Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240714

Paul our top stories this tuesday. To make axpected formal response to the growing unrest. Breaking news on the bloomberg terminal right now. Fromve correct accounts south korea for the month of june, and it is coming. 6. 376 billion dollars for the month of june. An improvement on the may figure of 4. 9 billion. You can see the korean won. It hit 1200 against the greenback yesterday. More consternation in korea. The hardest hit countries from this ever escalating trade war. You have to remember, these june figures do not count in the current spat with japan or the u. S. China trade war. That in mind, the figure of 6. 3 billion looks good. We will await the july figures. Shery investors have a lot on their plate today to digest. Ground, one losing point 5 after u. S. Equities lost more than 700 billion of market value just on this monday as we continue to see the trade war escalation between the u. S. And china. We saw the s p 500 lose 3 . Tech and financial leading the declines. It was a brutal day with the nasdaq losing more than 3 . 700dow jones more than points. After hours, china being designated a currency manipulator. U. S. Futures taking a hit as well. Lets take a look at what volatility did. Surge in this session above the 20 level. 10year gilts falling to the lowest level that we have not seen since before the 2016 election. When it comes to the threemonth tenure yield curve, inversion at the most extreme since the financial crisis, so really a lot to digest and even more as we continue to see the trade war escalation. Lets see how you are setting up for the market opens in asia. Selena. Selina. Selina we are expecting a lot more pain. Taking a look at sydney futures, down more than 1. 6 . In australia, we are watching for the reserve bank of australia decision where they may keep the cash rate target unchanged. 2 ,zealand exchange down expecting Interest Rate cuts later this week and we will be breaking their unemployment data later this hour. I want to look at gold. The escalating trade tensions, and possible currency war is giving gold a boost. We saw prices climbed to a sixyear high amidst these increased speculation that Central Banks will need to cut borrowing costs. Citigroup raised its threemonth price outlook. But if after prices broke its previous target. Citigroup is forecasting the metal is likely to class 1000 500 by the fourth quarter. Paul. Shery. Selena. Anks very much, lets check in on the first word news with ritika gupta. The trade war is taking another dramatic turn with the u. S. Treasury designated china as a currency manipulator. President trump started the move yuans lateste fall and suggesting the Federal Reserve take action. That follows beijing responding with the threat of additional tariffs by letting the one tumble. Beijing yuan tumble. The latest escalation in the trade war has pushed a key treasury recession indicator to its highest warning level since 2007. Rates on 10year note sank, almost erasing the search that followed President Trump election. At one point, they yielded 32 basis points less. That is the most extreme yield curve inversion since the lead up to the 2008 financial crisis. China is expecting to comment again later tuesday on the protest in hong kong. Second a Second Public statement. They will make a Second Public statement. They fought in the district late monday after a general strike disrupted business. Andce arrested six people say some have been linked to games. Gangs. Jeremy corbyn will call a vote of confidence to prevent the Prime Minister quitting the European Union without a deal. Corbyn says johnson is trying to deal split past lawmakers and voters and labor code table a motion on september 3. 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. I am ritika gupta. This is bloomberg. Shery thank you. U. S. Treasury secretary Steven Mnuchin have formally determined that china is a currency manipulator. The latest twist in the longrunning trade standoff. The decision is likely to send markets into deeper chaos. Joe sobczyk in washington and Tom Mackenzie in beijing. Joe, let me start with you. We have not see in the u. S. Little china a currency manipulator since 1994. Give us a sense of how significant this move is. Joe from a practical standpoint, there are no penalties that are immediately imposed because of this and the law encourages the u. S. To enter into negotiations with whoever is the currency manipulator. Negotiations are already going on, but this is a significant escalation and it gives china less of a chance to back down and it is making clear that President Trump is ready to double down on the straight conflict with china. Some liable to have repercussions in financial markets, but it signals that this will be a long trade war without any immediate sense of where it is going to go and how it might end. Tariffs theal president is threatening to impose on china will affect consumer goods and matt will have an impact in the u. S. In voters, prices for leading up into the 2020 election. And then we will have to see what the overall impact of the economy ultimately will be. But this is very clear that trump is in no mood to back down or softened his stance in an attempt to get negotiations moving. Paul were hearing that peter stepro has taken the first to label china as a currency manipulator and is working with the imf. E have less than 24 hours the u. S. Labeling china a currency manipulator. Tom mackenzie in beijing. Any response yet from the pboc . Tom not to the currency manipulator label. We heard from the pboc governor in a Statement Last night, beijing time, saying that china and the pboc do not intervene in the currency markets as the wall in the trade war. They were trying to emphasize that this was a market denominated or market derived move that we saw yesterday and market more about the and economic fundamentals. Of course, when we spoke to him in june, he gave us a signal in theven was not a line sand. He gave us something about heads up to what we saw yesterday, saying there was no specific number for the currency. Risks to this approach by the pboc, allowing this depreciation of the currency, because there will be a focus on capital flight. We have increased capital controls in place in china since surprisen we saw that appreciation. Whether those controls will be enough to stop capital flight will be squarely in focus. There is concern that there is a mounting part of just denominated debt owned by corporations. Debtpushes and puts that under pressure and how they pay that off will be in focus as well. Indoubles that holdings 2015. It may have some benefits for chinas exporters around the edges, but the risks are also there for china and its pboc. Shery Peter Navarro saying there are countervailing tools that the u. S. Can use, so this gives rise to more concerns that the u. S. Might take action and intervene. What can we see . Joe theres been suggestions that the Trump Administration would attempt to do something in terms of the dollars valuation. The president called on the fed to do something. It would also have to be through the treasury department. The treasuryk department. Impact, have some little affects, with other trading partners as well, if that were to come about. And possibly trigger some other italians were removed tory moves by other countries as well. They are stepping fairly delicately here. But we are seeing that they are willing to put the tariffs on china to move ahead with that aade dispute, and there are number of other deals that have been working. By comparison, because of the size of chinas economy, they not nearly as significant as the trade conflict is with china. Tom, that story was rather lost in all the noise of the action with the currency, so in terms of deciding to no longer take those and a cultural products from the u. S. , what other retaliatory steps might china be considering . Aboutna has tariffs on 110 billion worth of u. S. Imports into china. So there is limited scope for additional tariffs that china could put on those. That is something we will be looking at. In terms of the concerns for u. S. Corporate operating here china,big footprint in you have to take a look at the stock prices for apple and ibm, which derive a lot of their revenues from the chinese market. You have seen those under pressure as a result of these trade tensions. That draws out the question as to whether or not these countries will face retaliatory measures. Nontariff barriers. Will there be deals that will be scrapped . Increased oversight from officials . There will be mounting concern amongst the Corporate Business Group operating in china as tensions continue to escalate. In terms of additional measures that china could take, u. S. Treasury holdings have been a big focus as well. Whether or not china will sell down those holdings, of course, there are also was of impacts from any such move, and it is eating held as a lastditch option for china. We may be looking at whether or not china india goes ahead with sending it delegates to bc as has its delegates to d. C. Do these talks continue given the sharp escalation in tariffs and trade tensions that we had seen in the last few days . Paul joe sobczyk and washington, d. C. , and Tom Mackenzie in washington, d. C. , and Tom Mackenzie in beijing. Joining us now, brad. Thank you for joining us today. We heard tom mentioned a moment sgo that the pboc representative never said that seven was online line in the sand, but it was just a number. If we give this a cold, dispassionate stare, does china let the market do its work here . Brad the fixing yesterday was only 229 points, and if you look back in may, as recently as may, they had a fix that was well over 300 points. In two consecutive days. We were talking about the retaliatory tariff measures china was taking. That voted under the radar. Was sort oft night in mind. The pboc stepped back to point to it and say the dollar has been rallying and it is in line with where we think it should be. The market was set up for something out of china in response to what trump had been thinking about and the tariff increases, etc. The market just jumped on it and we flew right 37. Heaven, of course, the psychological level everyone was itty much keen on, flew right past seven. Seven, of course, the psychological level everyone was keying on. Shery you can see the onshore what analystsyond had expected when it came to yearend forecast. We continue to see the offshore and the offshore yuan. Does that mean the offshore really has more room to fall . Brad it definitely could. Right now, it is all going to on chinas response to this label as a currency manipulator. They can point to needing to adjust dollars and why higher based upon dollar cny higher. What is the political implications of them being named a manipulator . Do they want to continue to fix dollar see and why higher cny higher . Do they want to get things back on track diplomatically . It would be interesting to see what happens with the fixing. Shery that if we continue to see more yet if we continue to see more tariffs on chinese goods, given the fact that the terms of trade for china would be worsening, how much more pressure are we going to expect on the yuan . Brad china has a lot of tools available. They have been using them. There is more they could do on the fiscal side, more on the monetary side. It felt to me like the currency was the last thing they would go for in terms of china to stimulate the economy. There. It is a policy tool making use. They are reluctance over the music, and i think they are going to be a bit surprised at the extreme reaction in the market and from President Trump softrms of the relatively fixing they gave us last night. It will be interesting to see. They had plenty of room to in ordere yuan further to stimulate the economy but i do feel that that would be at the expense of noise around capital flight and probably pushback from a lot of g10, g20 central bankers. We agreed at the g20 not to do they are of thing, so in endangered territory if they keep pushing the envelope here. Some time ago, President Trump said he named china a currency manipulator and he had finally done it. It is marginally symbolic. It will not been a great deal in practical terms. What can the u. S. Do . Might we see some intervention and what would that look like . , the topic of an intervention has been coming up a lot. The first step would probably be to name china a currency manipulator. I was looking for that in october. To come before the next report interesting. Is clearly, it is a relatively emotional response. Proposed by the Commerce Department would expand the ability to penalize countries that manipulate currencies, countervailing duties. I am not sure. I do not believe that change had been passed. I think it was working its way through the system. Be a response. That could be where they are going in the interim. But it definitely, in my view, increases the onset intervention quite substantially. Shery thank you so much for joining us today. Foreign exchange at jefferies. Still ahead, more drama in the trade war. Chinas decision to halt purchases of u. S. Farm produce. Paul up next, stocks saw their worst rout of the year. More Market Reaction plus what will be moving in asia. This is bloomberg. Shery this is daybreak asia. I am shery ahn in new york. Sydney. Am paul allen in the decision by the u. S. Treasury department to label china as a currency manipulator is like you to send markets into deeper chaos. Is likelyeynolds to send markets into deeper chaos. Garfield reynolds. Garfield maybe 7. 2 is next up. It has already gone to a fresh intraday high, the option run in the off renminbi. We are not likely to see the same sorts of thanks. A lot of pressure being built up. What is lost a little bit in the labeling of the currency manipulation and so on is the reason the yuan is falling is because the fundamentals are saying it should fall. If anything, in fact, what the u. S. Is accusing china of and what it worried about back in june was that china would manipulate its currency by no longer preventing it from falling. So in fact, the u. S. Is complaining that china is letting its currency float, as it were. Is because china is not acting as a buffer anymore, right . It is allowing the yuan to fall. The reason we saw china would not allow that to happen, that seven would be the line in the sand is because of the dean anchoring currency. Garfield what has changed beijings calculations is a couple of things. What is going on in its own move to it needs to greater stimulus. Theres been a lot of concern recently about precisely that if it is going to go on holding the we are working against any stimulus. In fact, free them up to the stimulus and it will help its exporters to some extent. It will help other sectors of the economy to some extent. There are logical reasons why china would want to let the yuan we can. Weaken. The other thing that went on is they realized they were not going to get any progress on the trade talks, so there is no point in them continuing to hold y to pleaseuan the yuan to please the u. S. Shery Garfield Reynolds joining us from our mliv team. The escalating trade war posing risks for Global Supply chains and trade around the world. Our next guest brings a unique perspective on the intensifying standoff, the Global Supply chain, and access to capital. , she joins us now from singapore. Great to have you with us. How different are the latest round of tariffs that the u. S. Plans to impose on chinese goods when it comes to what we have before . And how much has the designation of china as a currency manipulator change the dynamics now . What we see currently is of course a bigger impact on certain goods that we are not so impacted before. U. S. Imports of shoes. Economy andthe u. S. The people will have to pay for , even down to the consumer. What we see as well with these tariffs is a big move and big consideration of diversifying the supply chain across the globe, so many sectors, many think of in the u. S. Purchasing from vietnam. Chinese companies go to vietnam. Across different sectors. We saw it before in the apparel industry and we see it in other sectors following. However, it cannot happen overnight. What will happen is it is probably an 18 to 36 month period before the Global Supply chain can transition because we have one year to threeyear contracts in the automotive industry. Manufacturers cannot quickly get out of china and moved to countries. Other indonesia is another one that will benefit from it. It will take time. We believe we will have more stable, more Global Supply chain, more diversified as a positive result of this situation. Paul so far, the u. S. Consumer has pulled through the trade war pretty well, and for how long do you expect that situation to persist if, as you say, shoes and apparel are next in the firing line . Kerstin the consumers and will definitely feel the pressure and feel the impact and they have to pay for it. However, we already see three different trends. Chinese to number one, already, goods are shifted and redirected through other countries, so we anticipate that over the next year, immediately, we will see more into asia trade that then goes intraasia trade. Even africa is becoming an attractive country from which the u. S. Will import. Especially ethiopia is one country where we see cap benefits for manufacturers tech benefits for manufacturers. Benefits for latin america and mexico, arising in the u. S. Without the trade tariff impact. The biggest impact since last week is the shoe industry, and this will hit the consumers, but quickly, there will be results and reshuffling. Shery thank you so much for that. Kerstin braun joining us from singapore. We have an alert on the bloomberg, developing headline from south korea. The deputy finance minister saying the uncertainties are expanding in the korean market. South korea will take quick, contingencysteps on plans. It will take steps to cull markets if volatility expands. The korean won has fallen below 1200 for the First Time Since 2017. Plenty more to come. 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. Ritika this is daybreak asia. The trade war is taking another dramatic turn with the u. S. Treasury designating china as a currency manipulator. President trump started the move criticizing the yuans greatest falls and suggesting the Federal Reserve should take action in response. That follows beijing responding to the threat of additional tariffs by letting the yuan moree to its weakest in than a decade. They are asking stateowned imports ofo suspend u. S. Farm produce. The escalation in the trade war pushed a treasury recession indicator to its highest warning level since 2007. Rates on tenure notes sank, almost erasing the surge that followed President Trumps election. They yielded 32 basis points less than threemonth bills. Extreme guiltt her in version since the lead up to the 2008 financial crisis. North korea launched more projectile, ramping up the pressure on the divided peninsula. Dhe north file fire weapons. The latest comes as south korea and the u. S. Began military drills which pyongyang described as a violation between an agreement with kim jongun and President Trump. The indian rupee fell the most in almost six years as the government scrapped the special status for kashmir. Triggered protests from local residents. Critics of indias hindu nationalist led government see the move as an attempt to dilute of kashmir. 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. I am ritika gupta. This is bloomberg. We are seeing Household Spending for the month of june year on year growing 2. 7 . Better than expected. A slowdown for the month of may. We have seen some bad weather in japan dampening spending on leisure activities. Bloomberg economics say the weakness in manufacturers corporate profits could drag on wage growth. Household spending growing to. 7 in the month of june. Labor cash earnings youre on your growing at 4 , which is better than an estimated year on year, growing at 4 , which is better than estimated. Ofcould see more gains ahead that sales tax hike in october, leading up to september. Paul. Thanks, shery. The unrest in hong kong continues as protesters move to shut the city down with a general strike on monday. There are clashes between proand antibeijing camps. Sophie kamaruddin is watching developments. Sophie, what has been happening . Scene, paul, to set the it is no longer unusual to see antigovernment and antipolice graffiti and posters lining the streets while surrounding the Legislative Council building. Amongst the rubbish, we see manuals for respirators and other graffiti and posters. I also have in my hand a list of the five key demand for protesters which have not changed in the two months since the class began on june c lash began on june 9. These protests will bring the city to ruin, they say. Anrie lams emphasis on my order without making concessions to protesters demand is not being well received. Clashes between demonstrators and police began early in the day with tear gas been used to dispel crowds here as well as at other rallying points around the city including residential neighborhoods, which brings the protests even closer to home for local hong kongers. Attacked some police headquarters. Seen slowingis not down, with more demonstrations expected in the coming weeks. Tomorrow, august 7, a lawyers being organized to call for an independent commission of inquiry. Shery. Shery what is the endgame for protesters . When are we expecting to break the impasse for beijing . The endgame is not entirely clear because you had carrie lam and the Hong Kong Government doubling down around maintaining law and order, putting the onus on the police of sensibly of sensibly. Obstensibly. We are seeing tension building with protesters around their demands not being met. We have seen a clear evolution of the demonstration from when it was first focused on the extradition bill and the withdrawal. Isng forward, the economy something the Hong Kong Government and beijing will use more publico garner support. Later today, we are expecting officials from the Hong Kong Office in beijing to announce something new. This would be the second time onr that china has commented hong kong in this manner. We are expecting again some attempts to focus on the economic damage. With protesters being detained, more than 500 so far is a tally since june 9 clashes began, it is unlikely we will see protesters back down while their demands have yet to be heard. Just taking a look at what is going on around me, it has to be said that this is coming the norm. Morning traffic continuing even after a night of clashes in hong kong. Shery Sophie Kamaruddin from the streets of hong kong. Lets return to the markets. We are half an hour away from the open in tokyo, sydney, and seoul. Lets turn to selina wang. What are you watching . Selina i am watching right now onemonthre volatility. As you can see from this chart, it has been spiking ever since beijing allow the currency to weaken past seven to the dollar. Almost tripleed the close on thursday, which is the biggest twoday gain since china devalued the currency on august 20 15th. The boring days of the yuan are august 2015. The boring days of the yuan are over. He said they will not be manipulating the currency. Switching boards, taking a look at the japanese yen, deflation in the trade tensions has led to this big rush in safe haven assets left again. It is climbing, hitting its strongest level in january against the dollar. That knock on effect of the knock on effect of other em currencies, that is a headache for the boj since it s slumping economy does not need that. Paul thank you very much for that, selina. More on what we should be watching as trading gets underway in asia. Us. Assets editor joins one of the hardest hit amongst this trading currency crossfire. It is career that is really feeling the brunt of it all, isnt it . Korea that is really feeling the brunt of it all, isnt it . Particular, wen know, were severely hit on fears that we are now seeing the start of a currency war. We have got a chart that shows the correlation between em currencies. The offshore yuan is the strongest it has ever been. Going back to korea, what is adding pressure is this spat with japan where tokyo has removed seoul from a list of trusted exporters. Seoul retaliated, saying it will do the same. You have this export dependent economy. It is caught in the crossfire of the u. S. China trade war and is concerned that you will see a in demand for chips. Shery given this risk off sentiment, we continue to see those traditional and sort of nontraditional a haven assets in ground. Safe haven assets gain ground. To 1500 andld go up downs. We also saw bond yields tumbled in just this morning in australia. The 10 year bond yield is now below 1 . That is for the first time ever. Bitcoin,tocurrencies, rallying towards the 12,000 of all, and they are being seen as a place to shelter in these times of distress and also began, as the again, as selina mentioned, heading towards the 105 level, a level it has not gone through since the crash we saw at the beginning of january. So safe havens still in place today as this rout does not look likely to let up and investors looking for somewhere less risky to park their money. Shery thank you so much for that. Bloombergs asia crossasset editor. You can find her chart on the gtv library. More to come. 20 this is bloomberg. Plenty more to come. This is bloomberg. Wery we have an alert that are following. We are now seeing this oped released by former fed chairs paul volcker, alan greenspan, and others. They are talking about the need for this independence. They are saying they are united in the conviction that the fed and his chairman be permitted to act independently and in the best interest of the economy, free of shortterm political pressures and without the threat of removal. We continue to see more pressure coming from President Trump for the fed to continue to ease policy. We are seeing this head on the wall street journal. Now, we continue to talk also about the trade headlines and the ongoing tensions. Goldman sachs has factored in the trade war. The question is, how do you strategize around the next potential escalation . Joining us on the line from atlanta is Goldman Sachs global head of an and emergingmarket fx and emergingmarket strategy. We continue to see this traditional safe haven for japanese yen. Is that where we should be going . Absolutely. Thank you for having me on. I think the ongoing trade conflict is very positive for the yen. It remains one of the few undervalued safe haven assets globally despite a sizable move we had already. We think dollaryen is still a bit too high. The yen is still a bit cheap relative to the dollar and we have to further that a claim. We think two 103 or beyond two 103 or beyond that. The yen has been the main beneficiary of the conflict and we think that will continue to be the case. Paul for how long do you expect to continue to tolerate the u. S. Dollar at levels where it is . We had a few conversations about potential intervention. Intervention is a rising risk in the u. S. No doubt about that. Although his advisers seem to have rejected the idea a couple of weeks ago, if we continue to see a mix of slower u. S. Growth and a stronger dollar and perhaps a fed that is not interested in cutting rates more aggressively, i think you cannot entirely ruled out intervention. It is harder to say is what currencies that might the against. And the yen are strengthening already versus the dollar. It would not seem to be a real need for intervention today. There is a kind of question about whether the u. S. President would be willing to intervene in the chinese yuan, which is the currency at the center of the dispute today. We think intervention is less it seemsan not, but clear the white house desires to see a Weaker Exchange rate to improve manufacturing competitiveness, so currency intervention is going to be part of the toolkit for the time being. Shery we continue to see this growing list of negatives for the euro. What are the implications for the european currency when you are seeing President Trump now designating china a currency manipulator and we know he is not happy about europe either . Were seeing the euro appreciates significantly in the last couple of days but we think that is a temporary phenomenon as investors close euro funded yen carry trades. Iso funded long mexican peso probably the single most popular carry trade in fx markets over the last year or so. So we do not think the news from the last few days is fundamentally positive for the euro area. We think it is clearly fundamentally negative given the euro area of openness to trade and the desire of the ecb. Although it has been bouncing in the last couple of days, we think it will most likely head lower, especially over the next 1. 5 months ahead of the september ecb meeting. Our next guest s is probably lower. Uess is probably lower. It could be quite damaging to the euro area economy given its openness and exposure to the manufacturing sector. Paul all right. Goldman sachs cohead of fx and ian strategies, zach pandl, thanks very much for joining us. Lets get more now on the latest development in the u. S. China trade war. Joining us is resident scholar you take a contrarian yo among among this say view all of this saying it is negligible and Everyone Needs to keep their head. Can you explain a little bit more . Apparently, that is not a popular view on wall street today, but when people talk about damage to the American Economy, the American Economy, gdp, was 21 trillion last year. When people talk about 30 billion damage to consumers, that is really a drop in the bucket, a rounding error. It could not be that there is a Material Impact we are seeing on consumers that matters to the American Economy as a whole. It has to be Something Else which is scaring stock market traders. Paul something is definitely scaring stock market traders and things seem to be escalating on the trade front. This appears to be working into a currency war as well. A lot of people have money in the stock market. Americans, 401 k s, other Pension Funds around the world, showed us how quickly things can escalate and get out of control. Those the selloff we are seeing make more sense in the context . You had a huge problem of freezing financial markets. We do not have anything like that now. Lets take the american designation of china as a currency manipulator off of a 1. 4 longoverdue evaluation. That is not substantively important. Drop,ow, the stock market they drop, so you cannot deny what the market is doing, but even a blow to u. S. Household wealth, it has risen 40 trillion 2010. You white 1 trillion off of nasdaq capitalization, it just knocks you off a few months. It is about vulnerability to market valuations and fear. The fear is of something nebulous. It is not of u. S. Current the manipulation. It is not caps on consumers ariffs on consumers. It pertains to a few stocks rather than the u. S. Economy as a whole. Shery we know how focused President Trump has been on the stock markets. Is there an inherent trump put beijing is counting on that President Trump will that down if the markets take a big hit . Derek that is a really interesting question. Obviously, the First Response today, where the markets dropped like a stone and the u. S. Call china a currency manipulator off of a very small action by the chinese, in the case of president is not sensitive to stop you to stocks, you have to ask what is wrong here. It looks like the president does not believe they will do what he wants them to do. Andas positive at osaka then he has since lost not believe that he can make a deal lost that belief with the he has locked that believes that he can make a deal with the chinese. Shery can beijing trust the Trump Administration . He has invented different steps with how they have treated the nafta negotiations despite the fact that they got a new renegotiated usmca. And then threatening mexico with new tariffs on immigration. Derek there is no question that u. S. Policy on trade has been unstable for a variety of countries. You look at the chinese response, they might think we cannot come to a trade deal. We know what the president wants. He wants more u. S. Exports. China was willing to accommodate him on just the export side, a partial deal could be made. This is the lifeline that is still out there. Traders who are worried about u. S. China trade. A partial deal is possible. It does not seem that u. S. Can get anything it wants. The westld not trust cannot demand more at that point. If the u. S. Wants more exports, which the president wants, there could be some sort of compromise. China buys some more u. S. Goods. This issue is shelved for a while and that is the path Going Forward. See some weakness in the chinese economy. We had some comments today. She says some republicans believe the chinese economy is on the brink of collapse. Doesnt that puts things into a more precarious states . There might be action in the south china sea. Derek i do not think the chinese economy is on the brink of collapse. I think that is an exaggeration. Indebted older countries do not collapse. They just sort of stopped. That is a misread of the situation in china. One of the things to consider is if the u. S. Has the upper hand on a trade war because we are less trade dependent, it is in chinas interest to expand outside of the trade war. Tothe United States wants win the trade conflict with china, we can. If everyone knows that, you are right to point to a risk. We can cause other trouble. The example of that to now has been north korea, where the president has been willing to cut china some slack when he saw progress was being made on north korea. I do not think it is an accident. We have your point, seen some more missile launches from north korea as well. American enterprise resident scholar derek scissors, thanks for a much for joining us. We have more ahead on daybreak asia. Stay with us. This is bloomberg. Shery lets get a quick check of the latest business flash headlines. Pershing square said to have quit his position. We are told he decided to sell the united rather than fight its takeover. He had opposed the deal in june saying it lacks strategic sense. He says his dropped Payroll Processor he dropped Payroll Processor adp because much of the low hanging fruit has been plucked. After swinging to a First Quarter loss and warning that fullyear profit will collapse. Shares in japans third biggest dealmaker sank the most since 2017. His net loss was more than 11 million in the threemonth since june and it sees net income dropping 72 . We have markets opening in tokyo, sydney, and seoul at the top of the hour. Lindo wing is here to tell it selina wang is here to tell us what to watch. Selina i am looking ahead to the market open. It is looking like another weak and volatile day. Look at the nikkei futures, down more than 2. 7 . Australia down more than 2. 65 . Open. Nts to a very weak investors seem to be grasping what the potential means for a protracted conflict between the worlds two largest economies. We saw, as we mentioned earlier, haven assets like gold and the yen really rallying, and bitcoin attaching approaching 12,000. Traders were really rushing to hedge their positions. Boards, in addition to all caps literally around the global macro picture, there are also a slew of earnings coming out of japan. Some of the stocks i am watching include softbank corp. , which reported earnings yesterday, revenue, and income gains. The mobile segment increased due to subscribers due to its plus plan. I am watching out for earnings at united arrows, which operates fashion stores. Paul thanks very much. Coming up on the next hour of daybreak asia, as the asian trading day gets underway, we are going to hear from a market strategist. We will be covering all the currency moves strategy. Ead of fx the market open, next. That will be interesting. 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, i am paul allen in cindy in sydney. Ahn. Shery ahn area i am selina wang in beijing. Welcome to daybreak asia. Paul our top stories this tuesday. Calls china a currency manipulator. President trump once the fed to take action in response. The drama heaps more pressure on markets. There are fears there is a trade war and currency wars at the same time. Shery protest flare in hong kong. Formal response to the growing unrest. Lets get straight to Market Action with selina. Seems the market direction is clear down we go. Itina it has been to say is a busy week for investors is an understatement. Nikkei down 2 , the same with the topix. We are watching the japanese yen. We are expecting more pain from emerging markets. Japanstioned earlier, headache is the strengthening yen. Looking at korea, weakness there. There finance ministers said south korea will take quick and bold measures based on a contingency plan to stabilize market volatility. It has also had a sluggish economy. That combined with trade escalation and yen weakness has increased uncertainty, not to mention japan sanctions on south korea from japan. Lets look at sydney futures. Australia we are watching for the reserve banks decision, the official cash rate target we expect to be unchanged. New zealand, expecting Interest Rate cuts later this week. And also unemployment data from new zealand. Paul thanks. Lets check in on the first word news. Four heads ofs the Federal Reserve jointly calling for independence of the central bank. Penned an oped in the wall street journal saying it operates best when free of shortterm political pressure. Removeere threats to officials for political reasons. The latest escalation in the trade war pushed to the highest warning level since 2007. Rates on 10 year notes sunk to erasing the surge that followed President Trumps election. Most extreme yield curve inversion since the lead up to crisis. China expected to comment later tuesday on the protest in hong kong. Make only the Second Public statement since the handover in 1997. Protesters,beijing a strike disrupted transport. Police arrested some who had links to triad gangs. Jeremy corbyn said he will call a vote of confidence in the Boris Johnson government when parliament returns next month to protect prevent leaving without a deal. Tosaid johnson is trying slip it past lawmakers and voters. They will return from recess september 3. Rupee fell. Uby it triggered protest from local residents and pakistan. Critics see the move as an attempt to dilute the democratic majority kashmir. 2400ed by more than journalists and analysts in more than 120 countries. This is bloomberg. Just asian markets are starting to open and react to the u. S. China trade war. Declaring china a currency manipulator a few hours ago. The topix dropping more than 2 . Erasing all of its year today gains. The 10 year yield now below 1. 7 . Lets bring in wes goodman. We are continuing to see this huge reaction. U. S. Futures down 1. 5 . Nikkei down 2. 8 . The topix erasing the gains. Thiswe continue to see action reverberate through asian markets until we get the yuan fixing . Obviously the outlook for stocks is not good as the trade war escalates, but you are right that the yuan fixing will be critical. The yuane decline in yesterday that said all of this off. Everyonehe bellwether is looking at. That declines further, will mean further downside for stocks. Fixing itself would be a Good Opportunity for china to signal what it wants next in this trade escalation. If it fixes the yuan weaker, that will be a snub to the u. S. That will be assigned they are not concerned about being called a currency manipulator. There is a school of thought, why should they be concerned about it . They already face all of these tariffs. They are already under an enormous amount of tariffs. Is stronger,an that is a different sign, that iny want to seek moderation these trade tensions. Wouldk a stronger fixing fix the inequality we are seeing. Moves toare seeing big the downside on this stock market open. You are writing that the real action is in the bond market. So. Yeah, i think stocks, everyone is lamenting what is going on in stocks. If you are a bondholder, rejoicing. Treasury yields plunging. Last time i. 71 looked. Now people are talking about 1. 5 the next stopping point. Some signals from the bond market are showing yields can keep falling. The premium is at a record low. Two breakeven rates that are tumbling. Most of all people are expecting the fed to keep cutting Interest Rates. Last week we were talking about the fed being one and done or done. On people are betting on four more cuts by the middle part of next year. Incident inan singapore, thank you. Lets look at more implications, what beijing is going to do in response. Lets bring in our china correspondent Tom Mackenzie. Yuan move above seven and the u. S. Declaring china a currency manipulator. I guess it is chinas move . Tom the gloves are off. The interesting part of this from a chinese perspective, up until yesterday, china had been holding firm on this line in terms of the currency, doing everything it could to ensure it did not go above that seven level as talks continued. Now it removed that support even when we are expecting chinese negotiators to head to washington to can continue these negotiations in september. China has run out of patience. There is a meeting between Senior Leaders at this coastal resort in china where we are likely to get clarity on the back of that meeting. It seems since may when trump the chinese side broke up sideiations, the chinese has become more tough in terms of the stance. They want to see tariffs removed and a more balanced deal. What about retaliatory measures . We have had the blocking of Chinese Companies from agricultural goods from the u. S. Additional measures china could take, we could get additional tariffs. Billionort about 130 worth of good. They are currently tariffing 1 10 billion. With heavyations exposure to Chinese Markets could face more pressure around the whole load of deals, whether it is deals, licensing, checks, compliance issues. Concern ofbe of a u. S. Companies with a heavy footprint in china. Companies could be published as well. The question is whether or not china looks to sell u. S. Treasuries. We should not dismiss that as a possible idea. Gauging inare we terms of what the beijing strategy is . Are they trying to wait out the 2020 elections here in the u. S. . This . R can they take china has felt burnt a couple times in negotiations with the u. S. With wilbur ross in 2017 agreeing to what was called and 90 day deal. Liu he going to d. C. And telling the state media the end to the trade war, they would be no tariff trade war. Weeks later trump put tariffs on. Recently with this announcement by President Trump he would put billiondditional 300 of chinese goods it them by surprise. They have run out of patience. They have three key demands and one includes removing all tariffs to get some kind of trade deal. Yes, it looks like they are digging in for the long haul. Sources in beijing suggest they would wait this out until after the november elections in 2020 to see who comes out of that and whether they can get what china would see as a more reasonable conversation. For the moment they will put the pressure on those states in the u. S. There is a political side to that and the currency remains in focus. We will be looking at that fixing at 9 00 to see whether we go up or down from here. Tom mackenzie, thanks for keeping an eye on that. Tradeto come, why latest war escalation is a game changer for australia and new zealand. Shery a rough day for stocks. We speak to a strategist. This is bloomberg. This is bloomberg. Shery you are looking at a map of Global Equity markets. The function is wm go. 2. 4l markets lost trillion of market cap the last couple days. This coming amid escalating trade tensions. Our next guest is saying this may not be the last of yuan weakness. Marketpan is a strategist and joins us from singapore. Given what we have thing seen with the chinese yuan, how much longer are we expecting the yuan stay above the seven per dollar level . Jingyi pan good morning, thanks for having me. [indiscernible] if wed not be surprised see prices ending at level. Been the reason we have seeing this trade tension escalation coming sudden. Away not going to go anytime soon. [indiscernible] a rude awakening from President Trumps latest tweet last week. It is viewed as a retaliation method, this [indiscernible] the pboc letting it go at the end of the week. I think they are both in a situation where they are ready to stake out the fight. We may see tensions persisting for a while. It could keep the yuan weaker until the end of the year. Shery this will come at a cost for beijing, right . Sandought the line in the at seven was because of concerns of capital outflows and deanchoring currency conditions. Jingyi pan i would say prior to the rout, Silver Lining for the chinese authorities, significant expectations in the market to see the more supportive measures coming through. This is on the fiscal end in terms of more tax cuts, expecting to triple into 2020. It has allowed the chinese , like this view of the fed in terms of the latest rate cut, to have ammunition to can continue this fight. See not think we will continuing declines, even if prices are on the soft side. Paul i want to bring up this chart on the bloomberg terminal onshore yuanhinas. What does the pboc do . Do they let this blow through seven as well . I would say in this case it is a wildcard because we have seen the latest currency manipulation accusation from the Trump Administration. We have to see what this move is. I think it is like a chess game. China overtime has been trying to curb yuan weakness. This could be out of goodwill as well. Position,inese may [indiscernible] extent they might not keep prices different from where we were yesterday. Volatility, we could find a surprise like we saw on monday. Paul you described that as a wildcard. There is another potential wildcard, the idea of intervention from the u. S. We have not seen that from the 1990s. With the u. S. Go that route . Jingyi pan at this point in time i do not think it is a likelihood because i think we will see it get a little too ugly. There have been a lot of twists and turns. It does remain to be seen. As far as what we have seen from the Trump Administration, suggestions from steve mnuchin, to see how the issue could be resolved [indiscernible] i do not see things going that far yet, paul. Joining us from singapore. Want to get some news on the bloomberg terminal. Iron ore prices continuing to slip. 96. 90 per ton. O we had been used away 120 handle. We have seen the aussie dollar slipping along with this. 1. 8 . Wn rio tinto up 1. 4 . Fortescue metals, their only product is iron ore. That is 3 or a shade under. More in a moment. This is bloomberg. Paul the unrest in hong kong continues as protesters moved to shut the city down with a general strike on monday. Tensions flare between proand antibeijing camp with 80 people arrested overnight. Sophie kamaruddin is watching developments. The unrest showing no signs of abating. Sophie that is the general theme here. I will walk between the pacific mall and Legislative Council building. It looks like things are returning to normal after a night of unrest, which saw clashes between police and demonstrators. Rubbish from overnight has been cleared. We saw an army of street sleep street sweepers clearing rubbish and posters, antigovernment antipolice posters. No end game insight. We think about the bigger picture, the government not making any concessions the protesters demands which have been unchanged. More demonstrations are planned in the weeks to come, including one scheduled tomorrow. Flight cancellations, trains halted, what are we expecting today . Sophie we have aarned protesters are to hold conference this morning. It is unclear which group is the organizer. To hold their Daily Press Conference at 4 00 p. M. Hong kong time at their thequarters, at one of stations attacked by protesters on monday. While there are no protest planned for today that we are aware of, there may be a potential spark when chinas Hong Kong Office in beijing makes an announcement scheduled for 2 30 p. M. This afternoon. Underlie daily underlined support for carrie lam. To punish commitment violent crime. Sophie kamaruddin, thank you. Lets get a quick check of the latest business flash headlines. Scrappingg Group Bonuses for staff after an ,nquiry into misconduct individual bonuses for the vast majority will be replaced with an incentive payment on the overall performance of the bank. Senior executives will still receive individual bonuses. Hsbc fell sharply in london after confirming lands to eliminate more jobs. Ceosollows news of the departure with the loss of 4000 positions, mainly among senior staff. Flint stepped down and already started training jobs across the hsbc group. The cuts should take a year to complete. Ofriott slumps after shares . 69 in the last quarter compared to 1. 87 a year ago. It was forced to take a 126 million related to a massive data breach. The marriott also narrowed for your guidance for available thes to between 1 and 2 , lower end of the range. Taking a, japan beating amid trade escalations. The topix headed for a loss. We go to tokyo for the latest. This is bloomberg. This is bloomberg. Reporter this is daybreak asia. The trade war is taking another term with the u. S. Treasury designating china as a currency manipulator. President started the move, criticizing the latest fall of the yuan and suggesting the Federal Reserve to take action for the follows beijing responding to the threats of additional tariffs by letting the yuan tumble to its weakest and more than a decade. They are also asking state owned companies to suspend imports of u. S. Firm produce fair farm produce. The u. K. Will join a shipping in the gulf join to protect shipping in the gulf. They will safeguard the strait of hormuz, but e. U. Nations have been reluctant. Cooperating with the u. S. Marks a shift in strategy. The u. K. Previously called for a Europeans Initiative European Initiative to protect shipping. North korea has launched more projectiles, ramping up the pressure on the divided peninsula. The north fired to unidentified weapons into the east sea before dawn. The latest tests, as south korea and the u. S. Began the terry drills which pyongyang describes as a violation of an agreement struck between kim jongun and President Trump in singapore. Wall streets biggest fall has seen the wealthiest 500 people losing 2 of their net worth. 21 members of the bloomberg billionaires index lost 1 billion or more. Jeff bezos lost the more, shutting the . 4 billion as shedding 3. 4 billion. He is still pretty welloff. 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. Back to the turmoil in Global Stock Markets after the biggest drop in 18 months. We have reporters in beijing, tokyo and new york standing by to bring you the latest action and outlook. Lets go to selina wang in beijing with the big picture on asia. It seems to be a sea of red. Things are getting worse and worse, seeing a lot of pressure across the asia market as trade war escalates. It is more like a forever problem with no immediate solution. A key factor to watch as trading gets underway is what will chinas response be to all of this, whether they will have a stronger or weaker fixing, how tolerant they will be of the declines. Showing a lot of weakness, a lot of pressure in japan given all of the trade war pressures. I want to locate stocks i am watching in hong kong. Raila government owned operator, has been immune to this dispute but facing difficulties with the violent protests. Demonstrations for nine straight weekends, and they have disrupted train services. Cathay pacific also down for percent. 4 . There have been disruptions to flights and it has worsened after strikes bringing transportation to a standstill. More than 70 flights leaving hong kong have been canceled. Macau not a good picture, down 6 . Casino operators have been pressured amid the trade war and protests. Paul thank you. To do you to get you some news, the bank of korea will be meeting on the u. S. Labeling china as a currency manipulator. The meeting will take place at 9 30 a. M. They will also be discussing the slide in u. S. Stock markets. Weakerpi is feet is right now. Lets focus on the selloff in japanese equities. Joining us is our reporter from tokyo. How bad is it . Like selena mentioned, falling more than 2 and everybody is watching close to see if the fall will be as bad as 3 . We were in a similar situation yesterday where we were watching to see if the topix fall as much as 3 which would be the worst decline this year and the worst since christmas last year when the index fell 5 . The reason is like we said, the ongoing dispute with the u. S. And china because we dont see an immediate end to the dispute and how bad it will get, we dont know. The yen is going higher and higher, around its highest level since january. This will have negative implications for the earnings. People are worried what will happen Going Forward. Rishaad shery Goldman Sachs saying earlier the yen is one of the few undervalued safe haven isets globally but it earnings season gray we have 100 Companies Reporting out of japan season. We have 100 Companies Reporting out of japan. What are they saying . Min jeong the earnings are not impressive. It is within expectations but the concern is whether this is the bottom of the earnings for japan or whether we are in for a worst quarter in september. There is no clear answer but investors are hoping this will be the bottom. If you see the yen surging at a pace like this, the understanding is the outlooks may be adjusted outlooks may be adjusted because of japans export reliance. We have to see how the yen moves on a trade dispute develops forward to make outlooks look better from here. Shery thank you so much. Our japanese stocks reporter there. Another volatile day when wall street opens later tuesday. It will be the first time the open market reacts to the u. S. Designating china a currency manipulator. We see the s p 500 futures tumbling. This is after the regular session where the vix surged 40 . Say expect more of the same, another surge in the vix, another selloff in stocks and another surge in yields. Ors go into the bloomberg look at the futures. We are deep in the red. It is down more than 1 pretty much across the board. Some strategists are saying everything will get clobbered. Prepare for this. They believe the more the u. S. Does, the more upset the chinese get. We could be down another 8 from here. Something the market has overreacted. Lets go into the bloomberg because the velocity of the selloff on monday is of note here. 5 from thedropped records we had days ago. It did that in less than six sessions. It has only done that twice in the past decade of the bull market, followed that quickly. Lets go to the stoxx. The Semi Conductor index. The fiveday chart shows you how it has fallen in five days. It has lost more than 10 in that time and monday alone it lowest, 3. 6 . The to give you an idea of the stocks to watch into tuesday, chip stocks will be on the watchlist. Apple was down more than 5 in the monday session showing the level of weakness in tech but nvidia even outside that, so many of the chip stocks which not only are coming off strong momentum but they are in the bullseye of a lot of these tariffs. Bank of america pacing the losses in credit cards and financial firms. International the equivalent companies particularly john deere really caught in whatever the opposite of the suites about the sweet spot is, the sour spot. Paul lets talk about commodities. A iron ore continue to slip, Oil Continues to slip, gold is a bright spot. Surging asd bitcoin you would expect as people chase safe havens. Lets start with oil because what is noteworthy if you talk to traders who have been in oil trading for a long time is there was yet another tanker incident in the mideast and it is hard to offset that. The trade concerns and how it will affect durant is offsetting demand is upsetting. You can see this in the fiveday chart, the terrific drop off the cliff. Bigger picture, oil has closed down, 60, west texas intermediate and many expect we will see more of a selloff as it down, closed gold etf hit a high for the year. We see a lot of investors, not just professionals, use the etf to quickly shift the weighting of portfolios but a lot of retail ones as well. Gold commodity itself near alltime highs, sixyear high, trading most of the recent sessions. A lot of the soft commodities we saw a range of moves. They are in the extended hours moving higher. There were strong gyrations hit by the trade concerns and the weather issues in the u. S. That makes it a difficult trade for investors at this moment. Paul thank you for that. We have more ahead, talking currencies. Lets take a look at how those markets are moving right now. 105. Apanese yen at Goldman Sachs thinks that could strengthen further. The korean won is around 112 and the aussie dollar getting near a 10 year low at 67. 76. The reserve bank of australia will have its decision in four hours. There is the currency of the moment, the offshore yuan pushing about that seven handle. We will have more on currencies. We have a head of forex joining us. This is bloomberg. This is daybreak asia. I am shery ahn. Paul i am paul allen. On the map it says the trade war escalation is a game changer for the forecast of the australian and new Zealand Dollars. The foreignexchange markets, head of forex strategy joins us now in sydney. Thank you for joining us. Lets start with the aussie dollar and the chart on the bloomberg. We have seen this a couple of times today. We are going now a towards a 10 year low. Good news for the rba, they can stop talking about wishing for the currency to be lower. Where is the floor . It is be careful what you wish for. One of your guests was saying, we know the rba would like a weaker currency but the circumstances under which it is being achieved are far from desirable with the latest escalation of the trade spat and the Global Economic outlook, let alone what it means for china in the shortterm. In recent going to be weeks and months, it has been trading as the preferred emergingmarket proxy. Tried to say how far the dollarchina Exchange Rate is allowed to rise will be pivotal to how low we go. The chinese want to moderate the pace of decline and safe to say we see a move up to 725. 7. 25. The aussie would represent reasonable value and that could be the levels we expect to see the economy and push of a in australia and try to hedge at attractive levels. We have yet to put a new tail on the donkey but levels around 65 dont look unreasonable. Paul the fate of the aussie enacted to the yuan. I want to did your thoughts on new zealand. We have the rbnz meeting in this context tomorrow. The new Zealand Dollar his holding up well. We have had unemployment numbers today, look at the cross rate with the aussie, parity. Icehe champagne has been on for the parity since the americans kept it. Every time we think it will get there, it doesnt. For as emerging markets, proxy in china is a concern. The aussie tends to win out. That is one of the reasons the aussiekiwi has been going lower. We have had still are labor market numbers today. That is challenging the thoughts that will creep into the market. The rbnz could be minded to cut by 50 basis points tomorrow morning. That will be expensed for the the being expunged for time being. Aussiekiwi down here, makes the kiwi look rich. At this stage we are not prepared to counter the idea of a swift move down pour through the parity level. Shery we are minutes away from the yuan daily fixing. What should we expect . I have not gone a number in my head but that fixing was literally 10 or 20 six away from where the market expected and the fact it was above 6. 90 was the spark for that mark above 70. Depending on which side of the expectation we come in, we expect to see the market moving . It is very unlikely the chinese authorities will cancel another big leap higher. They have to balance the imperative of wanting to do something to offset the impacts of the latest trade tariffs, bearing in mind additional tariffs on the u. S. Will not make much difference but they have got to balance against the needs first the needs First Financial stability. Income today we should expect moves in the dollarcny which will be ordinary from here on. Shery are we expecting more pressure on the chinese yuan given the tariffs will kick in from the u. S. In september, not to mention some Chinese Companies could have speculative positions betting that the yuan can hold around that seven level . It did not happen. Is the pressure inevitable at this point . We have not seen signs of the authorities making the cost of being short the cnh prohibiting. We have not seen that in the highball. In that sense the authorities are not concerned but Going Forward you have to think about the negative for corporate china is in terms of servicing offshore foreign currency denominated debt, funding that the chinese want the chinese yuan and adding to the cost of those liabilities. It is reason to think we are not going the chinese are not going to allow the currency to go to the downside from here. With tariffs, 10 tariffs coming in on those 300 billion, who is to say it wont be more than 10 in a manner of weeks . There is no reason to think part of chinas retaliatory response will be to do further weakening of the yuan . Paul you were talking about the strong correlation of china and the aussie dollar, but the correlation between the yuan and em currencies is very strong. We can see that chart here on the terminal. Correlation has never really been stronger. Em currencies are getting pounded including the korean won. Where does the pain and . End there are a lot of idiosyncratic things with japan and korea and the korean won is one of the most liquid emergingmarket currencies and it is a little bit like the Australian Dollar as a preferred em risk proxy because of the liquidity available. Out not like to call but the broader point you make and the reason the aussie dollar is linked to china is because of the chinaem links. Models that try to price this fairly early in relation to a broad sway. Em equities, local currency bond spreads and telling us the currency is doing pretty much what it should. If there is another 2 or 3 decline in em currencies, that sort of feedthrough to that dollar being down. Shery where do you see the japanese yen . We had Goldman Sachs saying the japanese yen remains one of the few undervalued safe haven assets locally. We have seen significant more strength here already at the strongest level since april last year against the u. S. Dollar. That is certainly consistent with where we are. If you look at some of the they fundamental drivers that are supplying volatility in dollaryen, u. S. Bond yields because japanese yields are fixed and zero effectively. What is happening with equity markets and gold at the moment, that model will tell you what is right. But the gold, based on the likes of gold in isolation and if you think the gold price will continue to be supported, that is consistent with levels near 100. Certainly down and through 105. Levels close to 100 we would not want to rule those out. North gold prices goes particularly. For joining usu from sydney. If you missed any part of that conversation, tv is your function. Watch past interviews and watch us live, dive into the securities that we mentioned throughout the show and the bloomberg functions and become part of the conversation, send us instant messages. This is for subscribers only. Check it out. This is bloomberg. Shery we have another on this designating on this developing story with china being designated a currency regulator. Currency manipulator. Japans that this was unexpected. They will keep watching japan said this was unexpected. They will keep watching the fx markets may we heard from koreas minister on international affairs. They say this will not impact the korean status, seeing that neighboring countries are pretty concerned about this latest development. We know the u. S. Continues to keep japan, south korea, germany and other nations on their currency watchlist. What tot a look at watch in markets later this morning. Wait for the china market open, i am watching for the yuan daily fixing. We will see if it will be tolerating more weakness or look for strength and stability. We heard the pboc say they would be fighting shortterm speculation and stabilize Market Expectations but we are seeing the offshore yuan blow past the 7 range. Seven per dollar range. Looking at xiaomi and another one. The chinese authorities will allow local investors to buy shares of Popular Technology Companies Listed in hong kong. Xiaomi and this other one went half public last year. They are the first to use the Hong Kong Exchanges new rules that allow the dual class share voting structures. This would be a big boost to the Hong Kong Exchange since it would benefit from a dramatically increased trading volume. Paul lets get a check of the business flash headlines. Square quit its position in the United Technologies sans adp. They decided to sell united rather than fight the takeover of raytheon. He opposed the deal in june saying it lacked strategic sense. He also has dropped paper will processor adp because low hanging fruit has been plucked. Shery amazon is letting alexa users opt out of human reviews of the voice recordings, saying it violates privacy. Now customers can remove the recordings from a tool that can be analyzed by inlaws by amazon workers. There was a team of thousands listening from alexa audio requests. Some of the viewers had access to certain personal data. Billionaire isan expanding into tech and will take on amazon. Reliance industries is buying a startup funded by google that will pay 42 million for a controlling stake. They operate the find platform and he plans to transform it from a Grocery Store and Neighborhood Store environment into an Online Retail powerhouse. Shery lets look at the futures trading, u. S. Futures are slumping down 1. 2 . The u. S. Fter designated china a currency manipulator prewe will see taiex futures down 2 . This is have chinese futures closed for hours ago but the offshore yuan now continuing to weaken. This as we are awaiting the onshore yuan daily fixing in the next hour. Plenty more to come. This is bloomberg. Tom it is 9 00tom a. M. , welcome to Bloomberg China open. I am Tom Mackenzie. David i am david ingles. We are counting down to the start of trade on the chinese mainland. Lets get your top stories. Stocks across asia extending to global declines. Fears grow over a trade war and a currency war flaring at the same time. Tom tensions are rising as the u. S. Designates china a currency manipulator. President trump wants the fed to take action. More clashes of protest again here in hong kong. China iste