Arrivedtwitter ahead of trade talks, raising the presence among the american people. Shery later in Bloomberg Technology global link, ibm closely 34 billion purchase of red hat, sealing the worlds secondlargest tech deal ever. Will this help ibm catch up in Cloud Services . We will discuss. First, a quick check of how the markets closed in the u. S. The s p 500 pushing higher. In the last hour or so of trading after fluctuating between gains and losses. We have fang stocks meeting the gains. We saw some declines when it came to the consumer staples. Not to mention material stocks that led the gains. We have the dow unchanged at the toent, falling slightly down 26,783. Investors still bracing for powells testimony to the house tomorrow and the senate on thursday. Lots of Central Bank News this week. Fed minutes on wednesday, ecb minutes on thursday, and Inflation Numbers on thursday. For the time being, we are seeing u. S. Futures unchanged. Investors being cautious at the moment. Lets see how we are shipping upper asia. Paul caution seems to be the word around the world as well. Futures in most markets pointing modestly higher, particularly the nikkei to a 10th of 1 higher. We are here in sydney as well. New zealand has been trading for a couple of minutes. Higher by 1 5 of 1 . Lets get the first word news with riddick a grougupta. Qatar has agreed to spend billions of dollars on planes and jet engines and to work on a petrochemical project. The deal was signed tuesday during a visit. The agreement includes qatar buying u. S. Military equipment and the Patriot Missile defense system. Qatar airways with going planes and gulfstream jet. The former head saudi intelligence says washingtons longawaited vision for middle east peace will fail unless it involves a palestinian state in the capital of jerusalem. The plan laid out by Jared Kushner is up in the air and will not succeed without the palestinian nation. The palestinians boycotted where kushner presented his plan last month. The British Parliament has voted to prevent the next Prime Minister, coursing through a no deal brexit. The house of commons backed the bill by just one vote. Meanwhile, the Opposition Labour Party has changed strategy and now backs a second referendum on brexit. Jeremy corbyn says the party would campaign to stay in the eu if a second vote were called. The Iranian Military is having to retaliate against britain for the seizure of a tanker, accused of taking oil to syria. The tanker was in International Waters and not headed to syria and describes the u. K. Action as piracy. The retaliation threat highlights the growing threat of shipping in the gulf. B. P. Is said to be keeping an md carrier close to the coast rather than having it seized by iran. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts. This is bloomberg. Shery thank you. Federal reserve chairman jay powell is likely to face questions on everything from stubbornly low inflation to President Trumps constant attacks. Hes testifying to congress on wednesday and thursday. For investors, there was only one question though he indicate a rate cut by the end of the month . Our Kathleen Hays is here with a preview. Would this question have been easier to answer if last weeks job data had not been so strong . Kathleen we can only assume that is the case because then we would have seen two months in a row, may and june, where payrolls were far shorter than recent averages. Putting the pressure on jay powell and his colleagues to say no doubt about it, we have to cut the rate now. Hes testifying to the House Financial Services committee on the economy and the appropriate Monetary Policy given its condition. Speaking of this, lets remember at the june meeting, the fed, this powellled fed made a historic shift. First, they took rate hikes off the table. Next thing you know, about half of them are saying it is time to have rates lower. What these dots show you, eight represents the thoughts of eight fomc members. At least one, if not two rate cuts this year. Another eight say they are not ready to see any rate cuts in 2019. The outlier, the person who sees one rate increase. Nonetheless, what it boils down to is, yes, we have seen a rebound in payrolls. Consumer spending has come back a bit. The data do not clearly signal the need for a rate cut just yet. On the other hand, we can look at invaded inverted yield curve which many people say that is a sign that recession worries are growing. That is why in insurance rate cut is needed now. What we will look at here is how the odds with the markets pricing in in terms of rate cuts have shifted. The market is looking for a 25 basis point rate cut. What about the 50 basis point that the market was seeing . Thats gone away, particular since i sat down with jim bullard on june 25. A 50 basis point cut would be overdone even though his colleagues had days before said that is what the fed needs to do. Heres powells challenge. How is he going to send a clear signal of that intention . He has to represent himself and the entire fomc, at a time where the entire fomc may be divided. Paul when jay powell does Start Talking and giving his testimony, what are we going to be watching for . Is there a risk he might overdo things, is he going to be walking back these expectations . Kathleen whether he tries to walk them back a bit or tries to make clear they are on the table, i think you make a good point. What does he say to make sure he does not emphasize whatever he says too much and gets the markets going. What people want to know, will he repeat what he said recently that the fed will act as appropriate to sustained economic expansion . That is important because people think sustained economic expansion, the fed opens doors to the rate cut. Lets look at things we are looking for. After we saw the Monetary Policy report that will be presented to Congress Wednesday are the kinds of things we get from that. People are looking to see if we get an upgraded assessment of the economic risk. If we see powell talking about the risk rising, he is establishing the rationale for a cut potentially. The fed sees weaker global trade, business uncertainty, curbing investment. Those are the kinds of things people are looking for to see how much powell emphasizes. Of course, he is going to be asked to respond to donald trump and his constant attacks on the fed, on jay powell himself. Going into the testimony today, larry kudlow, Economic Advisor to President Trump, said powells job is safe at the present time. It isr, he did say advised to take back the rate cut. Republicans and democrats, this will probably be a three hour testimony, plus question and answer. 60 members of this committee, the majority of the republicans, you will hear politicized questions from both sides. As i said, what does jay powell signal . How does he handle this point where the fomc itself may not have its mind fully made up ahead of the meeting and this is on july 31 . Paul Kathleen Hays, thanks for joining us. Still to come, urgent and desperate. How the trade war is threatening the existence of many chinese factories. Our exclusive interview with the head of the Worlds Largest supplier of goods. Shery wells fargo offers us arguments to shifts to riskier assets. Stay with us. This is bloomberg. Paul we are counting down to the sydney open. A cool and clear morning. Futures pointing higher by half of 1 right now, following mixed positive day in u. S. Equities. Im paul allen. Shery im shery ahn. Lets have a closer look at the u. S. Market action. Late p 500 eeked out a session gain. A rally in the faang stocks helped offset losses in material and consumer staples. Su keenan has more. Who can blame investors for being more cautious given where we are headed into this week . Su everyone seems to believe there will be a fed rate cut. It is what happens next is the big question. What investors dont know what is happening next, they tend to go to the sidelines. We did see the s p hundred each out a gain. We also saw the dollar at a three week high. Index, the semiconductor was an area of strength. Again, you have the s p 500 futures flat as we look ahead to the wednesday session. Bloomberg andthe find our library of charts. Good news with bad news. We have the s p 500 moving higher. Lastly, we were at alltime highs. We are starting to see a drop in futures. That kind of disparity is an issue because one of those is going to be proven to be the right direction and that will tend to be a wakeup call for the markets. Lets move into some of the big movers. You will see that carlyle group, interesting story, the private equity firm. They will convert to a corporation when they report secondquarter earnings. The washingtonbased firm will be the last of the private equity giants to switch from a partnership to a corporation. Facebook also got a big boost. A lot of talk about its libra coin. Advanced micro devices showing strength in the chip stocks. Levi strauss was up ahead of earnings but take a look at how it is moving after hours as it fell bigtime after missing its earnings. s the Second Quarter as a Public Company and tumbled earlier. 21 from the prior year. Big disappointment there. Paul su, commodities in the spotlight. Different reasons though. The stronger dollar putting pressure on gold. Then, we have oil surging on reports on wednesday that supply data will be bullish. Su supply data appears to be front and center. You can still see it is on a wild ride. But, it has definitely finished on a high note and surged an extra 2 after hours on the api report showing stocks fell by 8. 1 billion Million Barrels last week. It is confirmed by the government report on wednesday. Set thedown should stage for a rebound because prices have been way down because of fears of slowing demand. Gold. As we talked about yesterday, it is a no mans land. It has been seeing some of the wildest price swings since 2015. The latest price swings had to do with a stronger dollar, although it did gain, closing above 1400. Take a look at copper. Fell 1. 3 in the latest session but look at the threemonth low. Copper way down by trade concerns, above everything else. That reflects the weakness we have seen in material and material stocks. Shery thank you for the latest on the markets. We have this perennial debate when it comes to risk on versus risk off. Wells Fargo Securities is encouraging investors to think about moving money back to the risk on side. Anna han, strategist for wells fargo, is with me in new york. That is hard to do when you have so much uncertainty over Monetary Policy and trade policy. Is there a risk this week that mr. Powell could disappoint markets given that we have been really expecting rate cuts to come soon . Anna i dont think in the way he will disappoint with no cut. What i think is important in the takeaway is that unless you get some huge red flags in the testimony, we are going to enter into a more accommodative environment. When you have that, that is an opportunity you take to put risk on. Now that it is a bit overcrowded and a little bit overvalued. Fory does it matter that, example, corporate earnings outlook do not seem to be too great . This chart on the bloomberg showing you the more companies are lowering the profit outlook. This is a number of companies that has rate forecast minus those that have cuts. Is this because companies are cutting in order to make it easier to clear a lower bar or could this spell a little bit of trouble later on . Anna you certainly want to have an easier bar to jump over but the way we look at earnings, it is a Temperature Check on how the u. S. Economy is doing. How is the u. S. Consumer doing. The past earnings quarters as we have gone through this tariffs and trade turmoil, we have see from the earnings in the s p 500 that companies are able to mitigate. They will move the supply chain around and pass on price. Unless you see a big shift or a red flag in this earnings season, we expect a steady path but a steady u. S. Economy. Paul so, you are expecting a steady u. S. Economy. You also feel some of these defensive plays are a bit overdone. Why do you expect the fed to cut 50 basis points this year . Anna wells fargo security is for 25 points in july and another one later this year. I agree, the markets are considering a 50 point cut. Maybe that is something chairman powell can clarify in the next few days. Paul how about the trade war as well . I know you have some optimism that will be resolved before the end of the year. Anna yes, we believe the trade war will find some sort of resolution by the end of the year. As we are getting closer to the election and other macro events, you see a little bit more of heating up in the debate. The g20 came out, volatility in the market has dropped and i think people and investors believe we are progressing towards a better deal. Shery yet, would you be more cautious when it comes to different sectors of the market . Because whether it is trade tensions between u. S. And china, you have the huawei issue, or south korea and japan, semiconductors seem to be always caught in the middle. Anna i hear you on that one. Semis have had a bumpy ride year to date. If you believe like we do that trade and tariffs find some sort of solution, that will go well for the Semiconductor Space in the s p 500. Markets dont happen in isolation. We are keeping an eye on what happens in japan and korea but we think that is a minor magnitude than what has been going on in the chinese trade war. Shery going back to your point about defenses and how they can be overvalued. This chart showing the premium of defensive stocks versus cyclicals at the moment. Does that mean you have let go of some of those defensive sectors . Anna yes, we were overweight and brought it down to neutral. We saw the Technical Analysis space over but. Looking at this low volatility index, look at the performance of that. It has had a great run over the past couple of years because of the macro overhang. Now we think that boat is tipping too far to one side. If you are too late, youll get run over. Paul youre broadly optimistic but do you see some Political Risk coming down the road . Im thinking in terms of the debt ceiling which has been reached again. That appears to be rife for a political showdown . Anna i think definitely in the last quarter of this year, we will have a keep an eye on it. With that, we will see in accommodative fed environment and powell has given is no reason to believe they have lost touch with the market orally might see something we saw in december. Shery how much will regulation affect the faang stocks that has not had a good run but at the same time we saw apple plunged more than 2 because of a downgrade . We are now seeing this election season where you can see more and more talk about oversight for these giants. Anna that actually plays into her thesis quite well. We are in the value cap. You see a lot of the regulation move into the growth side. For us, we see that as certainly something to watch for but not something of a huge concern because we think the opportunity is when things are priced cheaply. Where you can find lower multiples that have an epic opportunity for expansion. Shery thank you so much for joining us today. Anna han, wells fargos securities equity strategist. You can find a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers, go to your terminal. It is available on mobile on the bloomberg anywhere app. You can customize the settings so you get the news and settings of assets you care about. This is bloomberg. Shery this is Bloomberg Technology global length. I am shery ahn new york alongside paul allen and emily chang in san francisco. Lets get thought it with a look at the top global tech stories of the day. Emily cisco will buy Acacia Communications for 70 a share, or 2. 6 billion. The price for the deal expected to be completed in the second half of 2020 which represented 46 premium to acacias monday u. S. Close. Facebook is fighting another blockbuster court fight in europe over privacy. The eu court of justice hears arguments wednesday on the legality of rules used by companies to move commercial data outside the region. Critics say eus citizen data is at risk and at the moment it is transferred overseas. Facebook insists the information is protected. Why might plans to raise the equivalent of 1. 5 billion from a group up chinese lenders and its first financing since the u. S. Restricted its access to key suppliers. It would be the companys first time tapping the syndicated market without the help of at least one international. Those are the global tech stories we are watching. Paul . Paul thanks. Ibm has closed its 34 billion purchase over red hat, the second largest Tech Acquisition on record. The deal is helping ibm play catch up Cloud Technology. The chairman and ceo told bloomberg there is more to come. We will help extend their reach into 175 countries. On the other hand, the synergy at ibm with our current products are those are going to work and you will see a lot of announcements this summer. Paul the deal not only has competition on the cloud but also the sometimes rocky path. Olivia carville covers this for bloomberg. What does this do for ibm and the cloud . Olivia we know that ibm is an american icon. It has been around for 108 years. Economic booms and busts and survived. And has gone through a transformation before to stave off bankruptcy. With this acquisition, ibm is essentially reinventing itself to become a competitive provider it is pretty fierce cloud marketplace. Emily what are some of the risks with this new strategy . This is obviously a huge acquisition, second largest tech deal ever. Certainly, there has to be some challenges ahead and integrating these companies. Olivia one of the Biggest Challenges we have for ibm is actually bringing it into the full. When ibm purchased red hat, it did not buy the company for its technology. It is an opensource Cloud Technology so a lot of its technology is available online. It purchased red hat fors developer community, for its talent. To achieve isas to keep those red hat employees in place. We saw in press releases earlier today that they plan to keep red hat as an independent Business Unit within ibm. That means its Leadership Team will remain in place. It will remain at its headquarters in rally, raleigh, north carolina. It will have its own sales unit, contract units and terms of conditions. The question remains if this will be enough to keep red hat employees within the wider ibm family. Paul how is what ibm is trying to do here different from what amazon, microsoft and google are doing with their clouds . Emily we heard them talk about the hybrid cloud for a long time but can they execute . Olivia for me to try to understand what it means, i was interested to see what kind of services a lot of the other competitors provide. Youve got Startup Companies that use public Cloud Platforms like amazon or microsoft. What ibm is attempting to do paul ok. Bloomberg News Technology reporter olivia carville, we will have to leave it there. That is uber Technology Global link. This is bloomberg. Paul 8 30 a. M. Wednesday in sydney. Futures currently pointing higher by about half of 1 . Im paul allen. Shery im shery ahn in new york. Lets get the first word news with ritika gupta. Ritika the Trump Administration has lost another attempt to insert a Citizenship Question into next year census. A federal judge has were just rejected a request from the white house. The president has said he may issue an executive order to enforce his wishes on the senses. Last week, he said that would be one of the many ways the question could still be inserted. President trump again attacked india for imposing tariffs on u. S. Goods. He announced the move as on acceptable. Just days before trade officials are to meet in new delhi. It was the Second Attack by President Trump in three weeks. He and the Prime Minister agreed to restart trade talks after they met in the g20. India imposed tariffs. The new greek cabinet has been sworn in, promising tax cuts and a more business friendly administration. Several politicians who were in previous cabinets but also technocrats who are considered experts in their field. The finance minister is an economist and engineer. He served as deputy minister in a previous government. The Chinese Ambassador to the u. S. Has joined twitter, raising his public presence ahead of revised trade talks. Twitter is on the heavily censored internet in china with accounts to promote beijings interest overseas. The ambassador is a new addition to the platform and says he is pleased to have the chance to engage with the american people. Global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery lets now see how things are shaping up for the asian market. A bit of a mixed picture across futures market with the nikkei unchanged at the moment but this coming as the japanese yen has now weakened to a fiveweek level against the dollar. We will see how the markets open. Coffee futures gaining a half percent. A lot of data out of south korea including the june unemployment numbers that are expected to come up in a half hour. Sidney futures gaining 6 10 of 1 . This as the aussie dollar fell for a fourth consecutive session. Some week june Business Confidence data. Kiwi stocks unchanged after falling all week long. Paul thanks. Lets get more on what we should be watching as trading gets underway in asia. Adam hague is joining us. Century bonds making a comeback. What does this tell us about the yield . Adam i think it tells you about how far people are prepared to go to find yield in this environment. In this part of the world, australian bonds and pretty much every security now, government bonds in australia trading below the rbas inflation target. Over in south america, this kind of influx of century bonds keeps going in places like mexico. This great chart shows you how much those have been outperforming the broader emerging markets. Argentina is a popular one as well. Some of these returns are double what you are seeing in the em petsmart which is a reasonably good place to be. The backdrop to all of this is the fact the negative yielding aspect of the global bond market continues to grow. We are now past 13 trillion in terms of the overall bonds around the world that yield less than zero. All that plays into that. As we go into todays fed meeting in a very uncertain outlook for policy, although people are expecting reasonable chance the fed indeed does cut this month, beyond that, the policy is very unsure. With all the trade uncertainties, i think what this bond backdrop really shows is how fragile the world is right now and how far people are prepared to go to find yield. Shery we are very close to kicking off the earnings season. The picture is globally a bit murky at the moment. Tell us about the disconnect between valuations and projected Earnings Growth and what this could do for the rallying stocks. One very coree, feature of the equity rally in 2019 has been the fact you have had multiple expansions without the real kind of reassessment of the earnings prospect. It has kind of expanded but it has not really to do with the earnings part of the equation. Proving that in many parts of the world, that has actually come down. What you see now is the disconnect between where people are expecting profits to be and where prices are, getting wider and wider. A lot that is premised on the fact people think that policy around the world will remain loose and Interest Rates will remain low for a significant period as this cycle ages in the global economy. What it shows is that the onus is back and companies now as we get into the next reporting season. Really provide some strong updates to fundamentals that suggest the companies are not being unduly affected by some of the global trade tensions, by some of the other things that are already impacting the weakness we are seeing in some of the pmi data around the world. Its going to be really interesting thing to see whether investors feel there is enough from those corporate fundamentals to really justify what they are seeing in the equity rally. Shery thank you so much for that, adam haigh. You can find his charts on the g tv library on the bloomberg. The Worlds Largest supplier of consumer goods is the latest to sound the alarm on the damage the trade war is doing to Global Supply chains. Liam fung supplies and transforms goods for the likes of walmart and gets roughly two thirds of his revenue from the u. S. The Company Supply chain extends across asia but gets most goods from china at a time where the fewest customers are pushing for production to be shifted elsewhere. And next news interview, spencer fung tells us he sees disruption underway regardless of whether a trade deal is reached. Spencer in the last 12 to 18 months, the world has been experiencing a lot of changes. Sometimes even on a weekly basis. As a result, that disrupts the trade flow. Especially the u. S. Based customers. Because now the u. S. China trading is being disrupted. Whether there is a deal or not, whether there is tariffs or not. A lot of our customers now, u. S. Based customers are trying to diversify outside of china. Not leaving china but diversifying outside of china. Basket andnto one spread out the risk. This has become a big opportunity for us because when you have to diversify out of china, you go, lets say into different countries, we have the Biggest Network in the world. We have deep knowledge of history and relationships with local vendors and local governments where we can help our customers move quickly. Opportunityy a big for us now that things actually, the world is changing more and more. You are saying this is the best opportunity for li fung in 20 years. We have seen Companies Move production out of china. The trade war might have accelerated that but why is now a more opportune time . Spencer things have been shipping out of china but not enough. There are still categories that are 80 sourced out of china and those are harder to ship. Because of a global presence, we are able to help our customers and suppliers to ship out of china quickly and set up a new factory to find factories that fit the price level and quality level much quicker. You are getting much more pressure from your clients now to shift production out of china . Mostly the u. S. Customers . What about the european customers . Spencer mostly u. S. Customers because of the tariffs. The european customers actually see now a buying opportunity inside china. Many upper factories are not operating at full capacity. When they are more eager for business, there is a pricing opportunity to lower the prices. It is an opportunity for any nonus retailers. Europeans, japanese, Southeast Asian or domestic. Your clients are trying to push production outside of china. Do you think the vietnams, bangladeshes, indias of the world could ever replace china . Spencer china has 1. 3 billion people. A few hundred Million People in the manufacturing industry. When you look at any country outside of china, most countries dont even have that many people in that country. So, short of an extreme automation, i would sit in the next five, 10 years, no single country can replace china. Many countries will pick up different areas, different products that china is trying to move up. The Chinese Government has been trying to move out a lot of the low, high labor intensive manufacturers out of china. Each country will actually have their own focuses and take on some of that. Vietnam is a big beneficiary of that. Bangladesh, indonesia, india, cambodia. A lot of the Southeast Asian countries will be a big beneficiary but no signal country will take over the Production Capacity of china. Paul that was spencer fung speaking exclusively to bloombergs yvonna man. Coming up, india is on the trade firing line as president from his attack. He says tariffs on American Products no longer acceptable. That is next. This is bloomberg. Shery i am shery ahn in new york. Paul im paul allen in sydney. You are watching daybreak australia. President from has attacked india for imposing tariffs on u. S. Goods, denouncing the move as unacceptable. That is they before trade officials are excited to meet in new delhi. We are joined by the founder and ceo of the washington is for business. He served as these is and secretary of commerce develop during the reagan administration. Thank you for joining us. Hello from washington. Paul President Trump in washington potentially opening a new front in the trade war. How much of a concern are these remarks about india . I think there needs to be concerned. President trump came into office having pent up frustration over the u. S. Position over many years in terms of the way the trump deficit the u. S. Deficit has increased over a long period of time. He believing that clearly there had been some moves on the part of the u. S. That really were never taken to be able to fend fair tradingthe un practices that have occurred over literally decades. A delegationres heading to delhi. How do you expect these talks to progress . Are they going to be an escalation of the scale we saw in china or something more restrained . Dr. Moore i think it will be a little more restraint. I think it will be watch and wait, look and listen for a little bit longer. I think india has civilly been put on notice in a major way. Bob lighthizer, u. S. Trade representatives and secretary mnuchin really tried to look them facetoface to make it clear that the United States is very serious about the relationship in trade between the United States and india. Believing that india has for too long a time enjoyed certain privileges that really should no longer exist given the fact it has developed as much as it has over the past few years. Shery were those trade relations getting in the way of President Trumps strategy with india, the strategy in the hole of the asian region instead of trying to take the influx away from china . Dr. Moore i think its threedimensional chess that is being played. I think you also keep need to keep in mind that next year, we will be in the u. S. Very much engaged with the reelection efforts of President Trump to gain a second term in office. So, this period of time is particularly critical because there is a great concern that although the u. S. Economy has done it freely well, at the moment, it seems to be an island, an oasis in the middle of the world where the economies are not quite as robust as they are in the u. S. Everything needs to be done right now to be able to anticipate what the economic climate is going to be right here in the United States by the fall of next year. Shery when it comes to those relations with china, we are hearing from the white house Economic Advisor larry kudlow about talks continuing. Take a listen. Mr. Kudlow there was headway last winter and spring, and then it stopped. Hopefully we can pick up where we left off but i dont know that yet. Our team, ambassador lighthizer, secretary mnuchin are exploring all of that. Discussions today went constructively. Too soon for details. Shery when it comes to secretary mnuchin and ambassador lighthizer, they seem to be two opposing views within the Trump Administration. Who has the president s ear at the moment . The dubs or the hocks . Dr. Moore i think the hawks at the moment. The president continues to say he loves chaos. He loves to have diverse opinions coming his way and he makes the opinions. It comes down the trade representative and the secretary, the president makes it clear that he accepts all of those positions in making certain decisions and how he will play this trade game. Paul our last guest earlier this hour, anna han of wells fargo, was very optimistic on a trade resolution, seeing one by the end of the year. You have been involved in this process before. You have negotiated trade deals with japan in the 1980s that still has sticking points. Dr. Moore i think it is a tad optimistic. I hosted one of the very First Chinese delegations ever to come to the United States. It was headed up by the mayor of shanghai. The chinese walked into the door, into the meeting room in mao suits. It was a very different time. In those days, they were really just a blip on the screen because japan, at that time, the second largest economy was foremost in all of our minds. The chinese have very quietly and persistently and patiently gone on to become the second largest economy in the world after the u. S. They have done so with quite a game face and doing everything from manipulating currency over time to being able to deal with intellectual Property Rights and being able to assume it for its own manufacturers. Paul you make some interesting points about that slow and steady rise, because it is really not just about trade. We have the huawei issue. Connected to it all is chinas aspirations of the south china sea. To what extent is u. S. Policy much broader than just trade . Dr. Moore you are right. There is a real concern now that china is coming on strong. And how to deal with it is something that is certainly being discussed every single day of every week. Everything from what took place in hong kong over the past few days to trade deficit to the military aspirations of the chinese in the pacific. Shery the u. S. Continues to block the appointment of judges to the wtos appellate body. Let me ask you how will this impact the multilateral trading system, not to mention whether or not, or how prepared was the u. S. When china was first accepted to the wto . Dr. Moore very good question. I was in uruguay when we launched the uruguay round of trade negotiations that took seven or eight years to conclude. It was there that the wto came into existence. When president bush decided to allow china to become a member of the wto, there was great concern that perhaps we were not really on our feet the way we should have been. In terms of making sure currency manipulation could not occur. That intellectual property right infringement would be met with very quickly and very severely. There were certain things of being able to bring in an economy that was growing as steady as china was, as large as china was and finding at the end of the day, while we were kind of looking elsewhere, china really became a real threat when it came to manufacturing and trade for the u. S. Shery thank you for your time today. Very interesting views, james moore. If you missed any part of our conversation, tv is your function. Watch past interviews. You can also dive into any of the securities or bloomberg functions we talk about and become part of the conversation by sending us instant messages. This is for bloomberg subscribers only. Check it out. This is bloomberg. Shery i am shery ahn in new york. Paul i am paul allen in sydney. Singapores state Investment Fund is staying cautious amid what it calls a lower everything world. A modest 1. 6 gain in its portfolio value over the past 12 months. Since first becoming ceo in april, he told us how he is positioning in an uncertain environment. The uncertainties have been there for some time. They have manifested themselves in different ways. We have a very different environment. In addition to the investment world, we have low Interest Rates, lower growth, lower returns environment. I would say the challenges of the future are going to be quite different from the past. How we turn out, i am not a futurist. But we are definitely paying attention to a number of things. You talked earlier about a low everything environment. This low yield environment, riskreward opportunities, where do you see the best . The real issue is what is the right corporate capital. For us, you we use a cap m model. It is higher if you are benchmarked. Looking at the lowinflation environment and low Interest Rate environment, your return requirements would be much lower than an Equity Investor looking to get an adjusted capital framework which is based on the risk associated with a country, a sector and a particular company. Taking a look at the portfolio, the bulk of it, 37 consists of financials. We are seeing an increase over the past three years. Will you be tweaking that . Financial services constitutes 5 . Within that mix, it is very bank centric. Today, it is more balanced. A growing part in insurance, payments, fin tech. Withtime, that will grow the Banking Services portion. So, if you think about how we are using the portfolio, Financial Services remains one component but technologies and Life Sciences takes up as much capital. 75 of your investments are outside the country. How concerned about the volatility . Almost 75 is outside singapore. Singapores dollar currency is much higher because of the fact that the companies we own, 35 of our portfolio, have exposure outside the 75 . The volatility still comes as a way the revenue is generated. Volatilitycurrency because we have no duration. Shery that was the temasek ceo. Lets get a quick check of the latest business flash headlines. Airbus is inspecting the wings of a380 doubledecker just after cracks were found on some planes. It will affect 25 of the oldest superjumbos inservice, including planes at emirates and singapore airlines. The aircraft will not need to be grounded. All other planes must be examined before they are 15 years old. Paul shares of the largest Budget Airlines in the philippines tumbled by a record, wiping on more than 400 million in market value after a local broker made a trading error. It slumped 38 in the last minutes of trading. Local broker quality investment admitted making the mistake during the philippine stock exchanges period at the end of the day. Shery plenty more still ahead in the next hour. At the top of the hour, we will bring you south koreas unappointed figures. Later, we will discuss the biggest trends in the esports industry with Super League Gaming chairman and ceo. This is bloomberg. Paul good morning. I am paul allen in sydney. We are under one hour away from the Australian Market open. Shery good evening. I am shery ahn. Welcome to daybreak asia. Paul our top stories this wednesday, treading water. Asian markets on pods ahead of ahead of the pause testimony. Investors want some guidance on where rates are going. Urgent and