Finance minister. President trump says Jerome Powell and his team dont have a clue. Haidi we saw shery we saw a downfall while the s p 500 was down. 2 of your declines on the s p 500. We have a very strong u. S. Jobs two hundred 24,000, beating expectations. That leading to traders curving back the fed rate cut expectations to the treasury yield, the 10year yield come at least 2 , and equity markets fall from highs. We see futures unchanged at the moment. Shaping upow we are for the asian markets. Could be looking at a riskoff session today with stocks already under pressure in wellington. Some we could see in tokyo. Futures are pointed higher. The Tech Industry navigating japan. The south korean president yesterday moved. 200 is set to lose points, but it is not too far off from the alltime high off of that mark. Checking in on the turkish lira, after falling as much as 3. 5 early in the asian session, we are going to see more action when money comes on long, facing backlash from president are to wine firing the bank chief president erdogan firing the bank chief. Trace figures from china and taiwan. We have the latest reading on aussie jobs. Ahead of that, we see the aussie 10year yield jumping seven basis points this morning, moving closer to 135 basis points as the bond rally takes a breather. A drop in rally stocks on treasuries while the aussie dollar is looking little changed this morning. Paul all right, thanks very much, sophie. Lets check in on first word news now with selina wang. Selina thank you, paul. The new Democracy Party has won greece,ng victory in 31 for the leftist. Alexis tsipras life support after agreeing to demand for more spending cuts by international creditors. I have a strong mandate to deliver on my agenda, which is an agenda to glow the growth the economy, create more jobs, but also to make sure that people feel more safe again. Selina type white house economic adviser larry kudlow says he expects u. S. China trade talks to be back on set soon, while the first have not had facetoface negotiations since may come although officials have resumed talks on the phone. Xi jinping have agreed to provide contact with a medical g20 meeting last week. The u. S. Had held off on imposing extra tariffs for the time being. On thelow they are phone, the leaders, senior sides, on both investor lighthizer, secretary mnuchin for the usa, they have been on the phone, they will be on the phone this coming week. I think a facetoface meeting is in the cards. I do not want to get ahead of that story. Selena five people were arrested a small group of protesters clash with police in hong kong late on sunday night. Earlier, tens of thousands marched against the governments controversial extradition bill. They moved to the citys new highspeed well with china. The chief executive terry lam suspended the bill, but protesters want it withdrawn. A landslide victory over jeremy hunt in the race to be the next u. K. Prime minister. The latest poll shows johnson backed by almost the majority of the party members, and he has also one bank support of another character, javid canada didate, javid. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am selina wang, and this is bloomberg. Shery selina, thank you. Central banks things to be more of a global trend. The turkish lira slumps since the Bank Governor was fired. Power Global Economic policy editor Kathleen Hays is watching these developments. Lets start with the white house. What led to President Trumps latest twitter barrage . Is interesting, because he started on friday as he was getting ready for the fourth of July Celebration o, ad he ended up on sunday, he could not quit. He was talking to reporters on friday. He said the fed does not have a clue on how to remove policy, does not know what it is doing. He said if it knew what it was doing, it would be cutting rates right now. He also tweeted the fed is mostly a result problem, they and raised fees too soon too often. What do we think donald trump going again . I think it could have something to do with the jobs report that you just mentioned, shery, that jobs rose 224,000 from 72,000 in may. They are back on track to show solid gains. Even manufacturing jobs growing at a time when people think that there is a trade war. How could manufacturers, how can factories be running like that . You can see the yellow line in the chart come the threemonth moving average. On thel, blue line righthand side of the 224,000 gain. What has this done . Lets move to our next chart. The stronger gain in jobs, the rebound, suddenly a big slowdown, the line moving up on the far righthand side, the bets on rate cards are not what they were. They are starting to come down this is a bit down just a bit, because people think hey, a 50point rate cut is not on the table, and those looking for a rate cut in june may be getting a bit of an upper hand, and a rate cut could be held off until possibly september. Congress will certainly be asked questions about this. We will see is he fires up that trump tweening engine again. Paul all right, kathleen. President trump wishes he has the powers president erdogan struck, firing the financial chief. Clip that backfire, though . Kathleen could that backfire, though . Kathleen it could already be backfiring, when we see what is happening with the turkish lira. He said he was going to fire the central bank chief, because he will not cut Interest Rates. Surprisedmething that many people, because number one, the central bank chief has already been, in 2018, floating raise rates, inflation was rising, there was a crisis in the lira. So hard and so quickly that he got it up to 24 , as we show you in another chart, you can see how that rate came down. Excuse me, the inflation rates come down with the type policy. The other thing that is really odd about this is the central for effect, and everybody thought there would be a rate cut anyway. That is why, if we move on, we can take a look at the liras behavior, taking quite a hit since saturday. Sharp moves lower by fewer and fewer dollars. You can see president erdogan stepping on something that could have helped the country because it was in a nice rallying mode. It was getting stronger and stronger. How could it backfire . Again, the currency could lose ground of people dow the central bank of turkeys credibility. Shery kathleen, what does it mean when we see Central Bank Independence threatened in turkey, the u. S. , anywhere in the world . What does it mean for investors . Kathleen one of the top guys at pimco in a note this weekend said that in fact if trump, for example, but the fed in a very difficult position, because they might feel that they cannot cut rates now, when they have to prove to everyone they are independent, in fact, he sees a new normal of dependent Central Banks, lower Interest Rates, and more quantitative easing than we would see other was, which is something investors are going to have to get used to. I do not think that is a really down conclusion yet with the Federal Reserve, jay powell of course maintains his independence. A couple of more years before donald trump has a chance to make another choice. But it is certainly something that people are talking about, and studies for years have shown that independent Central Banks show the best results for the economy and the market. Paul all right, our economics and policy editor, Kathleen Hays. So much for joining us. Deutsche bank will undergo one of the most dramatic overhauls in its latest turnaround plan. It will cut 18,000 jobs, post a 3 billion loss, and cut equity sales and trading business. We are taking the decision to retrench and step back from elements of our Global Markets from trading, and that is a significant step in reorienting the bank. Paul lets bring in Investment Banking reporter shannon al this is something ceo christian sewing as wanted to avoid. More than 7 billion euros, which means Deutsche Bank will be forgoing its dividend for the next two years, so when the markets open tomorrow, we will see how investors react to that prospect of no dividends, but on the other hand, a lot of the Restructuring Plan has been known for some time now. We saw christian sewing come out and say he will do a lot of the things that have been reported, and stocks have reacted well so far. On the other hand, the good side is investors is for Deutsche Bank to do well, so we will have to wait and see how the markets respond to this. Shery so far, investors have not been too happy. We have seen returns of equity from Deutsche Bank, and that is for the past seven years, right . So somebody will have to take responsibility about this. Who is moving out, it also who is moving up . Is the who is moving out chief regulatory officer and the head of the chief Investment Bank. I want to point out that shan oreilly will be taking responsibility for the americas and is on the management board, it was joseph the americans is not something that is completely being cut yet. And someone else being it on the data sites as well. They are investing billions into data moving forward. We see investment, but balancing that is a tough thing to do. What is Deutsche Bank going to look like after this of upheaval . Li something christian sewing focus is on is the global transaction bank, which is a pretty boring business of moving money around the world for corporate science. They are resizing the Investment Bank, which includes fixed income. They are keeping that business for now. They are also keeping an advisory business as welcome as of they will be advising on mergers and acquisitions, for example. They will have Private Banking and acquisition thinking as well. Banking as well. Shery sonali basak, thank you so much. Iran seeks to ease u. S. Sanctions. We will speak to someone about that later this hour. Paul but up next, Medley Global Advisors m. D. Ben emons. This is bloomberg. asia. Is is daybreak i am paul allen in sydney. Shery my answer ran in new york to we have seen President Trump continuing his criticism of the fed as well of the unexpected firing of the turkish central Bank Governor. Us is Medley Global Advisors managing director ben emons. Ben, so we continue to see these expectations, the Central Bank Independence or the heyday of this independence is behind us. What does this mean for investors . Ben hi, shery. I think it means in some parts of the world, like in turkey, they can expect a lot of volatility of turkish assets an higher volatility. The lira weakness dissipates only rate cuts have an adverse effect, you have higher inflation. Within the developed world, it is a bit of a different story. Most of the inflation as well below the target, and they have loser financial conditions. Theirt case, even though escorts of them, now there is concern about the independent sa the Federal Reserve and the ecb, but that saidy, if Central Banks are politicaltiny of the spectrum as well as the public some of the decisionmaking does become more complicated. Shery we are waiting to hear from fed chair Jerome Powell testifying to congress this week. We have seen the latest labor report in the u. S. , showing a lot of strength. At the same time, that leads investors to believe that perhaps fed rate cuts easing will not be as much as expected, so which side of the coin a strong labor market helping earnings, or less that easing should investors be focused on . Ben i think it is still about a combination of both. There will still be some level of easing, but not 50 basis points. That is really a dire situation. The labor market strength shows parts of the economy shows we are not in that situation of an emergency. The strength of the economy will lead to some moderate easing, if it is warranted, the downside from here, i think if that is until it hasition, the chance to make a decision, which we have from now until the end of july, a fair amount of data to come out. I would think they would take that into account before they make that decision. Think the market cetaceans for a rate cut are probably rational. Paul yeah, there is also the matter of the Balance Sheet unwind. Do that reallye need to happen before the conversation of cutting rates . Ben paul, i think it is clear that the Balance Sheets will stop shrinking. They have projected to do that in september, based upon their analysis about how much demand there will be four reserves in the system. That said, ultimately, if we can stop that process, it is easing, essentially, policy. I think if they are looking at welcome it kind of explains i think why we are going in the direction of moderate easing as opposed to emergency, and the Balance Sheet will play a role there. Paul i am just wondering if there is anything nagging in the back of your might after what happened in turkey over the weekend with the firing of the central bank chief, and then there is another 20 from President Trump, the signs barrage from President Trump, saying that the central bank does not have a clue. Do you think central bank bashing has become fashionable . Ben it sounds fashionable indeed. The volatility of the turkish lira is likely to go up. It probably will not have much contagion effect in emerging markets, because turkey is a very unbalanced economy. Itthe turkish lira weakens, will be l posts in turkey, not the developed markets. When you think about the developed markets, inflation rates are very subdued and stable and below the target. There is not much concern again about the loss of Central Banks, if anything, it is more about a concern that if rates were to go down further, that Central Banks would react. We are seeing this, for example, in your part of the world, like australia and new zealand. I think that is what the markets is more concerned with in the developed market, too low inflation. Shery what about the concerns over the impacts of trade . We saw the latest labor report in the u. S. We saw manufacturing jobs increased by 17,000. That sort of seems to show that it leaves the Manufacturing Sector and factory numbers here in the u. S. Have not been as affected by this trade war. Ben they have not been as much yet, shery, but if you do look at the isn data that cannot earlier in the week, it is continuing to weaken bank a bit. I think it is the function of bmiglobal story behind it, data across the globe does in fact the market, too. There is some deceleration happening, so i think this balance in the report looks good. It was also expected. I think you will see more strength from here. But it is the trend of an overall slowdown in the labor market in the United States, which does, presumably is near full employment and why you see that happening. Shery and of course we have seen President Trump also said his sites not only on the central bank here in the u. S. But also on other countries, like europe and the weaker euro. When it comes to the fact that europe right now, leaders are still juggling who has the top we are alsope, seeing the u. K. Election and Boris Johnson seems to be on the break of a landslide victory over jeremy hunt. How is this going to change the equation when it comes to europe dealing with a Trump Administration . A really challenging situation indeed, because the shifts of leadership, when you think about the u. K. , where perhaps the chance of a no deal exit is higher than before, and then also that we do not know who the next european commissioner will be and what his stance for the trade negotiation with United States, which are still pending, right, and it could will be that we see more attention happening in the future. There is that uncertainty. I think that is indeed affecting the euro to an extent that, aside from the weakness in the eurozone zone economy that is happening in both italy, and germany in particular, there is a Political Uncertainty about that too, about the leadership, even though it looks like lagarde will be the next ecb president. I want to get your thoughts on where bonds in developed markets may be heading in the second half of 2019. If we take a look at this chart here on the bloomberg terminal, you can now see that the jgb, t onds on record, the recent knows about the japanification of the global bond market, can you unpack that for us . Ben it is an interesting term. If you think about where bond are now ins germany and other parts of europe, they are actually lower in japan, and there are similar reasons for japan experiencing the 90s, advancing demographics, higher savings, ultimately lose Monetary Policy, a slowdown of the economy, all of those things are in place in europe, too, but there is some difference. Europe is a different economy. I do think there is a lot to do, expectation of your being in a situation where it has to do further work on deficits and debt that have only expanded since the financial crisis. Since it has been a crisis issue in the past, there is no Interest Rate needed to stabilize that, and i think it is one part of the idea of japan nification in europe because of major debt overhang in the eurozone. Paul all right, medley global managing director ben emons, thank you. You can get a roundup in todays edition of daybreak. Bloomberg subscribers go to day b on the terminals. You can customize your settings so you only get news on the industries that you care about. This is bloomberg. Is is bloomberg. Ery this is daybreak asia i am shery ahn in new york. Paul and i am paul allen in sydney. Lets get a check of the latest business flash headlines. Boeing has lost the 70 zenimax ax sales since the plane was grounded. They have replaced them with the airbus a320 airplanes. Flyadeal says it will only use the airbus fleet. Shery shared Office Space Provider wework plans to raise over 4 billion in debt ahead of an ipo. The wall street journal says it will use the fund to drive growth and could exten the credit line until 10 billion in the next two years. Weworks revenue is more than double that here, but it was not enough to overcome more than 2 billion in losses. Paul broadcom is identifying cost savings for purchasing symantec in an allcash deal valued at 22 billion. It has interest from several banks. The potential is about 1. 5 billion. A deal could be reached this month. Talks are still continuing. Coming up in a moment, the trade t American Farmers the biggest customer, and a recovery could take years. We will have more on the biggest fallout of the u. S. China standoff next. This is bloomberg. Ext. This is bloomberg. Reporter this is daybreak asia. President trump resumed his attack on the Federal Reserve, saying Jerome Powell and his team dont have a clue. It increased speculation he will replace Jerome Powell as chairman when his term ends in 2022, assuming trump is reelected. He is accused of fed of not doing enough accused the fed of not doing enough to bolster the economy. The turkish lira slumps after the president fired the central Bank Governor and demanded policymakers support his view higher Interest Rates cause inflation. He also threatened unspecified consequences for anyone challenging his economic line. Tensions between him and the bank rose after they kept on hold last month. Iran has officially breached agreed limits on uranium enrichment in which they say is europes failure to live up to the deal. The government will resume purifying uranium. Keeping pressure on european leaders who signed the deal but are struggling to deliver relief from u. S. Sanctions. The usa soccer top soccer ,eam has won the world cup beating the netherlands. The star of the game and tournament was Megan Rapinoe who netted six goals across the competition. Back to back triumph for the u. S. And record fourth title. They will fly back to a celebration parade in new york on wednesday. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Wang, and this is bloomberg. Paul thank you. We are half an hour from the start of cash trade in tokyo. With a look of what to watch, lets get over to sophie. The sagan seoul, continues. The german put money in a wideranging the official announcement for that sale will be issued in july after the Due Diligence report delivered to creditors this week. The chairman also touched on hyundai heavys taking over they were shipbuilding, saying they could close business if the sale doesnt go through. By does look at selling this year end or march at the latest. Korean chipmakers remain in assessing the fallout from the export curbs are you executives at samsung and sk hynix have captured concerned with the south korean government they could stop operations at the end areuly unless restrictions withdrawn. The only have two to four weeks of stockpiled materials. The Trump Administration said trade talks with china are resuming and facetoface meetings are expected soon. Beijing reiterated demands that the u. S. Remove all existing tariffs. Selena is watching this. What do we know about how the talks are unfolding . The talks have restarted with the latest rhetoric shows it a deal could not be reached anytime soon. Bejing is demanding tariffs removed, all the existing ones, but it is unlikely that will be done because of trade talks in beijing what the trade talks to remain in place. The u. S. Are due tariffs only be removed after there was promised argued tariffs will only be removed after there was promised for china to not renege on its promises. These are one of the many contentious issues on both sides. There is enforcement, intellectual property issues. Larry kudlow said while what would remain on the entity list some of the they make arrangements to expand the ability of American Companies to. Ell components to the firm we also heard from larry kudlow not to expect any solution anytime soon. He said if you want quality, dont expect speed. There are phone conversations ongoing, not expecting a solution anytime soon. Chinas auto Sales Numbers are due out soon, the industry has had problems. What are we expecting . Selina this is the worst car slump in a generation, and if you look at this bloomberg chart, you will see the downward trend as well as more than 10 consecutive months of declining passenger auto sales. They fell 17 in may but Bloomberg Intelligence is forecasting it could string strength at a slower pace given last year. The auto market has been facing Slower Economy as well as the consumer damaging sentiment especially a big areas like cars and in these rural areas, where a lot of these times it is the first car purchase, that has been hit hard in the smaller cities. It translates in to local carmakers being hit harder than the big foreign brands that have a cushion in tier one cities. The government introduced stimulus efforts, tax cuts, but the benefits will not be seen until the second half of the year at the earliest. Brightto point out one spot, new Energy Vehicle sales have been growing amid troubles in the broader auto market. Francine china correspondent paul the china correspondent for joining us. This is the First Airline to officially drop an order from boeing 737 max and it is following the global grounding after the two fatal crashes. David joins us now with more. How big of a setback is this . David it is significant if any Airline Customer cancels a number of planes. I would put caution on this. A couple of things, flying in part of said that saudi arabia, saudi arabia airline, the narrowbody fleet is all airbus a320. The existing fleet is all airbus a320. 737 max inn order of the first place last december, airlines like to have the same model to reduce cost maintenance. This is a return to norm. It is a cancellation, that is worth considering. Order out ofes on 5000 in the 737, it is 1 of the order book. Shery do we have any idea when the 737 max 8 will return . David it seems to be a moving target, been about four months that the 737 max 8 has been grounded. Problems still keep coming out. Two mexico the regulator, they announced there were further withems that had come out pilots recovering from maneuvering characteristics, which has been linked to the previous crashes. Aboutproblems could take three months to fix, so it would take us into the Fourth Quarter of this year before the planes back in the air. Last week, the european regulator came out with a fresh list of problems including things the faa havent highlighted around this engaging the autopilot. With each regulator that finds fresh problems, the others, they are the ones that started the whole thing, the chinese regulators, are going to look harder for problems. It is a moving target and it could be a way off. Paul how about the risk of cancellations . David it is worth bearing in mind since the cancellation happened, there was the paris airshow when iag came out and put in an order for 200 737 max. It was a firm order being put out. The relations between airlines and aircraft manufacturers are very close. I would not be surprised if iag got some other benefit in its book for putting out the letter of intent. No one has put in a fresh order at this stage. Airlines want this to be a success. They dont want a monopoly on narrowbody planes. This is a key part of the market. All of the delays and problems quote difficulties down the line. David they havent even presented the fournette shery they havent even resented the financial forecast. Thank you for that, Bloomberg Opinion columnist. Iran has breached the 2015 nuclear court. How will be e. U. Respond . This is bloomberg. S bloomberg. Paul iran has officially breached the 2015 nuclear accord, suppressing agreed uranium enrichment on what it says is europes failure to honor the terms of the deal. European powers are urging it to reverse the decision but stop short of threatening sanctions. We have more. What are europes option . Reporter they are limited. What we are seeing from iran is a sort of trying to expose the risk between the u. S. And europe who were keen to stay in the deal. The question is how far can europe let this go . Iran is doingant this change gradually, so they are going to come back to the negotiating table. See this as a negotiating tactic. Europe has bent it up too quickly and we are seeing a rhetoric against these moves. We will continue to see that in the shortterm, but the ball is in europes court for how far it will let this go. Shery President Trump morning i ran iran to be careful. How well has the u. S. Maximum pressure on irans strategy worked out . It is a good question. It remains to be seen. What certainly is certain is the u. S. Is stepping up. Its vocal complaints against iran, and it is a volatile situation, and we had a situation weeks ago where the president was 10 minutes away from pulling the trigger on airstrikes on iran. It is volatile, iran feeling the pressure and that is why it is trying to get leverage back by increasing the enrichment levels. Whether that will have its desired effect remains to be seen. A lot depends on whether europe decides to fall into line with the u. S. Pressure and put a united pressure across iran which will focus mines in iran on what they are getting minds in iran on what they are getting. On the u. S. Point of view, we will hear vocal pressure increased. Trump has got united hawks in his ear telling him we need to keep this going. His handbe ultimately is forced if iran shows intransigence. Shery thank you so much, asia energy asia energy editor. Joining with more on this issue is Johns HopkinsUniversity School of advanced International Studies professor of global affairs, also a Bloomberg Opinion columnist. Great having you, lets talk about the u. S. Strategy. We continue to see the maximum pressure strategy from the Trump Administration, when it is different from a strategy that perhaps they have used on north korea again, maximum pressure, but this going more internationally with international coalition. When it comes to iran it is more unilateral. How effective has this administration been enforcing allies to go along for the ride . Reporter there is a strong parallel between north korea and iran strategies in the sense that the strategies are both contradictory. In both cases the president desires to exert significant pressure on a rogue regime, to bend it to his will. In both cases he doesnt want to get into a military fight that might be necessary to achieve the end he has laid out, whether denuclearization in the north korea case or the iranian policy and regime change in iranian case. You are seeing the two contradictory elements of american strategy are becoming harder for the president to reconcile and balance. As the pressure intensifies, irans tendency to escalate becomes more announced, and that has created situations like the one a couple of weeks ago where , and the was shot down president appeared on the verge of military action. Shery how much have the iran crisis showed the world power of the u. S. . Hal what it has revealed is American Power is more significant even then many observers appreciated. What the United States has done in the iranian case is not simply apply its own economic sanctions to iran. It has forced most of the rest of the world to go along with sanctions. European governments may still be party to the jcpoa. They may reimpose American Economic sanctions, but german firms and french firms and british and others dont have a lot of choice, but to go along with the american sanctions. If they violate them, they will lose access to the american market. Paul in terms of nonchoices, President Trump has invited the european in Iranian Regime without it is not appealing. Hal the iranians would need some sort of american concession or some sort of european concession perhaps rider to entering into any negotiations. The image that has been portrayed is the United States , andeen applying pressure just politically speaking it would be very difficult for the iranian leadership to go into a negotiation on its back foot in that sense, unless it receives some sort of even symbolic concession before hand. We have a chart on the bloomberg terminal you may not be able to see, but what it illustrates is how severely Iranian Oil Exports are getting squashed by the sanctions. This is going to create some stress with an iran. Is this a recipe for inviting iran to lash out . It could be. The iranians are deleted they could wait out american pressure, they could iranians thought they could wait out american pressure. On the confirmation that a Democratic Congress or democratic president after 2020 would take a more accommodating line. I think the regimes patients, onis patience depends how tough the sanctions might be. Everyone is figuring this out, and the iranians are figuring out they are biting harder than they had imagined. That is what iranian escalations of the past couple of weeks have been about, trying to generate counter leverage in order to strengthen irans position in a crisis where it was coming under severe strain. Shery we heard the Trump Administration threatening sanctions on the [indiscernible] as a vehicle of trade three and the u. S. And iran. What will that spell for the nuclear deal between europe and iran . Hal it would be less significant in terms of u. S. Iran relations instead of europe u. S. European relations. It will have a relatively minimal effect on the Economic Campaign against iran, simply because there is not a particularly good way for european firms to shield themselves from american pressure. The u. S. Did go after this through the use of sanctions, it would be seen as significant escalation against europe by the europeans. That would intensify the sentiment you are seeing now in european capitals. There is a great amount of unhappiness with the way the u. S. Is using its financial power to course European Countries into taking a tougher posture towards iran. If the u. S. Were to increase pressure, there would be more impetus in europe to develop instead of the american centered Financial System over the long run will stop paul i want to get your thoughts long run. Paul a very large ship full of iranian crude was seized off of gibraltar last week. Iran has threatened to seize a u. K. Ship. If it was carried through, how much escalation would it represent . Hal i would look less for asymmetrical response of the type, sort of titfortat response than asymmetrical. The iranians have responded to what they view as provocations through asymmetrical means, because they realize they cant take on the u. S. And its allies and partners in any titfortat fight. You might see additional action in the persian gulf or in the strait of hormuz, some sort of effort to disrupt shipping and way of signaling irans ability a d havoc rick have a seven be more likely attack, then an effort to seize a foreign tanker. Shery thank you for joining us today. Johns Hopkins School of advanced International Studies professor of global affairs. We have breaking news out of japan, we are seeing the current account surplus for the month of ¥1. 594japan coming in at trillion. This is narrowing from the previous month, but it is beating expectations and coming higher than estimates of ¥1. 3 trillion. The current account surplus for the month of may is ¥1. 594 trillion. When it comes to the unadjusted number it is ¥1. 3 trillion. We have Lower Oil Prices inflating the import bill, so that could have given it a boost and helped the numbers eight estimates. With core machine orders month on month, they plunged 7. 8 , which is a bigger fall than expected 3. 8 and is contraction from the previous month of april when it had grown 1 . Machine orders falling 7. 8 , year on year 3. 8 . This could be reflecting the weak external demand for japan. We have seen weak exports and the stronger yen hasnt helped. Core machine orders month on month shrinking 7. 8 , the current account surplus also narrowing to ¥1. 5 trillion. If you miss out on any of the conversations we had throughout the show, tv in your tv is your function. You can watch interviews and watch us live, and if you want to focus on securities and functions we talk about, on the right side, you can ask the guests a question on the bottom left all stop this is for bloomberg subscribers only. This is bloomberg. Lets get a quick check of business flash headlines. Deutsche bank announced a radical overhaul that would mean the end of its equities business , a secondquarter loss of 3 billion, and elimination of 18,000 jobs. Shouldering dividends this year and next and will take a restructuring charge of 8 billion through 2022 to pay for this. It was approved by the board on sunday. Gold is working with advisors to find a buyer for its project in senegal. They acquired the site as part of the purchase of iran Gold Resources in january. It is excited to be worth 500 million. They are targeting 1. 5 billion in assets sales through 2020 as they try to sell off smaller and unwanted operations. Shery Punjab National bank has closed a new fraud amounting half 1 billion. This comes a year after pnb went through indias most expensive taking scandal and leads to nonperforming assets on insolvent power and steel company. They appropriated bank funds and manipulated accounts to raise money from other lenders. The markets in japan, south korea and australia getting underway at the top of the hour. Lets preview the market open. Up for ae are setting lower open while the yen is trading near a threeweek low as traders wait to learn more from jay powell this week. Japanese investors will have machine orders to consider, marking the first drop in four months. Nothing up on markets after friday, they brought the rally to a halt, treasury users with a steady start to the week after they pulled back. These was hinting at losses after dropping the most april 15. Aussie bonds are under pressure. Above 1. 3 . Here is the charge on the terminal, illustrating how asian stocks are running hot after capping a fifth straight week of gains, the longest in 17 months. Renewed appetite will be tested backweek with various to back with losses, the total nearly 9 . Paul thanks very much. Still to come, we are joined by kapstream capital m. D. And Portfolio Manager raymond lee and a macro strategist. The market open, coming up next. This is bloomberg. Good morning. I am paul allen and sydney. Bloombergs level headquarters in new york, i am sherry ahn. I am Sophie Kamaruddin in hong kong. Welcome to daybreak asia. Paul our top stories this monday, asian markets face a muted start, but are on the longest winning streak in 17 months. Australias within distance of a record. President trump fires off a twitter barrage saying Jerome Powell and the fed do not have a clue. Says the white house trade talks are underway and facetoface talks should happen soon. We have the latest from beijing. Sophie we also have the latest from beijing when it comes to data we are seeing end of june forex reserves at 3. 119 2 trillion. Of china staying above the 3 trillion mark. The estimate was for 3. 11 trillion, so it is slightly above estimates, when it comes to the gold reserves coming in million troy ounce when it comes to gold reserves in dollar terms, 87. 26 8 billion. The import number now is the forex reserves, which have come in again above the 3 trillion mark, slightly above what was ected at 3. 119 point chilly dollars. The markets get to in hong kong, japan and us joy. Withe shares are underway the nikkei losing half a percent while the yen is trading at three b cloak. Retreating from recent lows we have seen we have the 10 year yield seating at 14 basis points this morning. Ofestors are taking stock the jobs reports implications. For economic and earnings growth, Morgan Stanley has cut earnings. Over the u. S. And emerging markets. Off nearly 1 . The one is trading weaker against the dollar. Chipmakers in view as they assess the fallout from japans export curve. The start of cash trade. Executives are reportedly concerned that ship operations could be stopped this month of restrictions are not removed. Kiwi stocks are off about 1 10 of 1 . The asx 200 is also under pressure this morning, but not too far off from a fresh alltime high. The aussie dollar is looking steady after slipping back below 70 on friday. Ill say 10 year yields are gaining ground, climbing as much as seven basis points. Treasuries early in the asia session adding to the advance we saw on friday. Gold is sticking below 1400. Hedge funds are growing more pessimistic, pushing bearish bets on crew to a fivemonth hide. Traders are assessing the fallout from the turkish president sacking the chief of turkey. Tote sophie. The conservative new Democracy Party has won a sweeping victory in greece giving a former banker the mandate to rebuild the economy, after 10 years of crisis. The democracy took off with 40 of the vote, compared with 31 for the other party. He lost support after agreeing to demands for more spending cuts by international creditors. I feel i have a strong mandate to deliver on my agenda, an agenda to grow the economy and create more jobs. Also to make sure that the greek people feel safe again. House Economic Advisor says he expects u. S. China trade talks to be back on track soon. The two sides have not held facetoface negotiations since midmay, although senior officials have reviewed talks on the phone. President trump and the president china have agreed to revive talks when they met at the g20 last week. There on the phone. The leaders, the senior people on both sides. Lighthizer, secretary mnuchin for the usa. They have been on the phone and will be on the phone this coming week. I think a facetoface meeting is in the cards. I do not want to get ahead of that story. People were arrested as a small group of protesters classed with bright place in hong kong on sunday night. Thousands marched against the government controversial and extradition bill. Executive carrie lam suspended the bill last month. Epstein is due to appear in court after being arrested and charged with sex trafficking of minors. He pled guilty of two plans of soliciting a prostitute in florida. He avoid being tried for federal sex trafficking offenses in a nonprosecution deal. Global news 24 hours a more than 2700 journalists and allison hundred 20 countries per this is bloomberg. Shery we have an alert on a story we have been following. Deutsche Bank Spokeswoman saying that they will act cap exit the japan equity and sales trading business. Japanill keep bond m a in and will continue its ecm business in japan. This coming after that radical overhaul seen for Deutsche Bank, where they are expected to exit their equities business. There also cutting their 74,000 byto set off 2022, as they try to turn around the business. We are getting more clarity when it comes to the japan business, specifically, with the spokeswoman saying they will exit the japan equity sales, trading business. But they will keep their bond, m a, fx and one of the business in japan. , the fed has been laying the groundwork for a rate cut when the f one c meets at the end of the month. However, the strong jobs numbers may force a change in plan. Kathleen hays is here with fridays jobs report and what it means for the fed. How strong were the numbers, and what impact will this have on the Interest Rate path . From the strength of the report, the rebound we see from the previous month, it looks as if it will make this debate in the fed meets at the end of the month, all the more intense. Lets start with the numbers, because that helps paint a pitcher of why the fed may have to think harder about whether or not it can cut rates for its july meeting on july 31. You see payrolls gain in this chart, rebounding to enter 24,000 from 72,000 in june. You can see this on the far righthand side. There were a couple of pretty tok numbers rebounding 224,000, from 72,000 in june. Numbers, factory jobs, manufacturing jobs, were up evan teen thousand, even though some of the were up 17,000 even though some of the manufacturing pmi having getting weaker. Unemployment did rise 1 10, because people did enter the labor force. You look for a job when you are optimistic. Traders are saying that there is enough strength in this report to complicate this debate, and people are backing off on how many rate cuts they see this year. They had been getting quite spoke to thehen i president of st. Louis fed last year. He next the idea of a 50 basis point cut. Since then, we have seen the rate cut bet easing off, especially after that jobs report on friday. There you see the big move. Again, i think this june jobs report makes people say, a 50 basis point rate cut, probably not. Now it is all about, are they ready to cut 25 basis points or not. Chair jay powell is testifying before congress on tuesday and wednesday of this week. What will he say . Big question is, when he asked his first testimony on wednesday, the thend on thursday, given semiannual report on the economy and the Monetary Policy to go with it, will he signal a rate cut. And when will he signal it may happen . The fed already released a semiannual report on friday. This is new in the last couple of years. It shows the fed standing by its openness to cutting rates now. Because even though spending has picked up, there still concerns about the global tensions, and this feeding over into the u. S. Economy. Bloomberg economics points out that the yield curve still argues for fed rate cuts. Maybe not in july, but certainly by september. An of their gauges, the threemonth yield versus the 10 year yield, is still inverted. Not as deeply inverted as it was. This is something that will surely come out in jay powells testimony. Finally, on wednesday we will get the minutes from the june meeting. At the june meeting is when the fed revised its summary of Economic Projections on growth, inflation, unemployment. That is when we see, almost half of the federal open market committee, looking for rate cuts this year. Six of them looking for a total of 50 basis points. So we got a lot of information we will get a lot of information to digest on wednesday. It may tell us about the july meeting. Paul our nance guest is bullish on treasuries our next guest is bullish on treasury. Aymond lady, raymond lee, thanks for joining us. I would like to get your thoughts on where the fed may be heading. The chart you can see shows the output for fed cuts easing. Now expecting around 25 basis points. Do you buy this argument, the argument for easing has easy . Raymond absolutely. The data last friday was strong. Jobs, and wage inflation. It means that the fed has cut this tension between lower pce and trade wars. Two cutsitive side is not so likely but one cut is likely to affect the slowing of Global Growth. Paul how but the sustainability of those job numbers as well . We expect unemployment to remain around 3. 7 or 3. 6 , and to get a 200,000 job print every other month or so, is not out of the question. The driver for the fed is going to be the inflation number. If that takes up, then you will see the fed act accordingly. That is the thing to focus on. Nhery yet we have not seem pressure when it comes hourly earnings. As the fed hoping that inflation will be transitory . Raymond if you look at inflation for the last couple of years, it has been almost two step forwards and one step back. Even wage inflation, if you been tracking it, it went from low to two mid two, now into the threes. Sharemo the previous vice wageir said that if pressure gets into the threes, it allowed pressure. You might see the fed act accordingly, with the type of trends in the market. The inflation trend in the lower side, not just in the u. S. But in europe and japan as well. They given all of uncertainty priced in, we have seen the treasury rally continue in the gtb chart on the bloomberg. Pce cyo i cpi year after of year. Has this move gone too far . The mood has to reflect the fundamentals. Back to september, the market was pricing and for rate hikes. Since then, the fed has pivoted. That reflected slower growth. When you look at the first half of 2019, it is different from 2018. Followed the slower rate of inflation. We still want to stay long rates. We think the risk of rates backing up substantially is on the lower side. If anything, central blanks banks will remain dovish. So you want to be longer rate as opposed to shorter rate, in this environment. Paul you expect that central bank dovish nest to continue. But you are not that optimistic about the Global Growth outlook . [graphic of us 2 yr yield] raymond gdp is probably not going to be us strong as investors might think it is. Investing in lower beta sectors that will do better if the market falls off, is how we are managing risk so far. Paul raymond lee, please stay with us. Still ahead, Deutsche Bank shaking things up with a radical overhaul. Next, is it enough to put money to work in emerging markets . This is bloomberg. Ets . This is bloomberg. a traders portfolio. Data due outinese this week. We have the forex reserves coming in at 3 trillion. Other figures will be in the spotlight after that trade war truth. Beijing says all terrorists need to be lifted, for a deal to be struck. Portfolio manager raymond lee is still with us. He is looking to increases em exposure, but trade remains a key rest. Shery raymond, we continue to see uncertainty over trade. Does this mean there will be a cap on rates at the moment . Raymond definitely. If you look in the u. S. , longer and rates have been cap by expectations, or trade wars in general. If you think traders will continue to be a problem, you will see a cap in longer term rates. I do not see a revelation of the trade or anytime soon resolution. Ip. P ones restructuring on side, they want all the terrace the u. S. Has imposed to be off the table. Tariffswant all of the off the table. Because of these differences, this trade will take longer to play out. That will keep longer rates cap at that to percent mark. 2 mark. Shery keeping in mind that they have plenty of ammunition and policy tools to work with. Absolutely, there is always talk about chinese growth slowing, what one thing we can focus on is they still have a lot of tools that the western world does not have to address economic problems. First, one of the highest Interest Rates in the world. They still have over 3 trillion of reserve that they can put into the system. The90 of the debt in country is located domestically. So they are not at the mercy of International Capital markets. With all of these tools in place, it helps them be able to manage the slow down in a way that the economy can sustain itself over a longer. Of time. In terms of china, there is a currency dimension to the trade war. Peter navarro, the trade advisor, said beijing has weakened the yuan. But data shows it strengthening in recent weeks. You thicket is a fair criticism . Raymond if you look at the last six months, it has weekend. It has become weaker. The key point from chinas perspective is that the overall weakening has been positive for them as this trade war lays out. Around 7 cny around seven is where they do not want to weaken. So i suspect they will concentrate on that 7 handle. If it gets higher than that, you may see regulatory action on that you on side. Thoughts on you as well. Get some can still decent returns, around 9 in 2019. Is that something it appeals to you . Raymond when you are buying em the market is also if you think that is going to happen. The dollar may selloff and em otherp rally. Economies, like india, might be a good place to start. As up but you looking at turkey, which may be more volatile. Turkey dismissing the central Bank Governor, weld is due for investors looking at the country . What will this do for investors . Upmond there was firming the lire by increasing Interest Rates and containing inflation. With the central Bank Governor being fired, they will probably into place someone more dovish. If they cut Interest Rates, you can see the currency weakening. A much fors for joining us. You can get around up of the stories you need to know to get your day going in todays edition of daybreak. Beomberg subscribers 02 day go on your terminals daybgo on your terminals. You can customize the app so you only get information on the assets you care about. This is bloomberg. Shery Deutsche Bank will undergo one of the most radical overhauls since the financial crisis. In its latest turnaround plan, it will cut close to 18,000 jobs, and quit its equity and sales business. The impact will be immediate for investors. Absolutely. They will post a massive loss in the second quarter. Ube in billiondollar loss a to billiondollar loss. It is a sweeping change. Investors have been reacting well so far, given they wanted to see some drastic from Deutsche Bank. Paul there are a lot of changes at the top level as well who is on the way out and he was moving up . Seeing Garth Ritchie moving out, and leaves the Investment Bank under the care of mark federer sick, and nyack. They are keeping a lot of the fixed income business. There will be changes there so the pressure is on for them. The other interesting person living up is a woman named christiana reilley. She shows a commitment to the americas, even amid this global retrenchment. And stephen hoopes, who runs the newly named corporate banks, which is the future of the firm. Shery what does deutsches want to look like at the end event . Something im hearing from investors is they like the idea of the bank de levering a bet. They have not been able to compete in equities. Fixedill still have a income business, a banking business. A presence in global transaction blanking global transaction business. The jam business. Moving global money around from global clients. Indian lender Punjab National bank has disclosed a new fried amounting to half 1 billion. The news comes through the bank went through the most extensive banking scandal. Hushannk says that b misappropriated accounts. Boeing has a commitment since the grounding. Replacement of boeing with an airbus late flared an airbus late. Going last first 730 seven max contract since the grounding. Paul shared office space plans to raise 4 billion dollars ahead of an ipo. They will use the funds to drive growth until they become profitable, and could extend credit line up to 10 billion. The Company Double last year, but it was not enough to overcome to blame dollars in losses. South koreas been president prepares to meet Business Leaders and limit fallout for japans export ban. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Here are the first word headlines. Afterrkish lira slumped the president fired the central Bank Governor and demanded that policymakers support his fees that hire Interest Rates cause inflation. He also threatened unspecified consequences with anyone challenging his economic line. Officially breached agreements on uranium enrichment. The government says it will resume. Buying uranium beyond a percentage excepted in the nuclear accord. President trump has resumed his attack on the Federal Reserve, saint Jerome Powell and his team do not have a clue. That increases speculation that trump is preparing to replace powell as fed chairman when his term ends in 2022. The president has continually doing the fed for not anything to bolster the economy. He says he has the ability to fire powell at any time. Johnson is set to become the next u. K. Prime minister. The winner is expected to enter downing street in the week of july 22. The Usa Soccer Team has won the world cup, beating the netherlands 20 in the final in france. The star of the game was Megan Rapinoe. She netted six goals across the competition. Back to aill fly celebration parade in new york city on wednesday. Shery ahn markets in asia under pressure at the moment. Lets get another check. Check out these columns of red. Over in tokyo, the nikkei is halting a twoday gain. So is the cost be. Kospe. Lets get a quick check on some stock movers. Aeon is falling in tokyo. Over in seoul, we are seeing samsung leading the chip stocks. They are seen as benefiting from japans export policy. Lets stay with those simmering tensions between tokyo and seoul. The korea that finance minister held talks on the external economic situation. Reportergovernment joins us now. What do we know about that meeting . Deal ofnt have a great detail. What we have from local media is that the Major Companies lg. Uded hyundai, they were meeting with the president of south korea. Theres obviously a great deal of concern. About what affect the restrictions on exports and essential materials could have on south koreas industry as a whole. Thate also hearing samsungs vicechairman is visiting japan at the moment. Given that this was coming at a time when japan and to bicker, continue what has the japanese government actually said about this . They have said so many Different Things that has become a little bit confusing. South korea decided to disband a fund that was meant to compensate women who are trafficked through military and world war ii. They have also said there have been inappropriate incidents involving the export of these three materials to south korea. Over shery ahn over in china, foreign currency of holdings rose rose again. We are breaking down the numbers. Give us the latest. They take some added significance among the geopolitical situation we are in right now. Interestingly, we saw more inflows than outflows. All of the existing tariffs have we also heard from larry kudlow, who told us that there is not a timeline on these negotiations. Quality,nt call there will not be speed. Paul chinas auto Sales Numbers are due soon. The industry has had some problems. What are we expecting. If you take a look at this bloomberg chart, you will see this downward trend. Bloomberg intelligence is forecasting that shrinks could slightly narrow. Paul our china correspondent in beijing. Thank you very much. Still to come, a strong u. S. Jobs report and falling rate bits are giving the dollar another boost. This is bloomberg. Shery ahn the strong u. S. Job reports and rate cutbacks are giving the dollar a boost. The easing cycle should start away on the dollar. Does it change your view on the dollar . Thank you for inviting me again. I do not know. It does not change our forecast. And a weaker dollar. Ofo rule out the possibility a 15 basis point cut in july. We expect a december cut. Narrowing rate differential between the u. S. And the rest of the world. How long will the dollar stay weak . Have think the dollar can a peek from current levels. That should drive it lower than current levels. Paul President Trump said china is doing a currency manipulation game. Do you have any concern that we could see a currency war bring brewing . I would not say there will be a currency war coming soon. Perspective,ese. Hey are reluctant they need more stability. Shery ahn what is this telling us about capital flows in the chinese yuan . The economic reserves stable has told us that china has not differentiated its currency from the start of the year. They have been using physical stimulus instead of monetary stimulus. We dont think they will cut policy rates. Paul i want to talk about some of the other asian currencies. We have a chart here. What point is this going to become a serious problem for the bank of thailand . We are actually bullish on that. Weak global activity will make the currency vulnerable. Those in korea, taiwan, singapore, and thailand. Paul i have to give your thoughts on the aussie dollar. It is stubborn. It is dipped below . 70 again today. . Hat is propping it up aussie markets are always seen as a proxy of china data. If china goes well, australia will as long. Well. Shery ahn why are you expecting sterling to outperform . To rebound . Especially at a time when we could see Boris Johnson take the home alum helm. In terms of valuations, the sterling dollar has been very attractive for us. I am guessing on relative terms, they are better peaks than sterling. Put a comfortable only to long yen against the dollar for now. Let me just pointed to the growing number of negative yielding debts. Chart on the bloomberg. They are topping 13 trillion now. When you have so Much Negative yield among the g10 economies, what does this say about capital flows and what will happen to emergingmarket effects . This is one of the key reasons why we are so bullish on yen duration and effects this year. 2030 of ther total bond market in the world. We think this will discourage capital from flowing into developing markets. We have some strong inflow. We expect the strong momentum to continue. We do expect to see, after july, a cut. There will be more inflow into emerging markets. Withially for markets stronger risks. Such as indonesia. We are very bullish on indonesia. Shery ahn always great having your thoughts. If you missed any part of that conversation, tv is your function. You can watch our past interviews and watch us live. You can also dive into the functions we talk about. This is for bloombergs subscribers only. This is bloomberg. Shery ahn Hong Kong Police have arrested five people while dispersing a protest in one of the cities biggest tourist districts. A small group of protesters clashed with riot police late on sunday night after tens of thousands of march the governments controversial extradition bill. But get the latest from our Bloomberg China editor. What was the goal of this protests . Our protesters any closer to getting that extradition bill withdrawn . This is a bit different from what we have seen in weeks past. The protesters yesterday ones to take their message to mainland tourists. So they march the one of the busiest tourist and shopping areas in hong kong on the side. Oo and kowloon it shows the nature of these protests on the momentum they have. They have gone on much longer. They walked from the shopping district to the west Kowloon Railway station which has highspeed rail to china. They wanted to take a message to mainlanders and that the know what was going on. Paul how have please been treating the demonstrators during this latest protests . Usingice have been different methods. They have come under a lot of fire internationally for using excessive force. Demand ofe a key protesters looking into the use of that force. What they call police abuses. Theaftermath of that over last two weeks. Police have scaled back their presence a bit. Last week we saw Little Police presence for most of the night. They came out late at night in an effort to disperse the protesters to remain. But did follow a pattern where the priests Police Presence was lighter. But they come out in force at the end to try to get rid of people. Shery ahn will we see more instructions . That looks like it. Looks like were going to have another demonstration next week owloon side. We havent seen anything from the main protest organizers are the opposition. We could see something next weekend. I looks like this will continue to go on. This is thousands of people coming out, they have momentum. It is unlikely that this will fade out anytime soon. Our Bloomberg China government editor. Lets get a quick check of the business flash headlines. Deutsche bank has announced a radical overhaul that will mean the end of the equities business and the loss of 3 billion and the elimination of 18,000 jobs. The ceo is shelving the dividends business this year and next and will take a restructuring charge of more than a billion dollars in 2022. The plan was approved by the board on sunday. Shery ahn we are told that broadcom has won commitments from several banks. It sees a synergy potential of 1. 5 billion. A deal could be reached this month. Talks are continuing. Merrick gold is working with advisors to find a buyer for a gold project in senegal. They acquired the site as its purchase of rand gold in ja nuary. Worthal is said to be 500 million. But to get a preview of what to watch in markets later this morning. From taiwan, we will have trade that do this afternoon. Analysts are raising capacity for the new models to watch in the second half. Eva airways is also on watch after workers agree to and a strike. We are watching chinese carmakers after increases in sales. Watch their shares. Expects a positive reaction to the positive numbers. July numbers are expected to grow mildly. This comes after the Company Issued an apology for its chairmans behavior after he was arrested. That led to a plunge in the stock in hong kong. Both stocks have been put on negative watch. Over tofore we hand Bloomberg Markets asia, lets take a quick look at how we are trading right now. Seeing weakness across the region. The cost be in south korea is off. We are weaker here in sydney as well. After one hour of trading. New Zealand Holding the line. Shery ahn were seeing a lot of pressure around markets at the moment. Expectations of fed rate cuts using. U. S. Futures are under a little bit of pressure when it comes to the chinese features. Futures. Holding. Se yuan we have seen the dollar fall in global trade. Us. Is it for the china open is next. This is bloomberg. It is 9 a. M. In beijing. We are counting down to the opening of trade in hong kong and mainland market. Region andcross the bonds under pressure. Deutsche bank readies for a shakeup. The turkish lira slumps. Warnsent erdogan policymakers to get on board th