Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240712

3000 jobs will be cut under bains new ownership. Bain capital ownership, which in addition to these details relating to jobs, we are also expecting to hear about aircraft fleet and the future as well, this after bain bought Virgin Australia in what is a pretty bold that on an industry that has been shattered by the travel restrictions and the coronavirus pandemic. Virgin australia committed to regional and charter flying. Of targetsindication and priorities when they are restructured in addition to 3000 jobs being cut. Also getting data out of australia. Manufacturing pmi, services as well as composite index coming through. Dropping from that preliminary number for july. The composite number of 67. 8 also a little bit weaker. The performance of Construction Index coming in at 42. 7, higher than 39. 5. Lets take a look at the aussie dollar. Largely to do with the situation in victoria. We have that renewed lockdown, stricter stage four restrictions. At this time, later on today and tomorrow, we are seeing the aussie dollar trading at 0. 7160. Lets look at u. S. Futures. U. S. Stocks eventually grinding higher, still focusing on the stimulus negotiations. We heard from nancy pelosi just in the last hour that we could see a deal passed by next week. Nikkei futures tracking a little bit lower and gold continuing to grind higher as we continue to see extended gains after breaching 2000 for the first time. Haidi shery senior u. S. And chinese officials are planning to renew their phase one trade agreement even as tensions between the two nations rise. Tom mackenzie joins us from beijing. What do we know at this stage . The u. S. Trade representative and chinese vice premier are expected to meet on or around august 15 to talk about chinas commitments and get an update. This was always part of the plan, that they would meet six months after signing the deal, and a reminder that chinas on u. S. Agricultural above 2017 levels. Some estimates suggest they are just halfway toward meeting those targets even as they step up purchases of soybeans from the u. S. These discussions will be focusing on the trade picture, but probably, there are a number of friction points, as you well know. Everything from the uighurs to the South China Sea to the virus. All these things will be the backdrop for these trade discussions and we are also hearing from dow jones that the chinese vice premier is expected to address the issue of chinese tech companies, and no doubt tiktok will be on his list of concerns. Speaking of tiktok, weve heard some pretty bold demands from President Trump as to how the u. S. Should get a slice of the proceeds of any sale. Has there been any reaction from beijing . Tom we have seen a reaction from beijing. We have heard from President Trump himself, reiterating that he wants to see the u. S. Treasury get a cut of any sale and suggesting that he does think microsoft is the u. S. Company best placed to potentially make that acquisition. In terms of chinas response, weve had pretty strongly worded editorials describing this as a smash and grab, saying it was officially sanctioned theft, and also suggesting that maybe beijing would step in somehow to try and block the sale, but they didnt give details. What trump said is by december 15, either tiktok has to be sold to a u. S. Company or hes going to close it down. He has the power to do that by putting it on a list that would block apple and google from including tiktok in its app store. But when it comes to this question of whether the u. S. Treasury is going to get a slice, theres real question marks over whether they have the authority to do that. We will have to watch for any more developments on that front. In the past, trump has made claims that they can get money for the building of the u. S. Wall, that mexico would pay for that. That never happened. He also suggested the u. S. Was going to benefit from these tariffs on chinese goods. It was mostly the u. S. Importers that paid those tariffs. We will have to see what he means. The broader concern for china is that this moves beyond tiktok to other tech companies, for example tencent and we chat. Tom mackenzie there in beijing. Certainly very interesting views on microsoft. Our exclusive interview with bill gates on how the u. S. China tensions are affecting the tech sector, we will get that and much more. Still ahead, disney sends mulan online as traditional entertainment operations suffer a hangover from the pandemic. Spotlight acid group shares concerns about whether the next round of virus relief will be enough. This is bloomberg. Shery you are watching daybreak asia. Im karina mitchell. A massive explosion has killed almost 70 people in beirut and left thousands more wounded. The blast was so powerful it shattered windows across the city and was even heard in cyprus. Authorities blame explosive materials stored at the port but havent said whether it was an accident or deliberate attack. Meanwhile, the de facto leader of myanmar has filed to run in upcoming elections. Barred by the previous military constitution from becoming head of state. She is credited with ending decades of army rule in myanmar but has faced International Criticism for failing to stop attacks on minority muslims. China is offering more signs of a recovery with auto sales rising. Deliveries of passenger cars and commercial vehicles rose in july, topping 2 million in sales. The easing of the coronavirus shutdown is allowing car buyers back into showrooms, raising hopes that a slump may be coming to an end. Virgin galactic is pressing ahead with plans for space, releasing images of a craft under design. Virgin is working with rollsroyce to build a plane that can fly at three times the speed of sound. Show a closeres similarity to the concorde. That plane was able to reach mark to. Global news, 24 hours a day, onair and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im karina mitchell. This is bloomberg. Negotiations continue on capitol hill about the next round of virus relief. We have heard from President Trump that there has been progress in those talks and that he may have to take executive action on extending that eviction moratorium. Peter fischer says leaders in washington need to cough up a package soon if they want to restore consumer confidence. He spoke to bloomberg about his outlook for the u. S. Economy. I think the economy is doing all right. Durables good news in purchases by households. The bad news is Services Consumption is still much weaker and down. What i think is really important is we dont really know the mix. Goods and services is probably changing rapidly. The longer the covid economy last, the longer that is going to change. We dont know how we are measuring inflation. We just dont know. So i think this is an example where the uncertainty really is acute, but we are stumbling along here. Are areas of the economy bouncing, but some are still weak. When it comes to d. C. , in your work, what do you think we need to see in terms of support to avoid whatever worstcase scenario you might see . I think i understand the concerns of some members of congress for openended federal support. It feels like not something you want to do. But this is the wrong time to worry about it. Im worried about it being an Inflection Point where households are going to get really anxious. I think it is important to get that stimulus going. It is late in the day, but i am hoping that they will give governors confidence that they can pay to open schools wisely. If they dont, parents arent going to send their kids to schools. It is about confidence. We are not going to order kids to school. States arent going to enforce truancy laws. What is important is to open schools smartly and wisely. That is going to cost money. Congress better cough it up quickly. Goldman sachs had some predictions yesterday that in the Second Quarter School Closures took about 2. 2 off annualized gdp. But you raise a good point. Open,ter what, if schools people have to spend money. Is there anything anyone can do . I think it is hard. The jump in durables was positive but the weakness in services has worsened. It is all about confidence. Getting the economy going is so important. I would love to see a switch to the federal Government Spending on investment rather than just supporting consumption but that is for next year and the year after. We are at this Inflection Point. When you look at the employment, im focused on continuing claims and what happened in july. Monthtomonth, maybe it will be bad, may better, but continuing claims are just ridiculously high. Locking in households and the habit of worrying about their job and getting disassociated from the labor market is something we have to focus on. Weve got to get people attached to their jobs. Thee lose that, im afraid economy is in much more trouble than it appears from weekly data. Shery clinical professor peter fisher. Our next guest also says shes concerned about the Progress Congress is making on this package. Joining us now is spot let asset groups shana sissel. What would an income cliff mean, not only for the u. S. Economy, but for the markets, given how much support they are giving to u. S. Consumption . Shana im not sure it makes much of a difference on the markets. The markets have gone straight up since march even though we saw a huge decline in consumption in the Second Quarter. But it is of concern. Your previous guest talked about this. I think congress is a little too concerned about moral hazard when the support is really necessary if you want people to comply with lockdown orders and if you want people to comply with our government in fighting the virus. Feel like they arent getting the necessary support to comply with the guidelines, they wont, and that has unintended consequences as well. Shery talking about compliance, we have the chinese and american officials meeting later this month to discuss compliance with the trade deal. We continue to see rising tensions between the two sides. Is this really an underappreciated risk for the markets given that we are getting close to election season . Shana i do believe so and im interested to see the outcome on august 15. Due to the virus and some of the lockdown restrictions and changes in productivity, measures, and production measures, china hasnt been able to meet their hurdles to be in compliance with phase one of the trade deal. Im interested to see how those discussions go, whether or not tore is some flexibility due the very unusual circumstances we are in. But i do expect the rhetoric to continue to increase as we get closer to the election. The Election Results will have consequences to the ongoing negotiations. I dont think the market is paying enough attention, but at the same time, the trade deal is secondary to getting the virus under control. Virus under get the control, the entire World Economy has issues. In terms of getting the areus under control, investors pricing in this assumption that we will have a fully effective vaccine that everyone has access to and this will be a neat ending to the pandemic driven slowdown . Shana i dont necessarily think that is the case. You see from daytoday the drivers of market returns arent always the same. Technology has really driven the gains in the market, largely because the Technology Companies benefit no matter what happens. The work from home meant the shift to work from home i think is here for the long term. They will continue to benefit. The market for many of these Companies Like zoom and the like is a new one. Market penetration and market share is there for them to gain. If you look at have the market is performing, it really changes daytoday on whether we are having risk on, and whether people believe it is ending sooner rather than later, or risk off, where you see mostly the defensive names do well. I think that equities will continue to do well. You can hate on the valuations we are seeing across tech, but it is hard not to be invested. Shana i agree completely. It is a debate we have quite a bit on whether or not we should continue to stay allocated to growth and technology stocks. But it is hard to make a case against a lot of these companies because the Trend Towards Technology and efficiency and remote work is not going to go away even if we have a vaccine at the end of the year. People have found that having this flexibility is positive and it has real benefits that people are starting to use these more and more and it is becoming part of our lives. I think tech stocks will continue to benefit from this andt towards remote work remote learning, which i believe strongly will continue. Spotlight asset group cio shana sissel, always appreciate your time. Much more to come on daybreak asia. This is bloomberg. Haidi lets get back to that news we broke at the top of the hour. Virgin australia is planning to cut a third of its workforce as the buyout firm attempts to resurrect and restructure the airline. Lets get to the details. Knew it was going to be brutal, so were there any surprises . Brutalthat is a pretty sort of job cut headline figure. One third of the workforce. Virgin planned to cut jobs anyway before they collapsed under the pressure of debt it wasand the struggling to service. 9000 jobs in total, 3000 of them to go. Theess that reflects reality of the situation. They are not immune to job cuts. That is a reality check for virgin. The other surprising thing for me was that virgin sees a very long recovery for the aviation market, even in the domestic. The view was that the domestic market in australia was relatively immune to the virus. That is proving not to be the case. The Virgin Australia managing director saying it might take at least three years for domestic and International Routes to recover. That is a very tough environment for an airline to relaunch any circumstances, let alone the biggest crisis theyve ever seen. Haidi which takes me to my point, the government saying that borders could be closed until 2021. What prompted bain to make such a bet on the sector . Angus very good question. You could argue that since they started looking at virgin, it seemed to deteriorate. As demand is not recovering fast as the industry thought. Theres a resurgence of the virus in many major markets. That is making it harder. At the same time, we dont yet know what bain paid for this airline. Everything has a price. We arent sure what theyve committed in terms of capital. Chance to make a lucrative bet on Virgin Australia. To the plan, it seems, is suspend longhaul flights. Costhey are going to cut by just flying boeing 737s, so we will see how they do with that. Shery Angus Whitley in sydney with the latest. Lets get a check of the latest headlines. Disney lost almost 5 billion last quarter as the coronavirus closed theme parks, movie hurt advertising revenue. The only bright spot was disney plus, which grew to 57 million subscribers. Theme parks lost a staggering 2 billion, with nearly all attractions close because of the virus. Sony is offering a cautious forecast for the rest of the year. Operating profit for the june billioncame in at 2. 1 compared with average forecast of 1. 3 billion. Sony is preparing to launch the latest version of the playstation console, asking suppliers to double production. Prudential posted a second straight quarterly loss and expects low Interest Rates will continue to weigh on results. They reported a net loss of 2. 4 billion compared with net income of 700 million a year earlier. This is bloomberg. You are watching daybreak asia. Reports from washington say the u. S. And china are planning new talks on trade. The two sides have agreed to open highlevel discussions on august 15 to assess beijings compliance with the phase i deal signed at the start of the year. The u. S. Has been hammering china over a range of issues. China is fighting back over the battle for tiktok, denouncing President Trumps demand for a smash and grab. Indicate beijing may block any sale. The china daily article is the strongest support yet for the tiktok owner and said just beijing feels it has several way of responding. Instagram is concerned about its future. Tiktok troubles come as facebook faces a range of antitrust questions in the u. S. Ceo Mark Zuckerberg said any weakening of u. S. Tech threatens to strengthen chinas position and influence over the internet and social media. Global news, 24 hours a day, onair and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am karina mitchell. This is bloomberg. This tussleore on between china and the u. S. , we are joined by natasha, Research Fellows from the low e institute in sydney. Some people would say this is very political. President trump hadnt targeted tiktok until it became used to galvanize, i guess you would call them dissidents against him. Is this only a concern going into the november elections . With a change of leadership, would you still objectively consider tiktok to be a National Security threat . Natasha really great question and theres no doubt that any issue relating to china at the moment is being used to some extent as a political ploy by the administration. Think they feel that hitting china hard is a good way to win this election. Manyg said that, there are people who do see tiktok as having genuine National Security implications. A reviews already board looking at the acquisition. There are ways to do this without political slogans. I dont think a change in administration is going to remove the scrutiny from tiktok, but i do think we will see a more traditional path. Out, this is point not the First Company to be targeted or to be caught in the process. It is unlikely to be the last as we see chinas Tech Ambitions grow. Will beijing treat this the way it treated huawei . Are some of these other companies and apps considered the sort of National Champions that huawei is . Natasha i think that remains to be seen. Weve seen state media and chinas foreign ministry, out in support of tiktok, but i dont think it is nearly to the same extent as huawei. Huawei is much larger and more significant in terms of critical infrastructure. Thathen theres the fact the ceo of the Parent Company of tiktok has kind of a checkered history. Hes had to make apologies before. Im not sure that it is quite the close relationship weve seen between beijing and huawei. , eitherats we have seen with us or against us on huawei, i dont expect to see the same kind of behavior. They will be trying to just stay the course until the election. Haidi so far, for every u. S. Action, we have seen a reaction in beijing, whether sanctions on officials or the closing of consulates. What would be such a response coming from china on u. S. Actions on tiktok . Natasha it is a good question and it is hard to imagine. As much as we now say that the United States is decoupling from china, it is important to remember that this started in china a long time ago. U. S. Tech companies havent been able to get a foothold in china from the outset. I dont think theres much to be seen in terms of reaction from china. What i think is more likely is a lot of pressure on u. S. Allies and partners. Eve already seen threats i think other countries will come under pressure to not follow the u. S. Lead. Shery we have seen the likes of india blacklisting more chinese services. India and china have their own military issues over the himalayan border. But we have seen more actions and rhetoric coming from the ,ikes of the u. K. Over huawei some sort of coalition against chinese tech . Toasha im nervous characterize it as such. Theres been interesting analysis, saying that a united front is emerging against china. When it comes to a country like india, i dont think they are looking at the United States or australia. They have a long and complicated history. I think we need to be cautious about characterizing this as some kind of collective action. , chinasinly aggressive behavior has hardened opposition to many different elements, including chinese Technology Companies. See morexpect to cooperation and coordination. People are not quite there yet. Haidi it has also been proposed that australia needs to establish its own consistent approach to china independent of its allies. Do you seepening or pressure to follow suit . You do have criticism from china, from Chinese State media, very unfavorable depictions of australia being almost the barking dog of the United States. Natasha not almost. Weve been described in those exact terms and many other unflattering ways. Dismissreflex to behavior as just copying that of the United States and remove agency from the smaller countries. They dont need to say, actually, australia is very unimpressed and our policies are shifting. I think it is not actually true. In some ways, australia will look to the United States, but right this moment, with the kind of discord, really inconsistent and unhelpful policies weve seen out of washington, i think australia sees much less that it shares with washington on china policy than in the past. Haidi natasha, great to have you with us. Freemanspoke to carla of Johns Hopkins university on the tech tensions between china and the u. S. And their handling of the virus outbreak. We are not doing well in that direction if you consider sharing important. The chinese released the genetic sequence of the vaccine in early january, which proved important. They jumpstarted so much a vaccine for the virus. But the u. S. And china nader athip is at a this point and there is very little communication between the two sides. Francine the chinese economy is going quite rapidly after the pretty massive lockdown. Is there any lesson that we in the west can take from how theyve done it, or do we just do it differently in the west . Is the same across all countries. You have to do testing. You have to do contact tracing. You have to isolate people or engage in social distancing. From used extreme measures a western perspective early on, literally shutting down an entire province. Since then, it has really enforced measures very strictly. But what has happened around the world, weve learned that even just Wearing Masks can significantly cut the rate of transmission, but it is very difficult to get people to do that in countries that have more people and weve seen flouting these measures around west, and in the asia as well. Sports berg green bloomberg reports today on china and there is schism of tiktok, etc. , microsoft, etc. Thent you to explain relationship of the government and the communist party to these news organizations. Do you look at it as if the party or beijing authorities are literally writing those editorials . Are they in meetings where they frame them . Or is there some form of distance . That is a difficult question. The Chinese Communist party does engage in strict media control. On the other hand, there is a commercial press in china and also in internet sphere where inple engage quite freely many cases on certain topics. It is notalso the same as having free and open press. Moreover, china is controlling its messaging overseas carefully of a partyetwork controlled media outlet. So we are talking about carefully crafted messaging. Tom how do you see a resolution of this mess . How do you believe china will sense ofo the chaotic it in washington . I think the chinese entrepreneurs are having a difficult time with this. Think what started at tiktok, they have tried to make tiktok a nonChinese Company, but the home company is in china and countries around the world are very concerned about Data Management and privacy. That is not something the chinese have been able to persuade people that they can protect. Carla freeman of Johns Hopkins. A reminder that Johns Hopkins Bloomberg School of Public Health is supported by michael bloomberg, the founder of bloomberg lp. Coming up next, disney shares gaining an extended trade even as coronavirus decimated quarterly earnings. Launching its latest mulan remake straight to disney class. This is bloomberg. Haidi asian stocks are set to fall. The dollar is holding an overnight drop as well. What are you watching . The ecocalendar today. Decision,ilands rate no change expected there. Expected to hold on rates despite the dismal economic picture. The central bank said it would reserve ammo for a worstcase scenario. The chart on the terminal, following time yields. Point,rth noting at this thailand is the only bond market where the 10 year yield is still above average where yields are at near today at lowes elsewhere. The currency along with the trade led asias carry returns in the Second Quarter on sustained bond inflows. Switching out the terminal, that momentum may continue for the broader e. M. Space as we see a pickup in bond flow. After some leveling off in returns, the carry trade could bounce back as bond buyers cast their attention on higheryielding e. M. Debt. As our colleague notes, this picture should help further narrow bond spreads. U. S. , disneyn the shares popped in afterhours trade after news that the liveaction remake of mulan is going straight online, skipping a theater release altogether. Our bloomberg analyst. How creative is disney being in leveraging their content library when it comes to these online channels . Moveis is really a big from disney. This is a bold and aggressive strategy, one that investors are really looking for, and i think it is going to give them quite a bit to cheer about. Disney has been very protective of the theatrical strategy and has always said that it is committed to that. So just the fact that they are willing to kind of bypass that, although they pointed that it is a oneoff, but i think that it just signals they are willing to make these bold bets into very unusual times. In your view, when do we see a meaningful recovery in the parks business, or is it too early to get visibility on that . The parks situation continues to be extremely fluid. There is just too much uncertainty right now. Reopenedeir parks have except the ones in hong kong and california. Despite that, there are just too many unknowns. There are capacity constraints right now. And flow lot of ebb terms of cancellations. I think investors have reconciled themselves to the fact that fiscal 2020 and 2021 are not going to be anything close to normal. I think that could take another two to three years to go back to the prepandemic levels. Shery we have seen live sports restarting. How positive is that . It is definitely a big positive. Weve seen a huge tv ratings resurgence on espn with the return of nba basketball. Espn report some pretty positive numbers. Also, there is just a lot of uncertainty as we see this rise in infections and as players catch infections, it could very quickly derail the momentum. Do they need to be leaning in even harder when it comes to finding value online . I definitely think so. I think that is where the core strategy of disney is going to be. Unfortunately, there not a whole lot they can do in terms of controlling theme park attendance and the resumption of live sports or the opening of figures. I think one thing they can control is putting new content on their streaming platforms. Since that is a lever they can pull and where they have had some tremendous success, i think that is where investors are going to be focusing as the underlying linchpin of the streaming business going forward. All right, really appreciate your time. Coming up next, white House Democrats aim for a virus relief deal by the end of the week. The u. S. Treasury is making a guess as to how much funding might be needed. This is bloomberg. Haidi lets get a quick check of the latest headlines. To 3000to hire up planners in china to turn around lagging profit even amid rising political tensions. The first 100 or so have already started work. The rest will be added over the next four years. Hsbc is in the process of cutting banking jobs worldwide. Sosa get general sword after cutting top executives following its worst loss since the financial crisis. The deputy Investment Banking ceo leaves at the end of the year, while the one who oversaw International Retail banking departs immediately. Socgen lost 1. 5 billion in the quarter. Lender hast valuable named a new ceo. He will begin a threeyear term in october after his appointment by the r. B. I. He takes over as india faces a deep economic slump amid the coronavirus pandemic. Shery and here in the u. S. , the treasury is set to announce the biggest quarterly bond refunding ever. Our Global Economics and policy editor Kathleen Hays joins me with the latest. We saw the treasury lifting their quarterly borrowing estimate and they only assumed about a trillion dollars of additional spending. This doesnt get close to what the democrats want. What are we expecting in terms of offerings . Kathleen we know son, but when you step back, imagine if you were having a dinner party and you didnt know if 10 people were coming or 40 people were coming and you are trying to plan the menu, figure out how much to order. Gentlemen, as these the president , mitch mcconnell, steve mnuchin, the Vice President , they are talking and wall street is waiting in the treasury is waiting to find out how big the stimulus is going to be. Withve got to move ahead announcing their funding for the third quarter, which they already did, and then telling us what the funding is going to be. Most popular of all the quarterly bond sales. Heres what we know so far. The treasury is going to raise 947 billion in the third quarter. Assumption on the that that is what it is going to need in borrowing. Record 108to be a billion quarterly refunding. That is what wall street is expecting on average. Second quarter funding already set a record at 96 billion. Know talk about what we with republicans in terms of negotiations. Steven mnuchin says he aims to strike a deal by the end of the week. Lets quote him word for word. We are not close to a deal but we did try to agree to a timeline for an overall agreement by the end of this week. Meadows, the chief of staff, said that republicans are ready to agree on a moratorium eviction and extending unemployment insurance. Haidi what does this mean for wall street . Kathleen wall street is expecting that when we see the announcement tomorrow, it is going to support this idea that the treasury is selling more longterm bonds in the third quarter, not heavily relying on bills as they did in the past. Interesting to look at some things wall street dealer firms are saying. Deutsche bank thinks they should announce the refunding and if it changes, let it keep rising. Barclays is saying historically low rates will play a big role. Hays, globalen Economic Policy editor. Hour, up in the next exclusive interview with microsoft cofounder bill gates on how the u. S. China tensions are affecting the tech sector. Plus, those prospects of japanese automakers. At we will be taking a look the outlook when it comes to equities. This is bloomberg. Shery from bloombergs Global Headquarters in new york, im shery ahn. David i haidi stroudwatts in sydney. Major markets have just opened for trade. Welcome to daybreak asia. The u. S. And china planning new talks on a phase i trade deal amid worsening relations on tech , hong kong, and human rights. Shery beijing is sure of the agreed purchase targets. 700,000 as u. S. Cases ease. Uneven vaccine results. Collapses. China den ounces u. S. Pressure on tictoc as theft and a smash and grab. Microsoft remains interested in a deal. We hear from bill gates this hour. Shery japan, south korea, lets get straight to the Market Action with Sophie Kamaruddin in hong kong. Selina a busy a busy day for earnings. Trade, wert of cash see losses for the nikkei 225 after a twoday gain. They yen holding below 106 as dollar selling is picking up. Ahead of the bond buying, they are looking for support after a solid 10 year option. The 10 year yield for japan can get below zero. The last time that happened was on june 12. Turning to south korea. Microchip delivered a disappointing forecast. Opened higher after rising to an october 2018 high. The korean won on the front foot opening at 1190. The strongest since july 31. Stocks inoves for sydney and wellington. Asx 200 under pressure after rallying the most in two weeks on tuesday. The aussie dollar adding. Just holding gains. Bond markets will see the rba resume buying this wednesday after the three year yield rose above the target. Kiwi dollar gaining ground on the jobs data beat from new zealand. Downside thissome morning. Gold extending gains after stock prices broke through 2000 amid the push lower in treasury yields. U. S. 10 year yield ticking up slightly, but it has been closer to 50 points. Treasury volatility has stayed calm. Dollar under pressure, jumping into the terminal, it is below the multiyear trend. Declines make salary for the greenback. That is a boom for asian stocks, which have the strongest negative correlation to the dollar since at least 2005. Haidi u. S. And chinese officials were planning to assess the phase one trade deal later this month. It comes against a backdrop of rising tensions between the two countries. Our next guest says these tensions remain an underappreciated risk. Markets areit like pricing in perfection on so many fronts. Be it the valuation in tech, assumptions about the trade deal, this could potentially upend things, given the trajectory in the relationship over the last six months. And i think the next few weeks will be a feel on what the meeting entails. Gesture, is it simply administrative, or something material that will come out of potentially negative, considering the deterioration in relations. We have come through some pretty positive news. We are already entering uncertainty. It looks like u. S. China trade tensions can be back at the top of the list of volatility where i think markets are potentially preparing for a bit of a shortterm breakout in volatility once again. Much in the meantime, how do you say and where . As much as we grasp the valuations and prices across tech, is there enough of a meaningful rotation story to be away from that . Would you still have to be invested in tech . I think absolutely. In the bigger picture, you are looking at structural issues here. I think the worry factor is when the outperformance comes to the medium and longterm. Thats not going to change. Its largely driven by policy and the fact we are entering a world of volatility, underwhelming growth, and low return. I think in the shortterm, and just alluded to, there will be a shakeup. The first timing trying to make sure you are either entering the market, or you are making opportunities to play it lower if you would like to take it shortsighted. At the moment, we are seeing some of those things, especially as it relates to high data currencies. Assets more broadly becoming better valued. A great time to see that. Is a still think it broader market, we are probably looking at a shakedown in the shortterm. Looking for the entry points to play into those bigger structural themes and trends continuing to play out and will continue to play out because of the underlying market dynamics. Shery the dollar rally has paused. We have seen the downtrend enter a second consecutive week of declines for the u. S. Dollar. How much will this benefit emerging markets, especially asia . Tremendously. If there is one thing you can positive, the cycle of greenback weakness is starting to emerge. Concern an element of of how the virus in the u. S. Is being controlled. Still some economic recovery. Political risks, as well. Day, thee end of the real story is policymakers, the fed has been able to engineer a weaker dollar quite successfully. There is hope that economy will start. Europe is looking much more stable. Thats leading to dollar weakness. When you see the dollar weakness starting to emerge in the medium to longterm, it does feed upon itself and fit into that growth feedback loop, especially vulnerable emerging markets. There are some reasons to be cautious when you book the dollar. Ultimately, still a good story embedded in a sick little shift. Shery where do you see opportunities across asia, especially when it comes to valuations . I think you look at so many opportunities for growth, where the market is currently pricing opportunities. You are looking at markets like china, the chinese. Freeway of where theyd is driven from. Then we have slow recoveries emerging in the west, so to speak. Europe looks like it will be in a marginally better place than a couple of months ago. U. S. Recovery will pick up. Keepll be solid enough to risk sentiment you look at where the growth will come from that marginal shift, it will come from the east. The real opportunities will be chinese markets, which i give considerable growth, and our reasons for that pickup. Policymakers are throwing the kitchen sink at the economy. It is all coming down with the caveat that the virus remains under control, and now the trade war remains in check. Thats the risk you are taking inby taking long positions chinese are broader risk assets. If you are willing to take on that risk and plate recovery, play the recovery, thats probably where the true growth is going to be. Always great having you with us. Joining us from melbourne, ig markets analyst, kyle rodda. Usda trading like this. The bank opening 50 on higher known costs. We now see downsize pressure for the stock. Sony rising after reporting Profit Growth that outpaced estimates of demands for its games product. The Company Offered a conservative forecast on virus uncertainty. They usually have conservative forecasts. Resultsto toyota reviewed after subaru kicked off the auto earnings season with a miss on the bottom line and guidance. We discuss with vivek vaidya. Up next, we hear from bill gates on the companys bid for tictoc amid tensions between the u. S. And china. This is bloomberg. Youre watching daybreak asia. Rising concerns about the coronavirus in australia is prompting queensland to close its border with New South Wales and the Capital Territory from early saturday morning. All travelers will be denied entry, except for rare exemptions. Residents returning home must pay for a mandatory 14 day quarantine in the hotel. It will be reviewed at the end of the month. China is offering more signs of recovery with auto sales rising for a fourth straight month. Deliveries and passenger cars and delivery vehicles rose almost 15 in july from a year earlier, topping 2 million sales. The easing of the coronavirus shutdown is allowing car buyers back into showrooms. Raising the hope chinas three years sales slump may be coming to an end. A massive explosion has killed almost 70 people in beirut and left thousands more wounded at the main port. It shattered windows across the city and was even heard in cyprus. Authorities blame explosive materials. But it is unknown whether it was an accident or deliberate attack. It has renewed instability in the region. The de facto leader of myanmar has filed to run an upcoming election in november. She reads the National League for ther democracy, but once barred from becoming head of state. Shes credited with ending decades of army rule, but has faced International Criticism for failing to stop attacks on minority muslims. Global news, 24 hours a day, on air and on bloomberg quick, powered by more than 2700 journalists and analysts in more than 120 countries. Im karina mitchell, this is bloomberg. Shery u. S. And chinese officials are planning to review their phase one trade agreement later this month. Even as tensions between the nations rise on multiple fronts. We discuss with jodi schneider. What are the implications about this trade deal, given the rising tensions, especially over tik tok . This is the real question we have been asking, is this trade deal really still on . We have seen a rising tensions over everything from the muslims to hong kong, huawei, and now the tik tok issue. There is apparently going to be some meeting, and they will be discussing the deal. It is hard to see how you can negotiate trade among other tensions. And right now, President Trumps threat to ban tik tok and saying microsoft or another buyer has six weeks to make a deal. How kind of hard to see pages will get on the same on both sides of trade. But apparently they will meet and work something out. Are we hearing from china about the possible tik tok deal, given some bold statements and demands the president has made . Microsoft apparently is trying to move forward. Its on a six week deadline the president has apparently set out so they can have out deals to buy the operations of tik tok. It is a closely held chinese internet giant that has a whole family of internet entertainment applications. Chinesehe issues is government has said they are not sure they want to see that happen, they want to see it purchased. That is among the hurdles microsoft and the other buyers seem to be the ones that would be getting the authorization. There are other hurdles. Hawks in theina administration, including peter navarro, say the stock maker is to close to beijing, microsoft is too close to beijing. Microsoft entered china in 1992 and engineered the computer systems. Since National Security is a big issue, President Trump is wanting to ban tik tok in the u. S. For National Security. Some hawks are raising questions about what they want to see on that deal done. A lot of hurdles. Is further raising tensions between the countries at a time that they are apparently going to talk trade. Senior international editor, jodi schneider. Those talks will be interesting. Microsoft has toed the line between washington for decades. They were to set aside both the Trump Administration and the shareholders chinese parent. Bloomberg spoke inclusively with bill gates, and of course, the microsoft cofounder, about his views on the growing tech war and doing business with china. The whole situation is quite novel, in terms of the principles involved, what principles should china apply to companies in china, the u. S. , or those reciprocal and thought through and predictable. Now. Ot at the company we have made investments in china, we have engineers from all over the world, including in china. Aboutoft is very careful is data promises, and will try and have strong relations globally. We wont do things that are hostile, viewed as hostile. What about the app in general . Obviously it is very popular. Is it something you would like to see in the microsoft family . It is nice tik tok has created some competition through innovation. Preventingseem like that innovation from being sense whenakes much you want new things out there. Im not in the target audience, so im certainly not expert. Ive gotten a lot of education about my youngest daughter about this and why she spends time on it. They did a great job on it. Theres a lot of ways to take it. Thats allowed to happen in some form. Lets talk about what allowed. Is there Trump Administration correct in trying to force this Chinese Company to sell tik tok s u. S. Operations . Or even shut it down in the u. S. Because it is chinese . Should the company be suggestive to that . 100 million americans are using it. Or why wasnt it cleared three months ago, when people make investments, they should understand what is allowed, what is not allowed, and the reciprocal principle involved in this. Maybe i havent read the right article. I dont understand what happened on saturday. Focused on the foundation and the pandemic,i ill probably provide advice at some point, but im not at the center of this decision being made. I do want to quickly get your thoughts on the antitrust situation. Hearings have been a bit of deja vu for you, having gone through a lengthy review process yourself. You look at Companies Like apple, amazon, google, and facebook and think they have become too powerful . Is this a healthy way to preserve competition . The idea that congressmen get to talk to their leaders and find out what they are doing, in terms of media and competition, that all makes sense. They were lucky. Criticsl by myself with sitting next to me. I guess we are getting nicer to ceos than in the old days. I always felt going to washington and talking about our values and what we did was helpful. Particularly through this pandemic, where these companies have done so well. Likenderstanding what its to be an entrant into these. There are legitimate issues there that get raised. Gates,that was bill cochair of the bill and Melinda Gates foundation and microsoft cofounder, speaking exclusively with bloomberg. We have an alert on coronavirus cases are lon across china. 27 new cases on august 4, a decline from the previous day, 36 new cases. We continue seeing a declining trend in china. Reports of 100 plus new cases for several days last week. Australia is not so fortunate. Haidi not seeing a decline in cases when it comes to the hotspot in victoria. We see the daily number to be set on 125 new cases. That would be a new daily record, according to local media, including the abc. It comes as we get new business restrictions coming into place at midnight. This is bloomberg. Shery breaking news coming from jolly be, the largest philippine restaurant, a fast food franchise. They announced a secondquarter ,oss of 10. 1 7 billion pesos versus a profit of more than one billion a year on year. Nowceo coming out right saying results were very bad, but in line with their forecast. A rollerhas seen coaster ride when it comes to share prices. They were up this year, but have fallen more than 6 earlier this week, which also was the worst in about nine weeks. They have fallen for the last two sessions and are at the lowest since early june. We will watch them closely when we start trading later today. Jollibee announcing a secondquarter loss of 10. 1 7 billion pesos. The ceo says it will be positive by the fourth quarter. Howi lets take a look at we are trading in this early part of the session. Muted day as we continue passing these u. S. China trade and tech tensions, particularly as beijing has a meeting midmonth. Up higher by. 60 . Government bond market activity. We have the rba staying on hold. In new zealand, we are turning negative. This despite market data that the jobless numbers beat expectations. A busy day on the ego front across asia. A preview next. This is bloomberg. 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. You are watching daybreak asia. Im karina mitchell. The u. S. And china are planning new talks on trade, despite worsening tensions in recent days. Dow jones says they have agreed to open highlevel discussions on august 15 to assess beijings compliance with the phase one deal at the end of the year. The u. S. Has hammered china on a range of issues, including trade, the coronavirus, hong kong, and human rights. China is fighting back over the battle for tiktok, denouncing President Trumps demand for a sale of the smashandgrabs. Date media described orders the operator shut down next month. Beijing may block any sale. The china daily article is in strongest support of the tiktok owner. It remains interested in a deal and talks continue. Have engineers from all over the world, including in china. Aboutoft is very careful its data promises and will try and have strong relations globally. We wont do things that are hostile, better viewed as hostile that are viewed as hostile. A relief for arrival instagram as concerned about his future sends thousands of users to facebook video sharing platform. Tiktoks struggles come as facebook raises a range of antitrust questions. Mark Zuckerberg Told Congress any weakening of u. S. Tech threatens to strengthen chinas position on the internet and social media. Global news, 24 hours a day, on air and i quick, powered by more than 2700 journalists and analysts in one hunter 20 countries. Im karina mitchell, this is bloomberg. Shery breaking pmi numbers across asia. Hong kong pmi numbers coming in at 44. 5. Another monthly contraction territory. They have been in contraction territory since march of 2018. They were close to going into expansion territory, but didnt. When it comes to singapore, july pmi numbers, another six months in contraction territory below that 50 mark. When it comes to japan, final numbers for the pmi services and composite services and composite it again in contraction territory, a slight improvement from the previous month. Japans six months of contraction territory for those numbers. Our chief asia economics correspondent is on the line. We continue to see slight and gradual improvement in those japanese numbers. Whether it is on their gdp numbers or the latest ecodata. But hong kong has its own set of problems. Singapore is a very open economy. What are you seeing, in terms of their recovery . Definitely going backwards in hong kong. Economists project it to get worse before better. Reflects thejuly second wave of the virus we are in the middle of. Thats probably why we are seeing the pmi slide backwards. The growth story had been one of stabilization. That cant last when you have the recreation sector shutting down the way it has. In singapore, the story has been on the manufacturing side. We saw an improvement. These numbers, while they show on the service side some kind of stabilization, remaining in contraction territory. Things ared story, very much dependent on getting the virus under control. That pretty looks complicated. It will decide whether or not things stabilize or get worse. See steadylready recovery in china. What do you expect from the services pmi read . M looking at smaller companies, as you know. In june, the best readings in 10 years, april of 2010. Strong. Pmi was pretty also the stabilizations, like you say. Demand picking up. Economy, theonal story is complicated. It depends on how the external recovery goes, how the reopenings go around the world. The virus is complicating that. Theres a view chinas recovery has been steady. I have a feeling because of that. The servicesd is side of things in china should be ok. The numbers will remain heading in this direction. Haidi in terms of economies and tourism, sectors badly hit by the pandemic and travel restrictions. What do we see from the bank of thailand . There is no doubt about it. Textbook economy when it comes to tourism and sports. The stories are supposed to stay on hold. Thats what the economy is expecting. 5 . The thinking is they will probably have to wait and see. The backstory, in terms of a transition to ember, perhaps awaiting for the governor to take over to make that decision. Either way, there are certain new readings for more support of that. The currency, the dollar is already up 4 . Considering the export side of it, it will not have that. Forecast gdp expected to shrink around 8 . They haven thailand, more work to do over the coming months. Haidi our chief asia economics correspondent. Weve get more analysis ahead with that key rate decision. A senior economist will be with us. Coming up next, earnings from japanese automakers show the extent of the coronavirus impact. We will hear from vivek vaidya. This is bloomberg. Haidi a quick check of the latest business flash headlines. Virgin australia outlined restructuring plans or new ownership as it looks to survive the coronavirus downturn. Bain capital will cut 3000 jobs from the workforce. Will be discontinued and International Flights suspended until the Global Market recovers. Virgin australia collapsed under 5 billion of debt in april. Holdings isgraham the first to branch out of core operations. It brings a range of financial services, with new products aimed at existing users of its ridehailing and food delivery apps. It is to roll out a micro investment line called auto investment to allow users to save money and borrow cash from their traditional banking partners. Amazon has won the u. K. s backing for a minority state. Minority 15 stake was substantial will substantial we can comfort competition, but if amazon boost control. Back in december, the cma was worried about the deal, but made a uturn when it said it was running out of cash. Sony is offering a cautious forecast for the rest of the year, despite reporting earnings of estimates. Operating profits came at 2. 1 billion compared with average forecast of 1. 3 billion. Sony is preparing to launch the latest version of the and istion console ramping up production. Season forings japans automakers are in full swing. Many have been hit hard from the coronavirus pandemic. Over ¥15ing loss of billion in the first quarter. Dueield his results are thursday. Both expected to see earnings decline sharply. Lets get to vivek vaidya. He joins us from singapore. Great to have you with us. Nobody was expecting these great results, given the environment. What are the challenges these carmakers face . Especially japanese carmakers, given we are seeing a strengthening yen. Carmakers have multiple problems. Most of these Companies Likely derive their profits from exports. If you see the european markets, the american markets, they are not doing well. Except for china, there is no bright spot in the world. Their profits are definitely down. Yen has a big impact on earnings. Even in japan. A slowdown in Economic Activity across the world. Automakers will adversely back it because of this. Shery what are you expecting in terms of their reporting later this afternoon from the close . Across the automotive segway, we are expecting a decline of anywhere between 27 1990 andrough the year 2020. Q1 is likely to be the hardest. Thats when most of the countries went into lockdown. People werent able to make purchases. They aree surprised if shut down by more than 30 . Between q2 and q3, we will see it increasing. Most automakers are shifting to the reality they cant open showrooms, yet they need to send the cars. Positive, as far as automotive is concerned. But q1 will be a challenge. See thehere do you quickest recovery . Do you expect china to see more robust demand, given we see that economy steadily rebounding . Yes, definitely. Monitor things like the emi, things such as the ,umber of parts in route Economic Activity, china has definitely come back to normal. They have really come out of the crisis well. If you talk to your colleagues in china, they are getting on with their normal life. China has been the largest market, the first one to recover. Haidi what about the bright spots shery what about the bright spots, in terms of the categories of cars . I would definitely bank on atvs. D the prices are at an alltime low. Incentivizing electric vehicles and hybrid vehicles. The have been some other things. So the customers that want to go for relatively cheaper options in suvs and evs because of the lower oil prices. I would say it is going to increase. We will have more and more applications. Repay. Igital in spite ofrry on critical closures. I think that is the new mantra in the automotive interested. Automakers are gearing towards making their entire network for digital. Boom in theu see a indian market, given the stimulus we are seeing and how its being targeted to areas where you can reasonably expect a rampup . Yes. Situation, they are badly impacted by the covid19 crisis. It is relatively isolated. Make theake sure visitors follow corn to enrolls more straggly. Most of the migrant laborers have gone back. The government has activated stimulus. A bigesult, you see recovery, a vshaped recovery in two categories. Things like basic transportation, and second is tractors, agriculture. Showing,e are actually if you wanted in their stock rises, alltime high. Sharpbecause of the recovery. Always appreciate your time, vivek vaidya. Staying with the consumer sector, diageo saw sales slump as bars and restaurants closed around the world. Ecommerce and sumer market purchases plugging the gap. Revenue came in worse already than lower expectations and felt 8 in the last year. Seeing anid hes improvement. Two things Consumers Want conditions isese meeting up with the family and friends, and going to a bar. Motivation was going to endure. As conditions improved, we must go right back in. What we are doing in the meantime is creating the experiences at home. One of the trends we have seen is cooking from scratch and baking. So we moved right into that space on social media and digital engagements. We have seen a very good response. Walker, because we have a program called kitchen drinks, where online, we look at what ingredients you have in your fridge at home and design a cocktail you can make it home. You can get bar quality cocktails at home. Consumption, they have not gone up. We have seen per capita consumption come down for a long time. We stand very much for drinking in moderation and drinking sensibly. You have seen the shift from out of home to inhome, but in a market like the u. K. , where 40 of visits is are at home, they have collapsed. Due to alcohol, it dropped about 20 . True that the overall populations are drinking more. You are seeing the shift from bars at home to inhome. Towardsed by the trends per ties asian, where we were talking about tequila. 50 bottles of tequila growing doubledigit right now. I think that trend also sustains, particularly in the u. S. It is your margins. I have net investors. They have really appreciated. Im wondering if they can expect a boost in revenue with those big margins to really help in the second half, or in fiscal 2021 . You are seeing, i assume, a comeback in places like china as a precursor to what you expect in the western world. Can you tell us from that what kind of quality you expect in Sales Recovery . At the weakestng quarter, because it has the biggest impact of the lockdowns around the world. We are seeing sequential improvements, even in the last quarter. As we look forward the next couple of quarters, we expect things to get better. To your point in china, every day, every week is getting better. Reopening on premise is reopening. We see deliveries picking up. In things like the u. K. , where the pubs have opened a few weeks ago, we are seeing steady recovery. At about 70 of normal. Business in the first couple of weeks was 70 of normal. We expect that to improve. Clearly it is based on the conditions of the virus and Government Policies that will impact it. But overall across the world, we expect sequential improvement. Shery lets now get a quick check of markets. The nikkei falling right now. We are seeing losses with oilrelated stocks after an operating loss of over ¥15 billion in the first quarter. Honda also reporting this week. Kospi gaining for the third session, led higher by the medical center. This00 lower by banks, after rallying the most in two weeks. The kiwi dollar climbing on the jobs data. The Unemployment Rate falling to 4 . Take a look at some stock movers. Rising after reporting a jump in july sales. Musg under pressure after reporting the profits. We are seeing that cost rising. Softbank is on track to meet targets. Ratesility of dividend and share buybacks. Meiji holdings giving back gains. Plenty more to come, this is bloomberg. Shery overtraining when it comes to brent crude at the moment. We did see volatility after the huge explosion in lebanon after fresh signs demand can be keeping up in the u. S. Brent crude up by. 3 . Trading just over 44 a barrel. Su keenan is here with the details. U. S. Fuel supply indicating a second week of decline. We do. That is very important. We have seen oil hold steady after its longest rally since june. With stockpiles easing, that will be supportive. We did get private reports after the bell before the wednesday official government report and the private report, according to those close to the matter, almost 9 billion barrels. That will be the second week. So all eyes are now on the wednesday midmorning report in the u. S. , and the third out of four weekly declines expected. That will be supportive of that math. Whichns main port, rocked beirut. That raises concerns about fresh instability. It is important as you look at the big picture for west texas intermediate and brent, which is holding just above 44, that oil until now has really struggled to maintain momentum. There is trading data that shows investors have been trimming exposure to oil with the bearish positions that could help oil retreat all the way back to 30. Very important how these numbers pan out in the next few hours. Shery we are also hearing about london traders. Tell us about the related investigation. Bloomberg businessweek is out with a report. According to their sources, they have identified a small group of london traders who hit a half 1 billion jackpot on that day, april 20. The price of oil falling for the first time ever, precipitously below zero. It fell about 40 in an hour, selling at 3 37 a barrel. In other words, you had to pay for somebody to take the oil away. Traders, investors, and regulators have been scratching their head to figure out how this happened. People close to the matter tell bloomberg it was a small group of traders at a tiny firm that had placed a number of Aggressive Oil positions all in unison as the contract was may havend that it contributed to their significant gain, according to bloomberg businessweek. Regulators are taking a closer look. Shery su keenan with the latest on oil. Coming up, we speak with everything Standard Investments about the outlook on the chinese bond market as the pboc tries to exit crisis mode. We will turn to the private equity seen in china with v funds founding partner. Thats it from daybreak asia. The china open is next. This is bloomberg. What happens when a wireless carrier puts its customers in charge . Well, the good news gets shared. And it gets rated 1 for customer satisfaction. But dont just take our word for it. Take theirs. Its your wireless. Your rules. Only with xfinity mobile. Call, click or visit a store today. It is not 00 a. M. In beijing and shanghai. Welcome to Bloomberg Markets china open. Im tom mackenzie. David im david ingles. Our top story today, the u. S. And china planning new talks on the phase one trade deal amidst warned something relations amidst worsening relations. Beijing is short of purchasing agreement targets