Hong kong activists call on the g20 to back there protests their protests against the extradition bill. They want World Leaders to use their influence on beijing. Shery and getting around the huawei blacklisting. U. S. Chipmakers have figured out a way to do it. 14 . N of as much as lets look at the broader markets because we have seen the strength in tech shares. We have seen the nasdaq gained. 3 . We saw equity markets higher in the beginning of the session, but in the afternoon, they started losing momentum. Of course, there is concern over trade tensions ahead of the g20 summit. We saw the s p 500 fall or a fourth consecutive session. We also had some swinging between gains and losses throughout the session. Chipmakers, though, managed to finish up. Chipmakers really had a strong session with the Philadelphia Semiconductor index gaining more than 3 and closing of the highest level in about a month and the nasdaq gained ground despite the fact that President Trump came out saying that suings the u. S. Will be google and facebook. U. S. Futures at the moment not doing much. Lets see how the markets are shaping up in asia. Sophie this thursday after a twoday drop in the region, we could shrug off wall street declines with asian stock futures hinting at a mixed picture here. We could see gains even as trump warns of a plan b on china. The stock looking hard for a reason to stay invested in goldman. We are looking light on the agenda with japanese retail moving higher. Also gauging reaction to the latest news that apple plans to invest 100 million in japan. Very much. S President Trump stepped up his rhetoric against china as he prepares to meet xi jinping at the trade summit. Chief north asia correspondent Stephen Engle has the latest news. Stephen the latest news is that the trade war between china and the United States very much likely to dominate the talks even though they will likely be on the sidelines of the g20 meetings as they kick off tomorrow as most of the World Leaders do arrive in osaka tomorrow, but chinas trade war, also around likely to dominate. The other issues that other leaders perhaps want to push forward including climate change. I know ocean plastics is a big issue of the japanese as well as potential trade differences with the United States. Also, of course, hong kong protesters want to have a voice, but they all might be drowned out again by the latest news coming on the u. S. China trade front. Sources tell Bloomberg News that is that the u. S. Might be willing to kind of put off this second round of tariffs on another 300 billion worth of goods if beijing comes to the table and there is some sort of progress. We could perhaps get some sort of announcement that there could be progress at the end of the g20, but no deal, of course, is expected. All of that was turned on its head when donald trump spoke to fox news saying, wait a minute. Steve mnuchin saying we are a most 90 there on a previous interview. Around saying plan b might be my plan a. Hes taken the words from his treasury secretary who pretty much forecasted the deal a year trumply to have donald backtrack on that. Now a similar scenario coming here saying wait a minute. We might not be 90 there, but we have been there before as well. We have heard officials from washington say we are 90 there. Its always that last 10 yards to the end zone that is the most difficult, so i dont see this as anything new. You also mention other topics that could be on the g20 agenda including iran and hong kong. How much International Pressure are we expecting on the u. S. , given that the president really has not been in line with his allies . Stephen that would be an interesting one. With so many World Leaders here, will he be able to build any sort of coalition or is he going into these talks on a unilateral basis . He will be meeting likely vladimir putin, with her to one with erdogan of turkey, india of germany, moda of , shinzo abe will be there as well. He has a number of different meetings. Iran likely to be at the top of many of these discussions. In particular, we are hearing as well in our latest Bloomberg News story that a number of different leaders will be meeting in emergency talks to try to defuse and resolve not necessarily resolve, but at least diffuse some of the skaters on the Global Markets about the iran situation here he keep in mind, all the signatories, at least the leaders of the countries that signed on the 2015 Iran Nuclear Deal are here, so they would like to see this not escalate. Paul bloombergs chief north asia correspondent in osaka. Thanks for joining us. We will have in this coverage thus we will have his coverage live from osaka throughout the week, so stay tuned for that. Well the trade war is fighting especially hard on businesses operating in asia with Companies Reporting more delays, more cancellations of investments than a year ago. The American Chamber of commerce in Singapore Says the effects are cited by 54 of companies surveyed. More businesses are also considering moving supply chains away from china and the uniteds rates. Thousands of protesters rallied in hong kong on wednesday night, keeping up the pressure on the government and on china ahead of the g20 summit this weekend. Activists asking for backing in the campaign to withdraw hong kongs controversial extradition bill. Chief executive carrie lam has shelved the idea but is refusing to formally abandon the plan. Kim think says singapore is likely to slide into recession as the outlook for global trade darkens. The singapore government sees thirdquarter growth at up to 2. 5 . Would increase the chance of monetary easing in october. Some American Technology companies have resumed sales to huawei after finding legal ways to keep working with the company , despite its inclusion on a Trump Administration blacklist. The loophole means that even when companies are based in the u. S. , they may use overseas subsidiaries to classify their tech as foreign. If less than 25 of a memory originates in america, it may not be covered under the van. Global news powered by more than 2700 analysts in more than 120 countries. This is bloomberg. Paul thanks. Still to come, the democratic president ial hopefuls prepare for their first debate, hoping to find a way to stand out from the crowd. Bitcoin bulls, are partying like its 2017 with the bestknown cryptocurrency up on 2 since may. This is bloomberg. Paul we are counting down to the sydney open this thursday morning. We have futures slightly weaker, off about 11 after a rather mixed session on u. S. Equity markets. You are watching daybreak australia. On a surpriseged drop in supply. In the red fored four straight sessions. Su keenan has more. We saw strength in tech but not really anywhere else given the trade tensions. Definitely saw that strength offset by trade concerns. Again very much focused on the fed and the possible easing that multiple place in Central Banks. Lets go right into the snapshot because you did see the dollar steady here. Also yields on the 10year back about 10 so bonds were falling with gold. Again, investors easing back their bets on a deep cut of Interest Rates next month. Notice the chip index, up better than 3 . This is semiconductors. On theoff to the races back of microns strong earnings, which were reported this time yesterday. Relatively flat futures, but lets go right into the Philadelphia Semiconductor index, which is otherwise known as the sox. It rose by as much as 6 intraday and every component was in positive territory. Lets go to the big movers and you see facebook and google right at the top. They did not move as much but were certainly in the spotlight and they were under pressure as President Trump indicated that perhaps should sue them. He did not mention for what, what kind of lawsuit, any kind of details. He was actually in a televised interview on a Financial Network complaining that social media, which he believes is run by democrats, the opposition party, makes it difficult for people to follow him on twitter, so he would like to sue some of the leaders in the social media space. Notice micron, out of orbit, up doubledigits on very strong reports. They have indicated they have returned some shipments to huawei, which brings them about 10 revenue. Doubledigit gains, this has a st to do with overstock exposure to bitcoin, so its being used as a proxy for bitcoin, which is up, so overstock rising on that tide. Paul oil and gold very much the commodities of the moment. Moving in Different Directions today, but oil surging their 60. Su the supply data was really a surprise in terms of stockpiles of oil. We also saw an increase in exports from the u. S. Again, stockpiles fell by 12. 8 million barrels. You rarely see that. In fact, that is the biggest decline in u. S. Stockpiles since september 2016. Gasoline demand also near an alltime high, so that was bullish or oil. Gold giving back some gains, dipping on the stronger dollar, and some technical selling is what analysts say to sort of explain it, but many major say this gold rally is real, at least for now. As long as trade tensions are out there, as long as the fed is in is mode, as long as there is concern about slowing global growth. Quickly, lets go into the bloomberg because bitcoin was a key topic. It is up back above 13,000, almosth it did pullback 2000 after hours. There are many who believe the rise is different this time. It does not quite have the social media wallowing following or attention that it did. A lot of technical factors that now, butn existence the week of us twins are back in the news. Thatare the two brothers were instrumental in the beginning of facebook and went on to become very invested in bitcoin. Their net worth nearly doubled. They are back in the money once again on the bitcoin investment. Shery with a huge rally. Thank you very much. Top officials are scouring incoming data to see if they need to cut rates in july. We havent manufacturing report that could ease some of the concern on trade worries leading to a sharper than expected u. S. Slowdown. Our Global Economics and policy editor Kathleen Hays is here with the latest. Lets start with a rebound in durable goods orders. Think the message it sends is trade war uncertainty. We have seen some that manufacturing numbers, but around the world, the story is service is holding up pretty well. Goods report, very volatile. Nevertheless, visit us goods reports rebounded after falling three months, posting their best gains, in fact, in four months and were looking at a proxy for business investment, nonmilitary capital goods orders. It is the heart of it. When you take out aircraft orders, which are all over the map all the time, go here to the right with me. You can see that orders were up 0. 4 percent. They were down 1. 1 the month before. These were small gains in the previous month, so there is a little ray of hope that maybe they are holding up better than people thought. Also encouraging the yellow lines capital goods shipments. In other words, sales. They peaked appear in january and then fell. Ray of hope small that things are not really getting all smashed. Leading the drop was nearly at 12 5 decline in orders. They were down almost 39 the month before, but fed policymakers watching all these closely. Thisullard watching closely, saying he is looking for an insurance rate cut. We do not know how bad he says the second half will be. His Downside Risks from the global trade war, slowdown in europe, maybe the fight to maintain growth in china what that means for the United States when the thing to do now is make an insurance rate cut, but the consensus is saying we have to see what the data do. We are ready to move but we want to see if the evidence is there to do it in july. The San Francisco fed Bank President was speaking earlier in chicago. She in . Is kathleen lets remember who she is. She recently took over as the head of the federal bank of San Francisco from john williams. She has been head of research there for many years. , first ofaid today all, which way are you leaning . When you look at the data, what are you going to do . She said she does not want to front run the decision, but first of all, uncertainty around the trade talks. Are the president s of china and the u. S. Going to get back to the table . She is watching the g20 meeting between them very closely. We can inflation data, will that start Getting Better . Sees wages have also plateaued. She says it is not just a level but how much that has come down. Finally, we had a very weak jobs report in may. I think you are hearing this from a lot of fed officials, they are watching the june employment report because think of two cases. Case, another week report. Then you start to see a trend. That is how she referred to that today. If you see a rebound, you can say one month was weak. Looks like jobs growth is holding up. That is a very important signal for the fed as well. It is also true that it seems that said watches are not quite as convinced of the dry cut as they were a week or so ago, but i think it is also very important, but those are the things a top fed official is watching. Really nice to fiction of what is going on because the chance of a july cut, which has gotten quite a bit higher is now actually leveling out here, but you can see that i think now everybody investors, fed officials, traders are all waiting for these big, important data to see which way it ultimately will tilt the fed. Its not like anybody is thinking about hiking rates. I think the question is only this how much longer do we hold steady and wait . As mary daly said, the next six to eight weeks of data, very important. Paul thanks for joining us. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can go to on the bloomberg terminal. You can customize your settings where you only get news on the industries and assets that you care about. This is bloomberg. Bloombergis. Hnology global lets take a look at the top global tech stories of the day. Emily thank you. Blackberry plunged the most in a year after sales slowed and a recent acquisition contributed less than expected. Revenue in the fiscal First Quarter was 247 million dollars, up 16 from a year earlier, but income from the internet of Things Division was down 11 million from the previous quarter. Shares fell the most since june of last year. Weibo has sold a dollar bond shrugging off concerns about the effect of the trade war on its earnings. The fiveyour notes yield 1. 5 Percentage Points over treasuries and are rated be aa baa. Shares have plunged this year and one of the worst performances on the msci china index. Is introducing tools to let users override automatic recommendations over criticism of how it suggests clips. Users can tell you to stop suggesting content from a particular channel by tapping a menu next to the recommended video. The platform had been criticized for not taking action on extreme or misleading videos because it on been too focused increasing viewing time. Those are the top tech stories we are following. Companies think they found a legal side step around the ban on selling to while away. Some have resumed shipments to the Chinese Telecom giant blacklisted by the Trump Administration. Bloomberg news asias tech executive editor has more on this from San Francisco. Tell us how did they lawfully get around this ban . Interesting. So far, companies have not said very much about this. This first came out yesterday when macron was reporting earnings. They said that they have resumed shipping. The ceo was pressed to explain repeatedly why they thought they found a way around the black list, and he really did not give many details. What we think is going on here based on conversations with sources is that the companies have gone through the guidelines of the commerce department, and there is a loophole if products that are shipped by American Companies have less than 25 of of theirtent 25 technology from inside the United States. They can still continue to ship to while away despite the blacklisting you refer to. These companies, macron and intel, have operations around the world and if they are able to move ip or some of the components, some of the intellectual property behind these products offshore, than they are able to continue to ship these products to huawei despite the blacklisting. Its not clear exactly what amount of their products they are able to continue to ship. Macron did not elaborate on that did notn micron elaborate on that. Emily of course, there are other suppliers that had cut off shipments to huawei as well. Broadcom. Google said it would stop supplying why way with an updated android operating system. Do we know if other suppliers will follow their lead . Peter the surprisingly, suppliers have not been very public about what they are doing. We do not have information beyond the suppliers we talked about. You did see a broad rally in chip stocks today, but the anticipation that others would be able to do similar things and continue to sell to while away this point certainly, for a big relief. When the blacklisting came down, it was not clear where they would get key components, software, also to things they need from American Companies that make the Topnotch Technology in many of these areas that huawei needs for smartphones and communication equipment. Do we know how much already was sold with this legal loophole . Peter we do not know. Micron was asked that repeatedly. There are some caveats here, in clearular, it is pretty these companies cannot offer services support, so if they they areoduct because able to take advantage of this loophole, they will not be able to service it the way they had in the past. Paul that is it for Bloomberg Technology global link. Dont miss Bloomberg Technology at 7 00 a. M. In sydney, 5 00 a. M. In hong kong and 5 00 p. M. In new york. Tonight, 20 Democratic Candidates who want Donald Trumps job. We will have that story in a moment. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Paul it is 8 30 a. M. Here in sydney. Futures a bit weaker right now off about. 2 percent,. 25 . Watchingu are daybreak australia. Lets get to first word news. President trump is warning he has a plan b for china, saying he will impose substantial additional tariffs on imports if there is no progress at his planned talks with xi jinping at the g20. Is to take inan billions and billions of dollars and do less and less business thisbeijing, but contradicted treasury secretary Steven Mnuchins comments that he is hopeful about trade talks. President trump is praising mario draghi, saying he should be holding the reins at the fed, not jerome powell. He reiterated his claim that he has the right to fire the fed chief and tweeted that policymakers blewett last week when they kept rates on hold. Earlier this week, the president had attacked mario draghi for signaling more stimulus could be on the way for the eurozone. Lashingt trump is also out at one of his seemingly favorite hobbies. He is complaining about social medias perceived bias against conservative commentators, saying the government should sue google and facebook, though he did not say what for. The president said social media platforms are run by democrats and that has somehow made it hard for people to follow his tweets. Iran is set to breach the terms of the 2015 nuclear deal late this thursday, piling pressure on the european powers attempting to deal with the fallout of u. S. Sanctions and fears of war in the gulf. The Atomic Energy agency in tehran says it will exceed the agreed limit on stocks of lowgrade uranium in the coming hours and may raise enrichment to be on the level that prevents the making of weapons grade material. Rome is facing an increasing Health Hazard from the citys garbage crisis. Trash disposal is a decades long problem. Rome has had no major treatment site since a landfill shutdown six years ago. The issue produces almost 2 million tons of waste each year, but success of local governments have failed to solve the problem. Onbal news 24 hours a day air and at tictoc on twitter, powered by more than 2700 in morests and analysts than 120 countries. This is bloomberg. Paul thanks very much. The next couple of hours will see the start of the democratic race to take on President Trump in next years election. Miami is the stage for the first of two debates to whittle down forfield of 20 candidates 2020. For is the Main Objective this first bunch of democrats participating in the debate . Kevin get in the top tier. There are two of nights down here in miami from the first democratic president ial debate. All eyes will be on senator elizabeth warren. She takes the stage tonight cory booker, amy klobuchar, new york city mayor, as well as others. In biden, the front runner the race, is set to square off on the same stage as vermont bernie sanders, who has embraced the label of democraticsocialist. The questions are who will embrace the top tier of candidates, and two, will they attacked each other or hold their fire for just trump to fire. I spoke with one of Vice President bidens aides who is in the spin room, and he said he is back home in delaware, but he will be carefully watching the debate this evening. Shery he might be the front runner, but we have seen senator warren climbing in the polls. How will she make the best out of this opportunity . Interesting, when i talk to sources close to senator warrens campaign, first and foremost, they say she has not embraced the label of democraticsocialist, as has senator sanders. Says it she believes in capitalism with rules. Second, she is trying to position herself as someone with various policy prescriptions to help with the democratic party. She is a woman with a plan, they say, and she will be able to unite the democratic party. Her critics and detractors raise the issue of electability, but quite friendly, she has raised a considerable amount of small dollar donations. She also has a ground game in iowa that is very much in the toptier in terms of the other crowd of democratic president ial candidates in the field. Paul i hate to mention this is almost an afterthought, but what are the policies and issues the candidates will be focusing on . Kevin from a procedural standpoint, they will get 60 seconds to answer the questions in a twohour format. They will have 30 seconds to respond to rebuttal and 35 seconds to make closing remarks. That averages out to about eight or nine minutes for 10 candidates on two nights in two hours total of debate for the American People to watch, so it is incredibly hard to make your introduction to the American People based on those types of guidelines, but it is a marathon, not a sprint. This is the first of about 12 debates that are scheduled, and this field could narrow. It could whittle, or, technically, it could extend. There are some candidates who are not even qualified for this debate, such as the governor of montana, a red state that he was able to win twice. Will beresident Trump Aboard Air force one watching this debate. What are we expecting from him . Will he between . Kevin i ask that actually to the director of Rapid Communications for President Trumps reelection campaign. He laughed. He said he might tweet. He is trying to focus on the g20. He is headed to osaka, japan, but it is President Trump. We know he likes to tweed, so maybe he will be watching that and keeping an eye on president xi as well. Thank you so much. Our chief washington correspondent. He will be back with us just before the debate begins. Lets now bring in Sophie Kamaruddin in hong kong. What are you watching . Sophie we are watching galaxy resources. There is a delay in western. Ustralia the stock closed yesterday at the lowest level since march may, and alumina players move after alcoa predicted a new offer to end an 18month labor dispute. If the jail is rejected, alcoa has threatened to idle the project. The smelter has been operating at reduced capacity since last january. Paul thanks very much, sophie. Hear more of what we should be watching. Global bond yields inching back up after some huge declines in recent months. Do we get a sense that maybe we have reached the bottom, at least in the shortterm . Adam maybe some preliminary signs of stabilization, but there was a bit of news overnight which kind of contributed to that, i think, and a bit of demand. Centuryhe austrian bond, which is an interesting thought in europe, the kind of deal you are looking at in todays world in europe. Market has been very long duration, continuing to get longduration. Not really such a great trade given how much things have moved and given where, if you look at kind of the universe of global bonds and look at how far duration has been pushed out, the average now at about 8. 3 years or so, it shows you a thing moving quite far and a lot of people thinking maybe that is just about it for now. Looking on through the rest of the week, there is not really to reallye data front sway us from the u. S. Market perspective. That really brings us to the weekends meeting between the president of the u. S. And china and if we get any incremental deal which people want to add to risk appetite. We could see a lively up on on bonds and market equities, and if that does indeed occur, that is the next thing on the radar to be watching. In the equities market, we continue to see strategist a bit reluctant to predict big moves in either direction before the end of the year. Is this just because of all the uncertainty out there . Adam that is certainly part of it, but what you have seen is the expansion, especially in the u. S. Market, kind of leaving things looking a little bit fragile. Pretty much on average forecasting the s p 500 to be pretty much where it is now, 2912 is the number, really, so not far off where we closed just a few hours ago, and it leaves really, you know, little sense of the fact that profit projections continue to be cut, of strategist are kind reluctant to change their price projections, so it speaks to a second half of the year, which is looking a little bit tricky for investors, certainly from a wall street strategy point of view. No one really wanting to move too far outside of that consensus that has developed a moment, given how fast stocks have rallied in the first half of the year, setting up the second half of the year potentially to be slightly less volatile ride than what we saw in the first half. Paul thanks for joining us and dont forget to check out our gtb library for some of the charts you just saw there. Dont forget to check out our gtv library. Shery traders remain mixed on trade heading into the highprofile meeting between President Trump and president xi. Our next guest advises investors not to overreach but describes himself as generally positive. Is this just because a lot of the expectation over potential trade tensions easing has already been priced in . Generally mean, speaking, we think the fundamentals and the financial backdrop when it comes to centralbank policy, etc. , are quite supportive of the market, but unfortunately, you cannot dismiss a large number of binary risks. The key one is the potential for trade escalation, which certainly is not our base case of view, but it is something out there we cannot fully control for, and therefore, while we want to be risk on in our posture generally speaking, we do not want to be reaching for the stars when it comes to getting too aggressive in portfolio positions. Fact even despite the that we could see potentially more easing coming from the fed . I think generally speaking, the dynamics of global Central Banks, including the fed, is a positive story. The reality is that Central Banks around the globe this time by being more proactive than probably throughout history versus waiting for actual recessionary data to react, so we think that is a positive and its likely going to continue this Economic Cycle we have been in for the last 10 years or we may be talking about the same cycle in two or three years if the fed and other Central Banks are able to coordinate this kind of dynamic of being able to accommodate and extend this expansion we have been in for the last decade. Paul i know you are overweight risk assets and you make some good points about the fed, but there are plenty of other risks out there. We have geopolitical tensions. The trade war is very much up in meeting inad of this osaka over the weekend. This talk of a potential currency war as well. You must because ms. And of all that, too, right . Were definitely cognizant of the risk. Portfolios to be a little bit overweight equities versus fixed income, but we are not swinging for the fences here because we cannot predict some of these binary outcomes attached to things like trade wars, but generally speaking, when you look through some of those issues, some of those issues are pretty well reflected and known by the market. We do think multiples can trade at higher levels than they are today, particularly in a world where bond yields are so low and are likely to stay quite low in our view. People are likely to pay a bit more from a valuation perspective for equities. Some of this is a relativity aspect versus the expensiveness we see in the fixed income market. Paul in terms of looking for value on equities, you quite like european equities as well, based on the premise that it cannot get any worse, but surely, things can always get worse . Things can always get worse. European equities is one of our more contrarian viewpoints and it is a visa change in view. We do think a lot of negativism is priced in, but we also think a lot of it, if its attached to brexit or some of the debt issues in certain economies in europe and even the fact that italy, for example is or has been in a technical recession, inse risks are quite known the market in the market is trading at a pretty extreme relatively low valuation versus other equities around the world versus the United States. I do think especially in the world where we see the u. S. Dollar as may be stabilizing a bit, which is another benefit, on top of the fact the ecb has to be pretty supportive and we are also seeing evidence that the consumer in europe is pretty good. The Labor Dynamics in europe are pretty good and we are starting to see some stabilization in manufacturing data, so we see this as a bit of a catchup phase when it comes to european equities. They if its in europe or u. S. , it seems touch giants are facing regulatory scrutiny. President trump talking about perhaps suing google and facebook. Does that make you a bit more cautious about the sector . The tech sector is one of those sectors people keep coming back to constantly and the reason is because they have such consistency with earnings and in the low growth world, people are looking for growth. Despite some of the headline risks, including the regulatory dynamic, it is something we are watching closely, but i think there is such a laundry list of potential headline dynamics when it comes to regulation in the u. S. , i just dont see how this will be the top issue as it goes through the various debates over the next year and a half before the president ial elections. Thank you so much for joining us. Coming up next, we have chinas economy looking resilient in the s tradePresident Trump war. We will discuss that. This is bloomberg. Paul the australian Prime Minister is the latest world leader to weigh in on trade tensions ahead of the g20 summit in osaka this week. He spoke exclusively to bloomberg about australias place in the trade war. The balance between Strategic Engagement and strategic competition in the u. S. China relationship has shifted, but this was inevitable. We should not be surprised about this. Chinas conscious and right decision to pursue prosperity as a strategy for National Unity hasstability launched what truly been one of the worlds greatest economic miracles. Shery the china beige book says the mainland economy saw a modest improvement in the second quarter, but the risk ahead looks more serious. We were speaking earlier today about the credit situation in china ballooning, especially in the shallow banking sector. Those deleveraging efforts we saw years back, are they just out the window now . They are totally out the window. For a long time what people thought was the leveraging, were being told was deleveraging, was not corporate deleveraging. It was some degree of a crackdown on shadow finance. You saw that decrease over the last several years and the share has beenl borrowing tricking for several years now. This reversed itself completely in the second quarter. We saw the largest one quarter jump in shadow bank usage that we have seen in the history of the china bank survey and this fits in quite well with the fact that we have been watching q1 expand credit dramatically. Disadvantaged borrowers were getting more access to credit and q2, they have seen more access to credit. To thee seen more access economy, but that has come with terminus amounts of credit support. Does that mean that if you have support coming from the government, it does not affect sentiment or Capital Spending . Were expecting industrial profits and a couple of hours and they have been declining, so how much of an impact have all the trade tensions and other domestic impacts had in real demand from these companies . That is an important point. Manufacturing did quite well. They had in proved revenue and improve profit. We are seeing Something Different from the most recent pmi because we are teen of to four months ahead of those figures, but very we are two to four months ahead of this figures, but very important, q4 very high borrowing. Q1, you saw an explosion of investment. Even though you had topline improvement, you did not see firms invest like it, so there is clearly Something Holding it back. It is partly trade, but there is something manufacturers in particular are seeing that they do not like and are holding back on investment for now. Paul are there other pressures building up in the system for now . I would like to point out that this other chart we have on the at therg as well, down bottom, we can see inventories really starting to pile up. How much of a concern is that . That is exactly what we saw in our data. Headline data in the Retail Sector looked pretty good. Firms were not doing poorly. They were doing surprisingly well in this quarter, but inventories looked terrible. National inventories look as bad as we have ever seen them and retail looked worse than any of them. What you see here is a rise in sales prices, which is good, but you are still seeing supplies of stocks, inventory, being built up even with those price rises. We may be dealing with an even more dramatic problem with oversupply behind the scenes than anyone is aware of and that is some the that will probably hamper retail later down the road, probably later this year. Paul can we little another issue on top of that as well, the potential for inflation partially inspired by swine flu. Is that something that might require a policy response down the track . Everyone is aware that there is a food Price Inflation issue right now. There is a pandemic of swine flu. You have that weather hitting crops, but we saw something very different. We saw sales price rises virtually across the board. Were not used to strong inflation in china. We saw it nationally in manufacturing, across most sectors, and what this is interesting is that as a onequarter boost, it helped profits. Thats one of the reasons we saw better profits this quarter, but if you see this happen to know or three quarters in a row, then these prices put pressure on the balance sheet, so you may have a push that as firms are doing better, you are putting more pressure on the household sector and that is negative. There is a behind the scenes dynamic going on that we could the in the next couple quarters. Shery we see behind the scenes than amex when it comes to the u. S. Applying more pressure on china, not perhaps only a Tech Companies we have seen so far, but also financial companies. We have heard of these banks being probed because of north korea sanctions violations. Assuming osaka goes well, you l in see a low a lul if you have, but trade war resolution any time soon or not, you will still see a crackdown on technology companies. You will see a crackdown on chinese firms violating u. S. Sections, so these problems will not go away no matter what happens with the tariffs. Great having you with us. Thank you. If you missed part of this , you cantv watch past conversations and also watch us live. Dive into any of the securities and bloomberg functions we talk about on the right side of your screen. Also, you can ask our guest questions at the bottom left. This is for bloomberg subscribers only. This is bloomberg. Check ofs get a quick the latest business flash headlines. Bitcoin is surging again, jumping 18 and topping 13,000 for the First Time Since the start of last year. That brings its weekly gain to almost 40 . A Virtual Currency has climbed more than 200 since december. The dramatic gain left traders wondering if this rally has more staying power than the 2017 bubble that ended with a 700 billion crypto wipeout. Shery tests on the boeing 737 max are revealing a new safety threat that appears to be unrelated to the tune of fatal crashes that have grounded the plane around the world. Sources say the faa found that the failure of a microprocessor could cause the jet to dive in a way that pilots had difficulty recovering during simulated tests. The issue has not been linked to censor problems, but boeing has make changes. O call a u. S. Retailer will keep its majority stake after listing in japan and has announced a Business Plan to offer lower prices and grow online sales. The move ends the longterm speculation that walmart might sell the company. It currently has 334 Stores Nationwide but has been struggling to compete with local rivals. Shery plenty more still ahead in the next hour. We will speak to a former japan ambassador to the u. S. Ahead of the g20 summit in osaka. Paul that is it from daybreak australia. Stay with us for all the action coming up next in daybreak asia. 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. Paul good morning, im paul allen in sydney. We are under an hour away from the Australian Market open. Shery good morning from bloombergs Global Headquarters in new york. Sophie im Sophie Kamaruddin. Welcome to Bloomberg Markets asia. Paul our top stories this thursday more tariffs, less business. President trump talks of a plan b for china. The president s current target seems to have sidestepped his blacklist. A loophole is letting