Authorities warned against reopening too quickly. Sending a message to facebook. More advertisers cut spending. Anchor asian markets are setting up. Virus cases continue to accelerate, not just in the u. S. But closer to home. Lets go over for a look. I am looking at the numbers, it looks like a trading week. That backdrop, futures are pointing lower this monday ahead of hancocks anniversary. Trade data do from the city this monday. Morning, thehis economic fallout from the virus, higher jobless reports. We have a downside picture across asia. Checking in on commodities, lets check in on oil. Losing ground. Near a 2012ing high. Higher prices expected. Australia does see gold expert warnings hitting a record 22 billion in 2020 through 2021, before easing in 2022. We have to big picture that good gold could top 1800 an ounce. Global virus has hit grim milestones. Cases in tokyo rose by a daily record. Japan had lifted a state of emergency last month. In the u. S. , governors are struggling to contain the virus. See the record infections around some states like texas, florida, arizona. What are they doing about it . Disses there was a development. We have seen initially, the rebuff from some governors was we will have to watch and see what happens. They didnt put pausing on the table. Now we are seeing a big shift. Texas has posits reopening. The governor shut the bars. We are seeing a lot of activity on that front. Florida taking some action around consumption of alcohol. There is a sense that there are high risk places that might be contributing to this recent development. If these continue, there is also possible there will be an attempt to roll back the loosened restrictions. In texas, what is the latest there in terms of the effort to contain the virus, maximize capacities at hospitals given that we heard last week that icu heads were basically will. Texas the picture varies. In houston, we have seen this large medical complex called the Texas Medical Center say that their icu beds were full. They say they are able to convert other hospital beds to be places where really sick individuals can get the high intensity care. That is something a lot of hospitals across the country are prepared to do if the situation gets difficult enough in their facility. It is likely that other hospitals in texas may end up following through depending on what they see. We dont have a greater picture on how full hospitals are, because states report different kinds of data. The picture varies a lot. Arizona has had a lot of attention on icu beds, but not every state even reports that data to make it different difficult to know what is going on. President trump and republican governors have been pointing out, cases have been surging, tatts test deaths have not. They say that is because of testing. Where week to be in a month from now if previous caseloads are to prove true. Disses a great mystery. We have seen a recent uptick in virus cases, hospitalizations follow in many places, yet thats are stable. The toll is still rising every day, but the death rate has relatively stabilize. There is a lot of theories floating around. The main contender appears to be the shift from older individuals who are more at risk to the younger population. The question there is, are you going to see these younger people running the virus around the community. Maybe they themselves do better, to goingare they going on fathers day to visit their father, grandfather. Spreading the virus around that way. We know many people with this virus are a symptomatically at their other theories as well, are we Getting Better at treating covid19. Is notossible the virus transmitting as well because it is so warm. The main contender right now is that people are getting younger. But that may not be such a good thing. Right now it appears to have spared the u. S. Many deaths, but it is not clear how it will fare in the long term. We have breaking news. Hitting an update on offloading of a big chunk of shares when it comes to tmobile in the u. S. Recordingroup will be ¥600 million gains on that tmobile cell. They will be buying back up to ¥200 billion of unsecured bonds, the buyback of unsecured Corporate Bonds could be up to ¥200 billion. We have seen softbank carrying out that 42 billion push to unload assets to pay down debt. We are hearing they will record 600 billion gains on that team million tmobile sale. Could amount to billions of dollars for southbank, the latest unloading their assets. Facebooktill ahead, and exodus. Why growing number of companies are cutting spending. Plus, china is a step closer to targeting dissents in hong kong. One legislator discussed in their weekend meeting. Details next, this is bloomberg. Anchor youre watching daybreak asia. Industrial profits rebounded for the First Time Since september, indicating the economy is recovering. Billionrose 6 to 82 compared to a fall of more than 4 in april. The Statistic Bureau says the improvement is due to smaller cost increases. The worlds top shipper of iron ore says prices are here to say. Suppliers react. Just billion department of industries and resources have said it would hold its current levels while lifting lower toward the end of 2020. China has pushed iron ore towards 100 dollars a ton. Russian president Vladimir Putin is expected to easily win a constitutional vote that will leave him in power for up to 16 more years. A weak rating, slumping economy, and the virus pandemic. The book concludes on wednesday. Putin would be 83 when it runs out. A date has been set for investigators to start recovering flight recorders that was shot down over tehran. The reading over black boxes will take place on july 20 after iran insisted the probe would take place in the islamic republic. An iranian team will lead the investigation but other parties can attend. Global news 24 hours a day, on air and on quicktake by bloomberg. Powered by more than 2700 journalists and analysts in more than 120 countries. Anchor lets turn to china. Hong kong legislation. Enact a measure that could erode freedom. More on this. We have any more details about this proposal . That the congress did discuss the security law over the weekend. According to reports, it could pass as early as tuesday morning. Into did, it would come effect just in time for that symbolic july 1 anniversary of hong kongs china in 1997. We have get to see the full text of the law. Even those who have defended and supported it, they have not seen it. Reporting thee law includes a light sentence for acts of subversion. That prison sentences for the , would range crime between three and 10 years. Detailsin addition to that state Media Release last week showing that beijing plans to set up a local Intelligence Bureau in hong kong to control sensitive cases, and remove the courts ability to select judges on security matters. Hong kong leader has tried to reassure residents that the peoples legitimate rights and freedoms will be protected, but the law faces significant public opposition. According to a hong kong Public Opinion research paul, about 56 percent said they opposed compared to 34 who supported. Time, support for protest winning 251 . Policests have have arrested 53 citizens for Unlawful Assembly during a rally against the National Security law. What further backlash are we seeing for foreign governments, what were we expecting mark expecting . Governments are criticizing this law as a fundamental blow to the one country to systems principal that has kept hong kongs legal system separate from the mainland. Said the, mike pompeo u. S. Did impose fisa restrictions on chinese officials including retired bonds to our beliefs to be responsible for or complicit in undermine hong kongs high degree of autonomy. Move is largely symbolic. Chinese officials are not likely to visit the u. S. , especially now given the ongoing pandemic. According to state Department Officials who asked not to be identified, this fisa been is just the first step of many. Sources have told bloomberg that there has been intense debate inside the Trump Administration over just how hard to hit china over this National Security law. Severe sanctions, stripping hong kong of its special trading status will be a strong message to china, but will further damage the Global Economy and hong kongs economy. The senate has approved a bipartisan measure that would penalize doing business with chinese officials involved with this National Security law. It would have to pass the house before reaching trump steps. More on the Hong Kong Security lock just ahead. Npc, theeputy to the chinas highest organ of state power. Next, industrial rebounded last month for the First Time Since november. We discussed prospect for the rebound. This is bloomberg. Industrialnas office rebounded in may for the first time its november. To pickomy is starting up pace. Lets take a look at the week ahead. We are joined by senior economist. We are awaiting china pmis this week. Does the industrial profits number in particular suggest that we are seeing a bit more robustness in the chinese recovery now . Thanks for having me on the program. Back to expansionary levels written levels. The consumer side is not where it was before covid hit. Retail see that in sales, restaurant reservations, traffic indicators. I think that consumers are Still Deciding to self distance to some extent. Because they worry about another ways of an outbreak coming through. Has beentrial sector improved by Government Support and overall easing of Monetary Policy in china. This is the real concern. Globally, massive amounts, governments mailing checks, extending loans and paying wages. You cannot actually force consumer spend. ,hat does that make inflation deflation outlook like for china . Globally what is going to happen in the shortterm is you will get very low inflation, deflation in parts of the world. Effectivelye been free at the moment because you dont have to pay to certain utilities. In australia, for certain payments. Course, the pitfall in oil prices is going to wait on petrol prices all over the world. Spending in the near term will get you to that deflation. Mediumterm, i think there is a case that all the stimulus we have had from the government and Central Banks might actually work out to be inflationary. Particular around the Government Support, because the level of government stimulus has been unprecedented in our modern era. The only time you can see similar levels of Government Spending has been the second world war. , i thinkl of stimulus will probably stay in place for the mediumterm. Hard to see the government take it out of the system. I think it might be inflationary in two years time. All of the ecodata we saw out of china seems to be stabilizing right now. What is the risk that was just pentup demand, and most of it has been already released . That is a great question. I think what you need to see going ahead to get your activity back to her it was before covid, is to seek governments support in terms of stimulus continues to be in place. At that we are still getting it in china. They are still increasing bond issuance, Interest Rates are being cut across the board, not to consumers but businesses. Superstructure spending is likely to rise in the near term. You need that support to see the economy track higher, what you want to see is more confidence that the consumer can go out there and spend. It could be more of a sign that consumers are choosing themselves not to want to spend because they are worried about going outside. Is, that comes down to getting the virus under control and getting confidence back to live ins that you can this covid environment. And see howwait consumer mobility improves. On outlook, we have seen the chinese economy will get back into its precovid levels towards the end of this year, or in early 2021. Much faster than the other advanced economies. Anchor one of those advanced economies, japan, the imf said last week that they are going to see the slowest Economic Growth since the Global Financial crisis. We are getting data from japan this week. What are you expecting . Been hit by two different things. Iny had the increase consumption tax. An asset you saw falls in consumer spending. Had theately, they covid outbreak which has led to another big fall in the economy. Japan also relies on what happens, the inflow of Chinese Tourists into the country. Altogether stopped has stopped altogether because of the outbreak. Growth in japan will probably be similar to what we are seeing in europe. All the activity indicators that i track seem to be fall at a pretty similar pace. In the Second Quarter you are looking for growth to fall about 10 . The biggest fall they wouldve had since the second world war, perhaps the great depression. We are continuing to see iron ore hold up when it comes to prices. Despite these concerns it was mostly a supply side phenomenon. If we continue to see Strong Demand in china, as they continue on their infrastructure stimulus binge, and their appetite for australian iron or, is that the saving race for the aussie economy . Whats interesting about australia is, we run a tourism deficit. Australia spends more overseas done what taurus bring into australia. The fact that australians cannot go overseas means they are likely to redistribute that spending, perhaps internally, if they want to travel domestically or if they want to do tourism. Domestically they can go out and purchase more global services. We are not seeing as much International Travel in australia, the fact that we do not have taurus coming in might not be as bad for the economy as you would have originally thought. Think australia will come out of this pandemic in a much better position compared to some of the other economies, because we have had much lower numbers of virus cases. Supportive and targeted stimulus programs that have worked a lot at are thin and a lot of the other advanced economies. Wont forowth numbers as much as the other advanced economies. If we do see our reporters economies. 12 months, anchor great having you. The latest check of business flash headlines. Singapore reopening Tourist Attractions and casinos this week. Will be held at 25 capacity. Casinos limited to existing members. Domestic tour operators will have to introduce measures that reduce the risk of infection on their attractions. Facebook will be under renewed pressure when new york opens later as advertisers pull back on its policy on hate speech. Facebook generated more than 17 lien dollars in ad spending in the last quarter alone. Into American Social media, rolling out alive streaming service similar to amazon twitch. Mobile streaming network through a mobile affiliate through at least march. It is now branded as trouble lies. This is bloomberg. Until we get a vaccine. Markets tell us. A market revising down. Growth outlook for the United States, our growth for the market as we price and a possibility of lockdowns being extended. We are in the middle of a recession, the recovery road is going to be treacherous. At this point, emerging markets around the world will take a hit. Outlook for stocks. Lets continue with that theme. Hearing ast we are investors compared to the last half of 2020. In absence of clarity when it comes to earnings or guidance or even the macro picture, or, what will we be focusing on. Of the gains during the rebound in risk assets have been made. If you lean heavily and equities you have done well on the rebound. In the second half of the year, there are more arguments saying you need to be discretionary in those areas. Example, emerging markets could be under considering pressure. They have high debt loads and many cases tricky covid situations. Still a lot of concerns for emerging markets, a lot of people. One of the reflections from a bond perspective has been a huge increase in balance sheets, not just with the fed, but with many other Central Banks. Buying Central Banks are , somelaces like china areas of credit that still offer some value. The other call would be where you sit on the u. S. Tickler pertinent at this moment. There are some expectations at j. P. Morgan saying, you want to be looking to sell the u. S. Dollar against some of the stronger current countries. The swedish, japanese yen. Gold. It continues to be that kind of real protection against so much. There is still a lot of people that want to continue. Even at the highest level in almost eight years. We have been talking about this concept. Because of the pandemic, we could see fundamental changes in human behavior. Are there any ways you can trace this. Its been one of the big things. Ideasare individual stock , which are in there. Which look too many people. Still decent investment returns to be made. Some of theoking at changes, for example singlefamily homes. The crisis ishow accelerating trends already going on. How that has ramped up. Stocks like homes, highquality assets. Things like to move to leisure, more thing staying at home. People wanted to be aware of their health and to taking a renewed interest, peloton. Can, if there is a movement, can still benefit. Places like financials where, the Banking Sector there is an expectation that Technology Spending at banks will ramp up, particularly on security people. More staff working from home. Some ideas around there on some of the changes in the banking system. Battle between u. S. And china. There are some opportunities there. Anchor our Global Markets editor. Karina . Reporter global coronavirus cases have broken 10 million. Desks passing 500,000. Health authorities continue to warn against reopening too quickly. U. S. Infections above 2. 5 million. Health chief saying the window is rapidly closing. Pence toldent mike cbs that the u. S. Is wellplaced to respond to the crisis. Reports from europe suggest that you you will e. U. Will ban. A decision seen by bloomberg said 15 countries to be given entry, does not include the United States where virus cases are surging. Chinese citizens will only be welcome if mainland citizens are welcome. 57 new cases were confirmed saturday, more than a month after japan. The government has abandoned trying to wipe out the virus, focusing on limiting its red. In tokyo have now top 6000. Astests return to hong kong lawmakers in china are debating a new security law. The National Peoples congress will vote on the legislation on tuesday, the day before the city marks its anniversary to return to chinese control in 1997. Global news 24 hours a day, on air and on quickpick by bloomberg. Powered by more than 2700 journalists and analysts in more than 120 countries. Anchor coming up next, please are flushing their ad spending when it comes to facebook. This is bloomberg. Anchor facebook is undergoing pressure as more companies ad spending. Cocacola and starbucks are some of the major advertisers. Taking a hit on friday, crisis is escalating for the company. 8 , expected to take an even greater hit in the coming week. All of this as a slew of Companies Plan to join the at exodus. We are now hearing pepsi is joining. Companies, aller saying they are going to halt social media spending or outright boycott facebook to pressure a big crack down hate speech and misinformation. He Mark Zuckerberg says fears heres his critics. Committed to making sure that facebook remains a place where people can use their voice to discuss important issues. I believe that we make more progress together when we can hear each others perspective. Orlso stand against hate, anything that incites violence or suppresses voting. We are committing to removing that contents. No matter where it comes from. He went on to outlaw outline what the commitment is. Changes. To provide authoritative info on voter information in the face of the pandemic. Is going to suppress misinformation in attempts to defer voters. Higheroing to create standards for hateful content which is really the crux of what the protests are about. Zuckerberg also emphasized facebook is a force for good. The message is they need to do better. Does this leave zuckerberg . Both he and the company are in a bit of a bind. The stampede of advertisers combined with lobbying from civil Rights Groups could only get worse and put more pressure on the stock. When you combine that with a pandemic fueled economic beenurn, and facebook has warning about a weaker Second Quarter. There could be a serious hit to its bottom line. They are saying giving to growing noise that all of this is creating, the concern is that the advertising exits could spiral out of control. This evening we are already seeing reports that there is a global move to get Different Companies and brands to add to the pledge to cut spending. Shares under pressure, and friday when they just reached an alltime record week before, and took a 56 lean dollar hit to market cap. A Venture Capital firm is looking to diversify the tech industry. 250have just raise million with plans to back initiatives designed to diversify the sector. We asked the cofounder about the plan. We are thankful for the amount of confidence by our founders. My partner and i and the entire team, feel that we are at a because we are minority led organization, but we are known as minority focused. We just happen to be investing in problems means investing in people that represent the diversity of society. We feel we have the responsibility to do even more of that. Have been seeing incredible momentum behind the black lives matter movement, and i wonder how you have been experiencing that, whether it is impacting your strategy. See thee very happy to traction that that movement is having. We think investing in diversity is good his nose. Good business. We believe that the founders should represent the racial diversity and other diversity of that 99 . Andre seeing now, technology we have a collective responsibility to actually make that happen to remove biases that we all naturally have. Our commitment as an organization is going to invest in tatts. Find those founders that are out there and her wonderful. Overlooked,being better business. Also are excited to announce a formal monetary impact commitment to support diversity movements, because we have seen it is time to take a step forward. What is it like in Silicon Valley as a black investor . Unintended racism . I would say my experience has been overwhelmingly positive. Like hispanic, half armenian. Our partner is albanian. Think what the Community Feedback has been is actually positive. By being a diverse team, we might be able to empathize with. In particular, we are seeing that it is good to invest in the underdog. Being an outsider is maybe easier to find that underdog. That is not necessarily experience for black entrepreneurs. Us,poke to the ceo who told investors when he walks into a room, they expect him to be white. I have experience. I have experienced many different instances of that. I know that most of them come from a good place. What we believe, it is very important for all of us to be able to have an open conversation, realize that we all have these biases. We are programmed with them. We believe that something great can come out of this time, is actually the ability to put that out there, and be like we are be biased, and we might undervaluing certain people just by the fact that they dont look like. Leaving value on the table by not assessing those people correctly. Do have breaking news out of south korea. Were hearing from the finance ministers saying, south koreas extra budget will be the last this year. They already had two extra budgets this year that amounted to roughly 10 billion each. We have heard earlier this month that the next extra budget would be around 30 billion. Now coming out and saying that that third extra budget will be the last this year. He is also saying that the government will propose debt accumulation rules in late august. Korea is not at a stage to normalize liquidity measures. He thinks that korea can still achieve 0. 1 percent growth with a swift execution. This is coming from the south korean finance minister, saying korea will also unveil supply reshaping measures in july, and it still has fiscal room for more spending. That third extra budget will be the last this year, following two budgets already worth 10 billion each. Check of the markets. Reporter futures are pointing lower. Singapore opening the downside ahead of japan. The yen now, little change. Futures ticking higher ahead of the doj last by for the bond. The governor signaled there is no willingness to change the shape of the yield curve just yet. Waiting if the relentless steepening we have seen to the widest we have seen since june. Investors looking to the central bank to boost line by to relieve this pressure. Ont monthly plan is due tuesday. I want to end on gold as we are seeing demand pushing gold futures closer to 1800. Bully on hitting a record high, from here sentiment is mixed. More on Commodity Markets in just a moment. Whats ahead for metals. This is bloomberg. Anchor breaking news. Japan retail sales members worse than expected. We thought month for make gaining 2. 1 percent, less than expectations of 3 . That was in the depths of the coronavirus lockdown. Of 12. 3 , slightly worse than forecast by economists and marginally other than the previous month of almost 14 . Supermarket sells, we saw weakness contraction of 16. 7 . Slightly better than economist have been looking at. The month of may, this is backwards looking given that we know that the restrictions from the state of emergency were only partially lifted from the middle of the month, fully lifted by may 25. Not supplies only, still seeing weakness. Lets turn to the commodity sector. Chesapeake energy filed for bankruptcy over the weekend. The natural gas giant was a Success Story of the u. S. Shale boom, also a victim of that success, contributing to the oversupply that her pricing, and worsened by the economic shutdown. For a broader look at the state of energy amid the pandemic, lets turn to the senior commodity strategist. Us. Ys great having you with is this just the start of more consolidation in the industry . When you look at u. S. Shale over that. , certainly has consolidated a lot. Certainly on better footing these days with a lot of stronger, bigger balance sheet. Clearly, a strong levelry, still not to a where it will. Was highly leveraged. Struggle under the current environment. Particularly, when the demand outlook is still very soso. Anchor as we continue to see these headlines with surging coronavirus cases, texas right now seeing the positive test ofe soaring to any record 14. 3 percent according to state data. This background of rising coronavirus cases that could really dent demand, can we expect more upside for crude oil prices when the environment looks like this from like this . The market has become increasingly competent around the sustainability of the recovery. Highlights that it is not counting to be smooth sailing. You will see significant headwinds. As a consequence, i think the does have to evaluate where it sees demand over the short term. The reopening in states like texas are clearly going to impact demand. Further out, pushing out that recovery for jet fuel that we have been expecting over the next six, 12 months. I always been a bit in thewhere upside shortterm. Anchor i want to quickly get your views on iron ore . The geopolitical tensions between the two countries affecting commodities exports, and the second thing would be is there upside risk if we get more mine disruptions which kind of sparked the rally in the first place . The supplyside demand has been pretty good for this process. Certainly, in brazil have had impacted by worker availability and some operation shutdown. This the data at we look at shows that supply disruptions from brazil are relatively minor, and really it is what we are just looking at the moment, weakness from disaster related issues that they had last year. I think the impact is probably going to be relatively minimal. The market is going to have to reevaluate those expectations. Always appreciate your time, the senior commodity strategist. More to come, this is bluebird. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Bloombergsrom Global Headquarters in new york. Asias major markets have just opened for trade. Our top stories this hour, asian markets are facing declines. U. S. Futures are lower along with oil. Global coronavirus cases top 10 million. Deaths passing 500,000. Health authorities continue to warn against reopening too quickly. Chinas lawmaking body debates security legislation. We hear from carrie lams top advisor. Japan, korea, and australia coming online. Lets get to the Market Action with Sophie Kamaruddin in hong kong. We are seeing moves to the downside for the nikkei 225. As we digest the latest retail Sales Numbers from the country, the yen holding steady. Retail Sales Numbers falling more than forecast on a yearly basis. Rising slower than forecast on a month by month basis. Softbank set to book a 600 billion gain on a share sale. In the bond space, jgbs taking higher. After wen south korea heard from the finance minister ruling out the need for a fourth extra budget as the economy is seem to have bottomed out. The country is not at a stage to normalize liquidity measures. Monday morning we are seeing the kospi up. The caused act lower, the korean won on the back foot. Theching to check on morning, qe stocks adding 0. 2 . Out the Commodity Currencies base, under pressure, the aussie dollar holding fridays drop in the face of dollar strength. Also keeping an eye on miners. Gold continuing to push higher with 1800. Oil under pressure. The concern of a resurgence of virus infections. The u. S. 10 year yields off by one basis point this morning. We are going to get more outlook for stocks. Finally a sense that the dislocation between the economy and the Public Health crisis side of things and evaluations are coming to a reality check . Good morning. Kind of situation, we are seeing a slump in terms of sentiment and therefore markets as well. What we are seeing, there are more people coming to the view that what we are seeing is the virus threat situation, the second wave, a little bit inevitable at this point of time. Sentiment in the market pulling a little bit. If you try to trace, i think at this point time, even though we have data, this week, chinese pmis, that could help to reinforce what we are seeing. At the same time, the us inainty will keep gridlock as we look at the prices. Collects how much would you be hedging to safe havens like gold right now . Large to a large extent at this time, i feel cautious. There is a lot in the market, passed, therate had markets have cooled and start to think about how the trajectory is going to be, especially if we do see a second wave and also over and above, i think we are also finding quite a number of different risk factors, geopolitics and also the u. S. Election. Volatility once again back in the market. At this point of time, it is adjustment. Im just a little more leaning towards safe havens including gold over here. Gold fell in the year to date basis. One i see the upside here, that kind of interest to just really hedge with havens , especially to the november election in the u. S. Mediumterm trades. When it comes to the chinese equity markets given the more positive data we are getting with industrial profits rebounding for the First Time Since november of last year, could we finally see the shanghai composite top 3000 for the fourth time since march . Something we will look isward to, but i think there a lot of these kind of risks, particularly given the fact that we see china trade with just a little more caution on this end as well. The number of cases rising once again. Some of this rhetoric, not leaning toward the Positive Side , very important to the u. S. Once again, these are the issues that are going to be close, candidates coming through for the u. S. Elections. Even though we are seeing data itself coming through in the immediate aftermath, bloomberg cautious there a little bit cautious there. Given all the geopolitical tensions, but also the more positive data out of china, where is the chinese yuan, the renminbi headed . This is also very interesting. As far as the chinese yuan itself, it is trading in the real risk cents. , dollar offshore yen is really fluctuating. I do think we are at a point of holdingn prices are range bound consolidation. Clear impetus can be seen. I would not be surprised if it was more to the upside given the u. S. Election. Even though the u. S. Dollar macy may seeement encouragement, the china issue could lead to upside. Really just for the election coming soon. Prices trending toward fundamentals we have seen. Discussed, thee twoway yen risk persists, but the range bound is still what we are expecting. Always great to have you with us. Take a look at what softbank is doing right now. We are seeing pressure there. Companyheard from the that they would be booking ¥600 billion gain on the tmobile shares deal, that would be around 5. 5 billion. They are also now saying they would be buying back up to ¥200 billion of unsecured bonds, almost 200 of Corporate Bonds. This of course in the broader context of they are trying to unload asset to stock buybacks and pay down debts. Fortill ahead, a tugofwar fundamentals. Withfrom our interview ollie ons chief economic chiefr allianz economic advisor. Bernard chan is the deputy to chinas mpc npc enjoins us with his take on the Hong Kong Security law. Security law. You are watching daybreak asia. Lawmakers in china are said to be debating a new security law for hong kong. The National Peoples congress will reportedly vote on tuesday, the day before the city marks the anniversary of its return to chinese control in 1997. Hong kong police have refused to permit the annual july 1 march citing social distancing and potential violence. Industrial profits rebounded in china for the First Time Since november. Signaling the economy is recovering from the shutdown. Profits rose 6 from a year earlier compared with a fall of more than 4 in april. The Statistics Bureau says it is due to smaller processing spaces in refining chemicals and steel. Higher prices are here to stay for the rest of the year as demand strengthens in china and suppliers react only slowly. Of stralian Department Says prices will hold. The Department Notes robust demand from china which has pushed iron ore toward 100 a ton. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery the coronavirus has hit milestones. Global deaths hit 500,000 with infections rising past 10 million. In asia, a pickup in cases across japan and south korea and australia is can during new lockdown measures considering new lockdown measures. To start with japan, because we thought tokyo had been able to rain and the infections rein in the infections, and now it seems as if they are seeing a resurgence. The recent focus has been on the rising number of infections in tokyo. There has been over 50 new cases every day for the past three days. These are the highest numbers that have been reported since the state of emergency was lifted at the end of may. It is also good to note most of the country has been able to reopen around mid june. Most of the new cases in tokyo are coming from mass testing of post workers at nightclubs in tokyo, a virus hotspot. Many of the new cases are younger people in their 20s and 30s who usually do not experience as serious symptoms. Hospital capacity has been ok here. Officials also said there is no plans right now to reinforce restrictions area restrictions. What about south korea and australia . Theres a lot of eyes here on the countries in asia that have previously had things under control but now are seeing new numbers because numbers globally are seeing the most from u. S. , brazil, and india. On sunday, they reported the highest new cases in over a week. Australia, the state of victoria reported 49 new cases on sunday, the highest daily increase in almost three months. Because of that, the government there put some suburban areas into lockdown and are also going to be reinforcing mandatory testing for coronavirus for returning travelers to australia. That virus resurgence is testing Investor Confidence as weigh the risks. Chief advisor we are seeing this tugofwar between positive technicals and a much more uncertain outlook for fundamentals. Outlook,at uncertain we are seeing two things that i think are very clear. We do not have synchronization nationally or internationally. We are seeing massive dispersion. To be absolutely critical in terms of understanding the economy and the market. The positived on forces we are seeing at the moment. The below capacity Economic Growth and expended extended period of time. We have seen real evidence we will be below capacity for an extended period of time. Have we figured out what that will mean for the potential growth of this economy for the foreseeable future . We know the direction of the move. We dont know how big it is. We have evidence from developing countries. The more you look at developing countries, the more insight you get, the longer the list of questions you get. Its we are being hit by a structural shot. We know the longer you are below potential, the more you drag down potential. That is because Certain Companies cannot operate well below potential. Restaurants are an example of that. They shut down. Unemployment becomes longterm unemployment. You go from being unemployed to unemployable. That is a big shift. Notionger you are the of a square recovery, starting to come into the narrative, even president lagarde of the ecb said today the recovery day would be restraint and sequential, which is much more a square root analysis than it is a vshaped view of the world. This is something that scares the heck out of policymakers, particularly central bankers, the risk that the future potential growth rate declines. The risk that they need to do more in the near term. How do you think the policy move needs to evolve to account for risks . The problem is it scares the hell out of central bankers, but it is not scaring enough the politicians. What needs to happen, and i think now there is total agreement on this, is a handoff. A handoff from Central Banks carrying the bulk of the burden for growth, employment, because they do not have good tools for that, they have good tools to boost the financial market, but they dont have good tools to boost the real economy, handoff to those who have the tools, but have been unwilling to employ them. That is under the control of the politicians. It is not just fiscal expansion. It is fiscal reform. It is labor market reform. It is infrastructure, retraining, retooling, and a safety net to reduce household and security. As a whole list of things. We know what needs to be done. It is just the political will to implement it. What we are seeing is a real divergence between how policy is rolled out, how the reopening process evolves, and the experience between china, europe, and the United States. Are we about to see real divergence on not just an economic side, but also a Market Performance between geography in a way we have not seen in a while . Definitely in terms of geography. You are seeing it already. You look at the imf projections that came out yesterday. I must say, they are very realistic. I have often complained, but these are really realistic. I think the most realistic set of projections we have for a really uncertain year. There is one bright spot in the economy, and that is china and what is around china. Is how long i have can you run an unsynchronized Global Economy . We have not tested it to the extent we are going to test it now. Anz chief economic advisor. After being grounded for more than a year, we might see the boeing 37 737 max back in the air. We will have the story next. Anna the boeing 737 max may be one step closer to the air. Test flights may begin as soon as monday. A fairly academic exercise given the grounding of aircraft worldwide . In a way it is good for boeing. It gives more clarity on how soon it can start deliveries and productions on the 737, given that this plane has been grounded for more than a year right now. Yes, it comes at very Uncertain Times with the coronavirus and all these planes being grounded right now. It also does give a bit of certainty for boeing Going Forward with this max. It is definitely good news for boeing. Just the fact u. S. Regulators are willing to sort of certify boeing in the future does not mean world regulators will do the same, right . No, there is no clarity what other regulators will do after this test. This is just the first of a series of testing that will before the faa feels comfortable enough to have the max resume flight. Obviously, the other authorities have said before they would also conduct their own testing of the 737 max before they give the green light. As i said, this is just a start, but it is a start that has been waiting in long waiting, i would say. Given that it has been grounded more than a year now. A quick check of the business flash headlines. American Airlines Says it is ready to resume flights at full capacity, abandoning restrictions of passenger numbers imposed during the pandemic. Travelers will be notified if they are booked on crowded flights and will have to certify they are free of symptoms. Delta airlines is continuing to limit numbers, saying, as we returned to a return to previrus passenger levels is at least two years away. Chesapeake energy has become one of the industries most visible price crash victims, filing for bankruptcy as the coronavirus devastates the economy. Applied for chapter 11 protection and entered into a deal to eliminate 7 billion dollars in debt. Chesapeake is seen as vulnerable to the shale explosion and has contributed to the Global Energy glut. Facebook will be under renewed pressure when new york opens later as more advertisers pull back on its policy on hate speech. Pepsi,ks, levi strauss, are the most recent to curtail ad spending over posts that glorify violence and disinformation. Facebook generated more than 17 billion in ad spending in the last quarter alone, but the rising tally of withdrawals threatens to add to the exodus. It is a challenging start when it comes to risk assets, including riskaverse currencies with what we are seeing across the region. We have seen dollaryen seeing some strength, gaining off the back of fridays session. 107 is what we are seeing when it comes to trading in dollaryen. Retail Sales Numbers did see a minimal gain month on month. It is still worse than expected to show the depth of the retail and consumer slump as japan exited that state of emergency in the month of may. 7. 0835. Hina trading at the Chinese Market coming back to trading after two days on holiday. Aussie showing risk aversion. Gains,he recent run of it seems the aussie as well as the Canadian Dollars there. Lets look at how equities are trading. Downside, risk assets starting the week off on the back foot. The nikkei two to five off by 0. 6 . Expected to show a blow when it comes to big birds nest big business sentiment. We are getting jobless numbers in addition to retail Sales Numbers we got early on this morning. The kospi is off by 1. 25 . We had the news of the budget earlier. In australia we are seeing a 2 . Extended to just below spot, trading in new zealand modestly higher. South korea rules out further budgets and says the economic shock from the pandemic may have bottomed out. Global coronavirus cases have broken through 10 million. Deaths passing 500,000. Health authorities continue to warn against reopening to quickly. U. S. Infections are now above 2. 5 million with president Trumps Health chief saying the window is closing on controlling covid19s red. U. S. Isce told cbs the wellplaced to respond to the crisis. Reports from europe suggest the eu is to ban u. S. Travelers for mentoring the bloc as Leaders Debate the list of countries seen as unsafe. Virus cases are surging. Chinese travelers will only be allowed to enter the eu if european sentiments are welcome in the mainland in return. Virus infections have soared since early may, breaking a threshold level. Innew cases were confirmed tokyo on saturday more than a month after japan lifted its state of emergency. The government has abandoned trying to wipe out the virus, focusing on limiting its spread as International Travel resumes. Cases in tokyo have now top 6000. Retail sales in japan rose in may for the month before for the First Time Since february, adding the possible signs of worse Coronavirus Impact have passed. Government cash handouts of almost 1000 may boost spending, but the overall trend is seen as weak. Auth korea is rolling out fourth extra budget this year. The economic shock from the coronavirus pandemic may have bottomed out. Lets get the details from our economy reporter in seoul. You conducted this interview. What were the details and what was the rationale to hold back from more stimulus . The finance minister basically said he has seen some good signs of bottoming, especially with exports and Consumer Confidence. Export declines have used this month and Consumer Confidence has been rising for two months in a row. He said he still noticed a lot of businesses struggle with cash reserves. He said it is painful to see the companies struggle. I asked finance minister hong flightingought of the of the need to normalize the steps taken to funnel money into markets. He said it is too early to talk about some thing like that. He things liquidity has to stay at the current level to help with economic difficulty. Lets talk about liquidity. How much of what has been implemented already, we had two extra budgets. It is being felt across south korea. South korea has already drafted three extra budgets, which amount to a total of almost 50 trillion, about 14 of koreas gdp. The third extra budget is the biggest of all. The government is seeking to issue bonds to cover that spending. Hong is saying hes not going to be seeking a fourth extra budget. With not going to be regard to spending stimulus. That is also reflected in his the ratingout changing or being downgraded because of so much spending. He still said south korea has room for stimulus. The debt to gdp ratio is about 43 after current extra budgets. That is still very low, he says, compared to the oecd average. On wednesday,week we are expecting south koreas june exports numbers. Any indication whether coming from minister hong or other top government officials about their outlook for external demand given how dependent south korea is on its exports . See aare going to decline, certainly, compared to last month in terms of the export fold. Lifted of the lockdowns gradually across the world, thats going to be reflected almost immediately in exports from south korea, which include everything from memory chips to ships and cards. These are things that are very sensitive to demand around the world. I think what hong is saying about exports at this moment, is an indication that, yes, it is going to show another side sign of bottoming out, but he is cautious about the potential for a second wave of infections. I think that is going to be what we are going to be dependent on, basically, Going Forward. Kim withergs sam details of his exclusive interview with the south korean finance minister. Now lets turn to Sophie Kamaruddin for another check of the markets. Asian stocks mostly lower with losses in more than 1 in sydney and tokyo. We are seeing financials way the most on the kospi, but the decline has eased for the benchmark, now just off by 0. 9 . Among the biggest drags. The korean won losing ground. Resistance is staying strong level ahead of trade data do this week. We did get retail sales this morning. A pickup in may for the first time in three months. Some relief for policymakers, but not so for stocks. All sectors in the red. The board for a quick cross asset check. We have the dollar higher extending gains for a fourth straight session. Kiwi bonds continuing to climb rbnz indicating a reluctance to sell shorter dated bonds. Wti back pressure with below 38 per barrel. Futures moving ever closer to 1800 per ounce. Also seeing a move in Money Managers positioning as they are boosting their bullish bend. Be one stepsaid to closer to passing the National Security bill. The npcs Hong Kong Deputy joins us exclusively. Now is the critical point to not only seek for the general public and also important to have business matters. If you undermine the rule of law in hong kong, you start to make hong kong a less important Financial Hub. One country, two systems will remain. We have seen a lot of uncertainty. This time is no different. China areasia and seeking to be important to markets. We will do what is necessary. They know that without the rule of law, there will not be a financial center. We are certainly reaching a turning point. Whether it will turn for the worse is still to be seen. Some of our guests view on chinas Hong Kong Security bill. Protests have returned to the streets of hong kong. Lawmakers reportedly prepared to vote on security legislation as soon as tuesday. Joining us exclusively from hong kong is bernard chan, National Peoples congress Hong Kong Deputy and convene her of the hong kong executive council. He is also a top adviser to carrie lam. Great to have you with us. Thank you so much for your time. Let me start by asking, have you or the chief executive seen an actual draft of the law yet . Bernard good morning. I have not seen it myself. I am not so sure about our chief executive. I am sure she has been much more informed than myself of the content of the bill. Perhaps not in detail of the actual drafting, but i am sure she must know the basic just of the whole bill. Gist of the bill. The problem with these bills especially if they are vague is the potential there could be abuse of power, particularly if beijing tries some of these cases itself. What are your thoughts there . Im not so worried about it. Im sure by the time the law is passed into hong kong law, it will be very specific. That is how the law has been adjudicated in hong kong. I look forward to the announcement of the bill being passed. Right now, yes, obviously we have two different jurisdictions here. Law isay of passing the different from the hong kong way. I think that is why the confusion. We do not know what is inside the details. Passed,ime it has been in hong kong, it will be very clear. People should know, what is allowed, what is not allowed. There seems to be a lot of blind faith from supporters of this bill, bernard. You have not seen it. You cannot say with great certainty the chief executive has seen it. What makes you so confident that when it is enacted, it is not going to be in conflict with the common law, that it is not going to undermine the business community, and it is not going to undermine human rights . When i say that we dont know exact details, we know the framework of the bill is to address National Security, basically four areas, subverting state power concessions and terrorism act, and foreign interference. Areas thespecific bill targeted. We know what it is. It still boils down to the actual interpretation and enforcement. That needs to be determined. Even without the details, the secretary of justice in hong kong and our secretary of security repeatedly reassured us the law will be enforced in hong law, so under the hong kong , common law jurisdiction. It is quite clear that even though the law is in the mainland, the enforcement and the adjudication would be in hong kong. I have great comfort that the authorities are already sticking to the one country, two systems consideration when they draft this bill. Otherwise they could enforce the mainland National Security law, but they did not. They know specifically this is dealing with hong kong. It is a very different jurisdiction. They want to make sure this specifically can apply and can work in hong kong. We are seeing from beijing over the past few years the detention of shortsellers, booksellers in hong kong most recently, the continued detention of the canadians in what is widely said to be retaliation for the detention of a huawei executive. With all this evidence that the way beijing handles cases like this, how can the people of hong kong be expected to have trust or confidence that their cases may be handled fairly . First of all, i will not comment on those specific incidents you mentioned. It applies to the mainland side. New security law is specifically for hong kong under a different jurisdiction. Again, i am repeating myself, the reason why they decided to establish a new law for hong kong is due to the difference of the two systems. I am pretty sure china would want to continue two systems. Otherwise they would apply their own National Security law. Repeatedly, the Mainland Authority in the last one or two years, they have assured the Hong Kong Business Community that the one country, two systems will stay provided that the National Security is protected. The twothey cherish jurisdictions, but they want to imre people remain sure this will remain. Until time passes and we know how this will turn out, but i have reason to believe china wants to make sure two systems and the investors and the kongess people and hong people will remain as it is. Within hong kong, the Bar Association is now saying the chief executives ability to appoint judges what undermine the Judicial Independence of the city. Are the benefits of this law for worth ofnment really the hit hong kongs reputation would take . Again, without seeing the details, but from what i am told , the chief executive would appoint a panel of judges. It would still be up to the judiciary themselves to decide to assign different judges were different cases. That is not the case according to the chief executive herself. Whether it is worth it, National Security is important. Hong kong has failed in the last 23 years. China has delegated authorities to legislate National Security law. In 23 years, the opposition have tried every effort to stall the process. Last year, basically, they gave china noconfidence hong kong can continue without their legislation. Unfortunately, it is what it is. The National Security law is common in every country. Why should hong kong have one . You have said you expected this law to have a deterrent effect. It will not be used as much. Right now you are saying it is needed in hong kong. How much do you expect this law, once implemented, to be put into use . The piece of law is a deterrent factor. Have isthey dont askarn people, you cannot for hong kong independence and we do not tolerate terrorist acts like what happened last year during the social unrest. So long as people abide by the law, we never have to use this piece of legislation. , another macau especially ministry of region, they passed a National Security law back in 2009. From what i was told, not one case has been prosecuted under that piece of legislation. I suppose that people behave accordingly and we do not cross those red lines, we never need to use this piece of legislation. Mainland security agents will be able to operate in hong kong. We heard from another npc member seeing for serious cases beijing should reserve jurisdiction and extradition remains a possibility. If provisional was scrapped over the past 12 months, is still possible the extradition law will be reintroduced under this . No. I do not believe that. Any law that needs to be passed in hong kong will have to go through the legislative council. Inre is an election september. I do not think there is any possibility that the extradition bill will be introduced within this term of office. Nobodyse, in the future, knows, but definitely in this term, under the chief executive carrie lam, i highly doubt that. We saw a report saying secession, subversion, these are vaguely defined active criminality, but life sentences could be imposed. Can you confirm or deny that . Is that entirely necessary . I cannot confirm nor deny. Because i have not seen the details of the bill. So i do not know. Then again, i have seen National Security bills in other jurisdictions like singapore and elsewhere. I believe their sentence is very harsh. Most jurisdictions, including the u. S. , too. I have not seen the hong kong version yet. I have yet to find out. Mentioned other countries that have security laws. These are countries that have democracies, open judicial systems, which hong kong has had until this point, but with the oversight of china. Is that not a point that can be made, that you now potentially have a National Security law within the judicial system that has no longer retained its independence . Kongain, the hong jurisdiction is uniquely hong kong. Judges in the senior courts of hong kong are not even local. When hong kong returned back to retainedk in 1997, we the higher judiciary system. Foreign judges, nonlocal judges, are allowed to continue adjudication. We remain the same way up until now. I was told this will remain as well, even applied to the National Security law. I do not know the details yet. I am very sure the common law jurisdiction and judiciary independence will remain. That is why hong kong remains a top five in the world. People believe in our independent judiciary. Are you concerned about u. S. Hong kong relations . We have heard about potential sanctions against individuals and even banks. Myself, im from the Financial Services, but many of the people in the financial industry, bankers have told me they are not worried about the National Security law. The National Security level help the businesses. Hong kong, we were very uncertain last year with riots, protests, but now if things peopleto normality, would come back to hong kong to put money in hong kong. What they are concerned about is the reaction from their home jurisdiction. Notably the u. S. The u. K. Also and elsewhere. They worry about what their respective home jurisdictions will do to companies. Many of the bankers told me they are not worried about the Chinese Security law, but they worry about some of the unnecessary sanctions from home jurisdictions. Which is my question to you. Are you worried about that, about these countries putting sanctions that may hinder business relations with hong kong, not to mention what happens if the special trading status from the u. S. Is revoked . Is all of this along with all the protests and all of the negativity that comes with it really worth it given hong kongs future, especially as a Financial Hub . Top threethe Financial Hub in the world. There is tons of u. S. Interest in hong kong. Ifould be surprised to find not half of all the Financial Service providers in hong kong are u. S. Based. If the u. S. Tried to put sanctions on hong kong, they could. I just do not see their interest. They end up hurting their interest. It is definitely a situation. I can hear the rhetoric, i can see why some of these countries want to to put pressure on china, but to put a sanction on hong kong just does not make sense. You end up hurting them as much as hong kong. Is there any meaningful mechanism for consultations for the security law . Hong kong is just expecting to be cut out of this whole process. There is a reason why people in hong kong right now feel like this is the end of one party two systems. You mean one country, two systems. Has beentely, china very patient with hong kong. They gave 23 years. We actually made one attempt in 2003 but we failed to pass the law. They gave us enough time to debate, talk about it, but by now they realize the opposition would continue to use the stall tactic. There is no intention whatsoever to pass this law. Unfortunately, i agree. Article 23, which requires us to pass a National Security law, is still there. The Mainland Authority decided they have to pass this law to protect their interest. It is not just hong kong. They worry Law Enforcement will be using hong kong to destabilize the mainland. They have to pass this law to protect their interest as well. We failed to do so. Around,ately, this time there is not much input from outside. We remember of the National Peoples congress, so they have consulted, but they are very determined to pass this law. With the unrest last year, with all the political interference they can wait to pass this National Security law. Thank you so much for joining us. We appreciate your time with us. Bernard chan, top adviser to the chief executive carrie lam. Before we hand it over to the china open, lets get your look at how markets are trading. The nikkei 225 off by 1. 6 . Moderate uptick when it comes to month on month retail sales figures, but still showing weakness across consumer sector. The cost befalling by over 1 . Ospi falling over 1 an extra budget will not be granted. 1. 7 . Tralia, downside of trading resuming after the chinese holiday. Heres how futures trading looks at the moment. A bit of a mixed picture with u. S. Futures down 0. 2 . Thats it from daybreak asia. Tom it is 9 00 in beijing and shanghai. I am tom mackenzie. Yvonne i am yvonne man. We are counting down to the open of trade in the chinese mainland and hong kong. Protests return to hong kong as chinas lawmaking body reportedly debates security laws. Carrie lam said they will set red line foot cannot be crossed. Lines that cannot be crossed. Tom