A reaction that could further destabilize the global economy. And huawei vows to continue its campaign against u. S. Restrictions on tech. We will be hearing from the security chief a little bit later on this hour. Shery lets get you started with a quick check and how the markets are trading. U. S. Futures are down a 10th of 1 . We saw a fade in u. S. Stocks, giving up their gains after President Trump announced the executive order targeting social Media Companies. This coming at a time when u. S. China trade tensions continue to rise. We are seeing tensions over hong kong. The s p 500 fell for the first time in four days, and recent out performers, like bank and energy stocks, fell 4. 6 . Twitter falling almost 5 . We did get encouraging news with betterthanexpected economic data. Continuing jobless claims and capital goods orders providing some support. It is looking like we are shaping up to be a mixed start to trading here in asia. We are seeing for japanese futures, a little change when it comes to tokyo. Futures trading softer in sydney , edging ever higher in hong kong. New zealand, we are trading is already underway, we see upside of about half a percent. New u. S. Pecting policies with regard to china from President Trump on friday, and that could fit the direction as to the next part of his rally this rally. Lets get more on President Trump and what could potentially contain these new policies he is set to announce. This after beijing passed a Controversial National security law curbing nims in hong kong curbing freedoms in hong kong. His top economic visors said that china would be held accountable by the u. S. Tom, we heard from larry kudlow essentially kind of reflecting on what mike pompeo said yesterday, which is that they can no longer treat hong kong in a different way than they treat china. That throws open a lot of possibilities. What do we think of trumps announcement . There is a range of options on this, and but we could hear from trump is possibly a targeted approach in terms of certain sanctions on certain individuals within hong kong and within the chinese policymaking apparatus. You could be looking at visa restrictions, and asset freezes, but as you suggest, ultimately, trump could say hong kong would lose a special trading status with the United States that it has enjoyed since 1992. That would have major implications for the relationship between not just beijing and washington, but that broad economic relationship with hong kong and the rest of the world as well. Kudlow came out and said china had made a huge mistake in passing this National Security law for hong kong, which they did at the end and towable National Peoples conference yesterday, that they robbed this is kudlow that they had robbed hong kong of their freedom and we cant let this go unnoticed. Deal, which both sides agree on for now, remains in place, but for the moment. This could be consequential. Does he go for a targeted approach or a much bigger step, which is removing that special trading status . From we are hearing carrie lam issuing a letter to citizens saying the hong kong legal system is inadequate to safeguard the National Security, that the National Security law is a duty of central authorities , and over the past year, the Hong Kong Community has been traumatized. We have continued to see those protests. The objective is to prevent the andersion of state power protect National Security. We dont know it the exact details of the law as of yet. By also, in this statement the chief executive, it alludes to the fact that the law that hong kong really failed to pass this National Security law over the past two decades. Tom thats right, they have been trying to pass this law since 2003 at least and have failed. When they tried to pass it, it sparked demonstrations in the city. This is why beijing has decided to circumnavigate the Hong Kong Government and get this law imposed. Yesterday, in terms of signing off and voting on this bill, it was a major step in that direction. China has said consistently that this security law would be relatively focused and targeted on certain number of acts, that it would not undermine the autonomy of the country or the city or the freedoms of the people or foreign investors. Of course, the recent history of hong kong is enough for the pro democrats, the antigovernment people in the city to look at and say, we are deeply concerned, when you have people being abducted from hong kong, when you have certain curbs on press freedoms already in the city, how and why can we trust beijing to put in place a security law that does not further curb the autonomy of the city . That is why it is facing a backlash not just from people in hong kong, but from the International Community as well. You have china suggesting it can help repatriate hong kong citizens. The u. K. Is looking into it as well. And we have a robust response from the u. S. Shery Tom Mackenzie in beijing with the latest on china and hong kong. More analysis on chinau. S. Tensions ahead. Years asfman boasts 30 a resident analyst and Business Developer in china. He joins us later. Plus, huawei caught in the crosshairs. We will ask its chief Security Officer in the u. S. How long the company is prepared to fight the order. Still ahead, trump lance to punish social Media Companies for how they plan to please for how the police content. This is bloomberg. You are watching daybreak australia. Global Coronavirus Infections are approaching 6 million, with deaths approaching 360,000, although the rate of growth is continuing to slow. Lls the cliento for the first time in the pandemic, a sign people are starting to return to work. For 40 ofaccounting daily debts from covid19. Worthsays the economy is reshuffling after the fallout from coronavirus, even as governor abe eases the nationwide emergency. The labor market is weakening and Business Sentiment following. The government also revising downward outlook for exports. India continues to be a coronavirus hotspot in asia, with fatalities now surpassing those of china. The death toll has passed 4600 despite the Largest National lockdown in the world. The number of fatalities has quadrupled in less than a month, with infection rates climbing at a similar rate. The government says the outbreak may not pay can till next month, or even july peak until next month, or even july. Manilas lockdown is set to ease on monday, allowing transport to resume amid a record rise daily infections. Metro manila will lift stayathome orders while the rest of the country moves to more loose regulations. Time on, meanwhile, is cutting its for your growth forecast as the pandemic against demand from abroad weakens demand from abroad. Shery President Trump has signed an executive order that he says will limit Liability Protections afforded to social Media Companies, after twitter began Fact Checking his post. Shares of twitter and facebook are currently rising, however, twitter has fallen the most in four weeks since the regular session. Heard President Trump acknowledging himself he expects this to be challenged in court. What is next . Ben i think that challenge is a likely idea. I also think you are going to see, increasingly, a lobbying battle that spreads out in congress, at the federal trade commission, at the federal communications commission. What this executive order does is it takes the Liability Protections companies have. Companies can leave users content up or take it down if they do it in good faith. Trump wants the fcc now to define what good faith is, but the law does not give the fcc to power to do that. The law actually does not give the fcc the obligation to listen to trump. Thats before you get into any of the First Amendment issues of trump coming down on a company that expressed a view he did not like. I think there is a lot of grounds for legal challenge, and i think you will see that if the fcc takes the bait. So, with the early amount of analysis we are seeing, would constitutional . Ben there is a strong case that it might be. Experts i have heard on the left and right suggest that there were big constitutional issues here. The u. S. Chamber of commerce, certainly known to be allies with republicans, came out with a statement and said that only congress can change a law, that trump cant but by executive order. I think it is going to be a real battle. At the same time, you are going to see congress try to get in front of a lawsuit and change something to try to kind of appease the white house. You can see a battle flaring up there as well. We will get more on this breaking story as we get those details. Our bloombergs tech lobbying reporter, ben brody in washington with the latest. President trump lashes out on social media. Partners kim forrest will be with us. Shery its not just the u. S. China tensions that took the wind out of the stock rally. President trump signing a new executive order which will limit the liability social Media Companies benefit from. Joining us for a look at the tech sector and the Broader Market is kim forrest, founder and cio of bokeh capital partners. Always good having you with us. You have been bullish on tech companies, especially when it comes to 5g. Will be see more regulations challenging potential further gains for these tech giants . Kim i think so. Now it seemsight as if the legislation, or the pending legislation, is targeted at social networks, networking stocks like facebook and twitter, it also has been a Long Time Coming that google made too , and that hasd at held that stock down for a while because of its, i guess, dominance in the world of search. So the big get bigger and then they get in the eye of regulators, i suppose, or if not regulators, at least legislation. Shery is this still getting into these tech stocks . After the pandemic, we have seen them be really resilient, acting as a havens for the market selloffs. If we are expecting more regulations to come their way, is it still worth a buy at these valuations . Kim i have not recommended buying these, probably because of the valuations, but also because of consumer preference. If somebody makes a better twitter, people can leave twitter in a heartbeat. Its not that hard. I like business level of tech for the lowest level of tech like Semi Conductors. Is it a good time to buy . I would say no, but keep it on the radar. Here is the problem with any of the requests that might be made of them to police people. It is going to add to their costs one way or another. That is going to make their andings look even lighter their pe even worse than it is now. Thats the negative side. The Positive Side is they are one of the few places that is still growing with respect to advertisers. That is how they make their money. We dont give them money to post on facebook or twitter, so they get it from advertisers. I think that is the key thing, will advertisers continue to want to be on these platforms . The answer is yes, they know where the people are. Want you to take a look at this chart, because the last few sessions have given a hint of what could be the start of sector rotation, both in terms of size and style. Chart,to throw up this what it is potentially telling us. We see mega caps could see a bounceback. If you take a look at the new york relative strength index, it is starting to show that momentum is starting to turn bullish. Does that tell us there is still further to go when it comes to this rally, and that maybe it is too soon to talk about any kind of decisive rotation . Kim i agree with you, because the mind of the investor is on the recovery. As long as we keep getting news that there is a recovery that is some people are moving out and about, i think the investor is generally happy and wants to invest in what is working still. Again, i go back to the big mega caps, with the exception of microsoft, all kind of serve consumers. I think consumers are still they are still spending and advertisers want to reach them. Social networks and things like netflix are still popular. Start, then, kind of rotating some of that allocation away from the stayathome type stocks like netflix, which had seen a bit of downside, but more into the go out, the reopening stocks . Kim i would, but i would stay away from things that are kind of tenuous with respect to Balance Sheets. Its going to take some time for people to come back. Things like restaurants, and you have to look at their Balance Sheet to see if they can support lower volumes of people and have a small and a footprint that small enough footprint that they are not spending too much money to serve these consumers. I would take a look there. I would stay away from things like cinemas, because that does not feel like that is where people want to go. I would look to that, but i would also look to longerterm things like internet of things and 5g. Kim, we are running short on time, we are going to have to leave it there, but thank you for joining us. Credit marketsto has managed to bring liquidity back to nearly precovid levels. Citigroup is cautioning over unsustainability. It ceo spoke exclusively to bloomberg about the longerterm cost of market dependence on fed stimulus. Seee dont want to consumers, Small Business, big business come out of this in an indented disposition that is just unsustainable. The thats why we keep seeing in a number of these programs that they have been structured in a way that they are actually grants or have aspects of forgiveness in them, provided the money is used appropriately. The government is thinking about the same thing. We dont want to end up with an economy where our consumers and businesses are saddled with unsustainable levels of debt. The u. S. Has to go into this with a position of strength in terms of growth rates, from a monetary perspective, not without some challenges. Things on the monetary front that could necessarily be used with highimpact today, which leads the fiscall, and programs being put in place in terms of Small Business lending, payroll protection, main Street Lending programs that are out there, and that clearly will take up the levels, or as some people would say, balloon the feds Balance Sheet. Either way, other Balance Sheets weve got to be mindful that we dont want the u. S. Government or other governments to come out in a position that the debt at the federal level is untenable. Again, we are likely to be in a Slower Growth environment for an extended period of time, and weve got to make sure that we have created that balance in terms of people continuing to have confidence in terms of not just the u. S. Government, but governments around the world. In your mind, how does the government exit, as it were . There are some people who say they government does not need to monetize the debt, embrace modern monetary theory, and there are others who say as soon as it is practical, we are going to have to raise corporate taxes. We may have to raise taxes on wealthy individuals. We may have to start to chip away the amount of debt we have created as a result of doing the right things to fight this crisis. Again, i think that as you look at this, we have been in this extended period of fairly lax or easy monetary policy, not just in the u. S. , but around the world. If you go back and look at the fed Balance Sheet coming out of the last financial crisis, they were on a path on a trajectory of getting that down to levels that people would become much more comfortable with. Obviously with this, we had to go back in the other direction, as we try to get to the other side of this and hopefully come out not to just the future, it is going to be back on the table. A couple of things are out there. One, the u. S. Does continue to be the worlds preeminent reserve currency. When you look at our auctions and others, it has a very strong Borrowing Base and therefore has capacity. The second piece of it, and i dont want to be lulled into a false sense of complacency, but low Interest Rates impose a very low cost in terms of the u. S. Government r. O. E. To be able to fund these probe u. S. Government borrowing to be able to fund these programs. Weve got to be mindful in terms of the absolute and relative levels of our indebtedness, and we do have to have a trajectory to get back to a more sustainable level over time. But i still think we are in a reasonable place right now, and it goes back to how long this goes on for and what needs be in the future, and when it will take from governments around the world to be able to support their economies. We dont know exactly what the path will be like, so weve got to be very mindful of that. I think the u. S. System, lifesaving comes into this from a position of strength. In the first quarter, you saw us build considerable reserves. We built almost 5 billion of. Dditional reserves we have 23 billion dollars of reserves set aside right now. We will continue to watch, as we go forward as you can imagine, the calculations and modeling we do remains very sensitive to unemployment, very sensitive to gdp, to housing prices. As we continue to look at what we think the future trajectories are of those, we will continue to make appropriate d