The Commodity Index hit. Abouth the moment, off by 0. 6 . Look at that. Eld, a negative trend by over 1 . We have been down further than that, but that is quite shocking. David to anyone who tells you dont buy the 50, look where it is right now. Get the first word news. Paul allen is here for that. He has an update. Hurricane dorian has made landfall in the bahamas as the strongest storm ever recorded there. Torrential rain and winds gusting up to 300 kilometers per hour. A likely storm surge of more than seven meters. Dorian is expected to batter the u. S. East. Ordered alina has mandatory evacuation of its entire coastline. Argentina has impose capital controls to halt a slump in fx reserves that pushed the country to the edge of default. A limit of five days for exporters, while institutions will need official localization to buy dollars. The italian Prime Minister says he intends to present a new government by wednesday at the latest amid growing tensions within the latest fragile coalition. Dimaio threatened to force a new election if his policy demands are not met. The fivestar movement has called on Party Leaders to stop arguing and start governing. Chancellor merkels Ruling Coalition has managed to stem the rise of farright populists in two state elections. The euro skeptic into lost twoon party votes. Results will help ease the pressure on a coalition which suffered heavy losses earlier this year. 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 paul allen. This is bloomberg. 110 billion of chinese imports under new u. S. Tariffs. Retaliatory measures. President trump says trade talks this month are still on. David lets get more details. Tom mackenzie is in beijing for us on all the latest. Its great to see you. What do we need to know . I will sum up what happened. 15 on another 110 billion worth of chinese imports into the u. S. Market. They were expected december the 15th. 15 on 160 billion worth of chinese imports. President trump you will remember divided these up to avoid a big crunch of the christmas period. On decemberdollars 15. China responded with tariffs on 75 billion of u. S. Goods, including soybeans and beef and chicken. U. S. , youre talking about textiles, shoes, apple watch, starting to hit the consumer. You have business lobby groups saying it is time to start negotiating very seriously and have a truce when it comes to these tariffs. Jp morgan saying by the end of the year, you could be looking at households losing a thousand dollars because of tariffs. Tariffs on all chinese imports and to the u. S. Market. President trump saying talks are still on between the chinese and u. S. We still dont have an exact date. Ishaad and there we have it. Claire spent eight years with the office of the u. S. Trade representative and was an assistant at the ustr for china. Good morning from hong kong. Hello. Inhave talked several times the past over the last 16 months, yet we are still here. Why are we still here . Well, i think there were miscalculations on both sides. I think it is a very tough negotiation. To be honest with you, whether we get closure may depend on the u. S. Side. Calculations about what will suit him best for the 2020 president ial election. Ishaad you are saying it politically motivated. It could actually backfire in a big way, cut into . Couldnt it to . Absolutely. He is balancing questions about aether there will be permanent and damaging effect on the market as well as whats going to happen with his base. You know, this is a grand experiment. No one has tried this since the 1930s. It is very unclear what the outcome is going to be. There is a lot of risk here. David i asked one of our guests last week on a similar topic, do you think donald trump is willing to self inflict a recession in the u. S. In order to solve what he previously referred to as structural generational imbalances in the trade relationship, or does he want to get reelected and get a deal when the time comes . His track record has indicated whatever deal he signed is going to be he will describe it as a phenomenal deal. The question really is going to be, what are the constraints on him in terms of signing a particular deal . He found it was not politically feasible to just sign a deal that involved china. They tried that early on. That did not work politically in the United States. There is going to have to be some change in china with regard to market opening, reducing discrimination against other companies, and probably improvements to elect intellectual property enforcement. Possibly other changes. It is just going to depend on what china is willing to do and what trump is willing to take. To, he as david alluded was going to find a fantastic deal. That is what he is keeping on saying. It is going to be a biggie. Expectations have been raised so high now. What what a fabulous trade will actually look like . Is it achievable . I think it is extremely difficult to think about getting a trade deal that actually is fantastic. I think it is too bad in some ways. The things donald trump has called that are significant and having a global impact. The product gets dumped on the Global Markets and the other companies in other countries have to Pay Attention to market signals, they get hurt. That is not a good set of industrial policies. That is not a good way to run a railroad. That is a serious problem. The issues of intellectual property theft and Technology Theft and Technology Transfer that is being forced under the auspices of a National Plan in china that says they want to become dominant not only in their own market, but in world markets, they want to replace other players in the world, that is also problematic to the extent that these results are being driven by topdown government policies, subsidies, distortion, discrimination, and not really open market competition. We just got a viewer question here. It goes right to the to what is going on. Making factories suck up the costs of tariffs is putting a particular on these factories and plants. Does it mean more of the pain is in the cap of china at this point . I do not know that anybody has data on that. I do know there are a number of industries where the margins are extremely thin. No one can afford to take the pain. That is why a number of the retailers have made the point they are going to have to pass the costs on to consumers when it comes to the tariffs that are going to be put on this huge array of chinese products. I think that is a reality. Please stay with us. More from claire reade after this break. Exclusively tong australian trade ministers. Up, willso coming markets have a september to remember . We discuss that with j. P. Morgan private bank head of Investment Strategy. Rishaad next, calling on President Trump to intervene. The white houses radar. This is bloomberg. David david welcome back. You are watching Bloomberg Markets. July. Sales for have a look at the damage. Doubledigit decline. 11. 4 . What is more telling is that visitors from the chinese mainland, which make up 80 of tourists here, fell for the first time in 18 months. You do understand why a lot of disruption over the past several weeks, we had a massive one over the weekend. Unrest targeting the airports and also the subway systems here. Rishaad Stephen Engle has the very latest. Tell us what you are seeing. The airport express terminal, what have we got . It is night and day from yesterday. The rail link to the airport was severely disrupted with many hours of delays and cancellations of trains to and from the airport causing lots of disruption for travelers. The protesters pretty much their mantra has been, yes, there is an inconvenience for you, but take this abroad. Hong kong is fighting for its future. Thats what they are saying. We are going to hear from the government at 11 15 in an hours time. Interestingly, we are not hearing from carrie lam. We do not know her whereabouts at this time. Her second in command will be leading a panel that will also include the secretary for transport, frank chen. We will also hear from the secretary of education. Keep in mind, in the student union, secretary schools, and Chinese University of hong kong have called for strikes today as we are approaching or entering the beginning of the official school year. More calls for civil disobedience today. The morning commute was slightly disruptive. Ryan police have been deployed. Riot police have been deployed. Ofwas the 13th weekend demonstrations. We are also set to hear from beijing. What do we know . We understand there is going to be a press Conference Tomorrow morning. We do not know what that is going to entail. Hailed has has held two press conferences, the only two they have held since the andover in 1997. Both times, they condemned the violence and the illegal activities of protesters, again, threatening potential intervention by beijing. Keep in mind, carrie lam last week, the chief executive in hong kong, would not rule out the use of the emergency regulation ordinance. That is a hong kong colonial era ordinance that has not been invoked for more than 50 years. That could clampdown on Civil Liberties such as use of internet and publications, also imposed certain emergency laws that would grant the police greater powers. That perhaps would be a step before the bigger threat, and that would be the invoking of article 18 of the basic law, which would basically declare a state of emergency in hong kong whatcould preclude everyone fears here, and that is the sword of damocles over hong pla, the use of force, the coming into hong kong. That would be lastditch. Rishaad thank you very much indeed for that. Stephen engle joining us from the airport express in hong kong. Still with us is claire reade. Forwas assistant u. S. Tr china. I want to get a sense if you like we were probably going to ask you the same question. How does the white house look at events in hong kong . How is washington looking at these events . That 1992 policy act as well here, which gives Hong Kong Special dispensation. Think it is interesting to ask the question of who is washington . I think the congress in washington is looking very hard at whats going on in hong kong. There have been very strong statements from congressional sendrs that are trying to not besage that it would welcome if china interfered with hong kongs democratic rights and appeals that were made. I think it has been observed that President Trump was quiet on hong kong for quite a while. Even he ended up coming out stating what i think is obvious, if china does not treat the hong kong situation in trumps words humanely, there will not be a trade deal. It would be politically impossible in the United States for that to be progress or any compromise on the trade side of the ledger if there is any kind crackdown on hong kong. Tantamount to saying that perhaps indirectly, and not a lot of people are talking about this possibility, do you think that is a big reason or reason enough for beijing not to intervene in hong kong . I cant speak for beijing, obviously. If i were china, i would be tiananmen and i would be thinking i dont need that kind of problem again. I would be working on trying to resolve the situation without any kind of rupture. That would be a priority globally. Rishaad do you think the way hong kong is being viewed is a bipartisan issue . If it is, it is quite reflective of what this trade war with china has also become. The has also become a bipartisan issue. I think the issue is bipartisan. Ofhink there is a sense recognition of hong kongs Democratic Institutions and the rights that hong kong was given when it was handed over by britain to china in 1997. U. S. Nk that is something leadership is very aware of. But you asked me david right. Which is the more complex, existential question . Lets get to the practical side. Short of getting you in trouble and violating attorneyclient privilege, what are your clients asking for these days . What is the legal remedy as we pursue this period of uncertainty . There are a number of concerns that exist. That folks being hit by the tariffs are looking to understand what is going on and trying to see if there are any ofs they can get some kind exemption. Is a very difficult situation for Small Businesses in the United States. Whats going to happen is they are going to privately disappear because they dont have the platforms for Larger Companies do. I think that is a serious risk for them. That is very troubling. The other concerned, of course, that u. S. Companies and industries are going to have his to try to understand and navigate unpredictability, trying to figure out how they are going to live in this world. With think about a market 1. 4 billion people in it and with think about the fact that the United States is a free seems economy, it a largevable to me that Multinational Company is going to abandon the china market. Is, howtion that arises are they going to navigate . Are they going to have redundancy so that they are working one more separately from the other . Thats expensive, thats not efficient. I dont think you are going to see that. David thank you for joining us this morning. This evening. In case you missed that interview, tv for our clients. This is one we had during the yes, catchh more coming up. This is bloomberg. David lets get you the latest business flash headlines. The number three arranger of loans in asia. Companies use the bank to borrow 223 billion through august, down from a year back. Fall. W hsbc saw a china andslowdown in the wider trademark continue to trade war continue to put the brakes on macau. More than twice the rate of decline forecast in the latest berg survey. Bloomberg survey. Rishaad the biggest movers of the moment, dna sliding 7 plus. , this is down to the launch of agame at the top of the ios download at comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. With custom gear. S us motivate our students we love how custom ink takes care of everything we need so we can focus on the kids. [spokeswoman] custom ink has hundreds of products to make you look and feel like a team. Upload your logo or start your design today at customink. Com sydney, 10 29 a. M. In hong kong and shanghai. Im paul allen with the first word headlines. The tariffs have come into effect in the form of a 15 hit on roughly 110 billion of chinese imports. The duties effect goods ranging from footwear and clothing to hightech products. It includes laptops, cell phones, to be targeted in december. New trade talks are still on the agenda this month. The outlook for chinese factories even before the latest u. S. Tariffs, manufacturing pmi fell to 49. 5, worse than the 49. 6 we surveyed. In july,my slowed however it chopped forecasts, coming in at 50. 4, showing expansion. Economists at Goldman Sachs and citigroup have cut their forecasts for Indias Economic growth, and deeper Interest Rate cuts are on the way. This is after the latest gdp data showed a sharper than expected slump in outlook. The expansion could be even weaker. Patrolling key hong kong subway stations after calls for more protests to disrupt the citys transport network. It follows another weekend of violent clashes between demonstrators and police in which three people were arrested. Several people were arrested inside the subway saturday evening. Police reject accusations they acted aggressively. Todays incident was violent and chaotic. When Police Officers arrived at the scene, we used the lowest level of Violence Necessary to stop the unrest and start an investigation at the scene. South korean exports extended their slump as tensions with japan after the uncertainty of a wider trade. 30. 6 shipments fell percent in august from a year earlier, for a ninth consecutive month of decline. There was a trade surplus of 1. 7 billion. Says itrean trade data will relent on demand. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Mentioning, one of the data points we are watching this week, south korean export numbers. Hong kong will throw in pmi. We will have a look at where we are starting this week. Down,utures open 1 coming off the lows of the day, 29. 13 is the level. The crossice at gmm is your function. With the exception of chinese , we are coming off the worst month for hong kong equities. Bonds are on offer as we speak. We are trading below 1. 10. Was if you bought into bonds, you couldnt afford not to be in bonds, or you would be outperforming your peers. Private bankgan and Asia Investment strategist before we begin talking about what your view is of the current how many of your clients are asking about the best way to put their money at the moment and getting out of hong kong . That is definitely a topic is coming up and a lot of conversations. A lot of the International Clients are seeing immediate coverage abroad. They are asking a lot of questions because they are not sure if what they are seeing is the accurate information. Hong kong is important as a key financial center, so it is definitely a key concern. In addition to all the other concerns, weakening global growth, in terms of pmi and gold manufacturing, it all adds together to a key topic. What will be the most misunderstood thing . Betweena difference people asking locally and both sides looking in through the picture. What is the perception that needs to be corrected . I dont know if it needs to be corrected, but there is a view of International Clients it isasking us unsafe everywhere. I think it needs to be hlighted that daytoday business goes on. Exactly. Daytoday business still functions as normal. The Financial Sector is still functioning as normal. Highlight ishe that it is affecting daytoday business, and at a certain point you dont feel the change. Sales, whent retail you talk about financial environment, International Hubs it is left intact, no different and nothing being impinged upon. Thes dial it now tariff war, how much has it hurt sentiment, and how much is it really changing the way that you view the way you put peoples money . It hasnt changed that much. Our expectations going back a number of weeks and months, even in early may, when what looks like a deal fell apart, that was a fundamental shift for us in terms of our outlook, and we saw chances of a potential deal. From that point on weve been pretty pessimistic about the potential, and also pretty pessimistic in terms of the impact we thought this global uncertainty would have, the impact it would have on sentiment. The way we look at it, we dont think it would see a deal until the election of 2020, but we dont think theres much room for significant explanation. They dont want to tip their hand or hurt the u. S. Consumer, so that is still a question mark for us, but we also seal the chance of a deal is pretty slim. It creates something of an unsteady equilibrium, with tariffs that remain in place, pressure on global manufacturing, but we see some health and services. Up until now there has been a gap. Consumption services will also come down in line with manufacturing, but up until now, most of the pressure has been in global trade. Bonds have performed very well, and do i take advantage of that . We are recommending not a broad shift, but we like health care. Health care has underperformed. We like high dividends. We think dividend growing companies have underperformed. I know you dont necessarily buy into technology, but they can look through this cycle when you sit through longterm growth trends. Is, decisions, at a worse time with a cyclical slowdown taking place it makes things worse, does it not . How far do we go down . Is what is jp morgans base case . Thats a great question. A lot of the slowdown we are seeing was occurring before tariffs were put in place. The Global Economy moves in cycles and weve seen inventories building up. We saw over exuberance in 2017, even in asia. Seeing the normal inventory manufacturing cycle pressure on the Global Economy and then the trade war comes. It is creating an environment that is hard for my kids to price in four markets to price in. Praising that into growth is very difficult, and we are seeing markets overshoot and undershooting much more than they would based purely on the tariff impacts alone. Which, i would imagine, effect Central Banks. Is it accurate . The markets expect more support from Central Banks to common . Or are they equally confused . I think what is priced in is that markets expect more from Central Banks. If you factor that into the language globally not just the fed, but the ecb in asia is seeing surprise cuts as well. I think the market is definitely expecting more easing. But Central Banks are finding it really hard to be data driven. At the same time, the impact with trade is hard to estimate. With inflation is low as it is, there is room to cut. Real rates are still quite high. That is one of the positives we are seeing, that there is and a lot of the Major Economies to cut rates. How a stimulus that will be is another question. At the margin, many commentators are saying, how about stimulus from china . What are we getting . What are the assets which benefit . What are you looking at . So far, we havent seen that much stimulus out of china. Weve seen a lot of discussion on tax cuts, weve seen a lot of discussion on Interest Rate reform, but the actual impact, the measurable stimulus is still a fraction of what it was. 2009, it has been on stimulus. What we are looking at now is very weak credit growth. On the fiscal side, they have cut taxes, but the key question for us is how much will be spent. In the past, they stimulated by spending money. Tax cuts are relatively new in china. Because of uncertainty, if corporates stay, it doesnt have as much of a growth impulse. That is what we are seeing now. Credit growth hasnt picked up. We are not seeing a big growth boost from the tax cuts. The stimulus out of china is much smaller, and much more domestically focused. The global cycle is not feeling the positive boost the way it did every previous three years. Thats a measure of credit impulse, right . The amount of credit the amount of growth you are able to create based on additional credit. Is it because the economy is so different . Do we need to be more patient for that to show up . A i think it is largely factor of less policy space. Is approachingw 300 of gdp. We need less space on the credit side. But 65 rd to measure, or 70 of gdp is fairly high. Less policy space, some balance on house prices. Space, buts policy part of it is trying to shift away from the massive stimulus efforts. In many ways with the imf has been recommending for years is the right thing to do. Cut taxes, but it is just not as powerful as the Global Economy has become accustomed to. Can we afford it . That is the thing. The debt to gdp ratio overall, how does this feed into what you tell clients . Is it about wealth preservation, not accumulation . Therefore you look for yield, which of course would be 5 on the company is pretty good, but they did get whacked sideways. Its a combination. We are looking for stuff on growth and yield, and weve had a lot more interest in infrastructure products. In terms of what we recommend, it is much more focused. For china, we are looking at where there are beneficiaries of this type of stimulus. Tax cuts are geared toward households that keep consumption resilient. Even as we see a downturn in pmi and the industrial sector, consumption has been pretty resilient. Sales have been week but we are looking at consumer discretionary, consumer growth. The Domestic Services and consumption have been resilient. Not necessarily strong growth, but resilient. We are looking at sectors that can still do well in this environment. Even harkening back to 2015, 2016, a lot of what did well was Consumer Staples in the u. S. We are much more concentrated in terms of recommendation for the u. S. , which is somewhat less exposed to trade concerns. We are also looking at Consumer Staples there in addition to health care and technology. And credit . 4 7 yield . What do you think about Corporate Credit . We are liked moving up in quality in credit, and a little bit more away from reducing exposure to highyield. What is highyield now . Where do you draw the line . We still go by the index. Thats a good question, now that we have negative yield. I guess that wouldnt qualify as highyield. We are looking at moving up in quality. But of course, credit spreads have compressed. We think in the rate cycle environment, Higher Quality tends to outperform. Appreciate your time. J. P. Morgan private bank head of Asia Investment strategy. Coming up, we are talking elon musk. That is Tax Exemption usually only reserved for domestic players. Thats next. This is bloomberg. Here with Bloomberg Markets with the latest business flash headlines. Thending the removal of next month. There will be a Regulatory Approval and the landslide gains. The announcement coming two days through the middle of december. Until early january. Bruno le maire says he is furious that german infrastructure has sold its local to trade makers. They slammed the European Commission for allowing the sales to go through, saying they should be supporting local businesses instead. Back in february, the commission rejected a bid from a french trade maker to merge with their german rival based on antitrust rounds. Isthe local division reporting more than a 50 fall in august, down by more than 20 . Local call makers are also struggling, with a 60 downdraft. Low Consumer Sentiment and poor Exchange Rates are to blame with recent flooding. Earlier on we were talking musk, with tesla winning this Tax Exemption, usually only reserved for domestic players in the Chinese Market. Selina wang is here to tell us more. Thats right. This is a 10 personal Tax Exemption that they will be exempt from. This is a big deal for tesla because it meaningfully reduces the cost of a tesla, which is very important in growing the market. Right now tesla gets about 11 of its revenue from china, and they are building this multibilliondollar gige factory where they hope to be building their model three cars by the end of the year. They of course want this to be done this fast as possible, since right now china does already have pretty high tariffs on cars coming from the u. S. , with additional ones in december. If you combine those, the duties on cars from the u. S. Could be as high as 50 . Theres a lot riding on this relationship with the chinese government, building their presence with the chinese consumers. Have anything else of or did sociald, and having aup frugal visit . Elon musk already has a highprofile presence in china, but it doesnt hurt his case when he is shown as a man of the people he went to a famous place in china and we heard he was staying at the holiday inn, seeing these images as being swarmed by crowds of people but he did begin to make headlines before he was at the world ai conference and was engaged in a very highprofile debate with jack ma, where he talked about visions of the future and more importantly was praising china leadership andl he also used the fast buildup of their gige factory and how much can be accomplished in china. This comes amid growing calls from trump threatening to force u. S. Companies out of china. Elon musk is clearly not heeding any of those concerns and pushing ahead in the china market. Inn. Was the holiday thank you so much. Its your favorite segment. Charts isof the coming up next. Cant wait. This is bloomberg. Morning, battle of the charts asia energy puttings, Juliette Saly their best charts against each other. Clients can connect on the bottom of your screen. Lets start things off. Today i am talking about natural gas in europe. My chart here shows the price of natural gas on the bottom, which has fallen to the lowest level in a number of years. Inventory ofs show lng, which is imported from a number of countries. It is higher than the fiveyear almost 80 they are full for this time of year, which is very full. This is pushing down the price of gas in europe and is making it for new lng exporters to say where are we going to send our gas. Unfortunately europe is close to full. The top line with gas and inventory is so high, perhaps we could see there could be a reverberation around the world. This is something gas creators are watching very closely. Gas is great and all but you cant wear it. Im looking at a precious metal that doesnt get a lot of love but is worth watching because it is outperforming other precious golds, palladium, silver, it had five dollars announce, the highest level in 11 years, worth noting that this is considered the rarest and most valuable precious metal of the world, used to turn toxic material into less harmful gases , which is driving up the price of this demand versus shrinking supply. Demand hase saying very much outweighed it so it could hit a 2008 highs or go through 10,000, a pretty volatile and opaque market, but weve been seeing a huge rally and you can see it outperforming gold and palladium. I would give it a draw, but i dont know. Julietteving it to simply because that is the first time i can now spell rhodium. The periodic element table. Look at you, dropping knowledge on a monday. What does that have to do with the price of tea in china . Sorry, stephen, by the way. By the way, have a look at a couple things we are tracking just as a side note, we are up 50 for the stock and we will leave you with a weather update and we have three weather systems were talking about dorian on the eastern seaboard in the western coast has juliet, which is expected to become a hurricane on monday. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Its almost 11 00 in singapore, 8 30 a. M. In mumbai. Im haslinda amin. Im rishaad salamat. As we enter the last hour of the morning session, these are look at the top stories. Police patrolling the hong kong subway after a weekend of violence. Beijing is to make an official statement on tuesday. Showinas factories further weakness even before the tariffs. And Northern Ireland, border remains the big Sticking Point with brexit just two months away. We will have the view from dublin. This is Bloomberg Markets. Thisll starts september after a volatile collapse of the treasury yield. By those newdown tariffs, also by further weakness in the pmi numbers out 49. 5 versus 49. 7 previously which is hurting sentiment. The asian index down by. 3 , stocks in china breaking the risks are controllable, and it will ensure ample liquidity. Freshrrently down, tensions and we are awaiting to hear from the chief secretary in about 1012 minutes. We know the hang seng stocks are down more than 20 from its high, still about 5 compared to the lowest level. Wheretake a look at currencies are at this point in time. The you boo at 7. 15 and the preferred choice, it is expected to go higher from here. Thanks. Lets have a look at data showing that the owners of factories are getting a little pessimistic. This is the first word news with paul allen. Thanks. The outlook for chinese even before the latest figure tariffs, manufacturing pmi fell to 49. 5, reading even worse than the 40 9. 6 in a bloomberg survey. The economy slowed in july and early data shows it is continuing in august. At 50. 4,d forecasts showing expansion. Economists at Goldman Sachs and citigroup have cut their forecasts for Indias Economic growth and predicted deeper rate cuts are on the way after the latest gdp data shows sharper than expected slumps and output. They now forecast 6 fiscal year growth while there is a risk the expansion could be weaker. South korean exports extended their slump as tensions with japan add to the uncertainty of the wider trade war. Shipments fell 13. 6 in august from a year earlier, the ninth consecutive months of decline. Ofre was a trade surplus 7 billion and south korean due to his early release. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Thank you. New u. S. Tariffs on roughly 110 billion dollars of chinese imports, and china has followed through with its own retaliatory measures. Saysso, President Trump trade talks are still on. We are talking to china, the meeting is still on. We will see what happens. But we cant allow china to rip us off anymore. We cant allow china to take 500 billion per year out of our country. We cant do that. Lets get our china correspondent, tom mackenzie. It is still on, but the markets want to see a deal, and that is unlikely. It looks increasingly unlikely. Just to recap in terms of the total tariffs now in place, you are looking at u. S. Tariffs on chinese exports, there was an additional 110 billion worth of chinese exports through the u. S. Market hit over the weekend and that includes things like shoes and textiles but also Electronic Components and items like the apple watch. Come december 15 you need additional tariffs on 160 billion worth of chinese exports by the end of the year you will have all exports hit by tariffs. The u. S. And the chinese will be heading back with their own, including things like soybeans, beef, and oil. So you are right, in terms of the business groups, they are feeling under pressure, calling for policymakers in the u. S. To return to negotiations and come to a tariff truce, j. P. Morgan saying the hit to u. S. Households could be in the range of 1000 per year with tariffs on all chinese imports into the u. S. Market. Managers, at these what sort of picture is being painted with where we are on the chinese economy . Divergence between the official numbers we saw come out over the weekend they missed the forecast for four straight months of contraction for manufacturing pmi. You compare that to the private survey we got out at 9 45 local time at surprised, coming in expansionary territory of 50. 4. That survey is focused more on the private sector. Suggests that, it maybe some of the policy measures put in place supports small business. The private sector is having some positive effect. They do not ask ask that to be sustained, and uptick in terms of production, and Business Sentiment remains weekend. The demand picture is improving the drag on the manufacturing sector. A note for nonmanufacturing expansion, you have 53 for nonmanufacturing pmi out of the weekend, suggesting that maybe Construction Services are looking more healthy. Most economists expect policymakers to step up their support, whether it is making credit cheaper or weakening the curves around the property market, or just ensuring there are rrr cuts for the banking sector. Is showing clear signs of continued slowing. Thank you very much. Hong kong is bracing for more transport disruption. A weekend of violence and unrest in the airport as well as the subway system. Hasnorth asia correspondent the very latest on this. Steve, what is happening . What are you hearing . No disruptions to the airport this morning, but there , many tradesntrast were canceled, traffic to and disrupted by the protesters. That followed an extremely ,iolent evening on saturday going ahead as planned by protesters. The barricades were lit on fire by protesters, weve seen the teargas, the riot police, rooting out some of the protesters. There was some violence there were at least two shots fired into the air, warning shots, as police felt their safety was threatened. Weekend,consecutive which was perhaps the most violent outbreak of protests that weve seen. What we are waiting for now is a press conference coming up in about seven minutes, with the chief secretary of hong kong, the number two person, the deputy to carrie lam. We dont know why shes not attending, but it will be led by Michael Chung and the transportation and housing mind, ay keep in general strike has been called for today and tomorrow, as well as strikes by secondary students and university students, as the school year officially beguns and ernest this week. Civil disobedience is the main call for today, but the standoff continues. Steve, what can we expect that you secretary and security secretary to say . So far both sides have shown no sign that all of a compromise. Thats right. What i would anticipate them to say is along the lines with what they said in the past, that this is undermining hong kongs role as an International Finance center, undermining confidence in the city, ruining the economy. We have seen doubledigit drops in retail sales, 25 luxury watch sales and jewelry, heading toward a technical recession. The government has already said. 03 in 2019. Ro that might be ambitious given the economic numbers weve gotten so far. This is not necessarily a message they will give today to the protesters. The protesters want economic disruption. It is perhaps a message to go over their heads, that many protesters from the everyday citizen who is generally supporting the call for greater autonomy, but dont necessarily condone the violence or the undermining of the economy. Reacting, are already our chief north asia correspondent. Of a ahead, as the threat high brexit increases, we will have the view from the minister of state at the department of finance. Uncle darcis joins us for an exclusive interview later in the show. Is the month for emergingmarket investors, trade war and other tensions escalating. Will september be want to remember for the right reasons . This is bloomberg. You are back with Bloomberg Markets in hong kong. Im rishaad salamat. Im haslinda amin. Retaliatory trade tariffs rattled markets in august, making it the worst month for developing nation currencies since may, 2012. Adding to the Bleak Outlook for riskier assets, china allowed the you boot to significantly toward ifh a weaker path they u. S. Raises tariffs. Lets bring in the head of emergingmarket strategy at socgen. Always good to have you. The waist down for the yuan . Seen over we have the past year as we can broadly align with increasing tariffs. Tariffst this series of in place, that would mechanically suggest that this path will continue and the dollarchina could be closer to 7 50 and that historical pattern would tell us we could be close to eight. Merrill said 7. 5 by yearend far, china has ensured the depreciation of the you want has been pretty orderly and it is unlikely to allow that to be any different. That is true. It has been tracking weaker fundamentals, theyve been using the countercyclical adjustment factor very aggressively to limit depreciation and they have a lot of tools to stop it from being a very fast or disorderly appreciation. It is only going to move as far and as fast as policymakers want it to. How do you reposition and take advantage of what we are seeing . We had a very big moving august. We could have had a little bit of consolidation. But i think the mediumterm path is weaker and china is in the drivers seat. Either they have direct trade linkages or go through the channel, which is down with developed market currencies. When you see banks reacting weve seen how they have stayed resilient and theres a lot of pressure on rates easing. Have they been taking the right steps so far . In general, Central Banks are cutting rates fairly aggressively. Dont think any country wants a stronger currency necessarily but they will do the best they can through fiscal Monetary Policy to provide support and allow the currencies to go. Know you are more emerging look but taking a hostage is really held to every whim of whats going on with the brexit debate. Just tell us about the moves here. Ok. Chinesetioned, the currency is the big driver globally, driving down the euro. Obviously the pound is being dragged down by increasing concerns over brexit, and the euro is also being affected. Going forward, as we have seen fairly recently, the chinese currency has emerged as the big currency in the market, and that is the one everyone should keep an eye on. It couldhat in mind, get to 7. 5 how is this trade war we have seen the end get stronger but it just hit the resistance level so we can get stuck. Suggesting that we see further strength from the yen. Is this something which would be completely anathema to the bank of japan . At what level would they covet to support the dollar . Good question. Dollaryen has had a difficult time getting to 105. We think ultimately it heads toward 100 based on fundamentals and the lack of the ability of the boj to cause it to weaken anymore. The yen in this world, especially on the relative basis versus other currencies, is that it could perform very well. We have seen dislocation in the hong kong dollar. Do you expect that to persist . How does china view the hong kong dollar . Good question. There has been some dislocation, risk reversals are very high. This can increase, as there is speculative and hedging demand in the market, as people become concerned about the political situation. I think policymakers have the tools to manage the currency board. I think it stays in place for the foreseeable future. I think beijing could support the currency pattern, either directly or indirectly. This stability is important to china simply because it provides a source for the dollar. It provides a source of dollar funding, a source of legal and financial framework. I want to bring in our question of the day, since we are on hong kong. How does hong kong impact the Global Outlook . You are of the view that the impact could be pretty limited, but it has already been 13 weeks certainly sentiment is much worse now than before. Sentiment around hong kong is much worse, but the impact it has had on Global Emerging Markets has been fairly limited. Something like argentina would have a much bigger impact unless there was a major change in the currency regime. At what stage would you be concerned, perhaps three looking at your Investment Strategy . If there was some stress and the banking system, we would keep an eye on that. I just want to talk to you about this best performance in many against the dollar. What is behind it . We are also seeing some capital outflows its not a particularly good yield play story, so what gives . Asiaen you look across this has been one of the ones that is least affected by the trade wars, it is not as and it is probably one where there has been interested in some money that has gravitated there because it has been the best of the worst. The rupee has been holding up pretty well over the course of the year, despite signs of a deep consumer slow down still marginally low economic growth. Did performncy fairly poorly at august. It didnt ok yield play, if i was trying to bring currencies within asia i much more comfortable with asia given the heavy fixed income, we tend to see a lot of hedging demand in the market. It tends to see indonesia underperform. We like it better than indonesia. Thank you so much for joining us. News. , getting use of at theng officials Central Government office, talking at the moment about the weekend escalation in violence. We will leave you with what he has been saying, condemning the violence. That. L have more on andatch up on tv also send questions to our instant message function. This is bloomberg. Lets do a quick check of the latest business flash headlines. China have a grand is worrying investors, as its total borrowing swells about 20 billion in the first half, trading 114 billion, almost half of the full view in the next 10 the nextth three in few years. Become with more curves on property also. Is ever taking Agricultural Bank of china as the number three arranger of loans in asia. Companies used the bank to borrow 323 billion in august, down from 406 billion a year ago. Hsbc saw its loan market share increase. On the slow down in china, casino revenue for august fell 8. 6 year on year, core than twice the decline in the bloomberg survey. This briefing taking place at leeCentral Government, john abouting he is talking what has been going on over the weekend with this escalation in violence. We did have the chief secretary talk a short while ago. No exultation given as to why carrie lam is not there, but they are talking about schools not being the place for political confrontation there is a challenge to the one country. Two systems philosophy, if you will. But the security chief is saying that it puts Public Security under threat. We have a few lines coming through from Central Government offices in hong kong. Heading toward the Mainland China lunch break, we do see a pretty decent set of games taking place. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Kong. Ive shot over hong 11 30 a. M. We are in the middle of the trading day, the hang seng down percent, shares falling after weekend protests cause major disruption at airports. Some are saying that protests have become more and more uncertainty and how all this will end. Lets get the first word headlines with paul allen. Thanks. Hurricane dorian has made landfall in the bahamas, the strongest storm ever recorded their. It is bringing torrential rain 300wind gusting up to meters. Thes expected to batter u. S. Eastern seaboard from florida to north carolina. South carolina has ordered a mandatory evacuation of the entire coastline. Carefula has imposed controls in the bid to hold it slump in the fx reserves. Limitntral banks have a to repatriate foreign currencies, while institutions need official authorization. 3 million flowed out of asia on thursday and friday alone. Saystalian Prime Minister he intends to present a new government by wednesday amid growing tensions. Whenarkets were unsettled they threatened to force a new election. The fivestar founder has called on Party Leaders to stop arguing and start governing. Chancellor merkels rowing lition Ruling Coalition the social democrats beats the antiimmigration alternative party in brandenburg and saxony. The results will ease the pressure on the coalition, which suffered heavy losses earlier this year. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Lets get a look at the markets. Moving touities are the upside, coffee pretty much flat, with the yen strengthening and putting pressure on those exporters. The hang seng getting a double whammy what with the violence on the streets of the city over the weekend. We have seen the bloomberg Commodity Index drop by about. 7 , which is the position we find ourselves in. Around onerling dollar 21, Boris Johnson facing a week that could determine how long he remains Prime Minister, and how or if britain leaves the European Union. Jodi schneider is with me. Johnson may have overplayed his hand. Questionyes, and the is what will the rebels do about it this week . They come back september 3. If he succeeds in moving forward, they have only this week before that could go into effect, giving them only two weeks before the brexit deadline. To tryipples are going to use parliamentary procedures to try to get around the suspension, which is approved by the queen, so it is not so easy to do. We dont know what the exact plan is, we dont even know if they will succeed on the parliamentary maneuver. But they are going to try, and its a group of conservatives with the opposition labor parties that are seeking to do it. They say they will use whatever is in their arsenal to do it this week. We saw protests across the u. K. Over the weekend will they persuade mps to work against the suspension of parliament . Emboldenl probably some of these Party Members who want to see this. They would feel like theyve got thousands of voices on their side there were signs, the protesters held signs saying stop the coup, meeting trying to shut off debate for the month. Them,nly this will help whether it is a determining factor remains to be seen, but it will probably embolden some. The thing is, we have the former british Prime Minister tony blair getting involved, he is said to be getting into all of this. What is he looking for . Hes going to give a speech in london where he will say that he doesnt want to see another he isl election, that trying to persuade people including the labor leader that it would be wrong for britain to wait until after the brexit election. Of course, given how brexit has been delayed for three years, who knows when that will be. He is saying it is the wrong way to go, lets keep it clean and do it after. Thank you. Jodi schneider, international editor. Is the Financial Services sale michael darcy. Thank you for joining us. What do you make of this from an irish perspective . Many scenarios have been played out in the press and it seems like outside of britain, ireland has the most to lose. We are the country who are the closest trading partner with the u. K. , we are the u. K. s fourthlargest export market. We are potentially moving into the period of huge uncertainty. Most everything that has happened has been reasonably protectable, but between now and six months, it will be an unpredictable period. The end of october, halloween, could see a no deal brexit. Where does that leave you . How does that leave the whole motion of an irish backstop to keep the free flow of goods and people . The backstop is an insurance policy, to ensure that the island of ireland remains structured. So that if there is the reinstatement of the border between Northern Ireland and ireland thats our primary objective. The path has led to criminalization, to periods of terrorism. The backstop is in place to assure that doesnt happen. If we have a hard brexit and hard border appeared, how concerned are you about the good friday peace deal . The good friday agreement is why we have peace on ireland. It is underpinned by the irish government, and of course the u. K. Government. The backstop has been agreed by 28 governments, including the u. K. Way forve the best brexit to occur is with an orderly brexit. And of course theres the how much inflow have you seen from dublin to companies relocating . We have seen dozens of companies relocating from the u. K. To ireland. We certainly dont want to be trying to benefit from their difficulties. We have said to companies that if they have brexit difficulties, ireland can be part of the solution. We have a very strong offering in terms of what is available for companies to relocate. There are certain products in ireland, adding to that licensing in the offering so they can get into the eu. Minister darcy, haslinda in singapore. What do you make of Boris Johnsons move to suspend parliament, and what is seen as a do or die strategy . Comment on theot machinations of the u. K. , its a matter for the Prime Minister to operate in parliament as he sees fit. Lot ofthis period, a people may or may not change in the u. K. How the u. K. Government operates remains to be seen. You compared you likened johnson to oliver cromwell, a notorious British Military commander. You then deleted that tweet. Do you regret sometimes as a government minister, you dont get to tweet some things you would if you are a private citizen. It probably wasnt the wisest thing to do. I want to move away from brexit and have a look at why you are in town and what you were trying to do in hong kong, and welcome to hong kong at this difficult time. We are launching the services the European Union is soon to be deterred. We have a strong connection between hong kong and ireland, where similar sized jurisdictions between Northern Ireland and ireland. Markets, and do you see entry to china . Absolutely. Point fore entry Chinese Companies into the European Union, the opening between the last 1218 months has been hugely beneficial. You also have a financial hub, you have this bank bonus that was under the late brian moynihan. He reintroduced that, and that has been in place ever since. You tos pressure on remove those traps. There is a very small number of institutions there is the view that the bankers and those institutions are wellpaid. The threshold is half a million euros, which is a tough percentile of everybody in ireland. We have a lot of institutions outside of those banks, factoring dozens more in those institutions youre talking about. And you have a lot of international banks, people wanting they need a european hub, and that is one of the key reasons they are in dublin. Barclays has just moved there institutions other we also believe the aberdeen standard, and we have institutions like agencies in ireland and dublin. So we have a lot of different services, financial and sometimes they have a lot of potential. Will you have a final decision on that . No decisions made. Sorry is there anyering, concern this could be an exit . I dont think so, because its for a very small number of institutions. Three institutions on domestic and if there is an exit of talent, moving from one institution to another, thats the good thing, that we have a very strong cluster available to many institutions and so many different types of Financial Services in dublin. Before we let you go, one final question. So much uncertainty that is the biggest concern for ireland . To bring thiske to a conclusion with our british friends they arent just neighbors of ireland, we have a huge number of irish people who went to work in previous decades. It is that period of uncertainty, not just for ireland in the u. K. That also for the eu. Another interesting point if britain leaves the eu, you will find yourselves as the only english country left in the union. Thats a huge opportunity. It is opportunity, but as i said earlier, i have never pitched this as our wanting to capitalize on someone elses difficulties. The u. K. Will go through a difficult period following brexit, we want to be part of this solution in relation to passports, and we are offering new strategies that we are launching, the first launch in asia is part of that offering. You see that reflected in property prices and dublin. The irishvery much, minister for Financial Services integers. Coming up, why chinas new primary could be a boost to consumers. Exclusively with them next. This is bloomberg. S is bloomberg. Welcome back. Forces new rate will banks to divert lending to Small Businesses and consumers, which is where the growth will be. Thats according to bnp paribas in july, who spoke exclusively to bloomberg in beijing earlier. Opi, ityou look at the is almost the equivalent of the primary loan. When they announced that and forced everyone to apply for this rate, the first day of and theas done at 4. 2, median Lending Facility the best of the corporate clients in china, if they were issuing a bond, the yields of which would be 3. 05. You can see the gigantic parity between the two. When you consider the Chinese Market is about 80 of the market, you can see the need to drop these rates further and further, to be much closer to the median lending rate. When they do that, they will forcing it into the small and mediumsized businesses and the consumer. That is where the growth will be. There will be a shortterm pain, but it will force most of the banks in china to divert their resources into the small and medium businesses, because lending to the best of the pence, the spread will not be enough. And in terms of where demand is, from small to mediumsized businesses, the economy is not doing very well, so banks, i would imagine, would be attaching a risk premium. Talk to us about demand for credit. When you are talking about lending, diverting from the best of the clients, the natural spread would be narrow. People would have to find a way to go into the second tier of the market with a better spread. Yes, the risk will be higher. Are alsoagain, we seeing a lot of the new trend in china. A lot of new phrase, the companies in the third or fourth tier markets and also the city. We will start seeing the report which would allow many of the companies that would find a new growth area, and this would push up the consumption, and push up the credit demands, which would all be important for banks to sustain their growth. Paribaswas the b. N. P. Ceo speaking exclusively to bloomberg in beijing. Lets get back to the briefing taking place at the central been hearing weve from these four men here, the secretary for security, secretary for china, and you can see one person is missing, carrie lam. No explanation as to why she is not present. They have been talking about the violence over the weekend, which was a clear escalation, acknowledged by the chief secretary. We also have a government review of hong kong to help with more enforcement. The transport chief saying it is normal for police to handle the violence the way they did. He went on and said there were 25 Flights Canceled and 200 delayed on sunday. Earlier abouting just thent situation, usual enunciation of the violence taking place, going on to say that it is challenging the whole concept of one country, two systems, urging them not to be a political confrontation. Thats what we have at the moment. On citizens tog say no to violence. One third of stations were damaged on saturday, according to the transport secretary. This is bloomberg. Do a quick check of the latest business flash headlines. American airlines is the latest carrier to extend the removal of the max from its schedule for another month, awaiting Regulatory Approval to let the planes fly again. Withcan is dropping them, the announcement coming two days after united bought the jet in the middle of december. Southwest removed it from the lineup until early january. The french finance minister Bruno Le Maire says he is furious at the german rail sellingucture company, its local business to a chinese train maker. He slammed the European Commission for allowing the sale, saying it should be supporting local business. The commission rejected a bid from the french train maker to merge with the german rival on antitrust grounds. Car sales are hitting the brakes in india. How does local unit reported on more than 50 fall in august compared to last year, sales were down more than 20 , hyundai and volvo also suffered. Local carmakers are also slump ong, with a 60 a range of factors, from slow down and Consumer Sentiment to an exchange rate. The Hong Kong Government has strongly condemned the escalation of protest over the weekend, saying more than 200 delayed. Were arrests have continued after they were trying to disrupt the subway system. Stephen engle is at the airport express terminal here in hong kong. We have had various government officials talking, one may was missing. Yes, carrie lam, the chief executive. We dont know where she is but we know there will be another press Conference Tomorrow. Going to beis another one and it will be interesting to hear what they have to say but run me through those headlines you just recapped, coming from the chief secretary, the number two and also the transport secretary is speaking excuse me, frank chan. This security secretary is frankly. One point that stands out to a question Michael Chung answered about whether the Hong Kong Government would evoke this colonial era Emergency Powers ordinance, emergency regulations ordinance, which would give the Hong Kong Government more control over the media, the internet, and intentionally give police more sweeping powers to crack down on what they have classified as writing, as rioting, like the burning of the barricade, the live rounds fired by police, the teargas, the water cannons, the mayhem. It is interesting to see whether that is another statement from the government, saying we havent ruled it out yet stop china says the end is coming, it sounds ominous. Are we seeing chinas hand more and more in this . Sorry, i couldnt hear that question, other than what whetherrole in this the turmoil in hong kong is coming to an end. There are ways to make this come to an end will it be humanely or not so humanely . Those are the terms the white house in donald trump has used. Hes hoping that the chinese do resolve this situation, if they are going to resolve it. Ordinancency powers is one way to give the police more sweeping power in the government more ways to crackdown on dissent, but there could also be the invoking of article 18 of the basic law, which basically stipulates the state of emergency in hong kong. Our chief north asia correspondent, thank you so much for that. Still to come, the new zealand finance minister. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Willy davis, who has alzheimers. I decided to make shirts for the walk with custom ink. The shirts were so easy to design on the site. The custom ink team was super helpful and they just came out perfect. Seeing my family wearing my shirts was such an amazing reminder of all the love and support that everyone has for my dad. [narrator] check out our huge selection of custom tshirts and more, for teams, businesses, and every occasion. Youll even get free shipping. Get started today at customink. Com. The following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. Announcer the following is a paid presentation brought to you by National Debt relief. Are your credit cards maxed out . Are you just making the minimum payments, or worse yet, falling behind in your bills . Are you stressed out all the time by your debt . Is debt keeping you awake at night . Theres reason to worry. Check out your credit card statement. If youre only making the minimum payment, it could take you over 20 years to pay off. Having debt is like having a tremendous weight on you and you