Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240714 :

Intentional. Sending a message, xi jinping strengthens ties with north korea. Kathleen u. S. Stock market. Lets take a look exactly at what happened. Setting us up for the asian open. A rally. You can see the Dow Jones Industrial the s p 500, the nasdaq, across the board, up almost one full point. The s p did have a closing high. A record. Sincecond alltime record that last happened in april. That is all good. You can see the futures are pointing a bit lower. It is not a big decline, but after such a run, a small rally yesterday, after the Federal Reserve announced its policy decision not to change rates but to open the door to lower rates, the rally and this seems now it really like maybe people are just going to sit back and pods. Same thing in the bottom market and pause. Same thing in the on the market. It was bond market. It was dipping low. It is still very low. You can see that just a few days ago, we were up over 2. 04 . This has been a mighty rally. Central banks are getting ready perhaps to move through the door they have opened to lower rates, but they are not there yet so traders may be are just going to sit maybe are going to back and watch. Lets see how things are shaping up in the asian markets. Kathleen ditto sophie ditto over here. We may not be carrying the enthusiasm. Tensions over iran, brexit developments, and more antiextradition protests in hong kong. Of warns we have the yen Holding Gains near a five month high. Studyin ar yield just steadying. Fears of conflicts in the middle east. And Gold Building on its advance and 2013 high. Citi sees 1600 given the rate cut outlook. Boj easing,sing on the bond buying operations will be closely watched. Jgb futures are retreating from an alltime high ahead of that. A negativeelds territory, that is spurring speculation the doj will trim purchases today. Have 20 basis points on 10 year jgbs. Kathleen first word news with ed ludlow. Rareongress issued a rebuke to President Trump. The Senate Voting to block arms sales to saudi arabia. A handful of republicans supported the democrat moved to criticize the president s use of an Emergency Declaration to sell kingdom despite congressional objection. The resolution passed but the numbers did not reach the two thirds majority needed to override a potential trump veto. Chinese president xi jinping says he is ready to play a positive role in the drive to denuclearize the Korean Peninsula, calling for a political solution as he arrived pyongyang. He met kim jongun at the start of what is the first visit by a chinese leader to north korea in 14 years. The two sides are expected to coordinate their approach is in the current standoff with the United States approaches in the current standoff with the United States. The face of brexit, boris johnson, extended his lead among conservative lawmakers, winning 160 votes. While jeremy hunt has the backing of 77 mps. They will compete over the next month. The winner will be announced in late july. Nissansas welcomed decision to grant a seat on the board, signaling an end to a spat that has upset their alliance. He threatened to abstain from voting on a governance plan next week. Now, nissan will give him a place on the appointment panel. And the renault ceo, a seat on the committee. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ed ludlow. This is bloomberg. Thanks very much, ed. U. S. Stock futures are pointing lower this morning. For the first alltime closing high for the s p 500 index since april, su keenan has more. Is this a belated reaction . Su it certainly seems that way. We did not see a strong reaction yesterday, but the morning caps off was rather strong. Let kickoff was rather strong. We have got a third strong week for the s p leading the injured ray records. Intraday records. It managed to squeak out a gain right at the close. Lets take a look at the snapshot. Real estate stocks were among the big gainers. You also, as you mentioned, lower the futures ticking into the open on friday. Lets take a look at the big movers. And we have Slack Technologies very much in the spotlight. This is a company that decided to go different route than the ipo. They make software for workers to chat on. They directly listed their shares. Bloomberg data, the Venture Capital arm of bloomberg, is an investor. D on sort to almost soare the first day. Oracle soaring higher on strong earnings and growth in its cloud unit. Tilray doing well. Tesla taking a hit. The quarterly years and end. End. Ars an if youre cutting rates, it seems the currency should we can. What are the. Weaken. The dollar bears are saying you should see a 5 to 10 pullback. We are seeing the feds decision directly impact gold. Old poised for a big move higher. We are seeing a lot of investors jump into gold. Lets go to the bloomberg real quick. You can see the move here. In terms of the actual price of gold, take a look quickly at the chart. It has rallied to the highest since 2013. It put goldbach on investors radar. Gold back on investors radar. Is that possible . It is not. Lets take a look. All right we are looking at the, dollar. Jeffrey gundlach has talked about how you could see the dollar meeting its moment of truth, falling below its 200 Day Moving Average that he sees. It is set up for a fall Going Forward. Kathleen when he talks, we certainly listen. I want to share some breaking news. Following the european summit in brussels. They were there today to hammer out leaders, who is going to head the e. U. Commission, be the next head of the European Central bank . Instead of focusing so much on that, which has been a big deal the last several months, it got hijacked by a showdown over climate goals. Poland is spearheading eastham resistance to the collective commitment to reduce net Carbon Emissions to zero by 2050. I guessthe bundesbank did not get quite a chance to see how much progress he made trying to pick up more support bid. Late that is the latest news. We dont know what is going on there but we are going to get onto the news of the day and that has a lot to do with stocks. Joining us now is the head of u. S. Equities, susan schmidt. Welcome. Susan thank you for having me. Kathleen great to be on talking about stocks. Susan it is much nicer to talk about it when you get a day like today. Youre seeing the Market Reaction to accumulation of good news. We had a positive tweet about trade. About the concerns g20. The market needs reassurance from the fed, seemingly from every meeting. The fed is there to support the economy. I think what was important in this announcement and press conference for the fed was that the language was very much about framing and they were there to lower the rates to prolong the recovery to my extend this expansion. I think that is important recovery, prolong the extended this expansion. There are still a lot of strength in the underlying economy. The grassroots markets in the u. S. Seem really strong. Bank president s are saying that. It all points to resilience. Kathleen resilience and then some question about how much the fed will cut, because lets say what if . What if the resilience stays there . What if stocks rally even more . If you are the Federal Reserve and youre looking at all these things, you really feel you need to do a 75 basis point cut this year . Susan maybe not. This might be jumping to forehead. The market is quick to go to the extremes and think we might meet all of that to keep things going. Consumer confidence has been really high. Have not shown a lot of pressure so that has been a nice gradual increase, and employment has paid hyde. That bodes for steady growth. May be 50 is enough. 50,market is counting on assuming that is a certainty. Half the market is thinking 75 is there. That may be too extreme. Terms of moren media challenges for the market, i just want to show you this chart on the bloomberg. It is that time of year, the quadruple witching. Not always, it leads to increased volume and volatility. How closely are you watching this . Is it a good time to be on the sidelines for a little while . Susan it does increase volatility and we have a lot of things increasing volatility right now so you do not know what is going to happen around trade. We certainly have global issues that are attracting headlines. And when that happens, the market does tend to react in surprise with meijer type kneejerk type reactions. The etf will be swinging around, making sure they have the right exposures to the shares that go into or out of the different indices as they are required. The russell rebalances on june 30. I am prepared to ride it out. I think you have to look at the longerterm perspective. Of the things you do like longerterm is financials, ease, are you concerned at all that lending margins for banks are going to get squeezed . Susan mending margins will get lending margins will get squeezed. It completely changed the business model. We have a lot of banks that have fee income. Banks are showing they have got some nimbleness to them, trying to figure out to adjust our operating models. They understand how important scale is, which is why we are seeing that kind of m a activity. We are seeing a lot of managements talk about that, talking about how to improve their own operating efficient. I think that is what is going to see them through. Kathleen when you see the tenyear year note yields getting down to 2 , briefly the s p 500, at an alltime high, and inflation is low, is there going to be a pause here . Coyote, the roadrunner going out over the cliff, saying what are we doing here . And let us all settle down, particularly the rally in bonds . Susan a pause is good for the markets. It is not used the pausing lately. We do see a little bit of a pause. Lose a lot of falla am over the summer months. Secondquarter earnings are just around the corner. I think ceos announcements, how they talk about the Business Outlook on ford, and how they feel about her, a lot of businesses are counting on a secondhalf recovery. I think the market could definitely pause and potentially back off a little bit. Kathleen i am sure you have got lots of homework. What are you looking for . Susan i am looking for the commentary more than anything else. I think the numbers will be there, but the color around what the outlook is, how banks, industrials, Consumer Companies are feeling about their business , underlying, and what kind of backlog or demand are they see . If you do not seeing . This expansion can go on and we can see a very solid recovery continue on. I am not one of those who thinks are about to fall off a cliff. I think there is underlying strength. If we can do that confident tone, we will have a very good end to the year. Does yourhat extent optimism hinge on a good outcome from the trade talks, which are going to sort of resume in a weekend . Osaka this i know youre confident about the u. S. Consumer, but if this indoors eventual endures, the consumer will pay for some of these tariffs, surely . Susan the danger is we should ourselves in the foot. Goes away ande consumers stop spending. So that is the exhaustion us eventhat is exogenous that is related to politics and government that could take this down. That is what we have to look out for. So far, we have seen a lot of back and forth. Thisr has gotten used to type of bargaining from the Trump Administration and in this dialogue between the u. S. And china. They have been very resilient to it. They have not reacted to it aggressively. I think that probably continues. Kathleen speaking of politics and policy, what about the fact that the elections the election has already started, right . The campaigns, i should say. Susan rhetoric is out. Kathleen we are going to have all kind of things talked about. Maybe the democrats particularly about higher taxes. You think they are going to shrug it off until we get closer to the voting next year . Susan i think we see the markets react to headlines. I really do. It is a shortterm reaction, but it is a reaction. We saw it a little bit earlier. This reactione again when politicians talk about health care and what their proposals are. We did see the Health Care Stocks back off on concern about what policies might be proposed. We are in an election cycle. This one is going to be rulent. Larly zervi the Market Reaction, short, kneejerk reactions, but then settles back in. Much, thethank you so head of u. S. Equities. Still ahead on the show, we will assess the state of geopolitical risk. Xi jinping which is ray political settlement on the Korean Peninsula as he needs kim jongun in pyongyang. He meets kim jongun in pyongyang. Paul iran sends oil surging. The latest in a moment. This is bloomberg. Paul oil jumped the most this u. S. After iran shut down a drone it said was in its airspace, further ratcheting up tensions in the gulf. President trump is again downplaying tehrans action, saying he finds it hard to believe the attack was intentional. Pres. Trump i find it hard to believe it was intentional. I think it could have been somebody who was lose and stupid that did it. That will be able to report back and you will understand exactly what happened, but it was a very foolish move. That, i can tell you. Paul lets cross to gregg sullivan. The president does not seem to teen on the conflict in the gulf. What happens now . Signals from the president today. This morning, we had a tweet saying iran made a huge mistake and in that same conversation, sitting next to justin trudeau, President Trump said the u. S. Would not answer this am a but at the same time, he is seeking to tamp down the implication that this was a major issue. Saying that it was perhaps an individual making a mistake. We know the u. S. Is saying this drone was shot down in International Waters about 21 miles from iranian airspace and the u. S. Has said innocents could have been injured in this. President trump invited lawmakers to the white house to receive a briefing. Afterwards, we heard from mitch mcconnell, saying the white house is engaging in measured responses to this, although we do not quite know what those responses are yet. But again, President Trumps to downplay this as a significant issue. So we will have to look for what the white house reaction will be. Kathleen the reaction from iran has not exactly been apologetic it, has it . Greg that is correct. Iran was forceful saying they had the right to defend their airspace. Iran and the u. S. Are bickering over whether this incident whether the drone flew in iranian airspace or international airspace. In the letter to the uns secretarygeneral, iran said they had the right to defend their waters and air space. In a tweet online, the Iranian Foreign minister said iran is not looking to go to war but they will defend themselves, so some staunch words there. Thank you. Washington reporter Greg Sullivan following that toy for us. Oil did jump the most that story for us. Oil did jump the most amid tensions. Our guest joins us from tokyo. Not just supplyside dynamics moving crude prices, is it . Chris thats right. We have two scoops for the oil market, the supplyside with the geopolitical tensions kicking in , you know, tankers getting oman. Ed on in the gulf of you have the drone being shot down. You have the continuing yemen saudi arabia situation, so plenty of concerns about, you know, that crucial supply bottleneck in the street of hormuz strait of hormuz. There is no doubt that the oil onders continue to trade that merited. The other scoop is the demand side. Yet the Central Banks moving swiftly and decisively in favor of stimulus in the coming months, and that is protecting the outlook for global growth. The only thing perhaps that could ruin this ice cream sunday, as it were, is President Trump tweeting about the price going up too far. Kathleen ok. He could melt that ice cream, chris. So lets move on. Last night, it was interesting to hear what governor kuroda said about bond yields, especially with the global bond rally that is pushing yields lower around the world. Need to take an overly strict view on the 10 year yield target range. I think it is appropriate to allow a degree of flexibility. Kathleen chris, governor kuroda made it clear his target is not the amount of bonds he purchases. It is yield curve control, etc. Are they basically forced to sell some bonds . That is certainly a position at the bank of japan does not want to bn. Be in. A range of plus or 0. 2 for the 10 year. As the chart illustrates, we are getting way down towards the bottom end of that range. So the question then becomes, is the bank of japan going to do anything to keep the yield within the range . Governor kuroda yesterday made clear that this is not a tight range, at the bank of japan will be flexible. That the bank of japan will be flexible as the market moves, and no indication that the boj will take any action. That said, he expressed concerns about the implications of yields. We will be watching very closely at 10 10 this morning at the bank of japans bond purchase plans. Kathleen chris anstey, they do very much for joining us, the toss assets manager in your. As for you, get more analysis in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminals and this is bloomberg. Kathleen now, a quick check of the latest business flash headlines. , becominged on debut the most valuable tech company to reach u. S. Markets this year after uber. Shares closed 50 higher than the price set before the direct listing, giving them a violation of three times the last private funding round. Bloomberg is an investor in slack. Doubtsesla sank amid new about profit and demand. Said they appear to be on the high side and tesla stokevels to pull to investment. It improved to a level that is not likely sustainable. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Dow Jones Industrial<\/a> the s p 500, the nasdaq, across the board, up almost one full point. The s p did have a closing high. A record. Sincecond alltime record that last happened in april. That is all good. You can see the futures are pointing a bit lower. It is not a big decline, but after such a run, a small rally yesterday, after the Federal Reserve<\/a> announced its policy decision not to change rates but to open the door to lower rates, the rally and this seems now it really like maybe people are just going to sit back and pods. Same thing in the bottom market and pause. Same thing in the on the market. It was bond market. It was dipping low. It is still very low. You can see that just a few days ago, we were up over 2. 04 . This has been a mighty rally. Central banks are getting ready perhaps to move through the door they have opened to lower rates, but they are not there yet so traders may be are just going to sit maybe are going to back and watch. Lets see how things are shaping up in the asian markets. Kathleen ditto sophie ditto over here. We may not be carrying the enthusiasm. Tensions over iran, brexit developments, and more antiextradition protests in hong kong. Of warns we have the yen Holding Gains<\/a> near a five month high. Studyin ar yield just steadying. Fears of conflicts in the middle east. And Gold Building<\/a> on its advance and 2013 high. Citi sees 1600 given the rate cut outlook. Boj easing,sing on the bond buying operations will be closely watched. Jgb futures are retreating from an alltime high ahead of that. A negativeelds territory, that is spurring speculation the doj will trim purchases today. Have 20 basis points on 10 year jgbs. Kathleen first word news with ed ludlow. Rareongress issued a rebuke to President Trump<\/a>. The Senate Voting<\/a> to block arms sales to saudi arabia. A handful of republicans supported the democrat moved to criticize the president s use of an Emergency Declaration<\/a> to sell kingdom despite congressional objection. The resolution passed but the numbers did not reach the two thirds majority needed to override a potential trump veto. Chinese president xi jinping says he is ready to play a positive role in the drive to denuclearize the Korean Peninsula<\/a>, calling for a political solution as he arrived pyongyang. He met kim jongun at the start of what is the first visit by a chinese leader to north korea in 14 years. The two sides are expected to coordinate their approach is in the current standoff with the United States<\/a> approaches in the current standoff with the United States<\/a>. The face of brexit, boris johnson, extended his lead among conservative lawmakers, winning 160 votes. While jeremy hunt has the backing of 77 mps. They will compete over the next month. The winner will be announced in late july. Nissansas welcomed decision to grant a seat on the board, signaling an end to a spat that has upset their alliance. He threatened to abstain from voting on a governance plan next week. Now, nissan will give him a place on the appointment panel. And the renault ceo, a seat on the committee. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ed ludlow. This is bloomberg. Thanks very much, ed. U. S. Stock futures are pointing lower this morning. For the first alltime closing high for the s p 500 index since april, su keenan has more. Is this a belated reaction . Su it certainly seems that way. We did not see a strong reaction yesterday, but the morning caps off was rather strong. Let kickoff was rather strong. We have got a third strong week for the s p leading the injured ray records. Intraday records. It managed to squeak out a gain right at the close. Lets take a look at the snapshot. Real estate stocks were among the big gainers. You also, as you mentioned, lower the futures ticking into the open on friday. Lets take a look at the big movers. And we have Slack Technologies<\/a> very much in the spotlight. This is a company that decided to go different route than the ipo. They make software for workers to chat on. They directly listed their shares. Bloomberg data, the Venture Capital<\/a> arm of bloomberg, is an investor. D on sort to almost soare the first day. Oracle soaring higher on strong earnings and growth in its cloud unit. Tilray doing well. Tesla taking a hit. The quarterly years and end. End. Ars an if youre cutting rates, it seems the currency should we can. What are the. Weaken. The dollar bears are saying you should see a 5 to 10 pullback. We are seeing the feds decision directly impact gold. Old poised for a big move higher. We are seeing a lot of investors jump into gold. Lets go to the bloomberg real quick. You can see the move here. In terms of the actual price of gold, take a look quickly at the chart. It has rallied to the highest since 2013. It put goldbach on investors radar. Gold back on investors radar. Is that possible . It is not. Lets take a look. All right we are looking at the, dollar. Jeffrey gundlach has talked about how you could see the dollar meeting its moment of truth, falling below its 200 Day Moving Average<\/a> that he sees. It is set up for a fall Going Forward<\/a>. Kathleen when he talks, we certainly listen. I want to share some breaking news. Following the european summit in brussels. They were there today to hammer out leaders, who is going to head the e. U. Commission, be the next head of the European Central<\/a> bank . Instead of focusing so much on that, which has been a big deal the last several months, it got hijacked by a showdown over climate goals. Poland is spearheading eastham resistance to the collective commitment to reduce net Carbon Emissions<\/a> to zero by 2050. I guessthe bundesbank did not get quite a chance to see how much progress he made trying to pick up more support bid. Late that is the latest news. We dont know what is going on there but we are going to get onto the news of the day and that has a lot to do with stocks. Joining us now is the head of u. S. Equities, susan schmidt. Welcome. Susan thank you for having me. Kathleen great to be on talking about stocks. Susan it is much nicer to talk about it when you get a day like today. Youre seeing the Market Reaction<\/a> to accumulation of good news. We had a positive tweet about trade. About the concerns g20. The market needs reassurance from the fed, seemingly from every meeting. The fed is there to support the economy. I think what was important in this announcement and press conference for the fed was that the language was very much about framing and they were there to lower the rates to prolong the recovery to my extend this expansion. I think that is important recovery, prolong the extended this expansion. There are still a lot of strength in the underlying economy. The grassroots markets in the u. S. Seem really strong. Bank president s are saying that. It all points to resilience. Kathleen resilience and then some question about how much the fed will cut, because lets say what if . What if the resilience stays there . What if stocks rally even more . If you are the Federal Reserve<\/a> and youre looking at all these things, you really feel you need to do a 75 basis point cut this year . Susan maybe not. This might be jumping to forehead. The market is quick to go to the extremes and think we might meet all of that to keep things going. Consumer confidence has been really high. Have not shown a lot of pressure so that has been a nice gradual increase, and employment has paid hyde. That bodes for steady growth. May be 50 is enough. 50,market is counting on assuming that is a certainty. Half the market is thinking 75 is there. That may be too extreme. Terms of moren media challenges for the market, i just want to show you this chart on the bloomberg. It is that time of year, the quadruple witching. Not always, it leads to increased volume and volatility. How closely are you watching this . Is it a good time to be on the sidelines for a little while . Susan it does increase volatility and we have a lot of things increasing volatility right now so you do not know what is going to happen around trade. We certainly have global issues that are attracting headlines. And when that happens, the market does tend to react in surprise with meijer type kneejerk type reactions. The etf will be swinging around, making sure they have the right exposures to the shares that go into or out of the different indices as they are required. The russell rebalances on june 30. I am prepared to ride it out. I think you have to look at the longerterm perspective. Of the things you do like longerterm is financials, ease, are you concerned at all that lending margins for banks are going to get squeezed . Susan mending margins will get lending margins will get squeezed. It completely changed the business model. We have a lot of banks that have fee income. Banks are showing they have got some nimbleness to them, trying to figure out to adjust our operating models. They understand how important scale is, which is why we are seeing that kind of m a activity. We are seeing a lot of managements talk about that, talking about how to improve their own operating efficient. I think that is what is going to see them through. Kathleen when you see the tenyear year note yields getting down to 2 , briefly the s p 500, at an alltime high, and inflation is low, is there going to be a pause here . Coyote, the roadrunner going out over the cliff, saying what are we doing here . And let us all settle down, particularly the rally in bonds . Susan a pause is good for the markets. It is not used the pausing lately. We do see a little bit of a pause. Lose a lot of falla am over the summer months. Secondquarter earnings are just around the corner. I think ceos announcements, how they talk about the Business Outlook<\/a> on ford, and how they feel about her, a lot of businesses are counting on a secondhalf recovery. I think the market could definitely pause and potentially back off a little bit. Kathleen i am sure you have got lots of homework. What are you looking for . Susan i am looking for the commentary more than anything else. I think the numbers will be there, but the color around what the outlook is, how banks, industrials, Consumer Companies<\/a> are feeling about their business , underlying, and what kind of backlog or demand are they see . If you do not seeing . This expansion can go on and we can see a very solid recovery continue on. I am not one of those who thinks are about to fall off a cliff. I think there is underlying strength. If we can do that confident tone, we will have a very good end to the year. Does yourhat extent optimism hinge on a good outcome from the trade talks, which are going to sort of resume in a weekend . Osaka this i know youre confident about the u. S. Consumer, but if this indoors eventual endures, the consumer will pay for some of these tariffs, surely . Susan the danger is we should ourselves in the foot. Goes away ande consumers stop spending. So that is the exhaustion us eventhat is exogenous that is related to politics and government that could take this down. That is what we have to look out for. So far, we have seen a lot of back and forth. Thisr has gotten used to type of bargaining from the Trump Administration<\/a> and in this dialogue between the u. S. And china. They have been very resilient to it. They have not reacted to it aggressively. I think that probably continues. Kathleen speaking of politics and policy, what about the fact that the elections the election has already started, right . The campaigns, i should say. Susan rhetoric is out. Kathleen we are going to have all kind of things talked about. Maybe the democrats particularly about higher taxes. You think they are going to shrug it off until we get closer to the voting next year . Susan i think we see the markets react to headlines. I really do. It is a shortterm reaction, but it is a reaction. We saw it a little bit earlier. This reactione again when politicians talk about health care and what their proposals are. We did see the Health Care Stocks<\/a> back off on concern about what policies might be proposed. We are in an election cycle. This one is going to be rulent. Larly zervi the Market Reaction<\/a>, short, kneejerk reactions, but then settles back in. Much, thethank you so head of u. S. Equities. Still ahead on the show, we will assess the state of geopolitical risk. Xi jinping which is ray political settlement on the Korean Peninsula<\/a> as he needs kim jongun in pyongyang. He meets kim jongun in pyongyang. Paul iran sends oil surging. The latest in a moment. This is bloomberg. Paul oil jumped the most this u. S. After iran shut down a drone it said was in its airspace, further ratcheting up tensions in the gulf. President trump is again downplaying tehrans action, saying he finds it hard to believe the attack was intentional. Pres. Trump i find it hard to believe it was intentional. I think it could have been somebody who was lose and stupid that did it. That will be able to report back and you will understand exactly what happened, but it was a very foolish move. That, i can tell you. Paul lets cross to gregg sullivan. The president does not seem to teen on the conflict in the gulf. What happens now . Signals from the president today. This morning, we had a tweet saying iran made a huge mistake and in that same conversation, sitting next to justin trudeau, President Trump<\/a> said the u. S. Would not answer this am a but at the same time, he is seeking to tamp down the implication that this was a major issue. Saying that it was perhaps an individual making a mistake. We know the u. S. Is saying this drone was shot down in International Waters<\/a> about 21 miles from iranian airspace and the u. S. Has said innocents could have been injured in this. President trump invited lawmakers to the white house to receive a briefing. Afterwards, we heard from mitch mcconnell, saying the white house is engaging in measured responses to this, although we do not quite know what those responses are yet. But again, President Trump<\/a>s to downplay this as a significant issue. So we will have to look for what the white house reaction will be. Kathleen the reaction from iran has not exactly been apologetic it, has it . Greg that is correct. Iran was forceful saying they had the right to defend their airspace. Iran and the u. S. Are bickering over whether this incident whether the drone flew in iranian airspace or international airspace. In the letter to the uns secretarygeneral, iran said they had the right to defend their waters and air space. In a tweet online, the Iranian Foreign<\/a> minister said iran is not looking to go to war but they will defend themselves, so some staunch words there. Thank you. Washington reporter Greg Sullivan<\/a> following that toy for us. Oil did jump the most that story for us. Oil did jump the most amid tensions. Our guest joins us from tokyo. Not just supplyside dynamics moving crude prices, is it . Chris thats right. We have two scoops for the oil market, the supplyside with the geopolitical tensions kicking in , you know, tankers getting oman. Ed on in the gulf of you have the drone being shot down. You have the continuing yemen saudi arabia situation, so plenty of concerns about, you know, that crucial supply bottleneck in the street of hormuz strait of hormuz. There is no doubt that the oil onders continue to trade that merited. The other scoop is the demand side. Yet the Central Banks<\/a> moving swiftly and decisively in favor of stimulus in the coming months, and that is protecting the outlook for global growth. The only thing perhaps that could ruin this ice cream sunday, as it were, is President Trump<\/a> tweeting about the price going up too far. Kathleen ok. He could melt that ice cream, chris. So lets move on. Last night, it was interesting to hear what governor kuroda said about bond yields, especially with the global bond rally that is pushing yields lower around the world. Need to take an overly strict view on the 10 year yield target range. I think it is appropriate to allow a degree of flexibility. Kathleen chris, governor kuroda made it clear his target is not the amount of bonds he purchases. It is yield curve control, etc. Are they basically forced to sell some bonds . That is certainly a position at the bank of japan does not want to bn. Be in. A range of plus or 0. 2 for the 10 year. As the chart illustrates, we are getting way down towards the bottom end of that range. So the question then becomes, is the bank of japan going to do anything to keep the yield within the range . Governor kuroda yesterday made clear that this is not a tight range, at the bank of japan will be flexible. That the bank of japan will be flexible as the market moves, and no indication that the boj will take any action. That said, he expressed concerns about the implications of yields. We will be watching very closely at 10 10 this morning at the bank of japans bond purchase plans. Kathleen chris anstey, they do very much for joining us, the toss assets manager in your. As for you, get more analysis in todays edition of daybreak. Bloomberg subscribers can go to dayb on their terminals and this is bloomberg. Kathleen now, a quick check of the latest business flash headlines. , becominged on debut the most valuable tech company to reach u. S. Markets this year after uber. Shares closed 50 higher than the price set before the direct listing, giving them a violation of three times the last private funding round. Bloomberg is an investor in slack. Doubtsesla sank amid new about profit and demand. Said they appear to be on the high side and tesla stokevels to pull to investment. It improved to a level that is not likely sustainable. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network<\/a> store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. Theleen wonderful shot of imperial palace guardians in tokyo as well wait the latest numbers on japanese inflation. Lateste await the numbers on japanese inflation. 0. 8 percent yearoveryear, down from 0. 9 , and better than the forecast at 0. 7 . As for the headlines, from 0. 9 to 0. 7 , national cpi taking out food and energy prices. Also a bit weaker. 5 , mayzero point versus april, yearoveryear numbers, and of course, fresh food vices were expected to track some accommodation places, etc. , but obviously, paul, this is one that the bank of japans watching very, very closely. Rate what is expected for the boj response to these numbers is a big force driving those Key Exchange Rates<\/a> right now. Thanks, kathleen. As kathleen was describing, japans main cpi excluding fresh food, growing. 8 on year. A bit of a slowdown, but not as bad as what was expected, so lets get to the head of the japan economics for bank of America Merrill<\/a> lynch. I just want to get your reaction to those numbers. What is going to change the outlook for inflation in japan . Because it sure seems like the boj cannot move the needle. I will say a couple things about the cpi numbers. The first is that the monthtomonth cpi swings can be quite volatile because of hotel fees and overseas package tours, so i would not look into that much. If you look at cpi performance over the past couple months, it has been remarkably stable as a trend with core sticking at 0. 5 so that isnt 9 , actually good. The bad news is that going lowered, we will have some deflationary stocks from cuts in Wireless Service<\/a> fees, and we also have potential headwinds from fx rates. The in a strengthening. Going forward, we will get downward inflation and that will be a headache for the boj. Paul a headache indeed. I want to look at this chart on the bloomberg terminal, japans altra lowInterest Rates<\/a> pretty much becoming part of the furniture. This has been going on for a very, very long time now. The boj remains steadfastly committed to that inflation target, but isnt it the definition of insanity to keep on doing the same thing and expecting a different result . Because nothing is changing. Paul, i have no comment on that. I think one of the struggles that the bank of japan faces is with Interest Rates<\/a> so low, the ability of Monetary Policy<\/a> on its own to stimulate demand is going to be very limited, and inflation performance is going to be very much a function of fx rates. Is e need more help what we need is more help from the fiscal policy side. The consumption tax is going to go ahead. Is thatthe more problem Monetary Policy<\/a> and fiscal policy are not working in coordination and that is making the bojs job increasingly difficult. Kathleen it seems to be the story of the world these days that central bankers either him to orsay directly that hint orsay directly that they could use some to for help and they are not getting it. For japan, exports, we have seen a bit of weakness. The pmi weakening a bit. Around are weakening the whole asian region. When i spoke to governor kuroda a week and a half ago and asked him about what can you do to boost growth and keep inflation momentum going, he said rollout the tools. Maybe use different combinations. He expressed confidence that he does not been they will need to do it, but they will. Can the bank of japan do anything to boost these numbers . Izumi i think it is going to be very hard for the bank of japan to put a floor on growth on its own. I mean, the main issue with the Global Economy<\/a> right now is we have tremendous uncertainty weighing on private sentiment due to this escalation of trade wars, and prolonged uncertainty. And corporate our withholding are withholding capex. I dont think they can solve that problem. They can try to keep conditions easy, and what try to put a floor on sentiment and growth, but that is about all they can do. Kathleen so if there is a trade war resolution or even we all can expect, if we are knowing how these things work, you will not get a trade deal in a week, but they have to get to a point where they say, yes, we are back on track and making progress. Does that open the door to ofple breathing a sigh release and investing again and lifting some of those clouds . Think the trade deal has to be very definitive, and the resolution, definitive, if we are going to want to list the clouds over corporate mindsets. If it is just a partial deal or some sort of ceasefire, there is going to be suspicions that these tensions can flare up again. In that sense, i think the damage has been done, and we are looking at, you know, more weakness in capex and global trade. Mi, i do find it hard to cover this story without a sense of exasperation. I want to show you another chart on the bloomberg terminal. This is the bank of japan dominating the jgb market. Those white bars, the bank of japan holdings. The red bars are everybody else. Is that sustainable Going Forward<\/a> . How long can that persist . Flipside,ean, on the they only on 45 of the market, so they could go further. But no, there are practical limits to this. You know, because theres always going to be an amount of a minimum amount of jgb that Financial Institutions<\/a> are going to need to hold for lateral purposes. One sort of issue that is lingering under the surface for the bojs operations right now is the shortage of eligible collateral. They tried to address this issue in the policy meeting, but i think that, you know, they cannot keep up at this forever. Paul you mentioned it at the beginning as well. Riskse a lot of downside for inflation Going Forward<\/a>. What does this mean for the sales tax . Will that be introduced or increased at the end of the year as planned or is that pretty much doomed now . As i said earlier, i think the likelihood of a delay this time around is actually quite low. That does not mean i agree with it. I think it is not a great idea given where we are in the cycle, but the problem is that we have a little over three months ago, so the logistical and political costss of postponing the tax hik at this stage are nonnegligible. I think we will get a fiscal stimulus package or likely every year that japan does a supplementary budget package and i think this year around, they are going to do one and it will be fairly significant expect the messaging on the stimulus to come in the next couple makes. Is that a great idea to raise the tax and spend at the same time . No comment on that. But i think we will get some fiscal stimulus Going Forward<\/a>. Kathleen what about the markets . What about this sense that the markets are almost kind of testing and pushing the bank of japan . The yields are going lower. What are you going to do about it, governor kuroda . In the speculation that the bank of japan could actually be getting closer to cutting its short end rates, its key negative rate even more negative . Do you think that will happen . Izumi so in terms of additional boj easing actions, we are of the view that despite increased expectations and the likelihood of fed rate cuts and possibly even the ecb, that the hurdle for additional boj using in the form of rate cuts or increase to risk asset purchases is quite high. In the near term, i think the most likely a is an extension of forward guidance, but i think it would take further yen strength. And for the boj to be pushed even more for rate cuts to come into the picture. Rates,n fed cuts stronger yen, weaker dollar, is that enough to push the boj . Izumi that depends on the threshold. I think you would have to see dollaryen closer to 100. Kathleen ok, thank you so very much. Bank of America Merrill<\/a> lynch head of japan economics, izumi devalier, joining us from our tokyo bureau. We are half an hour away from the start of cash trade in tokyo. Sophie, what is on the radar . We have the cpi numbers come again. What are you watching cpi numbers, yen. What are you watching . A five recent gains near month high, barely budging after the latest inflation data which did show cpi slipped in maine, adding pressure on the boj. The Central Banks<\/a> task is getting trickier. After the year jay, kuroda signaled flexibility amid sinking outlook. Way more on investors that could weigh more on investors. Riskierld return to assets. Ri postal and aggr we have seen a decline for the topix index for things over the course of this year. Paul. Thanks very much. Lets check in on the first word news with ed ludlow. Ed. Ed President Trump<\/a> is downplaying irans claimed a taxonomy be drawn in the gulf, saying a Single Person<\/a> acting alone may have been responsible for the strike. Tehran says the aircraft was an iranian airspace and the shooting is intended to send a clear message to washington. The u. S. Insists the drone was in International Waters<\/a> and the president thinks it was a genuine mistake. Airlines offering to fly Central American<\/a> migrants back home for just one dollar. The carrier says it will take people currently in tijuana, one le havre, back to their countries, providing they can show some sort of idm be willing to take the next flight. Unitingram is called families and will run until the end of the month. Minutes from the last bank of india meeting show policymakers concerned about the slowing economy. The governor said growth have weakened, and headline inflation is expected to remain below the target. The government will present the budget on july 5 and sources say it may include a rise in the income Tax Threshold<\/a> in a bid to kickstart consumption. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ed ludlow. This is bloomberg. Kathleen. Paul. Paul thanks, ed. Coming up next, there is more extradition bill protests planned in hong kong in the coming hours. We will be live on the city streets to get all the latest. This is bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays<\/a> in new york. Paul and i am paul allen in sydney. A number of activist groups in hong kong are calling for new protests at government offices today, saying that demands have not met. Are for carrie lam to quit and for shelled extradition her shelled the shelved extradition bill to be canceled. We are seeing things getting more allowed here. The protest started about 40 minutes ago and we are seeing it we are seeing close to 500 people who have come out to support this protest here. Saw a social we media blast telling people to skip school, skip work, to come out here. The plan here today is to stake out the legislative offices here, the Central Government<\/a> that quarters, and also the Government House<\/a> which is carrie official residence, and to occupy some of those streets, so there could be some disruptions as well on the subway station, the ncr, here today. Mcr, here today. Areave a the headquarters temporarily closed. This is after the government did not give into protesters ultimatum, which was honor our taked or we are going to to the streets once again. The deadline came at 5 00 p. M. Yesterday and you mentioned some of the demands, full of strong of the bill, carrie lam to step down, police to protesters want a full independent investigation into handling of those events on june 12, and of for alllast one there, charges against the protesters to be dropped. But some of the closest allies of carrie lam say it just looks nearly impossible for the government to meet all of those. Kathleen as you were down there covering this and talking to people around you, what is your sense . Are they calmer . Could things get heated again today . Say, butt is more to what we have seen from some of these messages that they are sending out, whether it is on facebook or telegram, is that they are hoping for something more peaceful here today. They are calling this not just a protest by encouraging people to have picnics, to sing hymns. We are seeing it relatively calm here today and we saw Student Activist<\/a>s arriving to speak with some of the protesters here. Plan according to what we have been learning, at 3 00 p. M. , could be to talk about the assault here on the line here of police. We have heard that perhaps 5000 Police Officers<\/a> are deployed here today in light of these events here. Protesters have also asked people that cannot make it out here today to come out in joy thishis rally join rally at 8 00 p. M. Tonight. It could be a long day. Kathleen we know you will be up to it for sure. Thank you for joining us. Chinese president xi jinping says he is ready to play a positive role on the drive to denuclearize the Korean Peninsula<\/a>, calling for a political solution as he arrived in pyongyang. For the firstgun time in 14 years. Our reporter joins us from seoul. What is the mood . What is going to happen now . The most of xi and kim that we have been seeing with their Chinese State<\/a> media and north korean state media. These countries do not necessarily make press releases or release schedules in advance of such plans. Xi jinping said china backs north korea. Stability, development. Analysts we talked to could interpret this into china backing the Economic Development<\/a> of north korea, which requires listingations sanctions as well as supporting talks with the United States<\/a> in terms of denuclearization, so so far, the kim isetween xi and unknown. What we see and state media is this elaborate welcoming committee and pyongyang, but for today, we will have to wait and see. Paul kim jongun says he is willing to be patient. What sort of message does that send to President Trump<\/a> . Back intothis taps what north Koreas Foreign Ministry<\/a> released shortly after the hanoi summit collapsed reachedan agreement between kim jongun and donald trump. This is north korea basically telling the u. S. That the ball is now in the u. S. s court. It is now Donald Trumps<\/a> move now that kim jongun has made certain moves that ease tensions in the Korean Peninsula<\/a>. It is north koreas little jab at the u. S. , saying it is your turn to make a move because they have done so. Paul all right. Bloomberg reporter jihye lee in seoul. Thanks for reporting that story for us. The big interview coming up that we want to fly to you. You can hear our exclusive discussion with the malaysian Prime Minister<\/a> from the asean forum in bangkok from 6 00 a. M. Hong kong time, it 00 a. M. In sydney 8 00 a. M. In sydney. This is bloomberg. Kathleen now for a quick check of the latest business flash headlines. Swissinese love of luxury watches is leading gains in two companies. Better than expected demand for highend products drove the gains. A drop in interest for cheaper models. Is one of the years top performers on the swiss benchmark this year. Paul hong kong clp holdings will take a writedown of up to 900 million on its australian pushes toanberra lower power costs for consumers. The writedown comes in the form of a goodwill impairment. Clp says it expects its first half loss as a result while lower retail tariffs may cut earnings by 40 million. Kathleen Delta Airlines<\/a> is extending its push overseas by taking an indirect stake in partners outside the u. S. Market. It is fine for percent of koreas largest shareholder and expects to raise that to 10 . The deal comes one year after the two carriers began a venture that allows them to coordinate flights to 80 destinations in asia in 290 in the u. S. And nissan are signaling the truth in their simmering borde that come up percent spat, potentially mending relations. But get over to our bloomberg reporter for more. How did this ceasefire, about . Angus come about . It looks like they kissed and made up. Were given seats on the keyboard committees. This is really a source of huge friction in relations between down to newnissan, lows. Renault threatened to block the creation of key governance measures which had come out of the carlos ghosn scandal at the agm, which is due on june 25. Nissan granted these positions now. We understand renault will agree to vote through these measures at the agm. The times ahead for the alliance. Kathleen smoother times ahead. What does that allow them to do . For a start, it means they can address the corporate least,nce shortfalls, at that were identified in the alliance, not just that nissan, but also in the alliance between nissan and renault and mitsubishi, but also, it really allows them to move ahead and work to strengthen the alliance in the first place. They face huge cost pressures and other pressures in the year ahead. Fractures in the alliance are not going to help them address those measures. They will be in a better position to address those challenges, and also, it leaves them a bit of wiggle room to perhaps move forward with the proposal that some might say caused this fracture in the first place, the proposed merger between renault and fiat chrysler. Nissan blocked that merger and caused those talks to break down, so perhaps now that nissan theirnault have mended relations, there is room for those talks to take place in the future. Some say talks are already taking place between renault antioch. Kathleen and fiat. Kathleen when they broke up, it was hard to tell to fiat, beyond disappointed. Angry, shafted. Yours iats position fiats position . Angus it was a groundbreaking merger. It would have created one of the worlds biggest car manufacturing alliances and that is the way the whole industry is moving. You need scale and to be able to share technology. If youre going to be able to make these advances and will make money out of it, it is almost an inevitable move across the hall industry. One Sticking Point<\/a> that still remains in the alliance between mitsubishissan, and is the shareholding structure. No signs that is going to move anytime soon. Owns 43 ofnault nissan and that comes with voting rights. Nissans stake in renault does not come with voting rights. They have always been irked by the french governments say in the relationship as well. Kathleen very Important Development<\/a> that we see today. That was our asian transport editor, angus whitley. Lets review the market open in japan, south korea, australia. A lot of different moving parts. What is at the top of the list . Sophie futures are trading mixed. The nikkei set for games. Ditto for the coffee. Kospi. Coffee the latest trade checks showed exports fell 10 in the first 20 days of june, and with bets rising on boj easing, the bond buying operation will be closely watched. We are seeing jgb 10year futures retreating from an alltime high ahead of that. Checking in on this chart on the terminal, yields sinking deeper into megaterror it negative territory. Traders could go lower of that range. Kamaruddin,phie thank you so much. Coming up, on the next hour of daybreak asia, we will be joined by martin lee. He has been a very strong leader in this movement to try to keep some amount of democracy alive in hong kong. As the protests get ready to start up again, it will be very interesting to get his thoughts. The market open is next, and as i said, a lot more coming up. This is bloomberg. I dont know why i didnt get screened a long time ago. I kept putting it off. What was i thinking . Ok, mr. Jones. Were all done. I told you it was easy. With life line screening, getting screened for unknown Health Conditions<\/a> is so quick, painless and affordable, youll wonder why you hadnt done it before. So if youre over age 50, call now and schedule an appointment near you. For just 149 a savings of over 50 youll receive a package of five screenings that go beyond your doctors annual checkup. Ultrasound technology looks inside your arteries for plaque that builds up as you age and increases your risk of stroke and heart disease. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke. So call today and start with a Free Health Assessment<\/a> to understand your best plan of action. So why didnt we do this earlier . Life line screening. The power of prevention. Call now to learn more. Paul good morning. Asias major markers are about to open for trade. Kathleen good evening from new york. Sophie welcome to daybreak asia. Sophie our top paul our top stories this friday, asian stocks with a muted start start. The dollar falls the most since january. Tension clears in the gulf. President trump doubts it was intentional. Kathleen hong kong braces for more disruption as demonstrators continue to govern. Their demands have still not been met. Lets head straight to the market action. What you seeing, sophie . Sophie we are seeing divergence for the topics in the nikkei so far this morning. We do have cpi data to depend with contend with. Change after that latest inflation data which showed cpi slip in may. Taking a look at the mood for the cost be this morning, we are seeing it higher while the korean wons length yuan strengthening yet again. We got export data this morning. Thements fell about 10 for first 20 days of june. Taking a look at the mood in sydney, the s p 200 gaining ground. Dollar is steady as we see traders price in a 70 chance of an rba rate cut in july. Westpac seeing another bout of easing in august. We do have the index 50 gaining while the kiwi dollar is under pressure. Very much. S lets check in on the first word news with ed ludlow. At President Trump<\/a> is downplaying irans claimed attack on a navy thrown in the gulf, saying a Single Person<\/a> acting alone may have been responsible for the strike. Tehran says the aircraft was in iranian airspace and the shooting is intended to send a clear message to washington. The drum was in International Waters<\/a> and the president thinks the shooting was a mistake. I find it hard to believe it was intentional. I think it couldve been somebody who was loose and stupid. Thatll be able to report and you will understand exactly what happened. It was a very foolish move. Paul congress sophie congress has issued a rare reputed trump, blocking to voting to block on trails sales to saudi arabia. The resolution passed but the numbers did not reach the two thirds majority needed to override the potential veto. The chinese president says he is ready to play a positive role in the drive to denuclearize the Korean Peninsula<\/a>, calling for a political solution. He met kim jongun at the start of what is the first visit by chinese leaders to north korea in 14 years. The two sides are expected to coordinate the reproaches to the current standoff with the United States<\/a>. The race to become the next u. K. Prime minister is down to a field of two. The face of brexit, boris john chen, extended his lead, winning 160 votes. The last remaining rival jeremy hunt has the backing of 77 mps. They will compete over the next month for the support of about 160,000 grassroots tories with the winner being announced in late did i july. This is bloomberg. Inflation isans flowing again. Down a tense from the previous month. Lets see what this says about the economy and what it means for the bank of japan. Our columnist is in sydney. You always have something there refocused to say. We know what a big deal this is for the boj. Y have not had there to their targets. What you think do you think . You need to get perspective here. Dont mean kathleen i mean the debate about japan generally. It is perceived to have failed. Fill that what . Failed at what . Lets go to the month that shinzo abe was elected. Cbi had been consistently in negative territory. We are no longer talking about cpi in negative territory. There is too much attention paid keep missingt two percent. Which Major Central Bank<\/a> is consistently hitting their target at the moment . Japan is held to a different standard. It is troubled. Paul what can the boj realistically do to address this inflation problem . Dan whats interesting is that for all the talk about central bankers being out of tools and what we areition, hearing from the Major Central Bank<\/a>ers in terms of their remedies to address the current slowdown, is exactly the same toolkit they have used before. They are talking about going deeper in. The show made a great point earlier. Fiscal policy is letting corroded down here. Kuroda down here. Remember what happened the last time the consumption price was increase. Cpi was on its way towards 2 . What followed was a recession. Hes not getting a ton of help here. Paul Bloomberg Opinion<\/a> columnist dan moss, think you for joining us. Breaking news out of brussels at the moment. Tusk about tonald speak. A couple of news lines coming from the eu. Proposals against turkey are not going to be soft but perhaps more portly, theres an ongoing wrangle about key leadership positions at the eu. Donald tusk says theres no lead candidate to lead the Eu Commission<\/a> at the moment. There are questions over who is going to be at the next head of the ecb as well. To keep an things eye on an eye on coming out of that press conference happening right now in brussels. We will watch that for you. For now, lets get back to japan. Our next guest says japan is still worthy of investor interest. Joining us now is the Deputy Portfolio<\/a> manager at antipodes partners. Japan . Ou go to invest in good question. The interesting thing about japan is that, yes, inflation is missing a socalled 2 target. The previous figure, where did it come from . Look for they are going. One of the key interesting things from our point of view in japan has been that corporate has been very open to talk to shareholders, engage behind the doors. Seeingent banks are great opportunity for japanese corporates to restructure. Sony up the moment is in discussion about being breaking it up, the parts are worth more than putting it together. We like another business called honda motors. Has fantastic leadership in motorcycles across emerging markets, in india, indonesia. It could alone justify the entire valuation of the company. Those are the kind of opportunities we think, we have reform stories, i think japanese corporates are more willing to engage. Not all, but some are more willing to engage. You have to find those ones. Paul the bond market in japan tells a very odd story, doesnt it . I want to bring your attention to this chart on the bloomberg terminal. We have the japan 10 year yield, negative territory now. When you look at that, what do you think . A strangehink its world we are in. , if you had asked me would youars ago, expect half of the worlds global bond markets to be a negative territory . I would think absolutely not. To the extreme Monetary Policy<\/a> action being taken by Central Banks<\/a> in the name of trying to achieve 2 inflation. Frankly, we might be there but we may not be measuring it correctly. What does it mean for investors . The chase for yield is on. Particularly in savings versus japan. There is a huge demand for real assets. We like a Company Called<\/a> mitsubishi states, a leading commercial property where rent is going up in tokyo. This story play out in other markets like sweden or even in australia. View,k from our point of it highlights that we are in this environment of easy Monetary Policy<\/a>, for whatever reason, and investors have to justify Good Companies<\/a> that can survive and thrive in those kinds of environments. Kathleen it touches on what dan moss just said. Basically, japan may not keep its inflation rate but the growth has been decent. Theres a lot of pluses for the economy in that way. The policies have succeeded. Are you going to be concerned about yield . Bond yields are slow and equities have risen so much. Some people are wondering about where it is going, particularly when it comes for reaching for yield and taking on too much risk. Sunny that is spot on, i think. The incentives that central are not aligned with the incentive of private markets. We have a situation today where their release Monetary Policy<\/a> is definitely building up some risk around the world, particularly in the u. S. Corporate bond market. Corporate debt has exploded over the last several years. There will be a situation in the future that we will have to deal with. Whilst we do think the fed is probably going to cut rates, i think the current Federal Reserve<\/a> governor has a very tough job in terms of trying to navigate out of these very easy environments. Perhaps what should happen more is thinking about Financial Stability<\/a> risks. That is where the pboc takes a different approach. They are clearly worried about s,e buildup in their corporate particularly the state owned ones. The pboc is much more willing to lean against a strong chinese economy to control those risks. It might be one of the few Central Banks<\/a> that is really willing to be that cyclical at the moment. Kathleen they have more ability given whether economy is. In your notes, you think the chinese economy is better than some others due to the stimulus succeeding. How strong do you think it is . What does that mean for investors . People might want to pick up stocks in a market where people are afraid to go. Sunny yeah. Look, we think the Consumer Store<\/a> remains in pretty good health. One difference to last year slowdown was the chinese authorities didnt appreciate how tight monetary conditions were. The trade war really surprised a lot of businesses onshore. Towardernments attitude private investment wasnt very favorable. That has all changed. The chinese authorities are far better prepared. Monetary conditions have eased. The Chinese Consumer<\/a> is in good health. There is good opportunities to find these longterm structural winners in china. We like a Company Called<\/a> young china. This is the leading Restaurant Business<\/a> in china. Kfc and pizza hut. Its a growing business. Perhaps the only foreign player who has the ability to do so given their skill, reach, operating in china since 1988. Thats quite an exciting story as they roll out into the cities. It is a company that has invested heavily in digital, something that a lot of foreign players are now getting their heads around. It has been ahead of the curve in terms of driving loyalty on its own app. Doing its own delivery network. We quite like that story. Paul stay with us. We will get some more from you in a moment. We will discuss some more of your favorite top stock picks. That is coming up right after this break. Kathleen later, apple pleases the Trump Administration<\/a>. Keep it right here. This is bloomberg. Kathleen our guest is still with us. He Sees Opportunities<\/a> in china and india despite trade tensions. So many people, Foreign Investors<\/a> are trying to invest directly. Many get discouraged by all of the red tape and obstacles they find when they go into india. You see opportunities. Where are they . Definitely some headwinds at the moment with a slowdown in the corporate cycle. Against that, we have a reserve bank now cutting rates. Something that shouldve happened 18 months ago is coming through now. The good thing about the indian ,tory, you are starting off household gdp is 11 . You are operating in a system where people stall getting mortgages for the first time. That pays a very favorable backdrop. Our preference is to be very highqualityh banking franchises in india. The two stocks we like our hcfc bank. Sectore leading private business. , irrespective of what is happening on the tradeate size or this war side. It is a function of a country that is underpenetrated. Primeen when you look at minister modis strong reelection, when you look for investment opportunities, where you think this is going . What will you be waiting to see . Sunny right. I think there are a couple of steps that they have taken that have been quite positive for the long run outlook for india. One of them being the reforms simplifying the taxation for small to medium enterprises. Int has been quite positive the sense that it has brought in a lot of companies from the informal economy to the formal economy. That creates better opportunities for banking leads and services, taxation. The other great reform was the bankruptcy reforms. That i suspectgs that the Indian Government<\/a> needs to resolve is to actually resolve the issues that are currently residing in the state owned banks. They still need more capital. Without that capital being injected, indias Corporate Recovery<\/a> will be slightly sluggish. That would be a big step change if something there happened in growth which is now under 7 . It could get into the mid to high sevens over the mediumterm. That is elusive at the moment. Paul what is your broader outlook for earnings . Asia. E a chart that shows not too optimistic when it comes to earning estimates. Asia being the white line. U. S. Being the more optimistic blue line. Does that underscore your point that you need to be selective when it comes to picking stocks in asia . Sunny thats right. Downroad asian indices are over the past 1218 months. Areas only been in select where stocks have done well, where there has been a solid fundamental earning story. Business has navigated the tougher economic environment. Asia, itthing about has been a stock market for the last 18 months. It has not been a broad brush of liquidity coming to the region and lifting all above all the books. That probably going to stay the case. Its a difficult market to mag navigate through. We have significant uncertainties in trade. That is clearly a big deal for china and Corporate America<\/a> in the u. S. I think you just have to be selective. You want to be backing structural winners. The real interesting thing from our point of view, the market is paying off structural winners in the u. S. Structural growth in asia is cheaper. If one the opportunity looks through all the trade noise at the moment. Thanks very much for joining us today. There is plenty more to come on daybreak asia. Stay with us. This is bloomberg. Paul apple is making a clean to the Trump Administration<\/a> to not move ahead with tariffs on a new slate of products imported from china. Joining us for more is bloombergs china correspondent in beijing. Selena, how did apple frame its argument . The first time apple has called out the iphone specifically as one that could be impacted by these tariffs. They said this would impact nearly all of its products. The main framing was about the impact it could have on the u. S. Economy. It is responsible for about 2 million jobs in the United States<\/a> and is one of americas largest corporate taxpayers. It explained that this also hurt apples Global Competitiveness<\/a> because many of its rivals globally are from china and they arent subject to these tariffs because they have a small market here in the United States<\/a>. The entireens lucrative setup up that apple has created over decades in which they design their products in the United States<\/a> but it is assembled in china and sold back to the u. S. This depends on the free borders of goods across as well as cheap labor. Both of those issues are potentially being upended. Could applehleen move production out of china . Selina in china right now, apple employs millions of people. Through that employment, they have built stronger ties with the chinese government. If they shifted out of china, that would mean the loss of many jobs in the country. Igo put at risk the sales of its iphones and other products in the country. We have reported that apple is asking its suppliers to consider moving a portion of their supply chain outside of china. Analysts have noted that this is andedibly costly timeconsuming. It could take up to three years. Some believe this is just, apple has too much riding on china. It is the linchpin of the company. It has no option but to remain there. Paul all right. Thanks to our senior china correspondent. Lets get a check of the latest business flash headlines. South korean clothing retailer is considering a sale of its chinese business. The companys has held talk with potential advisors on the sale could raise 200 million. Its first brand store in shanghai in 2004. It distributes throughout china Via Department<\/a> stores. Kathleen Delta Airlines<\/a> is expanding its push overseas by taking a stake in a partner outside of the u. S. Market. It is buying 4 of its largest shareholder, and expects to eventually raise up to 10 . It comes in year after the two carriers began a venture that allows them to courtney flights to any destination in asia and 290 in the United States<\/a>. Paul tesla sank amid new doubts amid profit about profit and demand. Tesla has fewer levers to pull to stoke interest. The Second Quarter<\/a> may have improved but twitter level that is likely not sustainable. Elon musk has said sales could hit a record this quarter. Kathleen up next, protesters are gathering at hong kongs government headquarter. We will be live on the city streets to get all the latest. Things seem fairly calm. There is some concerns things could get heated. We will be talking about why this is such an important leading with a proponent of democracy in hong kong for many years. This is bloomberg. Paul ed this is daybreak asia. Japanese inflation slit last month, adding pressure on the boj. Forecasts that price gains will weaken further. Consumer prices excluding fresh food rose in may from a year earlier. More than the median estimate. Inflation is expected to slow later this year on lower mobile charges and free preschool education. From the last reserve bank of india meeting show policymakers increasingly concerned about the slowing economy. The governor said growth is clearly weakening and headline inflation is expected to remain below the target of 4 . The governor will present the budget on july 6. It may include a rise in the income Tax Threshold<\/a> in a bid ticket start consumptions. To kickstart consumption. Hilarious is offering to fly Central American<\/a> migrants back over one dollar. It will take people currently in tijuana and mexico city back to , el salvador, or guatemala providing they can show some form of id and be willing to take the next flight. The program is called reuniting families and runs until the end of the month. Has welcomed nissans decision to grant a seat on the board, signaling an end to a spat that has upset their longrunning alliance. Relations sank after the renault chairman threatened to abstain from voting on a government plan next week. Now nissan will give her no a place on the panel and renaults ceo a seat on the thought a committee. Onbal news 24 hours a day air and out tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Kathleen now its time for a market check with sophie. Asian stocks looking tepid early in this fridays session with a regional benchmark looking little changed after a three die rise. She is going pretty much know where this morning while the yen is holding euro five month high. Little reaction to slowing cpi data for may. The korean yuan has deepened its earlier jump. We had slumping imports, a big red flag. I will check in on bonds which are steadying after the week rally. Are backing away from the lower end of the boj target range. Taking a look at treasuries, they are resuming gains early in the Asian Session<\/a> with the 10 year yield extending the deadline and the twoyear yields moving further south below 2 . Aussie bonds are steadying after sliding on the governor of firming and easing bias. A quick check on wirp on the terminal. That shows that traders are seeing more than 75 chance for a july rate cut from the rba. That has brought forward its rates to july. Barclays has changes forecast for one market. The higher chance of easing seen in november. Barclays has trimmed its outlook for australia through 2020. A quick check on some early movers in asia. That sales reports talks are facing difficulties amid disagreements with south korean leaders. Csl a slumping the most in four months. The company said it would get lower sales ads as it shifts to its undistributed. Paul hong kongs government headquarters are temporarily closed today. Protesters are gathering in increasing numbers outside, saying their demands have not been met. Among the requests, carrie lam to quit and for her extradition bill to be withdrawn completely. We are down there. What is happening . Well, we are seeing the crowd here grow. The protest started about 90 minutes ago. We have seen here more and more people coming in. It has been peaceful so far. This is after a social media blast we saw from the organizers to get people to skip work and class to make it out here outside of the government headquarters today. The other planets to stake out the Government House<\/a>, carrie lams official residence, possibly to occupy some of the nearby roads. Yesterday, the government did not give in to protesters ultimatum here to honor those demands. 5 00 thursday or they were going to plan another protest. We spoke to a lot of critics, saying that the apology we saw from carrie lam earlier this week, she has apologized twice. It is too little, too late. Her allies tell me it is nearly impossible to honor all of those requests by the opposition. Kathleen if thats the case, whats going to happen as people gather . Could things get heated up again today . We will certainly see the crowd growing. Hundreds ofis about people here, many more than 500 or so. We have heard that there are 5000 Police Officers<\/a> that will be deployed outside of the city here today. It has been quite a tame group. Are publicizing this protest as a picnic, a place for people to gather and sing hymns. I spoke with a Student Activist<\/a> yesterday recently, the plan is to send up and see how police respond. They are encouraging people who have not been able to show up today, after work, they will be gathering your once again. Kathleen thank you so much. We will continue to wait for her reports. , as bring in martin lee former Legislative Council<\/a> member. Its great to have you with us. Thank you so much. You wrote an oped recently saying that extradition bill is the worst assault on hong kong law and democracy ever. Who is this all coming from . Why is it so dangerous . Martin there are all sorts of theories as to where it originated from, hong kong or beijing. I do think we need to spend time on that. Wherever it came from, its a really bad idea. Hong kong is a very special situation. It has two systems. The hong kong system is separate. Or 20 years now, after the handover, fugitives from justice from china who are now in hong kong would not be transferred back to china for one simple reason. We dont trust their judicial system. That is why a lot of countries will not sign extradition agreements with china. China allows hong kong to enter into extradition agreements with these countries. We trust their judicial system. Why change now . The only justification is that the judicial system in china has now improved up to international standards. That is not the case. We all know that. Why change . Kathleen you think that the u. S. May be one of the targeted countries. What is a set on. Martin the bill would make it possible for any person in hong though the plane is forced to land in hong kong. As long as you are physically in hong kong, the law would enable the Central Government<\/a> to apply to the hong kong government. Have you arrested and brought to china for china trial. The moment you set foot in china, you will be made to confess before cameras and you are convicted of any offense which they want you to be guilty to. There is no fair trial. No legal representatives, sometimes. Paul longterm, are you concerned about the future of hong kong . The one country, two systems promise expires. What is the fate of hong kong then . Martin i think this is a crucial time for the chinese leader to make up his mind. When we go from here . If he doesnt china change the policy on hong kong, that the Central Government<\/a> has jurisdiction over hong kong, we were promised that hong kong will be given a high degree of economy. Autonomy. Once tohy president xi control hong kong. This must change. It is not an working. It is impossible to be the chief executive of hong kong. The chief executive owes allegiance to beijing and is accountable to the hong kong people. The chief executive is not elected by the hong kong people. That is a problem. Beijing effectively chose every one of our chief executives, including kathy lamb. None of them work. This whole system doesnt work. Thats a problem. This is the time for them to take a deep look and go back to the blueprint for hong kong. Trust the hong kong people. Let us elect our own chief executive. Leave us alone. They are not leaving us alone. That is the trouble. Paul one of the risks, the removal of carrie lam. The removal would leave the installation for another carrie lam. What to protesters do . Do they continue to protest until a system such as the one you are suggesting is introduced . Martin young people know that. That is why the stepping down of carrie lam is not in their ultimatum yesterday. They excluded that. They can wait. The other things must be addressed first. There is no reason why the bill is not completely scrapped. Thateen you just noted president xi has been rewriting the joint declaration, all that great numbers have been chosen by beijing. What can hong kong do . Say everybody in hong kong says yes, we want to change this. President xi has taken control so effectively in china, what could hong kong possibly do to change his mind or exert some kind of leverage to make the kind of change were talking about . Martin i think hong kong people can only continue to demonstrate. I hope, peacefully. So that the rest of the world will speak up for us. In fact, the International Community<\/a> was brought in by china in 1984 when they signed the joint declaration. China lobbied for International Support<\/a> for fear that the immigration tied would not subside. Any government including the u. S. Government, which appointed the joint declaration, and still supports it, has a moral obligation to speak a project hong kong. China cannot tell the u. S. Government to shut up. The u. S. Government said, you brought us into support you. You are not behaving properly according to your own agreement. Kathleen one of my colleagues is asking me to ask the question. What about appetite to review Electoral Reform<\/a> in hong kong . What shape good that take . You have been involved in so many legislative struggles. What do you see there . Martin at the moment, there is nothing. Carrie lam has said shes not going to do anything to introduce Electoral Reform<\/a>s. Even though the primary obligation rests on her. If she writes a report to beijing, she can started going. She doesnt want to do that. Thats a problem. We have been promised universal suffrage for the election of both the chief executive and all members members of the Legislature Within<\/a> 10 years after the handover. This is the 22nd year. We dont even know in what will come. When it will come. China continues to interfere with hong kong. All right, founding chairman of the Democratic Party<\/a> of hong kong marginally. Thank you for joining us this morning. Coming up next, food for thought. Its election time at the uns top agricultural body. Fao next. This is bloomberg. Paul a vote for the next head of the food and Agricultural Organization<\/a> will take place in the next few days. Agency thatialized leads International Efforts<\/a> to fight hunger and work for food security. Lets look at some of the challenges organizations will face with one of the contenders for the job. Hes a former georgia minister for agriculture and joins us now. They give so much for joining us. There is a degree of Campaign Rhetoric<\/a> in what you are about to say. You have been quite critical of the human approach to food security. What is your argument . Number one is most important. The numbers. Hungerlion people facing worldwide. Facing poverty. This is the number one argument when we say we are to slow. Decisions must be made quickly and executed quickly. This is the only way we can go forward. Kathleen what is it that is not happening . Something food as that takes place over a long time. What is an emergency . How is the u. N. Not doing what it could be doing . David there are two sides of this. Naturaly, drought, calamity and conflict that your droids destroys livelihoods. [inaudible] that is for a while. For the long run, as soon as conditions are back to go, we need to start rp their livelihoods. This is very important. You have to do it quickly. This is the role of fao. To have the right policies to back people to their lives. As soon as it happens, as soon as they are back to production, ws destocked their operation and it leads to normal life. You would also like to see greater involvement of the private sector here. That is a bit of an anathema at the u. N. , isnt it . David indeed. Biggest problems here [inaudible] engagedl they are not in a fullscale manner. They dont feel they are real partners. If we do not bring them in, there is no way that we can fight hunger. Progress is coming from the private sector. Their engagement here drives it problem, itthis big will be tackled with synchronized action with the private sector and with a respected government. [inaudible] to compete and go back to assure the rule of law for everyone. In this case, private sector is active in all countries to 194 member countries here. They will be respected. Kathleen it surprises me a bit. The u. S. E thinking, would be trying to engage, get this private sector participants fully involved. You just said that actually, the u. N. And its programs are not trying to do that. They are not reaching out. What is going on . Is it some kind of bureaucratic mindset . Some sense that is passed down from someplace else . David that is something that is very important. I am talkingt, about food and agriculture accor. Organization. Not other u. S. Agencies. I held there is a designated role for the private sector to play. That thiss important one is absent. Successful,se to be you need to imagine yourself in the shoes of the recipient. You need to respect everyone who is asking. Im telling you because i have been through this process. I have been in many poor countries for years. I remember when they granted my request for assistance. Me,member everyone telling you will leave your proposal here and my secretary will call you after one month. Nobody was calling. When you are supposed to help someone, you must feel that they are in pain. No, you must is grab this answer quickly. Kathleen before we let you go, tell us about this partnership, this Mechanization Program<\/a> that you started with john deere. Thed this is one of movements that will be moved here. It is a publicprivate partnership. In seniorment, i was management of cultivating new frontiers and agriculture. The company is based in washington. Negotiations, we are a start starting a project african countries. It is just a pilot. This is something that brings down business toward to assist privates farmers who cannot afford tractors, to rent it and to make more active productive. It is an indispensable part of achieving food security. Kathleen we can imagine what that would do for poor farmers in africa. Thank you so much. The former minister of agriculture in georgia. We tried to contact chinas minister for comment but we got no response. More ahead on daybreak asia. This is bloomberg. Kathleen the 34th aussie on shawmut asean summit. Our correspondent is in the thai capital where the summit is hosted. This also happening, coming during a challenging time. You bet. Two weeks ago at the g20 finance ministers meeting, we heard how they lamented over easing growth, about the easing of Investment Sentiment<\/a> among businesses. That is exactly being felt here in Southeast Asia<\/a> as well. Take a look at the data out of this part of the world. We are seeing easing psi numbers. Singapore saw its electronics pmi contracting for seven quarters. Very close trading partner, the biggest trading partner for most of Southeast Asia<\/a> nations. A slowing china because of the trade war is pretty detrimental to this part of the world. Trump did here retract from his promise to impose tariffs on mexico. That was a bit of a relief. He also said that he may impose those duties on other countries. The trepidation among these remember, he did single out countries like singapore for possible currency manipulation. He did sing about single out countries like vietnam and thailand for the trade that they have with the u. S. They are all under scrutiny. These nations are not in a comfortable position after all these years of being strong allies of the u. S. In that regard, d you anticipate any sort of statement from the nations in regard to trade talks . Think theres always this question whether at some nations will asean have to choose between the u. S. And china. For this meeting, the Statement Issued<\/a> will reflect that it neutral. Tain it needs both the u. S. And chinese glee. China has been funding a lot of the Infrastructure Projects<\/a> here. One needs 400 billion for infrastructure development. 180hilippines needs billion. Where will the money come from . It needs to balance between the two giants. Paul thanks very much for joining us. We will rejoin with big guests from the business honor summit later on sunday friday. After that, our guests include the union bank of philippines chairman and bangkok Bank President<\/a> as well. Thats it from daybreak asia. Stay with us. Market coverage continues after the break. Beijing, shanghai and singapore. Markets o asian open. Were counting down to the opening of the last trading in hong kong. The main line for the, were lets get to your top stories. Asian stocks giving up a lice of their biggest gain since january. Investors waiting for the bond buying operation as yields linger near the bottom of the target. Rose the most this year as tensions fled in the gulf. Iran shot down a u. S. Navy drone. Resident trump said it was a big mistake. 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