about the same things we were worried about the fourth order. Here we are again, talking about the fed and china as well. This is a major concern for us. We are hoping that cooler heads will prevail. They very much want to see growth, but that is the major risk that we see for chinese growth and Global Growth as well, particularly sentiment shifts. We can look at the impact of growth. We cannot measure very well the sentiment shift that could come from a prolonged battle in terms of the trade negotiations. It is very difficult. We think that they have the means and leverage to keep that economy growing. We see some signs of stabilization there. Bullish from a sovereign debt point of view. The pbocdo have governors saying that he has tremendous options at his disposal to cushion the impact of the trade war. What do you see those options being . A lot of the things that we have seen being put in place could continue and persist, whether that be monetary, fiscal we do not think that they would likely ever take the currency off the table. View thaten of the they can continue to pull the right levers to keep their economy close to the levels that they want. They said earlier that the anxiety is much lower, but so far we are encouraged some of the things that they have done and we seem to be finding some traction, in terms of growth. For thank you very much joining us this morning. We will have more analysis on the fed and markets in the next hour. We will be joined by a strategist. This is bloomberg. Shery this is daybreak asia. I am shery ahn in new york. Paul im paul allen in sydney. The billing ceo said it made a mistake. Show,ng at the paris air saying communication was unacceptably inconsistent. He promised more transparency and is confident that it will be cleared to fly later again this year. Place amirates may large order with boeing. The paper cites an interview with emirates president who says that talks are approaching a conclusion, though the outcome may not be announced until the dubai air show this year. Paul review production plans across europe to cut costs. The study will include factors in france, germany, spain and u. K. It may result in restructuring, small disposals or shifting of other work to smaller locations. Police are urging protesters to leave after a massive show of people power against carrie lam. We had looking at live pictures at the moment. Some crowds applauding the police for not bringing weapons. We will be speaking to the chairman of the democratic party. Su this is daybreak asia. We start with the Trump Administration playing down the prospect of a trade breakthrough at the g20 in japan later this month. Wilbur ross told the wall street journal that the most he expects is an agreement to talk about the talks. There has been no official response yet from aging. Adia is raising tariffs on range of u. S. Imports in a response to earlier measures imposed by washington. They are put mainly on agriculture they are put mainly on agricultural products. Indias decision comes ahead of a visit from mike pompeo, aimed at deepening defense and energy ties. President trump says the u. S. Would face an epic stockmarket crash if he is not be elected. He officially launches his campaign with a rally in florida the dowso be performance at this point is behind the games. President of the European Central bank says policymakers will add stimulus if expectations worsen. The bank does not believe that is the case yet. Italy that the important part of the strategy is that it is 100 ready to react. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan and this is bloomberg. Paul thank you very much. Lets check on what to watch in the markets. Sophie tech shares are very much in focus. The stock was downgraded to underperform. Japan is on display. A taiwanese investor might pull out. Pan on atching the news report that over 50,000 cases were found failing to follow procedures. A check on the hong kong dollar this morning, looking steady. It hit the strongest level of the year as tightening liquidity weighed on property stocks in the city last week. The sector will also be interviewed today as the government plans to relaunch recentions on instabilities seen in the property market. Shery Hong Kong Police are toing remaining protesters leave the streets after the biggest protest yet. Thanknment forced you so much for joining us today. We have seen the government now suspending the extradition bill. Can you accept this as a withdrawal of the bill or is this just a sign that it is delaying . On one hand, the word withdrawal does not appear in the statement. On the other hand, include according to procedures, it is not a former withdrawal formal withdrawal. Times. S something at of a lack of confidence. We have urged the government to formulate a withdrawal that will be a better move than trying to make up some words. Back innot be coming the near future. Shery does this mean that he will stay on the street until the bill is withdrawn completely . A suspension for now . Suspension accept a as it is in the statements. We urged the government. Ou have to listen that is a better way to resolve the problem. Hopinging up words and ast the people see it Something Like a withdrawal. People like the chief executive. Is a withdrawal a little bit too much to ask . Rather facesaving solution for both sides. Taken. On is taking is that not acceptable to you . We have to concede that in a city like hong kong, last week we had a Million People turn out. Another 2 Million People turned out again. See the situation and how we can cut how we can govern a city like hong kong. It is like looking into her face. Just a word on the crowd numbers. Say 338,000. There is a wild disparity there. Why is there such a difference . I do not know how the police tried to get the number, but we can easily believe that the number yesterday is a lot more than last week. No matter what, we have to accept that a lot of people turnout to protest. It is the governments responsibility to find ways. The Student Activist who was also the face of the Umbrella Movement is being released from jail this morning. Serving half of his time in jail. What is your reaction . When the government tried to do something in a lenient way, it was designed to release the tension. We are looking for the government to go in that particular direction. Theould like to see government with the labeling lastthey have been issued, those, they said are words that are sensitive to hong kong people. Relabelthat they can the last confrontation. There will be another way to release the tension. Shery do you believe his to release they tension between the government and protesters . What, at least to the public, it seems that the government has to do something soften his sentence. Releasing him this morning. I would say that we hope that it would be a signal that the government will try to resolve the controversy in a way that they have to try to release the tension. Hong Kong Democratic Party chairman, thank you for joining us today. We are continuing to reach out to lawmakers and take holders on all sides of this be as our coverage continues. Breaking news out of australia right now. Nergy is withdrawing it was just six days ago. The voice and Data Network Company of 3 billion was given a four week diligence period. They have announced it withdrawal of their takeover offer. We will be watching shares. Have the show you of an in about 20 minutes time. We have been told they are preparing for a 40 to 60 drop. Wang correspondent selina has the story. We are projecting a 60 million smartphone unit follow. Last year comprised almost half of its total shipments. The phone is supposed to launch later. Remember the broader significance is the trump band which is having an impact. Has built its own sat set. Areconsumers of the phone not going to be able to get a hold of the products. Shery they have been stockpiling u. S. Components just in case of the trade war making it worse. What is the longerterm plan . We have been told from sources that they are going to try to focus on the domestic market. Aim to get as much as half of chinas smartphone market. They currently have more than a third of smartphone sales in china, but it still has ways to go before it reaches at least half. Given increased sales and marketing strategy, it could get as much as 45 , but also the Bigger Picture they are focusing on is creating their own operating system. They have talked about creating their own system, but this will be incredibly challenging. It needs to convince developers to develop for the Android System but to also develop a full set of applications for its own system. The trade war is making one of the worlds top chipmaker worried. They have sent to stocks tumbling this year. Bob swan told us how they are submitting. Through with think our customers and our own operations, how do we mitigate the flow of goods to reduce any impact the tariffs could have on our respective businesses . Our belief that higher tariffs and up and higher prices for consumers around the world. We do not think that is an effective vehicle. You are not there, thinking about shifting anything out or worried about backup plan. You are worried about mediating. No. I think there are multiple things going on. We are working with the government to encourage them to get to a better resolution. That is first. Secondly, we have been working manufacturing our is. We have been working to mitigate the impact of tariffs by looking at more effective ways of the movement of goods around the will, so that our products not be more expensive. De have anything actionable that you can tell me . Tariffs haveat the been effectively assembled in china and shipped to the u. S. Mitigate means, how do we move goods . Sometimes customers will move their operations. Less product is coming directly from china to the u. S. That will be subject to tariffs. Mitigate means how do we work us, our customers and our partners, to reduce the impact of higher costs arriving on consumer shelves . Ahead, the spread of asia havingacross effects. This is bloomberg. Shery counting down to the major market open. Teachers are unchanged at the moment. We will be looking closely at japans disc way. They plan to cut more than a quarter of the workforce. The latest on what we are isting an what the holding saying. They will withdraw their investment in the company. This is along with other investors. They will discuss the terms of the investment in order to complete the companys bailout. Wille hearing that they withdraw the investment from japan. Trade moren display than 5 gains in the past week. This is daybreak asia. Im shery ahn and you are. Paul im paul allen in sydney. Runninge fever throughout Southeast Asia has created concerns of the meat industrys ability to respond to global demand. The port supply gap may be impossible to fill in the shortterm and other important may needneed meat to overcome the shortage. Thank you for joining us. Indicates the impact that pork prices can have on the economy. Referred it used to be to as the pork consumer index. Describe how much of an inclusive influence pork prices have . Consuming. Ain it makes up a good part of their diet. Through have an impact that general cpi. We can see it having a massive impact on that domestic population in china, having to slaughter a number of pigs. Estimation could be down 35 as a result of the swine fever. That will result in a shortage of supplies. Paul how long before this resolves . The virus itself is very beer healing. Very virulent. The only way to control it is through quarantine measures and soldering the pigs to try to contain it. Basically, the question as to how long is uncertain at the moment. You have to go through a quarantine period and then they have to start to build the herds. He said production losses of up to 35 . How will china fill the supply gap . That is a good question. There will be local production that can grow in terms of poetry and other meat, but they will have to import. With the local production, we are estimating there will be a 10 million supply gap. There will be a supply shortage. It will influence prices, obviously. Shery what countries will benefit from this . Suppliers the major to china will probably have the ability to send more product there, but there are other supplies that we are looking at as well. There is year of who is the largest supplier of pork to china at the moment. There are some challenges there. We have canada and we are seeing an increase in canadian exports going to china. That is starting to flow through. From an Australian Point of view, we are seeing less canadian imports into australia. The other main ones will be brazil and the u. S. The last with that ongoing dispute with china and 62 of u. S. Is limiting going into china. Shery this chart on bloomberg showing how those resources showing how they had been recovering. This is before the latest escalation on the trade war. On will the impact be soybeans . It is an animal feed question. ,here are other industries obviously poultry. Complex is probably one of the more important in that trade dispute. From and i who cultural point of view, looking at the protein, that pork supply, the u. S. Has a record volume of pork production. Prices risingpork in the u. S. As an impact of the swine fever impacting china. There might be some resolution or some agreement between the countries as to how they can allow that to occur more readily. Frome seeing some imports u. S. To china in the form of pork. There is interest in u. S. Pork. The demand far outstrips the supply. Is there a risk that we could see prices going up here . In the australian market, there is demand from china that is providing a strong floor in our markets. Shape theen them cattle industry. We have had slaughter levels higher than normal. Has demand from china provided a good floor in our market. Again, for the fort ash for the first few months, they are higher than what they were last year. ,f you look below those numbers think about mutton. Our exports of mutton to the to china are about 60 . Is not the premium cuts of lamb, but some of the lower cost items, which might be a better substitute. Paul thank you for joining us. Stay with us here on daybreak asia with plenty more to come. This is bloomberg. Australia getand underway soon. Sophie futures are pointing lower and tech very much on the radar. Does not expect a memory chip recovery until the end of the year. Huawei suppliers are in focus as well. Set to gradually reduce chip orders from huawei. Reports that it has begun construction of its second artery plant in china by the end of 2021. There is more uncertainty facing japan. Withdrawn. Ve it plans to be organized its plans by 2030 to cut. On the deal front, minerals has done its Due Diligence for a joint venture. Makingwing a offer after a bid. They are no longer confident that the acquisition would create opportunity for shareholders. Paul thank you very much. Still to come on the next hour, we will be joined by activist, investor and website founder, as police try to come to an agreement with protesters. We have the market open coming up next. Aussie features are looking flat. This is bloomberg. Paul good morning. I am paul allen in sydney. Asias major markets are about to open for trade. Shery good evening. Im shery ahn. Sophie i am Sophie Kamaruddin in hong kong. Welcome to daybreak asia. Paul our top stories this monday, people power. Demonstrations continue in hong kong as police tried to clear the streets. The extradition bill is show. Protesters on it dropped. Shelved. Protesters want it dropped. At an the crisis lands air show. Forcing people to review strategy and chart a new course. In japan, south korea, and australia getting underway. Lets get straight to the market action. Sophie we are seeing weakness for the topix and the nikkei 225. The boj, the boe, and the fed on tap. The company says it is seeking holdingstaiwan ptek has backed out of that consortium group. The cost because under pressure this morning. You have the index the coffee is under pressure this the ospi is under pressure this morning. It does not see a recovery. The korean won is on the back foot, i that 1187 handle against the dollar. Were seeing the asx 200 opening lower, off by. 1 . Aussie and kiwi dollar are gaining some ground as the fed , they are weighing on the greenback. Kiwi stocks, looking for the nzx 50 to snap a fourday gain, as we get more forecasts that the gdp growth for new zealand coming under pressure. Paul. Thanks very much. Lets check in on the first word news now with su keenan. Su we start with iran come out which is expecting a further retreat from its obligations under the 2013 nuclear deal later monday, amid rising tensions across the middle east. The government in tehran had already increased the rate at which it is enriching lowgrade uranium, but not beyond the limit agreed to in the deal. Said iran isency meeting its nuclear obligation. Saudi arabia has joined the u. S. In accusing iran of attacking oil tankers in the strait of hormuz. Mohammad bin salman called on the International Communi to take a firm stance against community to take a firm stance. Iran has denied any involvement and riyadh and washington have provided no clear evidence of who was behind the attacks. A big power blackout has left tens of millions of people without electricity in south america as of sunday. A socalled unidentified issue on a shared power grid shut down much of argentina, uruguay, and paraguay. Transportation halted and hospitals struggling to operate with emergency generators. Argentina says it is investigating the cause and says it has not ruled out a cyberattack. To the u. K. Now, and the race to succeed the Prime Minister. The frontrunner was absent as the race to succeed theresa may formally began. Boris johnson came in for widespread criticism as he declined to take part in a televised debate. Won the first round of voting for this week, a second vote is scheduled for tuesday to further reduce the field. 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 su keenan. This is bloomberg. All right. Thanks very much. The standoff has continued this morning in central hong kong. We have police trying to get several hundred protesters to leave the streets near the government headquarters. Remained there overnight after the massive protests against carrie lam and her shelved extradition bill. Police saying 338,000 were on the main protest root at the p route at the peak. Yvonne man. Police trying to get protesters to move on from the area. What is happening now . Yvonne it has gone down just a bit, but there were some heated moments just at harcourt road, where you are seeing quite a few protesters sitting here. There was about 100 Police Officers that came down from now, and they had a different approach from what we saw last week. It was a much more peaceful encounter. They brought in a negotiator that stood in front of these protesters and they tried to talk this out for about one hour. What we heard from the negotiator and there were media liaisons as well they were telling them they were not trying to clear the crowds here. Crowd clearing exercise, but we just want to reopen this road. It is a major artery. It is a monday morning. Are is when people going to work, kids need to go to school, so they said they we just want to reopen this road. But we saw still quite a bit of resistance from these protesters. They are still calling for a withdrawal of this tradition bill. They are still calling for them to drop these accusations and charges for some of the ones that were caught in these violent clashes on wednesday. They once again reiterated they do want carrie lam to step down. To that point, we have a Statement Today from the Chinese Foreign ministry. Just to paraphrase, it does not bill. T suspending the it expresses support for chief executive carrie lam and the government of hong kong in governing hong kong in accordance with the law, but in terms of really ams future carrie lams future, is she being set up to take the fall here . Yvonne she has mentioned time and time again that this is her initiative. This was no mandate from beijing, so this is perhaps for taking this fall perhaps a fatal blow to her career. We have not heard that yet. In the 75 Minute Press Conference we saw on saturday with carrie lam, she was asked cap as times, six countless times about whether she was going to resign, and she dodged every one of them. We have not heard any kind of reaction to that. She has been defiant to sticking to her job at the moment, but a lot of questions, politically, what are next move is. Is she going to have the tenacity to bring this bill back on the table for a second reading . We are getting closer to the end of the Legislative Council session, july 2020, and time is ticking. Shery what does this mean for the bill . Will suspension mean withdrawal . We spoke to the hong kong democratic chairman, and he was saying that that is not enough. Yvonne yes, and this is what youre hearing from people on the ground, the protesters, that these are just half measures, the suspension, but you know, some people say you have to read between the lines. Media,r spoke to local saying that suspension is equivalent to a withdrawal because, in a way, because we are getting closer to be now, because we are getting closer to july 2020, the end of the session, that we do not have much time to debate these issues. First, you have got to go through a security panel, public consultation, and then several committees, which could take months. Sometimes, it is tough of legislation. It could take up to one or two years. Theres not much time left. And a lot of beijing watchers are saying this is a facesaving option for carrie lam right now. To backtrack, back down, and postpone this bill. We will see if they could bring this to a second reading here. It is very similar to a situation some are saying to article 23 back in 2000 three, where the former chief executive of the time had to back down, and it took a while for us to hear any more rumblings of it soon after. Shery how different is this from 2014 . This time around, president xi jinping will need to go to the g20. Right, and we have heard that the u. S. Has them trying trying to comment on the situation. President trump may or may not bring this question to xi jinping if they do meet at the g20 in osaka in just about a week or so. A lot of questions on how this adds more headache to xi jinping as he is trying to deal with the u. S. On this trade war. Hong kong is another hurdle here potentially because this has gone beyond the bill. Some say this is about governance. The hong kong peoples mistrust for autonomy and whether hong kongs future still has that one country, two systems, system because beijing has seen signs of encroachment into hong kong. I think the one thing, the messaging we have heard from this dramatic reversal from carrie lam is that perhaps these protests, the power of the people, actually works, which does not bode well for beijing either. Shery yvonne man, thank you so much, reporting from central hong kong. President trump continues to push for a meeting with xi jinping at the g20, but a Senior Administration figure downplaying the prospect of any trade deal breakthroughs. Wilbur ross told the wall street journal that the best he expects it is an agreement to resume talks. Joining us now is bloomberg Senior International editor, jodi schneider. Can we at least just expect a handshake even if we do not get an actual breakthrough endotracheal out of this . Jodi wilbur and no trade deal out of this . Jodi wilbur ross basically said , at this point, the most we could expect is talking about talking, setting a framework for future talks and perhaps a schedule for them. So at this point, he is really downplaying what could occur at the g20 later this month in japan. And there have been no talks, by the way, since early may when President Trump said the chinese negotiators had failed to live up to what they were going to agree to. He said several times he broke the deal. He did not want there to be talks if china was not going to agree on larger issues such as technology transfers, intellectual property considerations, those kind of things. There really has been no talking so far and now, they are downplaying what could occur potentially at the g20. Back even, to walk it further, we do not even know if there is going to be a meeting yet, and if there is, the most we could expect from it. Jodi that is right. There has not been a meeting scheduled. President trump last week kind of their his chinese dared his chinese counterpart to meet with him. There are risks for xi jinping meeting with President Trump, especially if it looks like he would have been bullied into it. We have not yet heard if there will be a meeting, and it likely would be we call a sideline meeting. Diplomaticull meeting. We really have to see. At this point, there is no further talks scheduled and now, we have the commerce secretary saying he is not sure what will come out of it if a meeting does occur. Paul jodi schneider, thanks for joining us. Lets check in on whats moving in the markets right now and get over to sophie american in hong kong Sophie Kamaruddin in hong kong. Sophie we have some tech shares slipping this morning as we did seen mizuho downgrade a group. Theo electron following most since january this morning. These stocks under pressure on mizuho downgrade. Sanother mover in sydney that i want to highlight is pilgrim minerals. 9. 6 this falling morning, after the company moderated its output outlook. Paul. Paul thanks very much. Still to come, the 737 crisis has landed at the Paris Air Show. What the ceo things about the way boeing has handled the issue. Shery the fed meets this week. Our next guest says the markets may not have it right on rate cuts. This is bloomberg. Cuts. This is bloomberg. Shery this is daybreak asia. I am shery ahn in new york. Paul i am paul allen in sydney. The mass protest in hong kong at to the worries faced by investors. Political risks weigh on sentiment. Margaret, thanks very much for joining us. Just a start in hong kong, we have the extradition bill suspended. Not a the longterm, was little preview of what my picture, as we sort of countdown ultimately to 24 7 as china 2047 as its grip china tightens its grip around hong kong . I think the step back from hong kongs government to extend or postpone the exhibition gone saturday was a great relief for investors during the weekend. Thisfeel relief because move actually prevents the whole situation from moving into uncontrollable or even violent kind of scenario, and that poses a huge economical risk for hong kongs economy, but that scenario has come to an end. That was probably the worst scenario is just behind us. And what we saw on sundays more like a victory show for the protesters as they appear only apparently has won this crisis. The Hong Kong Market this week, the hong kong index may find some support around 27,000 points. And another thing is from the fundamental point of view, a lot of Market Participants have focused too much on the topline news and have ignored the fundamental fact that most of the index components have the revenue coming out of hong kong, so the fundamentals have very little to do with the hong kong economy. They are more focused on mainland china, for example. Names like tencent and ping an insurance, the Telco Companies and petrol companies. Their fundamentals and profits have little to do with hong kongs economy, so that is one factor that a lot of people ignored. Paul lets look at china a little bit more closely. Hong kong was just another problem, really. The country facing a few problems, mostly inspired by the trade war. We have industrial output, the weakest since 2002. Investment decelerating. How do you see the sentiment for chinese shares at the moment . Margaret i think for china a share markets, the sentiment remains fragile and weak, because the fundamental the economy is time to bottom out. A huge pressure arising from the trade tariffs and ongoing androntation between china on the trade issue. The external factor is now deteriorated further. Based on the data coming in the last week, industrial output and retail sales, we do not see a strong rebound, although the numbers are about expectations. Still, the overall economy is still facing huge downside risks. Right now, the market is focusing on whether or not policymakers will. More stimulus measures. For example, for the tech cars, and for the debt slowdown. Good dynamic, is will it play out in the Chinese Market as investors continue to speculate about more stimulus to come . Yes, althought the shanghai composite has retraced a lot in the month of may. This six Oil Performance has sectorial performance has diverged. The 5g related and domestic substitution, electrics and chipmaking, are the components and the sectors which are pretty active and outperformed the overall benchmark. We talking about potentially more Central Banks in china, but also in the u. S. And across the world, as we continue to see this dynamic and more uncertainty, not surprisingly, we see these Massive Gains in gold, which for the first time topped 1350 an ounce. Does this leave more room for upside . Wasaret yes, i think gold very interesting last week. The price has broken up. It is not a 12 month high and it broke out of a key resistance level. Two bigueled by drivers, the surgeon political risks surrounding the hong kong protest surging political risks surrounding the hong kong protest and another big driver behind this is the softening u. S. Dollar, the fed cut expectation is rising. Not just that. We saw a couple of Central Banks like australia and new zealand and russia. Dhey have all cappe Interest Rates in the recent months. There is a dovish picture of global Central Banks with rising expectation of liquidity in the market. The policy shifted more dovish. The power of currencies are naturally decreasing over a long time and that drives up the for hard assets into the cold cold. Physical gold. Paul do you think the markets are getting ahead of themselves and pricing in these rate cuts . Data, the data driven, it will disappoint everybody, isnt it . Margaret that is what i am concerned about now. I think markets are fully or in a july rate cut scenario. The futures market is pricing in more than 60 of a cut in july and more than 99 of cars by december of this year. And i think that the feds datadrivenmore rather than sentiment driven. We need to see the jobs data and u. S. Secondquarter gdp as well as inflation to decline further in the months to come. Early july all this data comes about expectations, we will see a big unwinding of expectations in july and that will probably lead to a rebound in the dollar and retracement in equities. That is one of the biggest risks in the market right now. As well,terms of risks you are mentioning geopolitical tension earlier. I want to get your thoughts on oil, quickly, if we can. Ignored this interesting topic all day. On the bloomberg terminal, we see wti climbing out of oversold territory mainly due to those apparent all caps we saw in the gulf of hormuz yesterday. How is the broader supply a demand dynamic hitting . Margaret oil prices have been very clear bearish trend since may. Wti and brent, oil have found some Technical Support at 50 and 60 respectively, and some bearish news has been priced in at the current level. Going forward, there could be two catalysts. The first is the softening of the u. S. Dollar, and the second factor is that the market is looking for the opec meeting in early july to reach a deal to the production by the major producers until the second half of the year, to bring back the supply and demand into a balance again. The other factor investors might need to watch is the u. S. Commercial inventory. Paul thanks very much. Margaret yang of cmc markets, thanks very much for joining us. Plenty more to come on daybreak asia. This is bloomberg. Shery lets get a quick check of the latest business flash headlines. Agl energy has withdrawn its nonbinding takeover approach for focus group less than a week after making an offer. 27 als bid included a premium on the shares but it says it has lost confidence that acquisition would create value for shareholders. Earlier this month, eq t infrastructure eqt infrastructure withdrew its own bid. Paul withdrawn its investment in the company. Tpq was one part of the chinataiwan consortium. There is still hope for japan display. It is in talks with other investors. The management have proposed 150 million injection and will decide by june 27. Still to come, we will speak to activist investor david webb about what the hong kong protests and the extradition bill mean for protesters. 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. This is daybreak asia. I am su keenan with the first word headlines. Start with hong kongs government headquarters remaining closed as protests against the controversial extradition bill continued. Chief executive carrie lam has apologized and suspended the bill indefinitely. But protesters are calling for her to resign and for the bill to be fully withdrawn. Organizers claim almost 2 Million People marched on sunday. Police put the figure at around 340,000. The Trump Administration meanwhile is playing down the prospect of a trade breakthrough at the g20 in japan later this month. Wilbur ross told the wall street journal that the most he expects to talk is an agreement about talks. The white house is keen that President Trump meets xi jinping and no soccer but there has been but there has been no response from beijing. India is raising tariffs on a and fosters. Imports earlier measures imposed by washington. Charges are being put on mainly agricultural products, following trumps decision to end concessions on indian goods shipped to the u. S. S by mike pompeo, aimed at deepening defense and energy ties. President trump says the u. S. Market crash epic if he is not reelected. He officially launches his 2020 campaign on tuesday with a rally and appears to be testing some themes on twitter that he will be touching on in the next 18 months. Research by macro trend shows dows performance is trailing the gains under president obama and clinton over the same time period. And the Vice President of the European Central bank says that policy makers will add stimulus is Inflation Expectations worsen. The executive says the bank does not believe that is the case yet despite Investor Expectations for future inflation tumbling to a record low this month. That thetalys important part of the ecbs strategy is that it is 100 ready to react. 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 su keenan. This is bloomberg. Thanks very much. I just want to get you across some breaking news coming out of singapore right now. We have data for nonoil domestic exports crossing the bloomberg at the moment. A little bit better than expected although we were not expecting great things. 15. 9 contraction in nonoil domestic exports in may. The expectation was for a 16. 5 contraction, so better than expected, follows from a 10 contraction in april. Electronic exports, much worse than expected. A contraction of 31. 4 . We do see the singaporean dollar strengthening a little against the greenback after slightly betterthanexpected nonoil domestic exports. Check on what else is happening in the markets now, get over to Sophie Kamaruddin in hong kong. Sophie other than singapores export data, we have little on that front across the region. Asian stocks are under pressure, falling across the board with tech weighing the most in tokyo and seoul. Samsung under pressure. Japan displayed plunging 10. 5 . The regional benchmark is headed for a fourth straight session of losses. I want to highlight the aussie, which is rebounding, rising with a kiwi dollar on bets that the fed will signal easing. I want to take a closer look at some of the movers across the region, taking a look at the breakdown of equity movers on the regional index. I want to highlight advances, 4. 6 . Mizuho downgraded the stock in japan. Rs taking a look at what is happening with the hong kong dollar trading study below the 7. 83 handle, with potentially lower volatility head. Thank you so much for that. The mass protest in hong kong forced the government to suspend its controversial extradition bill and brought an apology from chief executive carrie lam. Our next guest says if the bill passes, it could have widespread effect. Joining us from hong kong is david webb and an activist investor. Great to have you with us. How does this affect you . David it would affect the entire economy. The whole principle of one country, two systems, which was promised to hong kong in 1984 and implemented in 1997 with the handover of sovereignty is to have a legal firewall between the very shoddy mainland and judicial system, which no one really trusts, and the very reliable hong kong legal system, which has its own set of courts. And to make sure that there is not any crossborder pollution youhat area, and so, if have extradition treaty under which people charged with offenses in the mainland can be , you completely undermined that system and have at that point, you threaten all sorts of activities. Some of the ones i could point out would be Private Banking because a lot of the Private Banking, Wealth Management activity in hong kong, is for mainland clients. Visit the mainland, meet your clients, come back here, and manage their money. If they were taken out for financial offenses in the mainland, convicted of corruption, fraud, or other things, then you would become an excess to that and you could be charged with Money Laundering by the mainland or conspiracy to exit ithe proceeds an did to face trial in the mainland. That would drive away private inking. Not only that, but it would drive away the assets because clients would want to have the assets off book in hong kong, completely on chinese soil, and move to singapore, switzerland, or other places. Shery at least for the time being. Go ahead. David in terms of free speech and critical commentary, i and many other analysts, have been critical. I have been writing for 20 years now. Have data analysts that they have obtained through various sources. If they were to publish that, they might be accused of leaking state secrets. And again, extradited. They might be accused of threatening National Security in some way. If this bill was passed and the next visa legislation probably would be socalled article 23, National Security legislation in hong kong. If that were passed, people could be charged in the mainland with threatening National Security when they write about chinese policies toward taiwan, for example. Shery for the time being, the bill has been suspended, and some people are saying that perhaps this could mean an thefinite suspension where bill would just die out. Even if that happens, how much would you think hong kongs confidence or the confidence of investors has been shaken about hong kong . David the current term of the Legislative Council any bill lapses. This bill will actually be thrown into the been in july in july 2020, and id you not think it will come back. It has fundamentally undermined public trust in the current chief executive, carrie lam, and her failure to respond to a huge protest two sundays ago, and only to respond to protests on violenty turned basically underlined she is tonedeaf to the public opinion, not just public opinion, but to of 3000 very experienced lawyers and overseas governments saying this would undermine the two systems model. The confidence has gone. She needs to go, but because the mainland government never admit to mistakes or fallibility because they are an authoritarian government, and you just cannot do that when you have an iron fist, there will be a period of time before she makes some alternative excuse for stepping down, but any second term for her, which would start in 2022, is completely out of the question. I think she will go before her term expires. Paul david, if you are correct in your predictions come to pass, isnt the next chief executive going to be another handpicked beijing chief executive . David yes, exactly. That is why this does not solve the fundamental issue. The more china interviews of hong kong affairs, the more it undermine one country to systems model, and a high two systems model, and a high degree of autonomy we were promised. It is only strong as long as overseas governments recognize it as such. If the u. S. Were to review the u. S. Hong kong relations act and withdraw its recognition of hong kong as a separate jurisdiction, then we would lose an awful lot of benefit. All of our experts would be taxed as chinese exports and duties imposed on those. Agreements for aviation would revert to beijing. And all sorts of other International Relationships we have. Membership of the wto, and the olympic team, would be under threat. China, at the if it prioritizes National Unity and wants to stamp out all kinds of unrest in hong kong, it may end up using such an iron fist that no one else recognizes hong kong as special, and then they would, having lost the benefits, the mainland government would say lets just hurry up and end the basic law and make hong kong just another city within china. I hope that does not happen, but the priorities of xi jinping and his government at the moment seem to be more oriented towards control and sovereignty than they are tort than they are to preserving hong kong s special status. Paul it is only promised by china after the 1997 handover. Time has a habit of passing quickly. 047 is not that long way. David 28 years. Paul was this just a trial balloon for more to come . David we have Something Else on the books, which is the National Anthem bill. If passed, it would make it a crime to insult the National Anthem with a three year jail term. If using it out of tune or smelled your nose snub your toe at it, you could be sent jail and hong kong. Thats an example of tightening grip. The uncertainty in hong kong will start to increase as we count down the remaining years of the promises we were given in the basic law and longterm contracts i think within the next 10 years, you will start to find people getting a bit more worried as they did in 1980 he, when we had a run on the hong kong dollar before it is pegged to the u. S. Dollar. We asked three of the New Territories police, which would lease, which would have a change of sovereignty. Sensible, itre would start promising an extension to the promises and the basic law and saying it will continue for at least 50 years, for example, which would give time and more confidence to people in hong kong. But right now, the message from beijing and many of the people who represent views on International Media is that you only had 50 years. You were lucky to have that at all. And cant be days because count the days because we are coming for you. Shery david webb, founder of webbsite. Com. If you have any questions for david webb, do not forget you can use our interactive tv function tv. , you can send us instant messages and questions during our show. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Paul thats check in on some of the movers now they check on markets with sophie. Sophie i want to highlight big stock movers in sydney. Focus sinking the most on record. It made a refresh bid. Another blow for the aussie Data Services company. This marked the fourth time in two years that would be suitors have walked away from focus after looking into its books. Focus plunging. In response to a deal agls withdrawal, they are saying the company is reiterating guidance. Back foot and investors liking this movie at the stock rising 2. 5 this morning. Paul. Paul thanks very much. The Trump Administration is downplaying the prospects of a trade deal when or if the President Trump meets xi jinping at the g20 in osaka. Wilbur ross says the best he expects is an agreement to talk about talks. Still with us is david webb. Thanks for staying with us. How much more could this potentially escalate . We do not even have an agreement to have a discussion on the sidelines, and i know you are watching another area that i have not that has not yet become an issue between the u. S. And china, and that is the deep entrenchment of u. S. 401 k s and other funds in the country. David so far, it has been a trade war, but that is only part of the financial relationship between the u. S. And china. There is also the capital account and hundreds of billions of dollars of u. S. Foundations, endowments, 401 k s, and mutual funds, i invested in chinese companies. Either listed in america, hong kong, mainland china, or other places. Deal of a great financial engagement, and it is very inconsistent in some ways to be criticizing the Chinese Government for subsidizing and propping up various sectors of its economy, when at the same ine, u. S. Funds are invested government controlled company is that is subject to those policies in companies that are not directly government controlled but have been required to form committees within their organization to take instructions. I think at some point, when the potential for tariffs has been exhausted if not before that, the u. S. Might give it to some of the other powers that the t to some has pivo of the other powers that the president has. Those powers have been tested in the case of a russian Aluminum Company two years ago when they were sanctioned for their close connections of a Controlling Shareholder to Vladimir Putins regime, and the u. S. Ordered on u. S. Persons, including asset managers, to dump to divest themselves of shares and not to deal with rusal. Was saidint, bloomberg to not deal with the company. Some Financial Providers disengaged. The share price crashed, and eventually, that situation was resolved. There was a change of the shareholding structure. That was a test case and shows us the powers of the president at the president s disposal, that he could order that the u. S. Government could use. Obviously, one hopes that they do not and that there is a trade agreement and that the pressures that have been brought to bear on china would cause them to up the economy more with the rest of the world. One could dislike the president. He does have a point, President Trump, that china has not played its role fairly in the International Trade system. Begine capital more could. It could get war could begin and get quite nasty. Paul in terms of euro on strategy, you are taking steps to immunize yourself against the trade war. Ownn terms of your strategy, youre taking steps to immunize yourself against the trade war . David they are run for party more than profit. And that makes them untouchable as an investment from my point of view. I focus as far as possible on businesses that have a strong element or that have a strong independent element so the manufacturing shoes in vietnam, cambodia, or making toiletries for airlines in china and cambodia and all sorts of private sector businesses that are still investable and are often overlooked because i focused in the small cap area of the Hong Kong Market. Larger funds do not bother with it because it would not make a big difference to their overall portfolios. Paul thank you so much for joining us. David webb, founder of webbsite. Com. Coming up next, boeing charts a new course at the Paris Air Show. How the 737 max crisis prompted a change in direction and strategy. This is bloomberg. Shery the Paris Air Show takes off this week. Normally, the focus is on deals. How many new plane orders airbus and boeing will announce. This year is different for boeing as they try to climb out of the 737 max crisis. Now. Mccombs joins us so did boeing realize the difference this time around . And how realistic were their ambitions . Dave they have. They put on an offensive here to show they are being humble, taking a humble approach to this. They have a lot of explaining to do. That will set a very different tone at this show. As you pointed out, it used to be a contest to see would airbus or boeing get more orders . Boeing has done to the wall by that. If you go to the last paris show in 2017, they beat, they almost doubled airbuss orders in that show, so that was a big win. Last year at farnborough in the , theyy also beat u. K. Also beat airbus. They are coming out of those two contests at the biggest airshow of the year. This will be a very different scenario. It will be hard for them to match boeing. There is so much focus on the 737 max, and whether or not boeing has a Clear Strategy of how to emerge from the crisis and what they are going to say about safety. Very often, they are out there counting, fuel efficiency, the range, the comfort features, all of that. This time, it will be focused on safety and what the plan is going ahead, what plan boeing has two get this airplane back allhe air and to make whole of their partners in terms of the airlines. Paul in terms of this difficulties boeing has been having with the max, what kind of advantage does that hand to airbus . Dave well, one would think that this is airbuss chance to come a you know, when the order race at least and show they have got more orders. That has been a very competitive sector for them. A lot of it was because they had introduced that max 10 model that sold so well. This is a big chance for airbus. Boeing goal for this show mights be to get one order. If they could just get one airline, a major land to sign up and say they are still committed airline to signup and say they are still committed, that would be a very big win for them. With that kind of pressure going on, boeing is ready to deal, offering very good deals most likely to airlines, and that will be tough for airbus to compete with even though they have the safety advantage. Paul bloomberg conglomerates editor dave mccombs in tokyo, thanks very much. Well have some big guests from the Paris Air Show as well, coming up this week, including boeing ceo dennis. And john harris and ge aviation ceo david joyce. For now, lets get a preview of what to watch in markets as the morning rolls on. Sophie kamaruddin is here. Sophie when taipei trading caps off, tdk molding and focus after withdrawing its investment in japan displays, citing various changes of these situations. Extending the kleins after key client, broadcom, cut its outlook and sees their gorgeous thirdquarter guidance. There may be tailwinds from a report that they might be making five nano chips in the First Quarter of 2020 with apple as the first one. The mediatech ceo has warned of a tough year for the industry, but the Company Expects to mass produce its first five g chip in march of 2020 as well. Investors have the antiexhibition protest to consider. The hang seng did manage to get a modest gain of 27,000 points despite a three day drop. Liquidity conditions tightening. This morning, the hong kong 783 athovering around the start of this. Shery lets get a quick check of futures. Youre seeing u. S. Futures up , as of course, this is coming on the back of tech shares waiting on the on friday. We have seen markets lower on trade tension concerns. Whense futures down. 5 they stopped trading about four hours ago, but of course, all right now is focused on those protests ongoing in hong kong. Take a look at my pictures as we continue to see protesters on the streets. The Hong Kong Government headquarters temporarily closed. The china open is next. This is bloomberg. 9 00 in beijing. I am tom mackenzie. And i am rishaad salamat, counting it onto the open and trading on hong kong and mainland markets. Demonstrations continue in hong kong with police trying to clear the streets. The extradition bill has been shelved. Protesters want it dropped altogether. Brings backton expectations. Wilbur ross says he expects only talks about talks. Huawei admits rising damage from its blacklisting by the u. S. Its global phone sales will fall