Growth overseas. And a promise and a warning. Talking about Nuclear Weapons and at the 2015 Iranian Nuclear deal. Lets get started with a check of markets. We saw the s p. , 500 fall for a second consecutive session, and finish below the 3000 level. Industrials leading the declines. The dow also down 4 10 of 1 . We have the dow transportation average, a gauge of economic growth, sinking at one point to its lowest since december. A mixed bag of corporate earnings, not to mention lingering trade tensions between the u. S. And china. Unchanged. Lets look at how things are shaping up for the asian market. Looking quiet on the trading front. Volumes likely to continue in asia, futures pointing lower. Stocks adding about 1 10 of 1 . Central banks and earnings will be top of mind. The jury is out on the bank of indonesia, cutting rates today into the chip sector is on watch, following earnings from asml that got a boost in 5g. And also on tap, japanese trade numbers that may show weakness easing. And early moves in the bond market, aussie 10year notes extending gains for a Third Session ahead of jobs data, pushing it closer to 1. 3 . Treasury futures also holding overnight, as the bond market regains some of its mojo. Paul ok, thank you, sophie. More breaking news. The last batch of production numbers we are expecting today. Woodside has secondquarter production coming in at 1. 8 above estimates. Second quarter production at 17. 3 Million Barrels of oil. That is a narrow beat. Million, the, 738 estimate was for over 800 million. That weakening there. The average price was 44 a barrel of oil equivalent. Second quarter production numbers out there from woodside. Now to first word news. Thank you. Backpackerse continue to infiltrate u. S. Targets, furthering concerns about meddling in the upcoming elections. Microsoft says it detected more than 700 attempted breaches in the past year, and has notified about 10,000 customers that they have been targeted or compromised. The report points to russia, iran and north korea is the most insistent hackers. The Iranian Foreign minister has told bloomberg that washington has a shot itself in the foot by pulling out of the 2015 nuclear deal. He also said that european have failed to offset u. S. Sanctions against iran against iran. And although they have the capability to pursue Nuclear Weapons, they will not do so as the Supreme Leader had made a religious commitment banning them. We will not build Nuclear Weapons, because if we wanted to build them, we could have built them a long time ago. The Supreme Leader made a commitment, a religious commitment, which is not breakable. His religious view is that Nuclear Weapons are for bidding for bidding and islamic terminology. You can catch more of his interview with bloombergs editor in chief a little later in the show. A nota brexit is seen as potentially pushing sterling the dollar parity. Morgan stanley says a dollar. 10 would happen in the worst Case Scenario, with the u. K. Crashing out of the European Union without a deal. The banks as the risk of that happening is growing daily. The pound hit a twoyear low on wednesday, as Prime Minister rivals Boris Johnson and jeremy hunt hardened their rhetoric. European car registrations fell last month. A downward spiral adding to the auto industrys woes. Following a profit warning from daimler, the Group Reported a 7. 9 year on year drop in sales for june. That was the biggest lump this year and the nights decline in the past 10 months. Factory confidence is weak. And germany is at risk of recession. 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. This is bloomberg. Shery netflix tumbled after hours, some has losses in u. S. Users and a slower subscriber growth abroad. So what caused of the bigness . Miss . Big a recent price increase . Karen spencer newman. Here is spencer newman. We saw where we increase prices, we saw some elevated turn rates and lower retention. So it was a combination of those things. The primary story was around seasonality and timing and the nature of our content slate, but pricing played a factor. Shery now are entertainment reporter lucas shaw joins us. It seems like those price increases did not sit well with customers. Lucas netflix has for many years now been a growth stock, something investors believe in because it will keep adding customers at a record rate. They have set records for the company in terms of new subscribers added many years in a row. And what they will have to decide in this case, is is this a one quarter slow down, order signs of a trend . Netflix insisted it was a blip. That they have a hard time forecasting. That they had a weaker content slate. Lots of excuses given, but they still forecast that they will add a 7 million subscribers in the thirdquarter and this will be another record year for them. If it is not, if they miss again in the third quarter, then they have a real problem because they are not making any money. This at are just seeing the moment, netflix down more than 12 after hours. So what is the problem . Reachedtions, have they saturation point . Or is the content week . Weak . Lucas they hit 60 million in the u. S. , the lower end of their forecasted range. They could reach near 80, but that will be increasingly difficult since you are targeting poorer households. Service will be an issue. And they will have competition from at t and apple, introducing their own services. Internationally, there should be room to grow. The slowdown, to me the slowdown in the quarter is even more concerning, because their target internationally is to hit a couple million couple hundred million more. So they have a very strong slate in this current corridor quarter with stranger things, and coming up later this year they will have big movies from Martin Scorsese and michael bay, so time will tell whether it was just a weak slate in the quarter. Or if it is a longerterm issue. Shery they have been investing in local language content, so what happened in the International Markets and what are the challenges that they face . Lucas one of the challenges was assessing the International Markets, that it does not break out territory by territory numbers. Territories like brazil, the u. K. , france and germany are big. Asia has been a struggle. You saw they announced today that they would introduce a cheaper, mobile only plan in india, suggesting that they realize the current pricing in india will only appeal to a certain segment of the population. I would not be surprised if they rolled out that plan in other markets in south asia. There is a lot of programming available for free. And if netflix wants to be as popular across asia as it is in western europe, and in latin america, it may have to lower prices to get there. Caroline ok, our entertainment reporter in los angeles. Paul thank you for joining us. Stocks are on the back foot, while bonds are gaining once more, raising the possibility that yields could go a lot lower. To ouro to singapore strategist wes goodman. Why do you say the rally is that he risk . Is at a risk . My family just signed up for netflix here in singapore, so that has to be an important economic indicator, i am sure. Let me talk about real indicators. Speaking of the feds beige book, which said that the economy is growing at a modest pace, but the outlook is positive, i think that that is a good summary. I think that the signs of improvement are growing. I am thinking of retail sales, Consumer Prices, jobs. These all show that the economy is moving along pretty well. We evident a number of officials who have commented on the and have said in aggregate, the economy is still doing pretty well. I think that that suggestion or warning that the fed may not cut to three or four times, that you know, that some investors are forecasting. Speaking of which, bonds are quite expensive here. I was looking at the 10 year treasury yield of about 2. 05 , which is less than the core Consumer Price inflation rate. The cpi rate at 2. 5 . So u. S. Treasuries are delivering a negative real yield. The economy seems to do pretty well. And i think that investors are going to find bonds expensive at these levels. Stocksith bonds into mostly moving together this year, sometimes we have called it a rally and everything, so lets have the everything rally so can the everything rally keep going . Wes i think that the fed will clearly cut Interest Rates at the end of this month, take out insurance against the possibility of slower growth. To have two goals in mind. One is to make sure that the expansion keeps going, that will help stocks. The s p 500 did not have a great day yesterday, but it is still near a record high. And with the support from the fed, i think there is a chance it could stay near the record. At the same time, fed officials keep talking about the need to boost the inflation rate to get inflation up to their 2 target, may be higher. That of course will be for bonds, it will eat into returns. Stocks and bonds rose together in the first half, sometimes called of the rally and everything, but for the second half we may see the stocks draw support from what the fed is doing and it stays near a record high. But as the fed boosts inflation, that means bond prices will fall and yields will rise. Shery important data this morning out of australia, the jobs report, will that move markets . I think that they are going to show a bit of a slowdown in hiring. That is the forecast. The broader message from australia and its economy is the reserve bank cut Interest Rates twice and is now pausing, holding to see how those Interest Rate cuts affect the economy. I think there is a lesson there, that central bankers do not keep cutting and cutting. They are willing to make a couple cuts, then pause for a while. So that may be what the fed is going to do. I would never say the fed is going to copy the rba, but i think it is instructive because we are looking for patterns, we are looking for the way that central bankers approached the rate cuts. Again, if there are a couple of cuts followed by a pause, i think it may be a warning that people who are expecting three or four reductions may be expecting too many. Shery ok, they do so much, wes goodman. Still ahead, south32 reports output figures following rio tinto, we will wrap up what is happening in mining. Paul while the rate cut is likely when the fed meets, one official says there is no need to act. This is bloomberg. Shery this is daybreak asia. Paul to of asias biggest Central Banks meeting in mid circumstances that could argue for a rate cut now, but neither are expected to move into the Federal Reserve shows its hand at the end of the month. Our global policies editor is here with a look of the bank of korea, the bank of indonesia, and at the debate at the fed. If there is a strong case for cuts in korea and indonesia, why wait . It will be important to Central Banks around the world to find out if it will start on a rate cutting path in the middle of july. Lets start with the bank of south korea, they are expected to cut their rate, but not now. They have inflation below 1 for six months. Start with the exports. Since december of last year, nothing but red when you look at exports yearoveryear. That could potentially be worse because of the spat between south korea and japan. The next chart, south korea cutting inflation there inflation forecast because it has been so far below 1 , it must acknowledge that it is going down very fast. And of course, the key rate at 1. 75 . It was raised a couple times last year. So they would have moved to at least take the rate cuts back, but Bloomberg Economics says they will not move until they know what the fed is doing. Do not look for them to do anything this month, but if they cut in july, the fed, then korea will cut in august. In indonesia, the governor has already signaled he think that rate cuts are coming, but he also is not expected to do anything today. In fact, Bloomberg Economics says they could be waiting for the fed before they cut rates. One of the main reasons, they are worried about widening the differentials and a seeing capital outflows. Take a look at this chart, it is looking at the rate cuts, about six of them last year in indonesia. It has definitely strengthened their currency into they are concerned if they move ahead of the fed, that could weekend again. Shery the Central Banks really waiting for the feds Rate Decision at the end of the month, right . So where does the fed stand right now . We will start with the beige book. They are talking about an economy that is sort of just going along. The positive outlook remains. In this picture, take a look at this because what we see is jobs slowly and somewhat, inflation is weaker, stable to weaker. Firms cannot pass the higher cost on. Facebook is mentioned. And Technology Companies are cutting jobs. As for esther george, president of the kansas city fed, she says it she has not changed her mind about rate cuts since the june meeting. She does not think she said there is no need for insurance type cuts. She is worried about the potential for financial imbalances, companies or investors reaching for yields. And she also thinks that there is an economy here where jobs are growing. Ifis making people wonder she could dissent against a rate cut in july. Granted, she has been hawkish, but i do not think she is the only one worried about the stability of the fed keeps rates this low and it takes them even lower. Shery kathleen, thank you so much. Joining us is the chief economist at sg and financial. Welcome to the show. Could she have a point . We have seen strong data recently. I think the case for waiting is good. Powell did a good job explaining why they want to cut. Inflation is too low. Global growth is weakening. The growthpacts outlook as well. They seem to be miles apart on a trade deal. Uncertainty is dragging on and that is another reason to act. Crisises into what is a of confidence in american business. Reversed only partly that could translate into job weakness as well. You know, the final reason is this insurance idea. That it is absolutely necessary to keep the expansion going as long as possible. I do not think that is a risk. That could be a risk globally. And i think if you look at europe aware sovereign yields are negative, way out on the yield curve, that is pushing people into risk riskier assets. People are buying junk bonds at modestly negative yields, which i think is really difficult to explain. As rational behavior. They have done a good job with discouraging the lending. For example, subprime auto loans. We have seen a real slow down in issuance because of the regulators cracking down. Real Estate Development loans as well. The think that because regulators have done such a good job it is less of a risk. Do your point on negative yields, i will bring up a chart on the terminal. We have shown this quite a lot. Yield ins the negative debt is hovering just below 13 trillion globally. That itritten yesterday is lunacy right now to hold bonds. But in terms of your point about not spreading to the u. S. , we have had jp morgan wanting this negative yield quicksand, then maybe one day you will see it in the United States. How seriously do you take that warning . I think it is a warning that we have to take seriously. That is the reality. I think this is another reason that the fed should error on the side of lower rates now. Of thet is because tightening that they did last year. It did not just affect us. It slowed the world economy. Particularly dollar borrowers outside of the u. S. , they had a difficulty in finding liquidity, that freed up capacity and lowered global inflation. So backing off is something that i think will eventually help europe and japan come out of that negative rate environment. But it is years away and it will require slot strong Global Growth to get there. Paul ok, thank you. Plenty more to come. This is bloomberg. Effort. Shery bank of americas profit hit a record. That is because of gains in retail and in the search in productivity. And a surprise drop from the fourth quarter. Tougher times as the Training Division revenue falling. In line with its bigger rival, jp morgan. Yes bank returned a profit in the First Quarter even as its bad loan ratio worsen. It is one of the worst affected by indias shadow banking crisis , losing a reported profit of 60 million. Yes bank has been cleaning up its Balance Sheets after being wrapped by the r. B. I. Over discussion disclosure of its problem loans. Still the calm, en and energy is one of chinas largest gas suppliers. The president says chinas economy is alive and humming. Humming. This is daybreak asia. Wants morerump information about how the pentagon drafted a huge Cloud Computing contract that it is poised to award to either amazon or microsoft. The deal is worth up to 10 billion over a decade and will be given to one of the parent month with amazon seen as the favorite. The president has been told that Companies Including oracle were frozen out of the bidding. The house of representatives has joined the senate in voting to block arms sales to saudi arabia. The decision may trigger a third president ial veto. Lawmakers passed measures to terminate the Emergency Declaration the Trump Administration had used to push through 8 billion of weapon sales to riyadh and its regional allies. All three measures earned some republican support. A legal an outbreak of ebola is a global emergency. The World Health Organization calms after the virus was detected in a city in the congo of more than 2 billion people. 2 million people. It is the second deadliest outbreak of the disease on record. The wto says the risk of infection outside the region remains low. Japan is counting down to this week upper house election. Seemsminister shinzo abe to be taking inspiration from president trump, stepping up his social media game add targeting young voters. Abe is focusing on instagram with his liberal democratic party, turning out slick videos of him meeting and greeting and enjoying global delicacies. 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. Im risk a group death. This is bloomberg. We are more than half an hour away from the start of castrating. Tokyo from the start of cash trading. Tokyo could be a down day. Trade data due in about 20 minutes time. Singapore is handing out losses for the nikkei 225 with volatility at 2015 lowes despite trade talks. Prospects of a soft running season and rising tensions with south korea. Japan set to defend its export curbs at the upcoming wto general counsel. Canon is in view on nikkei reports that the companys operating profit is on track to fall 30 this year, falling short of guidance downgraded in april due to a slumping chip market. Canon sent to announce results this week. Yahoo japan has dismissed a request from to reconsider its Capital Alliance and wanting to reconsider their arrangement. They say sweeping arrangements are needed to improve earnings, to bring younger management, and to enhance value. Thanks very much. We also check on australias commodity sector today. Also meetingfiner production expectations. Lets cross to melbourne and david stringer. Lets start with south 32. Says it is continuing efforts to reshape the business, so how is progress . Thats right. Production data out this morning pretty steady, probably inline with market expectations. Focuseds might be more on the plans to try and reshape the business. This was a collection of diverse assets across the globe, across commodities spun out of bhp back in 2015. They said before the end of the year they should make progress to sell a South African coal unit. They received a number of bids in the june quarter, working with those bidders and expect to maintain the market within the next two months. They are also working through a process, looking at options for its manganese smelters in south africa and australia. Potential changes to the mix of commodities and the geographic spread for south 32. We have had a number of the miners for production data out this week. What is the outlook on the sector more broadly . We are seeing a number of issues that have been flagged by those major miners. Bhp are expecting a one billion hit, the result of production of fires andresult asset problems. Also flagging they have experienced difficulties in the iron or division, also facing setbacks and cost blowouts to a huge copper project in mongolia. The mood music has been pessimistic. The only thing investors can take comfort in is the outlook looks stronger. Bhp are expecting the production of iron ore to rebound and expand as much as 6 in the current fiscal year. What does that mean for earnings . Ners will begin reporting in about two weeks. Absolutely. The first out of the gate, reporting earnings on august 1. We have seen the huge runup this year in iron ore prices because supply demand has been strong. That means higher prices will flow straight through to the bottom line. Earningsfyear expected to jump around 12 , bhp reporting annual earnings, expected to rise about 15 . We are going to continue to see strong cash flow generation, strong profit. The expectation is a lot of that will come back to shareholders. There should continue to be some pretty bumper packages of shareholder returns. David stringer, thank you our Senior Energy and commodities reporter. Coming, south korea and japan are struggling to find a resolution to the ongoing trades that. Trade spat. This is bloomberg. The president when we spoke to him. We have to see what happens in terms of the negotiations, but he did not rule out looking to buy u. S. Llg when there is a trade deal. He is confident besides look come together with some kind of pack. Deal, theyn that could potentially look to buy u. S. Llg and they did not rule out investing in the u. S. As well. There are no commitments from him. It is interesting that he didnt rule it out. Tom mckenzie in beijing, thanks for joining us. Still to come, no easy exit insight for the worst trade spat between japan and south korea in years. Japan has rejected south koreas talk on recent export curbs and is expected to send an official to the wto to defend those restrictions. Attt snyder is senior fellow the council on foreign relations. Prospects of resolving or deescalating the historical longrunning disagreement between japan and south korea. I think leaders on both sides are overlooking caution flags relating to the economic relationship and still see political benefit domestically on both sides to continuing down this road. This is really the first time the economic component of the relationship, which has normally been the glue supporting political cooperation between south korea and japan has become a solvent. That should be a great concern. I think it really has political and strategic ramifications for both sides as well as for the United States. Thats a nice analogy, a solvent, in terms of what looks to be a war of attrition, which side is going to suffer the most, japan or south korea . I think the South Koreans have immediate concerns about supply and i dont know whether samsung and other Semi Conductor producers are going to find a satisfactory solution. Downstream it means any products that use South Koreans of a conductor components are going to see potential problems. These South Koreans i think have been threatening consequences. Findare hoping japan will that this backfires on them, but i think the concern is they havent yet reached the limit where they will drive both leaders back to talking to each other as a way of bounding this problem. We know that japan and south korea and relations, attention spikes for a period of time, but this distrust has been building for a while. How much does this have to do with Prime Minister abes relationship with the former Prime Minister of south korea . You have put your finger on one of the critical origins of this, that moon, the south korean current president walked away from the agreement that was made between Prime Minister abe and his predecessor. Of course, her agreement was really discredited and south korea by her subsequent impeachment, and as a result the relationship with japan has got caught in south korean domestic politics in new and unprecedented ways. President moon jaein when he took office said he would not let historical issues get in the way of progress on special relations. So what happened here . The administration began with a dual track policy placing history in one track and future relations and the other, but i dont think the Moon Administration has handled their nonrejection rejection of the agreement very well, and there is the issue of forced labor in the south Korean Supreme Court that has added to the complexity and deepened the domestic component. Of the issue as a problem between south korea and japan. In a practical sense, south korea needs a number of resources for its technology industry. If it is not able to talk to japan. Does this open the door to other suppliers, potentially driving south korea into the arms of china economically . I think Semi Conductor manufacturers are looking at china, russia, whatever alternatives are available. One of the problems is there is no trusted supplier outside of japan. That is one reason why japan has had a virtual monopoly on supply of some of these chemicals and elements that are necessary for Semi Conductor manufacturing and south korea. Would it be in the u. S. Interest to inject itself into the situation, broker some agreement between two of its closest allies in east asia . Anthe United States has interest in facilitating and in bounding the conflict between south korea and japan. It does not have interest putting itself between two allies. I think the Trump Administration has been late to the game in terms of addressing this downturn, as we have seen it evolve. Now we have an assistant ,ecretary, secretary stillwell who has had conversations with the japanese and South Koreans. Nderstand the key for the United States is toof each side, rather than placing itself in the middle. Shery will it do that with this administration . I think that they will try it we will have to wait and see whether or not they find the correct formula for balancing this or not. They are late to the game. I think that they have suffered from a kind of vacuum at senior levels in the state department, prior to that confirmation. So the question is whether they can catch up and he can get support and find a method by the risingund tensions between the two sides, and kind of stabilize the environment for positive south korea and japan relationship. Ehery scott, let me interrupt. We are seeing exports a year on year in japan contracting 7 in the month of june. This is a bigger contraction than we had expected. It is smaller than in the previous month of may, but down 6. 7 still. Exports down 5. 2 . This is a big one, expectations were only for contraction of 0. 2 . Imports have contracted even more than in previous months of may. What this spells for the seasonally adjusted trade balance is that the trade deficit has in fact narrowed a little bit to 14. 4 billion yen. This is narrowing firmware for more than 600 billion yen in the previous months. Is smaller deficit than what is expected for june. Now, undigested for seasonal factors. We are talking about swing into a surplus of 589. 5 billion yen after a deficit of more than 900 billion in the previous months. It is also a bigger subclass than was expected. Of course, we have negative factors for the japanese economy, including the trade tensions, the rise in the japanese jen, not too much in risks coming from more protectionist stances coming from china and the u. S. Still, we are seeing the trade balance at the moment for forgested for undigested billion toward more than 500 billion yen. And a deficit of 14 million yen. Scott, let me return to you. I want to ask, borten will the strength of the japanese economy end of the south korean economy being deciding who will be the winner in the japansouth korea spat . Scott i think that that is a factor on both sides that could help both leaders to have a justification to change direction, and to move forward in terms of actually trying to talk with each other in order to solve this issue. The south korean economy faces a lot of headwinds, as well as a result of the u. S. China trade. But which side ends up feeling the pain the most to could actually be a facilitating factor in getting the leaders back to dialogue with each other. Shery scott, thank you so much for doing this. Scott snyder from the council on foreign relations. If you missed any part of this is your tv function, you can dive into any functions we talk about, and become part of the conversation by sending us messages during our shows. This is for bloombergs subscribers only. This is bloomberg. Shery paul this is daybreak asia. Shery lets get a quick check of the latest business flash headlines. Netflix shopped investors by reporting a drop in u. S. Customers at slower than expected growth overseas. Shares plunging in late trading on concern that hires obstruction charges have not been supported by a Strong Enough slate of new content. Netflix gave a more upbeat view of the next quarter, forecasting 7 million new signups, thanks to several new shows and new seasons of current favorites. Paul ebay jumped in late trade after boosting its fullyear earnings forecast. Earnings per share at two dollars 75, that is up sums five cents. It also jumped in the regular session. It is saying it is reviewing the rule of its star hub and classifieds businesses. Ebay shares are up about 40 this year, up more than double the benchmark s p 500. Shery ibm jumped in extended trade as earnings beat estimates. Investors are also looking forward to the prospect of potential future gains, saying that 34 million acquisition of red hat. After lagging in the cloud market for more than a decade, ibm is pegging its future on a strategy that will allow it to offer services on both private and public clouds. The markets in japan and australia getting underway at the top of the hour, lets preview the open. Willpans do trade data show a seventh straight month of contraction. Nikkei futures under pressure while that yen is little changed. We are looking at research players, data from the likes of santos and woodside. Korean investors will have a decision on tap this morning, if they will cut rates in the face of sluggish growth. Analysts say they are we gaining against the dollar. Trade tensions with japan. They are seeking an extra budget to counter the impact of japans export curves. We will see if the rebound of Semi Conductors in the u. S. Could offer help for the korean sector. Results are due as well. Thirdquarter guidance will be key as Analysts Expect a revival from the Taiwanese Company after a dismal first half. That report comes on the heels of asmls number, in important supplier to samsung. That is a snapshot of what we are watching in tokyo. This is bloomberg. 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. Good morning, im paul allen in sydney. Sydneys major markets are about to open. Good evening. Im in hong kong. This is daybreak asia. Our top stories this thursday, asian stocks look set to track losses on wall street and businesses are weighing the next earnings and worrying about the trade war. The bank of korea expected to hold despite rising threats to the economy. Talksns foreign minister about Nuclear Weapons in the 2015 deal. Lets get straight to the market action. What are you seeing . Weakness across the board, bearing in mind, asian stocks have lagged and we are seeing downside moves in tokyo. 8 6 10 of a percent. The earnings outlook, more than 200 Companies Due to report next week, including canon which is on track for a 40 drop. Creativeck in on markets, opening lower. We are seeing higher in samsung shares. We do have the korean won trading this morning while bonds are gaining ground ahead of the policy decision this morning. Over and checking in on sydney , set for kinally second day of gains while the bobby dollar is ahead. Aussie dollar is ahead. We are seeing a climb as investors wait to see if it will prompt another rate cut from the rba and treasuries like this early in the asia session while jake bb is holding j bb is holding firm. Thanks very much. Lets check in on the first word news. The house of representatives have joined the senate in a vote to block arms sales to saudi arabia, a decision that may trigger a third residential veto president ial veto. A billionthrough 8s of weapon sales billion of weapon sales. [no audio] planentagon says the cannot coexist with that platform and collect information and russian intelligence. Says the u. S. Has been placed in a difficult situation. The Iranian Foreign minister has told bloomberg that washington has shot itself in the foot by pulling out of the 2015 nuclear deal. They also say they have failed to offset your sanctions against tehran and although they have the ability to pursue Nuclear Weapons, it will not do soon it will not do so as the Supreme Leader has made a religious commitment banning them. If you want us to build Nuclear Weapons, we could long time ago. The Supreme Leader made of religious made a religious commitment which is not breakable. This week, chinese cap continuing to flow and they say the economy is actually humming along. I guess provider says things are on the mend and Steel Production is returning to normal levels. The company is sensitive to changes in the wider economy and the situation stabilizing. Global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. This is bloomberg. To our top story, two of asias Central Banks could argue for a rate cut now. Kathleen hays is here with a look at the bank of korea and bank of indonesia. Quite a start strong case for a cut. This early as. Some of this has been brewing for some time. South korean exports getting weaker and weaker. Remember, they are very dependent on sales and they have been in the midst of a cycle. They cycle every two years from top to bottom and now japan and south korea in their own trade war. Interesting to note south koreas export growth last year chip2 increase due to sales. Lets not look at exports so much as inflation to we know exports are week. Six months now they have been down and look how strong they were. That was feeling south koreas growth and inflation in this next chart, below 1 for six months now. That is another reason why the door seems to be wide open. Arguingg economics is you can see the key rate boosted to 1. 75 last year. They have had a couple of hikes over the past three years. The door is open and Bloomberg Economics saying they want to wait to see what the fed does. Cuts and ifrate they get the cut in july, they will get one from the bank of korea in august ready to make that move. For south korea and other Asian Countries like japan, taiwan, they are all facing this as well as the trade tensions, so given how export dependent in thee, could they be canaries in the coal mine now . As you mentioned, japan, we just saw the export numbers for , but japan,early 7 china, korea, they are all part of the leading chip producers in the world along with the u. S. , russia and europe. All of them are showing this we have aakness and bunch of trade indicators that we will put together and there are 10 of them. Are in the below normal range, not the normal range or above normal range. It is a sign that if you look at , the trade war is taking a hike. The tech or has gotten on top of that, so it is really a negative signal. Economist surveys economists surveyed see a cut. What are the factors that might support the other way . Lets start with Bloomberg Economics. They are saying that indonesia may be concerned that if they cut rates now, they will widen [no audio]es lets go to the chart and can see the dramatic series of rate sharply this weekend so so as the blue line stays up much it 6 , look how is. It is volatile, but definitely a strongest currency. On the other hand, the trade war is taking a toll on the indonesian economy as well. Difficult for their budget deficit. That is another thing in focus with the market, but the head of indonesia already signaled when, not if rates are cut which is why think the consensus is looking for the cut today. If it doesnt come today, it will probably come soon. Singapore,w from fromal 10 joining us singapore, crystal. The 25 economists dont expect a change in todays Rate Decision and yes, they expect to cut the policy rate by 25 basis points. Why is that . We do it and the picture worth a response and Economic Data has been very weak. Basically, raise the pressure sooner rather than later and even if they decide not to cut the policy, it is in the pipeline. Given how much pressure that could put on the south korean won, would it make better sense to wait for what the fed could do at the end of the month . I dont think it is really necessary for bank of korea to wait. The market is already pricing in a cut later this month. I think bank of korea is ok for moving forward and it is worth noting that they have previously cut policy for u. S. Citizens so there is a president s for that president precedence for that. He says korea might be a recession right now. The bank of korea current 2. 5 . St is it is very likely they will lower that forecast today. Headwinds, that makes sense for the Central Banks to move sooner rather than later. Like agovernor also said lot of Central Banks, theres not a lot of room left for action. Are they running low on ammunition . Isgiven that the policy rate 1. 75 , yes, it is fairly limited for much progress and rate cuts and ideally, it is the policy. Hat is doing the heavy lifting it will be fiscal policy that takes the lead in korea. Lets talk about indonesia because the expectation from economist is that the bank of indonesia will not move. We are seeing the indonesian rupiah being vulnerable to outflows, not to mention a account an account deficit that could rewind in the second quarter. Why did they expect cuts but 25 basis points by 25 basis points . Its rrr and if you look back, the last time [inaudible] alsoow with the table and it is a Good Opportunity for the bank of indonesia to take off. It ensures that the current deficit is elevated, so this is the key reason why you dont expect it to fully unwind. We are penciling and 75 basis points. Ersus 175 basis rupiahmentioned the being relatively stable. How conscious will the bank of eden asia bank of indonesia be . At the moment, they are doing well because the global yield environment is pretty favorable. All right, crystal tan. The worlds most profitable the story keeps on making a profit. But how is it not good enough . The british pound with the dollar. Look at the a currency calls. This is bloomberg. Asia. S is daybreak now and a check on the stock market in asia. 3. 3 naan losing as much as on a report that the company will cut forecasts next week. Haskell is giving up some of yesterdays 12 gains and we see little change after that drop on yahoo japan. Andstock now checking in earnings missed and the company cut forecasts will be for the full year. Much as 15. 9 after posting results. The aussie coming in and that was one in the first half. And lastly, rising as much as 25 as much as nearly 28 . This after an investment it may get from japan for the company. Thank you. For more on what to watch, lets bring in mark. ,ust as sophie was telling us will stocks here in asia track the losses . It was not a great session for wall street. There will certainly be concern in asia, particularly with the transportation index having a very bad day. For people who live on a longterm basis, this is a warning sign that american stocks may be reaching a serious peek. We see the transportation index start to decline ahead of the rest of the market, so that is deathly a warning with further definitely a warning with further weakness. It is really going to hurt earnings, so definitely something i will take a look at, maybe people like Airline Stocks in play, but certainly weve had this split were some of the Economic Data has been going. We have seen pmis week across the world for some time. The global index has been grinding lower and yet, u. S. Docs continue to go higher. If we see Major Companies like charlie dropping dropping sharply [inaudible] andet me turn to europe bring a call from Morgan Stanley. They are saying the pound could plunge to parity against the dollar. How are we supposed to get there . One of the issues for the pound right now is from a longterm investors point of view, it is neither cheap nor expensive, but it sits around the 124 level. It is at a point that will really excite people. If it was closer to 110, longterm investors would say that looks like a relative value position. An neither position, so what you will get is the shortterm trade pushing the pound around and for the moment, they will be influenced by the next news headline. For the moment, it is not very good. Europe wants to keep to the old deal. All the things we are hearing from the next leader of the u. K. Boris johnson suggests hes willing to take the risk of a note of brexit. The u. K. Deficit is currently quite large and that is before the u. K. Leads the eurozone, so the risk of recession when the u. K. Leaves is pretty higher and it looks by judging the federal reports, they are getting close to saying yes, a recession is a high probability for next year, so you take that into account the path ofmoment, least resistance will be for the pound to go lower so when you think of all those things, Morgan Stanley could be right. It is more likely to head towards parity and it is to a much higher level, so certainly the risks are skewed that way. Definitely risks are skewed for the pound to go lower. Big day here in australia. Closely is going to be watched by the reserve bank, isnt it . The governor of the rba has said he wants to cut rates and see how that plays out the assumption is that we expect 5. 2 unemployment numbers and the risk for the rba is that we have a surprise upside that goes up to 5. 4. The plans scuff because then the pressure will come and they muni may need to cut rates earlier. They are hoping for a small increase in jobs. That would suit the nicely, but if we do get a jump in the unemployment numbers, certainly people would be surprised. The rba meeting the may need to consider moving ahead and they may have to bring your ford, so certainly theres a lot on the table. Mark cranfield, thanks for joining us. You can follow more on this story and all of todays trading and you can find the on the. Loomberg at mliv you can find out what is affecting your investments right now. Plenty more to come on daybreak asia. Stay with us. This is bloomberg. This is daybreak asia. Lets get a quick check of the latest business flash headlines. Netflix shocked investors by reporting a drop in u. S. Customers and much lower expected growth. Want to make clear it was a loss of subscribers, not an accounting loss. Hi subscription costs have not supported new content. Ebay jumped in late trade after losing its forecast. Up five cents. The company also jump into a bowing tossion after investors saying it is leading reviewing the role. Ebay shares more than double the market. Earnings jumped estimates thanks to a 34 million acquisition of red hat. After lagging in the club market or more than a decade, ibm is taking his future on a strategy that would allow it to offer services for private and public cloud. Startle is reported to trial and part production. They say one of the Key Contractors will test the process with the latest wireless earphones in the coming weeks. The report also says apple has written to other components asking for their support. Lets get you a quick check of how markets are trading. We are seeing the nikkei fall 9 10 of 1 . In fact, when it comes to asian stocks, we are seeing the regional benchmark fall and in japan, every sector is in the red, Energy Something the most and we are seeing the cost yield down 3 10 of 1 , down for a second consecutive session. Numberstacking the job out of australia and had a few minor supporters as well. Posting revenue surged nearly 17 . This is bloomberg. This is daybreak asia. There are renewed fears that attackers continue to infiltrate u. S. Targets. Microsoft says it has detected more than 700 breaches in the notified about 10,000 customers that they have been targeted or compromised. They all point to north korea as the most specific. President trump wants more commission on how the pentagon dropped of huge crowd. Up to 10s worth billion over a decade and will be given to one of the pairs next month with amazon seen as the favorite, how the president frozenn told that it was. A note of brexit could see sterling pushing to dollar parity and Morgan Stanley says it would happen in the markets worst Case Scenario with the u. K. Out of the deal. The banks say the rest of that happening is growing daily and as pound twoyear wednesday the rival hardens their rhetoric. Now angal outbreak is emergency. The World Health Organization 2 millionmes after people. And than 60 other people what is the second deadliest outbreak on record. The who says the risk remains the same remains slow. Global news 24 hours a day, powered by more than 2700 journalists and analysts and at tictoc on twitter, in more than 120 countries. This is bloomberg. Thanks very much. Its get a check on the markets now. Asian stocks are falling for andird straight session they will offer more clues on the impact of trade tensions. It is rising even as you are seeing treasury gains this morning. They had about four basis points andd that could spark easing if the numbers look week. Weve already had trade data this morning not budging much easing even as exports did not budge much. A third day of losses with earnings weighing in and also on the back foot while the korean won is steady. There is building pressure for a rate cut and our colleague can walk them with or without using, cream bonds will continue to view given a consensus given the risk of further escalation. When they issued their forecast. It we will find out when they issued their forecast. Going in the first half and revenue of 17 . We have seen a closer look at the numbers. What stood out to you . The revenue numbers certainly stood out. By any measure, this would be really impressive for most companies, but we have come to expect a lot more. If you look at the Revenue Growth for the first half, this level is highly its lowest since 2016 and well below the 10 year average, so perhaps we are seeing weaker Consumer Sentiment, but this company is really in a league of its own and analysts saying they are not too faced by these fluctuations and in fact, a lot of people are very fixated on profit earnings that have pulled in. How about Consumer Sentiment in china . Any sign that they will stay resilient . Companies are looking at that. We saw june retail sales growth come in very healthy and that was higher than what most Analysts Expected and i was boosted by auto sales as well. Swatch reported earnings yesterday and the company says the demand in the china is still very strong, they are seeing a lot of consumption growth and we also saw the Worlds Largest jewelry chain say that sales rose in the quarter for china and up 11 while it actually fell in hong kong. Certainly, wealthy chinese are splurging for the moment. Thanks for joining us. Joining us now for more on the story. Sonny, thanks for joining us. Take a look at the chart on the bloomberg terminal. The yellow line is the china index, so my blowing performance really. S is almost bitcoin like mind blowing performance really. This is almost bitcoin like. Approximately is 75 million Chinese People of about 30,000 or more, so theres actually a Large Population that has a strong consumption power and these individuals are buying luxury , and these guys perhaps less immune to the daily. Luctuations with aow, we see them lot of robust consumption and mao high is really getting into that. Just because of the price action, the stocks had a phenomenal run. I think expectations are high and there are incremental signs they would disappoint and that might take up a sign off of the stock. What is the potential for it internationally . When you look at the bottle, it looks like a household cleaner. Can anything be done about that . It is not going to fit into it isategory, but i think probably going to be some of chinesein terms people offshore that will try it out and theres perhaps maybe a little bit of opportunity in terms of mixing and cocktails, but a pretty strong flavor. It is a very traditional drink in china. The chance of it expanding, we dont think it is very high, but having said that, as long as we continue to see the highend individuals, population which theyto grow intooth get into geared. The chart showing how soaredr staples have compared to other sectors. Are there any specific stocks that you like when it comes to china . Sumer in i think it has faster growth and has had a great run. It is pricing in that now and we have been positive on one of the largest their makers dairy makers. View, listent of busy asset as we were a year ago when valuations were quite appealing. We think the other parts will be interesting to us and some of the old names that people have left behind such as alibaba, a moment. Eresting at the ecommerce continues to grow and the youe the on yuan. There are only a few companies well. Na selling it very there might be some consolidation, but still a very strong business cycle. , they are notons dampening Consumer Sentiment at all in china . They deftly had a big impact less here last year. A bit of a concern on whether the private sector would have interference from the government. Two out of those three things have reduced financial conditions and the private and private sentiment has improved. That, the china had tax cuts. [inaudible] Interest Rates have been cut which has slowed down mortgages is ine Chinese Consumer good spirits for the moment. Obviously, a full on trade the battle trade battle could dampen spirits. That is kind of the focus on government to refocus towards consumption. It is all positive reform and quite frankly. Thank you for your insight into chinas consumer partners. Coming up, wti falls to a twoweek low. We will tell you what is driving oil lower. This is bloomberg. This is daybreak asia. Wti has been down all week and it fell begin on wednesday. Official data showing americans going through a lot more gasoline than expected. Again, the concerns demand. At around the lowest in two weeks, between 56 and 57. Think the reason why it is energy lower is the u. S. Administration released andntory numbers yesterday combined, expanded much higher than analysts were expecting and it suggests a real weakness in steel demand from u. S. Consumers. The reason why that is surprising, peak summer driving season. This is why right when you andd expect demand to pop not gain as much, so i think that is why we are seeing a lot a weakness and if you take it a step earlier, theres concern that the slowdown in fuel demand suggests wider weakness. To that point, what other factors are there . There is a couple other things at play. It seems a little bit more willingness between the u. S. And iran to perhaps reopen talks. Sanctionsas slapped on countries, trying to limit oil exports. They bullish, but if reopened talks, that suggests they might be able to boost exports which would be bearish. The other factor, President Donald Trump said he could slap additional tariffs on chinese exports. This suggests that the trade war could continue to accelerate. That is very bearish, so i think those two factors are weighing on prices this week. Thanks for joining us. Iran has told bloomberg that it is capable of but doesnt want to. We spoke tocame as the editorinchief in new york. We have said that the boat is not going to syria. The United States with its policy will prevent us from setting that. The United States is preventing us from doing transparent phased sales. There are no eu sanctions that are applicable to noneu member states. Unlike the United States, it does not impose its sanctions on third parties. That is only what the United States does and the eu has objected to that all along, so the United Kingdom was not in a position to cease the ship. That was not destined. It was immaterial. , noe were no sanctions human sanctions, nobody has the right to confiscate that ship, so it is piracy,. Simple. You denied being behind the attacks. Who did them . Unfortunately, the United States and its allies have made this body of water. It is right next to our gulf. Ine on the persian it is right there. It is a very crowded place. Dangerous because it is so crowded . Last time, it was as crowded as it is now and United States an iranianown civilian plane with 290 passengers, so it is very dangerous. We understand and that is why we want to avoid a dangerous escalation, but we cannot give up defending our country. Guard hasolutionary said it cannot close the straits. Would be this edition would do that . We certainly have the ability to do it, but dont want to do it. It has to be secured. We play a role in securing it. Can controlink you the revolutionary guard . Some people say they own a different tension . Sophisticated system of governance where everyone does what they are supposed to. Are we not supposed to take measures that undermine our security . A lot of people would say that the big issue in the region is not so much america, it is saudi arabia and iran. Unfortunately, saudi arabia believes they can purchase their they pay as a commodity and they buy. They are ready to fight all their problems with american soldiers. That is how they see it. You see america as saudis mercenary force . We see the presence of the conducive to greater instability. It exacerbates tension and creates a false sense of security and they believe they could get away with murder of innocent innocent civilians on a daily basis. Would you like to see regime change . No. We believe it is the business of the saudi people to decide their government and we dont have any alternative to the current ruling regimes in that is not of our business. We do not want to see regime change in any country. Power. A status code ,e are content with our size content with our population and content with our resources. We dont seek anybody elses territory. Afteran live happily ever if they wish to. Is, they are not living in peace with their neighbors. If you want to look at the line behavior, we see everywhere in the region where you have a problem. Uaehave a uae port footprint. You dont have and iran footprint, but you still have a problem so if you want to look at a line behavior maligned behavior, you have to look elsewhere. Plenty more to come on daybreak asia. This is bloomberg. This is daybreak asia. Taiwanill be watching after the Worlds Largest [inaudible] this half. Nterrupted erupted this half. Manufacturert chip as its client, so investors watched earnings very closely as the barometer for the semi industry smartphone are performing. Analysts are expecting that they are going to suggest a revival after a very rough half first of ,he year, expecting to increase driven by a number of factors. For one, theyre expecting that this loosening of restrictions on huawei will increase demand of smartphone sales overseas. Apple rampup of iphone manufacturing as well as advanced micro devices. Send some customers like qualcomm may try to further diversify. We have seen a downturn for quite a while now. With the terrible earnings in the first half or was this Company Specific . What a very difficult half following the most since 2011. Some of them were company side,ic and on the macro huawei dragging on their sales, overall dampened demand on the chip industry because of the increasing escalation because of a trade war and in addition, you had apple which is their key client trying to shift into services. In addition to that, you had a slower smartphone market. Leadership in areas like 5g and Artificial Intelligence expecting to boost sales as well. , the chips to that are also positions for faster growth and smartphones need to be faster and smaller processors. Thanks for joining us. Lets get eight quick check of the latest business flash headlines. Ericsson is battling huawei or position. However, it says it should not affect targets for 2020. They are talks for a syndicated loan which would mark a return to the debt market after a twoyear gap. Facility, they are yet to be finalized and the loan market in 2017 when they raised a 3. 5 billion facility. Market coverage continues as we look ahead. The china open is next. This is bloomberg. When the company went public it which is a 11 , record decline by an ipo. I love how this is starting. Will it be before your Driver Program is one where there are no drivers . The Better Things that humans robots alone are having them work together. Interviewed for the job and you said i already have a job . No way. Rst, i said will you fix your tie. People wouldnt recognize me if
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