Standing declines. Airbus orders takeoff leaving boeing by 30 billion to zero. The ceo. Kathleen lets take a quick look at how the u. S. Stocks ended the session. Modest gains. Modest gains better than none at all as trade wars tensions swirl. Across the board for the dow jones industrial, s p 500 up fractionally. 22 points on the dow. Three points on the s p 500. It was the nasdaq that had the best performance, up 6 10 of 1 . It was based largely on the faang stocks. In particular, facebook saying it is getting ready to unveil a cryptocurrency. Investors like that. The s p futures are indicating positive ground to be taken. However not as much as i was an hour ago. As for treasuries, interesting Economic News showing more signs that a trade war is have an impact. Treasuries ended at 2. 09 on the 10 year. Close to the 2 yield. One from the National Association of homebuilders saying it looks like tariffs are weighing on the prices of building materials. We also saw a Manufacturing Index from the new york fed. The empire state Manufacturing Index, the biggest onemonth drop on record. People are looking at trade war or tensions, and tariffs. Lets look at how things are shaping up for asian markets. Sophie futures are pointing to a muted start in asia after a mixed monday session. Kiwi stocks crawling back monday declines adding 4 10 of 1 . Following that advance on wall street, looking for a turnaround in tech shares after a fourth straight day of losses for the tech check tech sector. Growing morning worries plagued the group. It one of the worst performing groups of asia in that time. Analysts become more cautious on ships in particular. On the echo agenda, home prices from australia and china and the rba Meeting Minutes and aussie shorter data bonds nudging lower. Alltimeill in at lows. They are betting there is more life in the bond rally and expects three year yields to fall by 50 basis points if the rba delivers a second rate cut this year. Paul thank you very much, sophie. Lets check in on first word news with jessica summers. Thanks, paul. Satellite images have been released showing two oil tankers that were attacked in the gulf of oman last week. The pictures were taken on monday. Tankersw both the paired the Defense Department has released more photos of the tankers showing the bam the damage from what the administration claims was an attack carried out by iran. Breach thet will nuclear deal on stockpiles within days unless europe helps ease the pressure of your resting u. S. Sanctions. It is threatening to raise it beyond the level intended to prevent the making of weapons grade material. Europe is urging iran to stick with he agreed it deal this despite u. S. Pressure. Meanwhile, a Federal Reserve gauge in new york state fell last month by the most on record. That adds to signs that President Trumps tariffs are hurting manufacturers in the wider economy. The survey fell more than 26 points to minus eight. 6. The lowest level since october 2016. It indicates that Business Conditions are worsening. Opec and its allies still cannot set a date for the next production meeting. It is leaving the oil market uncertain but the output wrist restriction is set to expire. Iran says it is willing to meet on july 10 or 12th year that is native later than the due after othereek nations. Opec plus is struggling to lift oil prices amid falling global demand. Just to make sure we continue to Work Together closely. All of our members of the opec plus coalition. And then the good work we have done over the last 2. 5 years oftinues in the second half 2019. Jessica global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im jessica summers. This is bloomberg. Paul thank you. Osaka mays g20 in still see a sidelines meeting between president s trump and xi. Wilbur ross has told bloomberg that the summit is not the appropriate form for the u. S. And china to resolve their trade differences. I think eventually, we will have a deal with china. But i do not think it will come directly excuse me, out of the g20. I think the main thing that could come out would be in an agreement on principles for how to move forward. That is the most that could come. More, lets cross to beijing and our china correspondent, selina wang. Does this put a damper on expectations . Elina there was never an expectation that the two sides would be able to negotiate through thousands of pages of documents at the sidelines at the g20. We still do not know if they will meet for sure. Statementss certainly tempers those expectations. Even an agreement between trump andxi to restart stocks would be a big deal since these talks did break down since early may. Bloomberg is reporting here a slight shift in town from trump. We reported he personally stepped in to ask pence to delay the delivery of a speech on june 4 that would have criticized chinas human rights record. It is clear he does not want to jeopardize the chances of getting a meeting with xi and is recognizing the economic and political costs ahead of his 2020 elections if you cannot cut a deal with china. This week we are also watching this a days long hearing in which hundreds of companies and stakeholders are going to be criticizing the tariffs saying it is bad for their business, bad for the economy and bad for america. Kathleen Something Else that is catching a lot of attention, at least in the last few hours of trading in the u. S. On monday, a fall in chinas holdings of treasuries. We know they go a been down by they are at a twoyear low when the chinese have made their displeasure wellknown with how the u. S. Has been handling things in these trade negotiations. Is this an accident . Is this possibly a subtle message from the chinese that we can sell treasuries and we are willing to do it even if it ends up hurting us a little bit . Is certainlyiming interesting as well as the size. It declined by 7. 5 billion in march to 1. 1 1 trillion according to Treasury Department data. It is very difficult to read much into these numbers given they were collected before the latest escalation in trade talks and before these talks really broke down. Despite the fact that there has been much speculation that china could use their Treasury Holdings as retaliation against the u. S. , the consensus is that it is improbable. It would be very hard for china to find another place to park its cash in a place that would be as safe and as liquid. Treasuries, dump of it would cause the prices to fall, chinas holdings of use it could mark the dollar to rally the costs outweigh the benefit. Kathleen thank you so much for putting that in perfect perspective for us. Making is understand how it is something to watch but maybe not such a bad sign. Airbus races ahead of boeing locking 13 billion in sales. Here why the airbus ceo says they have the advantage in china. , bank of America Merrill lynch ahead of u. S. Equity strategies, and someone joins us what sectors and stocks she is watching. This is bloomberg. Kathleen wall street kicked off the week with the faang stocks back at the front of the pack. The nasdaq is much higher. We saw the dollar weakened on the latest factory data. Su keenan joins us with more. A lot of threads to weave. Faang stocks looking good. The banks are worried about the news and su keenan bakes it into one cake. Su modest gains across the board. A market on hold ahead of the fed meeting. Thes take a look at bloomberg that we have. Becauseit is a question this suggests that the s p 500 may find a new record high before potentially dropping big. In other words, the other shoe to drop may be out there waiting to drop. Lets go to the snapshot. What you will notice is that the nasdaq 100, the tech heavy index in the green, getting a rebound as a kathleen mentioned. It did have a weaker dollar because not only weaker than expected housing data but the factory data, which indicates that the fed may not need to cut rates at this point. Lets take a look at some of the big movers on the day. Faang stocks rebounding. Facebook, one of the biggest gainers. If you look at the second pail of stocks in the spotlight, target. Kathleen mentioned Deutsche Bank which was in the park in the spotlight. Target is also an error in which their cash registers went on the blink for a couple hours. Could cost the company 50 million. We will see in their latest number report. And a boeing in a competition with airbus over the latest round of jet allotments. The stock is doing well as was tesla on this latest round. Oil, we also have got falling further into a bear market on weaker than expected Economic Data. What are traders saying . Su the traders are saying that concern to get the opec plus meeting in place and the latest supply glut is weighing heavily on oil as you can see there. Weaker than expected Economic Data that goes to the demand. We are down significantly from the april high. Entering into a bear market because of the trade rift and concerns that supply outweighs demand. Kathleen a lot of pushing forces pushing the market. Su keenan, thank you. We want to move on to something we just mentioned. The next stage of the overhaul is taking shape. The ceo is zeroing in on another round of deep trading cuts that could result in a complete exit from its u. S. Equities business. We want to bring in our reporter. Though reconstruction has been going on for a while. Clearly this time, it made investors it is making them nervous. What are they doing now that they did not do a year ago . Year ago, there were some cuts. 25 . Now they are saying lets get rid of equities entirely. This is not a sure thing. This is something they are considering and it is not so clearcut because i getting rid of it, do you spoil some of your interactivity with the global clients that need a footprint on the ground . Equity is about half as much in revenue as the fixed income business. It is a smaller business. There is nothing to say it cannot be a fixed income powerhouse potentially. Around ratesas that may get cut in a deeper way than last year. Paul how are investors reacting to this so far . Sonali we are seeing a lot of analysts saying that this may not be deep enough to really turn the bank around. The question here is ok, you are making cuts, but how do you return the bank to profitability . Is it something that can compete and where will it compete . It is not something that is very clear in terms of how it is communicated to investors. There are doubts about whether it is enough. Paul thank you for joining us there. The latest on the Deutsche Bank story. You can get more on Deutsche Banks restructuring on the days addition of daybreak. Bloomberg subscribers, go to dayb and their terminals. This is available on mobile in the bloomberg anywhere app. This is bloomberg. Are said to buy their time on tuesday ahead of this weeks fed decision. Here inubramanian is new york. Today, she is joining us from hong kong. Thank you for joining us today. I terms of fed expectations, want to jump into the bloomberg and show you this chart we have here. It shows the fed policy rates getting close to zero again. The lowest compared with any expansion since the 1950s. I guess the question is, is the fed starting to run out of ammo if things turn south again . Savita indeed. I think the real question here is, is a fed rate cut a good signal for the market or is it actually a signal that things are not as good as we thought they were . Heres the thing, i think the fed, we think the fed is not likely to cut rates in june. We think it is pushed out. There is a low probability of a cut this coming wednesday. What i do think may happen is the fed may start to talk more about being patient which could potentially roil the market. I think they will walk out that next cut date a little bit more. I do think the fed is more likely to cut rates than hike. We have i think our economists are cut calling for two fed rate cuts this year later on in the year. Is that theresting market has actually absorbed all of this news relatively well. I worry a little bit though because every time we have seen policy response diving in to save risk assets, the response from risk assets has been a little bit lesser than the time before. Meant call, tarp was met with a resounding rally from risky assets. Then we got qe after qe, and ltro, and each time we got policy response, the market responded a little less to that. We might be now at the point where risk assets do not respond at all. I think that is what we need to watch out for. On the other hand, i think it is hard to be bearish on u. S. Equities in this market because we remember the adage do not bite the fed. If the fed is ready and willing and accommodative, then it is a tough market to be short in this type of environment. Paul we have been discussing over the past few days the possibility that maybe the market has gotten ahead of itself in pricing and rate cuts from the fed. You have the s p at 2900 by the end of the year. What is your rationale behind that . Savita 2900 which is basically where we are now. Kind of neutral on stocks. I think what is interesting is underneath the surface, there could be a major sector rotation. Point that is key driving a lot of the differentiation in the market today is trade and tariff risks. Interestingthink is is there are a lot of opportunities from an equity standpoint by trading within sectors. Within the discriminator the Consumer Discretionary sector, we would avoid Luxury Retail stocks. The reason is simple. China consumers have dropped and we have heard from six or seven retailers that are on the higher end of that they have started to see a slowdown in sales specifically from a cut in tourism and tourist traffic waning. I think that is an area where you can play within the sector and look for opportunities. With intact, i think there is still opportunities within tech. Exposureskew our towards software and security companies, and avoid semiconductors for now given the supply chain issues at huawei. I think really, where you go from here from a market perspective is not necessarily just buy or sell equities, but a look for opportunities from an internal level because i think there is a lot of interesting things going on. One of my favorite sectors, and this may sound counterintuitive given the feds accommodative stance, but i think financials is a place to hide in this trade war. The reason i say that is financials is actually a very high quality sector today. I feel like im going to be struck down for saying this because i lived through the financial crisis but financials have cleaned up their balance sheets. In the u. S. , they are regulated to the point where they have not participated in the credit expansion cycle. It could be a good place to hide. Kathleen i want to ask you about semiconductors. You just said stay away from them, i think with good reason. If we look at the bloomberg at exports, they are down sharply. Not the only one that has been hit. Some of the big indexes around the world have shown that there was a rebound. Suggesting it is not just the trade war that we have gone through a global cycle come it has peaked and is on its way down. Does that mean you do not avoid adding to chips, you stay away from them and get out of them if you are holding them . Savita i think it is neutral to an underweight. Here is the idea. I think you are absolutely right. It is not just traded, it is also a slowdown in the economic metrics. Here is what i worry the most about trade, not the specific tariffs and specific local supply chain disruption, but they idea that u. S. Corporations are actually starting to meaningfully slowdown spending. What they have spent the most on is tech. I think that is a risk to some of the more unit volume sales played within the tech sector. This is something in this trade uncertainty that is causing corporate guidance on capex to plummet. We just noted that from the beginning of may 2 now, companies are guiding down almost twice as much on planned then they are guiding up whereas prior to may, companies were very optimistic and they were guiding quite aggressively higher on capex spend. Today, the spend is lower. To your point, big multinationals that have been spending a lot on tech are slowing down that cycle. Lots of issues. Kathleen we have a chart up showing faang stocks jumping. And if the big stories, facebook talking about coming out with a cryptocurrency. How do you feel about the faang stocks . It was not long ago that they were so overbought. How do they look now . Savita faang still looks overbought. The average u. S. Fund manager is about 50 overweight. Now thathe bigger risk is not priced in to these stocks is regulatory. We are hearing about this from all different angles. We are hearing about this from data privacy, from antimonopolistic legislators starting to rear its head. I do not think it is an accident that Mark Zuckerberg testified in front of congress a year ago and 10 years earlier, it was all the financial ceos. I think this is a sector that you need to watch for potential multiple compression on regulatory risk. I do not think that is priced into the sector at this point. I do not think that it has become a lighter weight in the average fund. Above the benchmark is a pretty big bet on these companies. Abouti just want to talk your worstCase Scenario which is stagflation and the thing that i am curious about there is where is the inflation part of that going to come from . Savita it is a great point. I think the inflation comes from this artificial protectionist policy. Think about it, if we have closed borders, that could potentially temporarily hike prices within the u. S. It could be positive for labor inflation, it could be positive for Price Inflation if companies decide to pass through higher input costs to their consumers. We have looked back at the markets reaction to previous tariffs and generally, you have seen a little bit of inflation,. At least in the short term i think. We longerterm risk is that see a closing of borders and that could potentially compress margins. Littleknown fact, 50 of the Margin Expansion that the s p 500 has enjoyed over the last 20 years has come from globalization. I think the idea that that reverses is negative for u. S. Margins. I think the worst Case Scenario is that corporate confidence, we move into a recessionary framework and that is typically 25 downside. to we think the u. S. Equity market still has a lot of attractive areas but thinking about worstcase, that is where it gets a little bit ugly. Right, bank of America Merrill lynch head of you echo equity and strategy, savita subramanian. Thank you for joining us. Cling lam continues to what analysts have called an impossible job after hong kongs historic protests. We will get the latest from the city center in a moment. Stay with us. This is bloomberg. I dont know why i didnt get screened a long time ago. I kept putting it off. What was i thinking . Ok, mr. Jones. Were all done. I told you it was easy. With life line screening, getting screened for unknown Health Conditions is so quick, painless and affordable, youll wonder why you hadnt done it before. So if youre over age 50, call now and schedule an appointment near you. For just 149 a savings of over 50 youll receive a package of five screenings that go beyond your doctors annual checkup. Ultrasound technology looks inside your arteries for plaque that builds up as you age and increases your risk of stroke and heart disease. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke. So call today and start with a Free Health Assessment to understand your best plan of action. So why didnt we do this earlier . Life line screening. The power of prevention. Call now to learn more. Jessica this is daybreak asia. Im jessica summers. At least 11 people have died and more than 100 injured following an earthquake and chinas province. Emergency crews have been working through the night to search for casualties after that quake struck late monday. The epicenter was 20 kilometers from the city. Housing damage was reported as far as 200 kilometers away at the nearest major city. China is holding u. S. Treasury fell to a 14 year low in april, extending to the previous two months. To total fell by 7 billion 1. 1 trillion dollars. That is the lowest level since june 20 2005 and makes up 7 of total u. S. Government debt. Chinas ownership of treasury peaked at 14 in july 2011. The numbers were collected before trade talks collapsed in may. Jinpingpresident xi will travel to north korea on thursday for talks with kim jongun ahead of the g20 in osaka. State news in beijing and pyongyang say the visit marks the 70th anniversary of ties between the two states and will also be xis first as chinese leader. There is no evidence that north korea is ready to give up its Nuclear Weapons program. Chinahe top banks in including icbc are demanding more than 2 billion from embattled indian tycoon. His Reliance Communications went bust earlier this year. 1. 4 billion. It is seeking 400 80 million and icbc, over 220 million. The brotherfrom fell through on regulatory issues. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im jessica summers. This is bloomberg. Paul thank you very much, jessica. The Police Commissioner of hong kong is backing away from labeling protests last week as a riot saying only five people are facing that charge. It goes some ways toward the demand of demonstrators who rallied in massive numbers on sunday. Yvonne man joins us yvonne man joins us. I things returning to normal . Yvonne things have died down quite a bit. Yesterday we saw all of these protesters storm around this area to carrie lams office. It seems like things have cleared out. The roads have reopened and we have learned that the Central Government office here will be reopening today. Now that traffic has been cleared. Over here, seeing things are sparse. A bit of a headcount. About 20 protesters are still hold holding the fort outside of lech crow. I was speaking to one on the way. They said they decided to pause. There was rain here this morning. No word on whether they chief executive, carrie lam, is going to be holding her normal q a session with the media today. Thisolice backing out on reference of calling last wednesdays violent clashes a riot. Why is it important . A lot of concerns among the protesters was if it was considered a riot, there are those who were arrested who would actually face tougher charges. This could actually alleviate those concerns. As he mentioned, there are one of several requests they have demanding carrie lam to step down and a full withdrawal of this extradition bill. Kathleen if carrie lam or to step down, how much of a blow would that be to beijing . I think observers inside hong kong are wondering how much that would be her own independent decision . Independent of china, that is. Is tough to say whether it is her decision or not because ultimately, does anything change even if she does step down . If you look at the election process, yes, if she were to step down tomorrow, the chief secretary administration would step up. According to the basic law which is in the constitution and hong kong. He could serve that role for up to six months and during that process, the 1200 Member Election Committee will work to select a new leader. Keep in mind, within that committee, there are Many Political insiders here who likely will elect another carrie lam, so to speak, or some say a beijing loyalist. What is going to change . We asked of that to a Student Activist and here is what he had to say. They might be the puppet of beijing. That is the reason for us to organize a movement for a free election. It is time to freely elect the leader of our city. That alternative is also quite tough as well. There are some people like jake like regina who say bringing them back would be divisive. Other members or names people have brought up like jaspers own, the former chairman. They say they may be more some pathetic to the opposition as well. A lot of people are saying it is Wishful Thinking to think that there is anyone better than carrie lam to do this job. How is chinas state media been portraying and reporting on the protests . Yvonne it has been an interesting thing, we have looked at the newspapers in china. The one that came out yesterday, the headline raised eyebrows. This is it hong kong parents took to the streets in order to urge the u. S. To stop meddling in internal affairs. We also saw the global times take it one step further and actually put this whole hong kong issue with these trade negotiations with the u. S. And china. This is what they said. The first time they connected the protest to these trade talks which they have avoided all week. They said if washington thanks playing the hong kong card can force china to make compromises with the u. S. , it had better think twice. The riots will only consolidate beijings tough stance against washington. It is not just with the papers as well. We have seen when it comes to social media, if you search for chinas twitter and post support for hong kong protesters, those posts are removed. Same goes for if you are within the firewall of china, and also when it came to that song that you hear sometimes during these protests. Can you hear the people sing . Which has quickly become the anthem from these protesters from les miserables. That song has been wiped out if you go on Tencent Streaming Service qqqs a. Kathleen the yvonne man, thank you so much. Now for some stocks to watch. Here is sophie in hong kong. What is at the top of your list . Sophie i want to check in quickly on aussie bonds. We are seeing them nudge lower. You are seeing the two and three year yields up one basis point as we get a newsline out saying they see two further cuts in 2019. Stocks tomes to watch, lets check in on these names that we are watching. Chip players are in view on huaweis revenue warning. Germanys sala tronic cutting its Sales Forecast on trade tensions. Self tronic drives 15 of its revenue from samsung. In tokyo, we are watching that to which has agreed to by germanys company. Of chinese demand for graphite electrodes. Toque i aims to close a deal by the end of july. The companys Aviation Unit on the sidelines of the Paris Air Show that acquiring rival see r. J. Regional jet program, that would make sense raising the possibility that a deal amazing be reached. Kathleen thank you very much. Airbus cleaned up on the first day of the 2019 Paris Air Show, locking in 13 billion in jet orders compared to zero for boeing. The ceo spoke to bloomberg about whether the trade war gives the company an advantage in china. We have a historical relationship with china. China, we have produced more than 400 planes. The 10th anniversary of this line. This is a very Firm Commitment to the chinese market. We continue to grow. To serve the needs of china. I think we have seen a loyal partner of the chinese alliance. That is the way we want to go. Do you see yourself having an advantage . Is President Trump giving you an advantage in china as a result of what he is doing . We have a strong advantage. It is the most successful plane at the moment. It has been a game changer. This is fulfilling the market demand. Theres always politics in the background. You need to keep going steadily and keeping the eyes on the ball. Guy you bring up the issue of the plane to have. Your ceo is conducting a review of the way that airbus makes aircraft. Could he do more in china . With that lead to greater order . Guillaume we are doing more in china. Look at the activity in china because we think we have benefits of the chinese aqua system. That is the way we are managing to be successful in china. That is our commitment to china. We need to look at the entire picture and make sure we remain competitive overall. Guy we are seeing consolidation and other parts of the industry. Raytheon is one part of that. They are betting the scale is going to bring huge advantages. Do you think airbus will be paying a little bit of the bill for some of those advantages they are gained . They are talking about 1 billion of costsaving. Will airbus be paying some of that . Guillaume costsaving would be positive. It would lead to better prices. Exchanges, the first the first negotiations with the new leadership for the new sector. We wantbeen clear that them to continue to be performing on the business where because some are very important. Yes, staying on the existing business and if there are benefits, on the longterm, we would like to benefit from it. Ceo that was airbus guillaume faury. Plenty more to come on daybreak asia. Stay with us. This is bloomberg. Paul this is daybreak asia. Im paul allen in sydney. Kathleen im Kathleen Hays in new york. One of the big stories of the day, lets return to present interims trade war with china. Polls are showing he is losing popularity and farm states the next guest says there is Major Political pressure on the president to save face and make a deal. Joining us is edward goldberg. He is also the author of a new book a joint venture nation why America Needs a new foreign policy. That covers a lot of ground. Lets get right to the trade war. I want to start with this. I was in china covering the belt and road form on april 26. President xi came in said a speech and said he would lead the world toward all of these things and all of the things he listed were things on that trade deal agenda that the u. S. Was asking for. 10 days later, President Trump tweets out that china has backed away from the deal and he will put on more tariffs. What happened in that 10 days . Ed i think what happened was xi looked atally, it and said this is against chinas national interest. To deal trump wanted xi make was saying that china, you have to slow down your growth as a country of the future. Because we want that space. Kathleen why do you say that . They said to not steal , aellectual property complaint that japan and eu have joined in on him joined in on. There are other things there. Are you interpreting this a bit too much . Is there nothing legitimate and what the u. S. Is asking . Edward absolutely there is legitimate things. I think we have to look at it a couple ways. One, is china a competitor of the u. S. Or an enemy . If it is a competitor, it is a good thing. As we know, the reason a working 24 hours, seven days a week to beat apple. Competitors make growth. But an enemy, and if we say china, you cannot to grow anymore because you are coming into u. S. Based, u. S. Space, that is the problem. Part of what trump is saying is correct. Is has played fast and loose with some of the rules. China has stolen intellectual property. China made a data agreement with obama and it and then did not live up to it. All true. But then the trump people went beyond that. What is going on to chinas industrial policy and it was like china coming into the United States and saying hey, you should not be capitalists anymore. Paul how about huawei. Did the u. S. Go beyond there because huawei says well, we are a perfectly innocent to and Technology Company and the u. S. Has rallied the alliance against us to some pseudospy agency. Where does huawei fit into the picture . Edward basically, i think that it has made a point of yours. One, we never got exact information from the government whether huawei was doing bad things are good things from the u. S. Government. That is still out there. The u. S. Government is trying to convince the europeans that they were doing bad things. But the europeans have not bought that yet. But one thing, when trump started to attack it as part of if tariff war, it was like china were to have attacked one of our first class Super Companies like google or apple. And really brought the war up to a new point. Paul how does the heat get to turn down . We have had our expectations managed around this potential meeting that has not been even scheduled at the g20 in osaka. Could that be a Circuit Breaker or if it is symbolic, where do we go from here . Edward i did not get your question, im sorry. Paul how does this resolve with our expectations tempered around the possible meeting that has not even be scheduled at the g20 in osaka. When that be a potential Circuit Breaker even if it was embolic . Edward i think things are moving quickly politically. And after as kathleen said, trump is under a lot of pressure. We saw these quotes from the Trump Campaign and it is a disaster for him in the farm states. Totally because of the trade war. The economy, as we know, looks like it will not be as golden as it was. And trump is going into an election. He needs to possibly soften this. Plus now he has the pressure of iran. It is all very much tied into it. Kathleen what needs to change . You can see pressure on china. This is not good for chinas economy. They say they can go on another long march and withstand it but they do not think this is good. Either the hong kong uprising, whatever you want to call it, this is putting pressure on the president of china, presumably. What does the u. S. Have to change . What will the chinese except . It seems you are saying the u. S. Cannot get everything they want, however china also is going to have to agree to certain things. One is the deal that will make it . What is the deal that will make it . Edward my sense is from an academic perspective, not speaking to anyone in the trade negotiations, my sense is that it is going to be like the nafta deal. It is going to be basically papered over. My sense is that it will be more opening for u. S. Core in china, a little more opening on the u. S. Banking interests, and papered over. Interest to paper it over also because of what you said about hong kong. Kongpears to me that hong is more of an immediate threat to him than the u. S. Trade war. The legitimacy of the party directly. Hong kong brings up all of the history of what is china, what is not china. Hong kong is a major problem at the moment. Kathleen how is that going to proceed . Everyone says if carrie lam steps down, it will not make a difference. The same candidate or new president of hong kong will be elected who has maintained close ties to china. Can china other people say, it is inevitable that hong kong will no longer be the democracy it was supposed to be an china will be in full control. Edward it is funny, looking at the statue of liberty behind you, reminds me of the Tiananmen Square riots. The person we thought was a great reformer saw this democracy riots in the heart of beijing as a threat, as anarchy and he sent in the army. I mean, it is a great example for xi to follow. Kathleen you think that could happen . Edward i think it is a tremendous possibility. Kathleen thank you for joining us. We are happy to have you on the show. Edward the new book is how globalization works for america. Kathleen we are showing you the joint venture in nation next time you come on the show. We will talk about how globalization works for america. I think we did to a certain extent. Edward thank you for having me. To check outsure his latest book, not just a joint venture nation but how globalization works for america. And dont forget our interactive tv function tv. You can watch us live, catch up on past interviews, dive into any bloomberg functions we talk about constantly. Check it out at tv. Keep it right here. This is bloomberg. This is bloomberg. Australias new treasurer has a tough challenge ahead of him. He is facing an economy on track for its worse fiscal year since 1991. He appears unphased despite calls for a sweeping new fiscal agenda. Joining us to dig into this more, we have economy reporter michael heath. The government has only just won this unexpected election victory. Are we expecting much from them in terms of sweeping agendas . Michael we are in a way, paul. Particularly given the strategy in the election, you cannot expect much. What people are looking for is that they are prepared to dig into this and look at what more can be done in terms of short terms and longerterm structural rate reform. The Central Bank Governor has pointed this out. He cut rates and said Monetary Policy cannot do it all. Throwing the ball across the government as well. Responding with a line use during the election, that large numbers with tax cuts and infrastructure. So that does not hit until the next decade. The Central Bank Governor is well aware of that. That is why he is calling on it. He is struggling to emerge from the Election Campaign that he is in government now, he does not have to talk about the opposition all the time or tax cuts that everyone knows they are some ways off. There is the here and now and the slowing economy. It is a real issue for them. Kathleen he is boxed in by his own election rhetoric. He was saying the economy is strong based on the budget when it wasnt. He also said, when i interviewed him a week or so ago, that they were taking steps to stimulate. How does he get around all of that . Michael yeah, it is a difficult issue for him. You can understand where he is coming from. In australia, the benchmark for Government Economic management has been can you run a surplus . The government is saying we will have a surplus next year and the numbers look like that is right. Perhaps optimistic but looking good. It is based on high commodity prices. It is based on strong employment from a couple years ago, not based on a booming economy or business investing. He has got on one hand things looking good. On the other hand, the reality is that they are not. He needs to recalibrate what he is saying otherwise the Central Bank Rate cuts will recalibrate it for him and he will lose control of the narrative. He needs to make a back slip. I think he will have to execute one relatively soon. He will not be able to keep continuing this continuing with this. Paul michael heath, thank you for joining us. Lets check in on what is happening in terms of the markets. Have new zealand open right now. 1 ,ently higher by 1 10 of after we saw modest gains on wall street with the exception of the nasdaq and russell which performed quite well. Meanwhile,utures weaker by more than 1 10 of 1 . Similar story in japan. The kospi looking kind of flat. Kathleen coming up on the next hour of daybreak asia. Kevin page joins us live from singapore to talk about positioning ahead of the fed meeting. Keep it right here. The market opens next. This is bloomberg. I dont know why i didnt get screened a long time ago. I kept putting it off. What was i thinking . Ok, mr. Jones. Were all done. I told you it was easy. With life line screening, getting screened for unknown Health Conditions is so quick, painless and affordable, youll wonder why you hadnt done it before. So if youre over age 50, call now and schedule an appointment near you. For just 149 a savings of over 50 youll receive a package of five screenings that go beyond your doctors annual checkup. Ultrasound technology looks inside your arteries for plaque that builds up as you age and increases your risk of stroke and heart disease. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke. So call today and start with a Free Health Assessment to understand your best plan of action. So why didnt we do this earlier . Life line screening. The power of prevention. Call now to learn more. Good evening. Kathleen im Kathleen Hays. Welcome to daybreak asia. Paul our top stories, a muted stop start for asia, futures flat as wall street managed only modest gains. Markets brace for a prolonged trade war. Wilbur ross tells us the g20 is not an appropriate form to resolve u. S. China differences. Extended declines from the previous two months. The skin straight to Market Action with sophie. We have the nikkei falling to the downside and the yen near a oneweek low. Change. Mood in in on the seoul, the cosby also under pressure that marginally after a fourday decline. The yuan is going steady. Geopolitics in view with south koreas envoy resuming talks with the north ahead of a thursday meeting with kim jongun good australia, checking in on the asx 200, little change, the aussie Dollar Holding Steady near fivemonth low and also little change from china. The central bank is set to cut rates at least once more this year. Management says the bond rally has further to go into there could be two more rate cuts this year. Checking the mood in wellington, kiwi 10 year yield has risen a touch while the kiwi dollar is looking little changed. We are seeing consolidating above a sevenyear low sevenmonth low. Kiwi shares rising for a fifth session. I want to mention bitcoin, which has climbed past 9,000 to a may 2018 hike on news that facebook is going to roll out its Digital Currency this weekend. About 154 ne is up this year and crypto linked stocks have tracked the rise. Paul thank you, lets get the first word news with jessica. People haveleast 11 died and more than 100 injured following an earthquake in china. Emergency crews worked through the night to search for survivors after the quake struck late on monday. The epicenter was about 20 kilometers from a city. Damages to houses was reported as far as 200 kilometers away, at the nearest major city. And new satellite images have been released showing the two oil tankers that were apparently attacked in the gulf of oman last week. They were taken on monday and show both tankers. The defensive lineman has released more photos of the tankers, showing damage that the administration claims was an attack carried out by iran. Iran also says it will breach the 2015 nuclear deal on uranium stockpiles within days and must there is an ease on u. S. Sanctions. They say they will breach the cap on june 27. They also say they will raise enrichment beyond the level intended. Europe is urging iran to stick with the deal despite u. S. Pressure. Says federaleserve output last month fell the most and that President Trumps tariffs are hurting the wider economy. The surveys main index fell more than 26 points two 8. 6, the lowest level since october 2016, and indicates that Business Conditions are worsening. Opec and allies still cannot set a date for the next production meeting, and it is leaving the oil market increasingly uncertain with output restrictions set to expire within weeks. Are willingng they to meet a week after the schedule proposed by other nations. Opec is struggling to lift oil prices amid falling global demand. Our intent is to make sure we continue to Work Together with all ofaterally our members of the opecplus coalition and that the good work we have done over the last 2. 5 years continues in the second half of 2019. Jessica global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers, this is bloomberg. Kathleen thank you. This months g20 meeting in osaka may still see a sideline meeting between residents jump and trump and xi. However, wilbur ross says this is not the appropriate summit to resolve differences. I think we will eventually have a deal with china but i dont think it will come directly out of the g20. The main thing that could come out would be in agreement on principles for how to move forward that is the most that could come. Kathleen lets get over to beijing and our china correspondent. Am tempted to ask if it puts the dampener on expectations but it is hard to be what expectations have been. So much have happened has happened going into this meeting. We dont even know if the meeting is going to happen. Theys never an expected would realistically be able to agree on thousands of pages of documents at the sidelines of the g20. Wilbur ross does seem to be tempering expectations somewhat but it would be a big deal if they agreed to restart talks at the g20 given that talks have stalled since early may. Meanwhile, bloomberg is reporting that the tone from trump has changed a bit. He doesnt want to jeopardize the chances of xi agreeing to a meeting in were hearing that he personally stepped in to ask to poor stone postpone a speech that would have criticized chinas human rights record. Atis facing economic costs home and we are watching a weeklong hearing in which hundreds of companies and stakeholders are coming together to publicly explain why tariffs are bad for their businesses and the american economy. Paul we have seen a decline of about 7. 5 billion in chinas holdings of u. S. Treasuries back in april. Is that significant . The cut in treasuries, as you mentioned before, is actually nearly a twoyear low, but it is really difficult to read into these numbers and whether or not it is tied into the broader geopolitical tensions. It is worth mentioning the latest numbers were collected and the latest escalation of the trade war. Even though it is been speculated china could use holdings of u. S. Treasuries as retaliation against the u. S. , the consensus view is that it is improbable. It would be very hard for china to find another place to park its assets that would be able to absorb the massive amount of investment, and that would be safe and liquid. In addition, if china did massively dont treasuries, it would cost the price to lower and devalue chinas Current Holdings of u. S. Treasuries and could spark a dollar rally. The consensus view is the costs outweigh the benefits. Paul thank you for joining us. Still to come on daybreak asia , white opec and partners cannot settle on when to meet. A regional cio thinks that markets have it wrong on rate cuts for the fed. Find out why. This is bloomberg. Is daybreak asia. Stocks are mixed at the start of this big week for centralbank policy. Investors will be scrutinizing the feds decision later for signals on the chances of rate cuts ahead. Our next guest says the market might be misreading those signals. Forin tay is a regional cio Global Wealth management. I want to jump straight into the bloomberg terminal to take a look at this chart. 50 basis points of cuts this fed, according to the market. You think the market is misreading what is in store. What are you seeing . Kelvin there are three reasons we think the market is misreading it. Firstly, [indiscernible] rate stood atnt 3. 7 in the u. S. , very low. That signals the u. S. Economy is still in full employment mode. Second reason is corsi pe has not fallen significantly. That measure should fall or needs to fall for the Federal Reserve will move toward a cut. The results in the First Quarter of this year have been resilient for corporate. 80 of the companies on the u. S. Stock markets met or exceeded expectations in the First Quarter of this year. Alone, for those reasons the Federal Reserve is quite likely to not cut in july even though there are expectations of a cut priced in. Paul if you are correct, what do you foresee, upheaval in markets once the realization dawns . Vin i think the markets the equity markets and on markets are moving in the same direction at this point in time. You look at it year to date, and markets are still positive in the u. S. And asia despite tensions between china and the u. S. On the trade front. Misread thekets signal from the fed and the Federal Reserve has been dovish in its commentary, the markets are likely to correct when the equity market is concerned. Kathleen i have to push back against the idea that they wont cut. People think they need to see more data if they need to cut, but they are not tilting toward a hike at this point, they are tilting toward the possibility of a cut. That is number one. Number two, the retail sales wereweek for the u. S. Strong, but Inflation Expectations continue to fall and the fed is very concerned and many say a key marker is Inflation Expectations. Do you think that could tilt the balance toward the fed cutting the rate at some point this year . Kelvin we think it is unlikely for them to cut this year. We think that next year, the Federal Reserve is likely to move ahead with one or two cuts in the area of 25 or 50 basis points. I think cutting this year would be premature. As we stressed, the economy is not falling off the cliff as you look forward and if you cut right now, what other policy actions do you have next year if the economy actually falls . Impact from, the the tariff increases on chinese exports to the u. S. Have not really been felt yet. At this point, a lot of the imports in the u. S. Are just stocking up. Once the full impact of those actions or tariffs come in, you will have the chinese and u. S. Nomy the climbing decelerating from the recent growth rate. Thats when the cuts will come in more useful. If you cut right now, it is premature. Kathleen equity markets globally, and bond markets have taken the lead, yields of come down so much, negative rates around the world, certainly in europe. How does that to the balance for the global stock market if the fed is not cut now and the process is kind of tabled . Yields presumably back up, does that hurt or help stocks . What are investors to do . Is a smallre disconnect between equities market and bond market right now. The bond market is basically pricing in a cut in july and september, but the equities market is basically holding at this time, not just from the cut alone but they are trying to done u. S. Deal doing and china trade tensions. In less they come through, President Trump is going to increase tariffs, [indiscernible] indications are coming that President Trump is going to on chineseriffs exports, and then the market will correct significantly. Paul is that possibilities central to your reasons for downgrading your gp forecast for china . Kelvin we have penciled in the fact that the latest increases in tariffs will affect chinese exports and revise growth from 6. 4 this year to about 6. 2 in 2019. We think the tariffs will hurt the u. S. Economy more, and we have downgraded the gp forecast for next year for the u. S. Economy to 2 from 2. 8 this year. Paul you are also sure the aussie dollar. Im sure this is related to the i assume this is related to the china slowdown as well. Kelvin the aussie dollar come as we know, is tightly correlated with the chinese economy. The latest indicators are that the it is not in their favor. Weakness in the chinese economy, further weakness in the if the tariffs come through, it will not bode well for the aussie dollar. In thek the weakness aussie dollar at this time is warranted. Kathleen it does seem the chinese have started to signal they will allow the yuan to go past the red line on seven and two weaken further. How will the markets take that . Will they be concerned about some kind of u. S. Punishment in terms of sanctions, certainly branding them a currency manipulator. Xi jinping said they would not do any germanic evaluations dramatic valuations. The u. S. Is not on the same wavelength with that the chinese. Alvin you cant just label country a currency manipulator without evidence to support it. If we use the current balance approach, it clearly shows that the chinese rmb is not undervalued at this time. Gdp dropping below 2 means the currency is not week, not undervalued. If you were to libel label china a currency manipulator, other currencies would fall a lot more than the rmb. I dont think its a valid argument at this point. Its a reflection of the slowing down of the chinese economy. Exports have been hurt to a certain extent, Major Companies have been hurt because of the actions of the u. S. Government. As a result, the economy should slow down, and the currency should reflect a slowdown in the economy and it does. In most other countries, currencies to reflect the economy slowing down or increasing. Kathleen i think the Treasury Department might not see it that way but that doesnt mean they are right. Question, do you think things are stable enough in china that they can sit tight and let things move ahead . News with theod chinese is they have quite a number of policy options they will undertake, and the reason for that is the Banking Sector is directly controlled by the government so they can pump more liquidity into the system by the cuts to the reserve requirement ratio or liquidity action. Theres a lot more they can do. On top of that, they can employ fiscal stimulus measures to pump the economy up as well. This is something that a lot of other major developed economies cannot do. Right, kelvin tay, thank you for joining us this morning. There is much more coming up. Later on tuesday, we will bring you Mario Draghis keynote address from portugal. This is bloomberg. Opec and partners are struggling to set a date for their next meeting, leaving the markets in increasingly uncertain position just weeks before they are set to expire. They said it will continue to look toward the goal. We want to continue to Work Together closely, not just i laterally, but with all members of the opecplus coalition. And that the good work we have done over the last 2. 5 years half ofs in the second 2019. Paul joining us now for more is our Energy Reporter in singapore. What is the market expecting from opec . Stephen they expect there will be a meeting, but the exact timing is to be decided. Rand came out and iran said that after saudi arabia and russia made a decision on the first week of july, iran said we can do that, we want the second week. , the market isc looking at it as an emblematic view of the infighting between iran and other nations after the accusations of the tax on takers in the streets of hormones straits of hormuz. Saudi arabia wanted to keep cuts low and russia had at one point said they were more willing to boost production. Now youre seeing inside opec, iran playing a different tune. The markets expect them to meet eventually in july but i think there is a bit of people are nervous. There is a bit of ambiguity as to when they will meet and because of that, it is spooking the market a little bit. Kathleen there is a lot to spook the market lately. A lot of factors are pushing oil down now. Stephen right. We have entered a bear market since april, prices have fallen more than 20 , and there are a few factors because of that. Broadly, there is a lot of production coming out of the u. S. , the u. S. Is producing as much oil as it has ever produced. At the same time, the u. S. China trade war is putting a crimp on demand. Folks think there will be less demand as the trade war goes on and there is no end in sight. Just yesterday, he saw some disappointing news on a more microlevel from the u. S. The Federal Reserve said new beyondctory output fell the record for june, and youre also sing Housing Sentiment for contractors falling. All of these bad demand sectors in the United States on top of the boost in supply, with the opec happening stuff happening as well, has wrought a bearish mood to the market and push down prices. Kathleen thank you so much, stephen. Now for a quick check of the latest business flash headlines. A downgrade for disney. Shares fell from record levels after it was cut to the equivalent of a hold rating. Disney is up since the low on Christmas Eve and has been upgraded this year. Imperial says the rampant runup was behind the downgrade and most of it was re priced in. Paul Software Company slack is barking excitement ahead of its listing on thursday. Like may have an enterprise value of more than 20 billion, almost triple the amount decided at its last private funding round in august. It will have a direct listing in new york. Kathleen alibaba is preparing for a stock sale that could see could be hong kongs biggest since 2010. Chinas Largest Company is proposing to increase the number of ordinary shares eightfold. The primary plan will be put to a vote in hong kong on july 15. If approved, this which would take place no later than july of next year. Boeing says it is open to dropping the max ranting for is troubled 737 model. The company is working to restore trust among travelers and industry workers following two fatal crashes involving its bestselling jet. Boeing has brought in a range of external branding and Crisis Management advisors but has faced a tough time at the Paris Air Show, where it has yet to announce any orders. Plenty to come. Just ahead, hong kongs chief executive keeping a low profile after sundays massive show of people power. We will have the latest from the Legislative Council in hong kong next. This is bloomberg. Jessica this is daybreak asia. Dust chinasing holding in u. S. Treasury fell to a 14 year low in april. Must 7. 5fell by a billion to 1. 1 trillion. That is the lowest level since makes up 7 of total u. S. Government debt. Chinas ownership of treasuries peaked at 14 in july, 2011. The numbers were collected before trade talks collapsed in may. The chinese president will travel to north korea on thursday for talks with kim jongun ahead of the g20 in osaka. Says thes in beijing twoday visit marks the 70 the anniversary of ties between the two states. It will also be his first as chinese leader. A year after china President Trump met kim, there is no evidence north korea is ready to give up its Nuclear Weapons program. The london shanghai stock connect enjoyed a positive first day with a chinese brokerage closing almost 4 higher on debut. It is the first to test the new link and success could serve as a template for projects between china and other exchanges. The londonshanghai connect gives companies the ability to raise capitals in the largest equity market in europe. And some of the top angst in china, including icbc, art demanding are demanding more than 2 million from an indian tycoon. His communications went bust earlier this year, going China Development bank 1. 4 billion. A bank is sinking 1. 4 billion, 1. 4 million. A deal fell through on regulatory issues. Electedfirst freely president of egypt has died suddenly. He suffered a heart attack and collapsed while attending a court hearing. He was 67. A lawmaker with the Muslim Brotherhood, he was elected in june 2012, but was toppled and imprisoned by the current president. The Muslim Brotherhood has since faced a sweeping crackdown. Global news 24 hours a day on air and on a tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 come in 120 countries. This is bloomberg. Paul thank you. Lets check in on the markets. Sophie asian stocks are drifting higher with little enthusiasm and currency markets are muted with bonds mostly steady and little action ahead of the fed decision. The aussie looking steady ahead of minutes doing about an hours time. We will also get data from scalia and china. Australia and china. More excitement in the crypto space with bitcoin above 9,300. This on news that facebook will roll out a Digital Currency this week. Were seeing short positions bill for futures. Some stock movers across the region, i want to highlight in ,apan, and apartment builder hinging on a report that the Land Ministry plans to extend in order on building loan borrowers. Buy ahite maker is to german can for 921 billion to boost its european footprint. And the chip market is weighing on competitors in tokyo. High after afresh refreshed strategy. Company Steel Company because of softening steel margins. They have announced a buyback extension that could change the outlook. Falling. Shakespeare itsas been downgraded after guidance came in below consensus. Kathleen thank you. The Police Commissioner of hong kong is backing away from protest labeling protest last week as a right and saying only five people are facing that charge. It goes a way to meeting some of the demands of protesters. Yvonne man joins us. Our things returning to normal and what is normal going to feel like . It is still an easy but it has died down in the last couple of hours. We see the Central Government offices are reopening after some of the major sidestreets and roads were reopened after protesters streamed here to the offices and occupied the street. That has commented down a bit. Protesters i spoke to said it is time to take a brief pause today. Thats why we are seeing things a bit sparse here. I counted more than a dozen or so people Still Holding down the fort today. As you mentioned, with the police moves, backing down after labeling the violence a riot, that was significant. Fromf the key requests protesters. This is a victory for the opposition although they are still fighting for two key demands, which is the full extradition of this will, and for carrie lam to step down. We will hear later if she will be seen speaking to media today. Paul if she were to step down, how much of a blow with that to beijing . Yvonne that is the thing, right . A lot of questions on if she steps down, what happens . , theding to the basic law secretary would step up for up to six months. During that period, it is up to the Election Committee of 1200 members to select the next leader. Keep in mind, the panel is comprised of political insiders who have a loyalty to beijing. Ultimately, the communist party has the final say. What is going to change . We asked that question to the Student Activist that came to meet with protesters after being released from prison yesterday. That is the reason for us to organize, to ask for free elections. To freely for us elect the leader of our city. Is, there arect no likely replacements as well. You talk about former contenders , the names might still be divisive. Other people brought up, the x finance secretary, or the e xchairman. Those names are more synthetic to the opposition. Yes,are still saying that perhaps carrie lam is a lame duck, but given that there are no obvious choices, she may stay in office for now. Kathleen how is the state media in china for training the protest and what kind of signals are they sending . Several ofheard from the state run media in the last 24 hours, the china daily raised some eyebrows. Im going to quote it really quick. Took to the streets to urge the u. S. To stop meddling, which is not what the protesters were therefore. The global times took it one step further and for the first time tied the hong kong issue to the u. S. And china trade negotiations. They say if washington things playing the hong kong card can force china to make compromises in trade negotiations with the u. S. , it had better think twice. It will only consolidate beijings tough stance against washington. Its not just the media, the social media as well. Weibo, anyposts on agreements with the protests are wiped out quickly. Song,hen it comes to the sing, hear the people when you go on a streaming service you cannot find it. You see a since of effort from beijing to contain what kind of information goes to the mainland. Paul yvonne man in hong kong. Thank you for joining us. Loebist investor dan announced he has taken a 1. 5 billion stake in sony. Analysts are calling him out. Peter elstrom joins us from tokyo. What is he proposing and why are analysts skeptical . Back sixn loeb is years after he made an original run at sony to get them to change some of their strategic directions. He is back again and what he is proposing is for sony to restructure and spin out the sensor business that has been very strong for smartphones in particular, and also selloff some assets he sees as noncore to the rest of the business. The Insurance Business in particular, and a couple of others. To take that cash and invest it in entertainment, the hollywood business that sony has in california, and the games business. The reason analysts are calling them out for this is because this is essentially the opposite of what he proposed six years ago. At that time, he was saying sony should spin off the entertainment business and forced it to perform more anectively by making it independent unit where people could see the financials. Analysts say he is flipflopping on a strategy and he will not get a lot of traction. It doesnt help that he first of all has criticized the analysts and say he doesnt they dont understand the business well enough. And number two, he has a much smaller stake this time as a percentage of the overall market cap than he did before. About one third the size of last time. Is not clear what traction he will get. Kathleen if i am sony, i dont know if i would be willing to give him much traction at all. Did you get a sense of how they are reacting internally, publicly . Officially, sony is not commenting on the specific proposals, but they are saying they always want to hear from their shareholders, and a have interest in good ideas. People familiar with the matter loeb met withan them in new york last week and talk about some of the proposals. Sony is reportedly open to these kinds of ideas and structural changes. The new ceo has been quite active in terms of buybacks. He announced a couple this year that helped the share price but there is still a perception that sonys individual assets are more valuable than some of the parts right now and there was a burden to figure out what to do about that. The Shareholders Meeting was today in tokyo, so certainly he will get some questions from investors about what his plans are, how he is reacting to the proposal, and where sony goes from here. Kathleen thank you for joining us. Our Bloomberg Asia tech editor from tokyo. Up next, our preview of chinas may Property Data with ryan rees. Stay tuned. This is bloomberg. Latest home prices from china in about an hour. It comes after sales moderated in may after the deepening trade war. A difficult topic for chinese investors. It was still be growing on a year on year basis, but the trend could come down a little bit because as you can see from the first five months of the macro data, sales momentum has flown down slow down. Kathleen a little bit of a slowdown doesnt seem like much of a problem, it could happen in any housing market. How much more severe do you expect this to be, or do you down, just a little slow and things go on in a fairly healthy and strong way . For four years, j. P. Morgan expects about 2 decline in overall, but it could be offset by 5 increase in home price. Overall value would be in positive territory for 2019 is a whole. Paul if we look at the broader chinese economy, we can hop on to the bloomberg terminal and a look at this chart. Premuch everything is slowing down. Industrials slowing, production, fixed asset. The purple line is investment in real estate. It is holding up reasonably well. Remain real estate immune to the forces we are seeing, the trade war . There are two important things to consider for the property market. If you look at the property market, most of the demand comes from the mastic. International demand doesnt really impact domestic demand on property at all. That is the first thing. It is our view that we do think the government would do a lot of policy support to the property market, particularly to support overall construction activities. As you mentioned, this could provide a positive investment on the macro basis as well. Paul how about the impact of pboc policy . What a weakening yuan change their look at all . Ryan to the developer, yes, but to the market, the impact would not be that much. When the yen starts depreciating, it takes four to five months. One, if you see what has happened to come it wont happen until the Fourth Quarter of this year. The second thing, for the list of developers, some of them tend to borrow in u. S. Dollar, so if depreciated, the developers this time around are better prepared. Kathleen what about developers . What about raising funds, refinancing . They are an important part of the property picture. How will it affect them . The crisis we had toward the end of last year for developers refinancing is mainly driven by the fact that local authority seems to be borrowing these developers to raise money onshore and offshore. I think the government learned from that and this year, they are more accommodative when considering refinancing options for the list of developers. Jpmorgan does expect the overall situation to be easier this year than last year. Kathleen for a lot of chinese people, for people around the world, the disinvestment is in their home or property. Lower prices is not good for you if you own property and are looking toward the future. Buy moreu want to property or get into a home, it can be a good thing, right . Ryan yes. If you consider the impact for the property, its not just on the Real Estate Investment side. The Property Price has a wealth affected effect. If home prices stay healthy, it could stimulate some consumption as well. Paul i am wondering if you have any favorite real estate stocks . Preferor the stoxx, we the one because of the macro environment, we prefer the ones trading at relatively low valuation. Theyk pick we like are at a lower range of historical trading. To ryan lihank you for a very thorough overview on the property market. Dont forget our interactive tv function, tv. You can watch us live, catch up divest interviews, and into any securities or bloomberg functions we talk about all the time. You can become part of the conversation by sending us instant messages during the show, you should check it out. This is for bloomberg subscribers only, and you can check it out at tv. This is bloomberg. Ups is continuing to face the Cold Shoulder in china after a comment ubs is continuing to face the Cold Shoulder in china after a comment. Doing business in emerging be easy,s not meant to according to our guest. Do you find the comments offensive . How do you take it . I personally dont think the comments are offensive or racist and i did not draw the linkage awayinese laborers slaving in the u. S. But i do think his comments, the timing of his comments are a little unfortunate. To put it into cultural perspective, 2019 is the year of zodiac,in the chinese it is supposed to be a year of abundance, but were not seeing that. China is having a swine flu epidemic and china gets most of its Animal Protein from pork. The chinese economy is going down and the stock market is doing a correction. What paul said, it is the timing that is unfortunate. I think he made the comment when in full steamy is and the stock market is doing well, nobody would make a fuss out of it. This is my personal view. Paul you say this is the cost of doing business in some emerging markets, its not really a phenomenon unique to china. Can you think of some other examples . Last two examples in the decade or so came to my mind immediately. There was an economist who worked at Morgan Stanley who left Morgan Stanley in 2007 after a private n. L. Of his leaked to the media saying that singapore, that part of their success was because of money laundering. That was very offensive and disparaging to singapore. Two years ago, j. P. Morgan, the Equity Research arm downgraded indonesias stock market, not the bond market, citing emergingmarket volatility. Said theyia, they would cut business ties with hadrgan and indonesia wellliked assets for Foreign Investors so jpmorgan lost is there. In india, you cannot talk about holy cow, in china you cant talk about the royal family. China is a little bit heavyhanded with foreign companies, but this i would think is emergingmarket. Paul thank you for joining us. Lets get a quick check of the latest business flash headlines. Deutsche bank is planning on more cuts as it continues a Major Overhaul to boost profits. We are told the will likely be a reduction of u. S. Equities trading and creation of a noncore unit to wind down more than 50 billion in unwanted assets. This announced after the ceo took over last year. It has included a 25 headcount and reduction in trading. Kathleen equities soaring on news that it is being bought. The deal resulted in the company beat going private and the top auctioneers are french owned. The company has struggled with finances. Ofl lets get a preview markets. Sophie heres a round of some warning calls. Estimates for a company, but the price listed to 19 hong kong dollars. And acquisition should add to earnings prospects. Morgan stanley has downgraded china bank on u. S. China trade tensions. Some stocks may move today after a gross estimate was cut due to low vip volume this month. A taiwanese bicycle maker is on the radar as the stock has rallied 78 this year, climbing to a november 2015 hi. The stock does not carry a single rating by bloomberg, it was one of the cubbies that moved quickly when trump threatened tariffs in september, moving to taiwan. It is a stock to keep on the radar. Paul thank you very much. Were almost done here on , but letssia quickly check in on how we stand right now. A mixed picture, very flat in australia and japan. Cosby surging ahead by ahead after a mixed picture in the u. S. As well. The nasdaq performing strongly but other markets not so much. Kathleen thats it from daybreak asia. Welcome to bloomberg markets. We are coming down to the opening of trade in hong kong. Hong kong government offices reopen. The trade war is putting the bite on apple iphone sales. Weaker than expected demand, especially in china. Showad the paris air leaves rival boeing at zero. You will hear from