tv First Up With Angie Lau Bloomberg June 17, 2015 7:00pm-8:01pm EDT
track.still on the 17th said improving labor market means gradual tightening remains likely to hear. bracing for a breakdown. minister sayse he's ready to embarrass possibility for rejecting an unfair deal. responsibility for rejecting an unfair deal. plans to fly nonstop to new york. up," and angiest
lau. the fed has a signal that the pickup in the u.s. economy is keeping it on track to raise interest rates later this year. speaking after wednesday's meeting, chaired janet yellen says tightening will be gradual -- the feds would not allow follow and mechanical formula. she also says she anticipates conditions could support a rate rise but there should not be too much focus on the actual timing of the first hike. the importance of the timing of the first decision to raise rates is something that should not be overblown, whether it is september or december or march. what matters is the entire path of the rates. and as i've said, the committee anticipates economic conditions that would call for a gradual evolution of the fed funds rate towards normalization. angie: let's get more on the
announcement. chris condon joins us live from washington. what can we gain from her comments? reporter: hello, angie. we have a two level message from the fed today. a bit of a hot, short-term message. ,he longer term -- hawkish short-term message. the saidr term is that intends to go very slowly. we had a statement telling us that they are intent on raising this year. they talked a lot about the improved state of the economy compared to the dismal slumped we saw on the first quarter. that all sounds very encouraging. she gaveroader message was, don't get too excited about one rate increase. it won't type things too much. after that -- it won't tighten things too much. after that, we will proceed very
cautiously. i think it sends the message that in the short term they are feeling good, but they still don't have a great deal of confidence about how sustainable economic growth is in the longer term. angie: how about those much discussed docs here? live about the quarterly forecast? dots referred to the forecast that the members -- all of the 17 members of the make regarding where the fed funds rate is going to be at the end of every year. then they arrayed the forecasts on a graph and thus, you get the dots. the interesting thing about the dots was that they certainly moved to. so where they expect said funds to be at the end of the year felt. -- fell. if you look at the average, it is quite interesting.
i don't want to say substantial, but a notable move down. there are fewer members that expected there to be two increases this year. janet yellen would still have us believe they are still on track for september and perhaps december. they havets show us left confidence there. they are not as confident today as they were before that we might see two increases this year. angie: interesting. of course, all eyes on economic data. thank you so much for joining us. let's get all the market reaction to the fed decision. here is david. david: good morning. it is all about the dots, certainly. those forecasts are basically it's important to look into context what happens overnight.
to quarter-point increases. that is the forecast. 500, a fraction of. volumes were consumers leading the way. the bigs index fell. -- vicks index fell. that is as far as u.s. listed chinese equities. asia, new zealand is open. down about a fifth of 1% on the index. look at the bond markets, we are at 232 right now. look at the session yesterday. eight or nine basis points, 232 brings us back to levels of early last week. that is a one-year look of how yields have gone up and down. we are still down 10%.
this is the important thing. from 140 or 142, i think this was the end of january. on thestill up about 40% 10 year u.s. yield. i mentioned that the u.s. were to 32 right now, down about points. eight basis japan yesterday, at 40 8/5 for that. moving along at the dollar index. a very important gauge. it dropped to a one-month low. a fairly steep drop on the dollar index. 94 29 is the level right now. dollar yen, where are we? 123.48. there we go.
big drop in dollar yen. we are looking at dollar strength compared to this morning, still flat. 123.48. oil prices, let me end with this. back below 60. a big drop there. gold getting a spike up. of a few points. somewhat flat for australia. futures, down a few points for that. back to you. angie: in other news, official eu nations including germany say they are bracing for breakdown in talks over greece. alexis tsipras says he is ready to assume responsibility for the consequences of rejecting a deal with creditors. euro area finance ministers are preparing to meet in luxenberg later today as a last chance to seal the deal on as much as $8.1
billion in bailout. talks have stalled over what greece perceives as overly stringent requirements for the package. is falling in extended trading after the company missed estimates. 5.4% toal reports fell $10.7 billion. hurt by currency population and sagging sales. at eight --e was 70 $.78 per share. jp morgan vice-chairman jimmy lee has died suddenly at age 62. he was exercising at home when he fell short of breath. he was taken to the hospital, where he died. the investment baker has worked for jp morgan since 1975. he was involved in some of wall street's biggest ipo including motors, andl
alibaba. he is survived by his wife and three children. the wearable devices maker fitb it has priced its ipo at $20. leslie picker has been tracking this for us in new york. what is the investor appeal? why did it grant -- generate greater than expected? this company generated more than $250 million in proceeds from when they first showed it -- started their roadshow. they have increased shares. they pressed about that. that is tremendous demand. fitbit thatbout could generate such demand? in thewer is largely finances. this is a profitable company. this is a company that is one of only four tech companies that have gone public this year with a profit. that has investors excited.
it is also posting tremendous growth. in thetripled in sales first quarter of this year, compared with last year. occupies 85% of the market share for activity trackers in the u.s. does really stand out to investors when it comes to ipos. angie: what are you expecting in terms of the trading tomorrow? theseer: typically with companies, bankers like to target a 15%-20% discount where public market investors would value a share. we like to see at least 20% of a pop in first-day trading. with consumer names, you get a lot more retail investors. individual investors who are not just sensitive, who don't just look at the increases in prices as being something that makes the stop more expensive, but something that makes it more in demand. they do tend to buy on the first day of trading. they are less price sensitive.
we tend to see that first-day pop especially with consumer tech. when you look at companies like , they searchedy at least 30% in the first day of trading. angie: good to track. leslie picker, tracking all of this for us out of new york. inc. you. singapore airlines is hoping to reclaim the title of world's longest flight. the carrier says it is in talks with airbus and boeing developing a plane allowing it to fly nonstop to the u.s. profitably. haslinda amin joins us for more. how important is this direct flight to the u.s. for singapore airlines? haslinda: it is important. it will fill a gap in the network, now being filled by rivals like qantas. it was not too long ago that it flew and all business daily 19 hour flight from the lion city
to l.a. and new york. it was forced to end the roots in november 2013. they were just not comparable -- profitable. in particular, the 83 4500. air ceowhat singapore told me in an exclusive interview. >> currently there isn't really a viable aircraft that could fly nonstop. we used to fight the 8345, but that is not enough, a four engine technology. haslinda: currently they fly to new york via frankfurt. to houston via moscow, and to california via hong kong seoul and tokyo. you have to add five hours. there are viable intermediate points, but that is because the countries have not given the
approval to operate. angie: that's a problem. a lot of challenges. what are the options? it is looking at increasing its partnership with the likes of air new zealand, these would provide more destinations. it also plans to develop outside singapore to give it a broader network connectivity. case in point, india, has gone into a joint venture with thailand. these would hopefully feed into and expand the current network. haslinda amin out of singapore. thank you for that. you can get more of this exclusive interview with singapore airlines ceo and all of the day's top stories at bloomberg business, bringing
together the best of bloomberg and new digital content all in one address. bloomberg.com, why that 300% instant returns on china ipos are suddenly vanishing. drivefacebook's diversity and a look at why it is y ruleenting the roone doing its process. that is bloomberg.com. coming up, the feds in focus. reaction to janet yellen's comments with our next guest who seems best season signs of a turnaround. you are watching "first of. up." ♪
the china backed election plan. on vote is expected later thursday. after six hours of debate wednesday, none of the legislative council pro-democracy members say they would support the plan. the bill would allow a citywide election for the next chief executive in 2017 from a list of candidates approved by beijing. continuing and parts of southern china following record rainfall last weekend. swollen rivers have why still he and caused landslides. heavy rain also caused flash flooding in shanghai, prompting a social media storm about the poor drainage system. final testing is underway on high-speed rail. the $7 billion line runs from a city in the north from -- to the southeast fujian robbins -- profits. it goes through some scenic
spots including mountains and villages famous for ming dynasty architecture. back to the markets. palladium sells for a fifth -- fell for a fifth day. as -- and internet security company received an $8 billion takeover. trip advisor was the biggest gainer on the s&p 500. shares jumped after announcing a partnership with marriott international. markets, stocks rose after the fed signals. it will raise rates after a gradual pace. ivan att more from national australia bank. it is very good to see you. when you heard the comments from janet yellen, what was your reaction?
a lot of people felt it was a less than expected. guest: i think they downgraded this slightly for interest rate expectations before the end of the year, and also as a consequence to next year. the five saide governors only expect one increase this year. think the one or two increases. i think you can't really get three increases and remain consistent with a slow increase. , think 10 expect to increases and seven expect one or no increase. increases., two i september i think we will have another three. i think we look at a good update on unemployment. numbers print all right between then and december, we
will probably get to rises before the end of the year. angie: it is one thing for the u.s. economy to handle it. what about the rest of the world? guest: they will take into account what happens in the rest of the world. it will be data dependent on the u.s., but also depend on what happens globally once they increase the rates. angie: most notable are the comments on greece, that they are monitoring for contagion into the u.s. guest: at the moment, the markets are still scheduled rising of -- in terms of contagion. there has been a little bit of volatility, of course. pricing,u look at there is not a huge pricing band. it is going to spill into some of the peripheral markets. central bank you always monitor everything that could go wrong. and what might happen to your
economy. you continue to monitor, that is what every central bank is doing. angie: on the other end of the spectrum, a lot of central banks are diverging. they are doing the complete opposite. how effective will that be, especially when on the other end eventually there will be rate rises? guest: obviously the fed was the first central-bank to be cutting interest rates. it had the weakest economy earliest. it diverged from a lot of our earlier -- other places. everyone caught up because the u.s. is such an important economy. the divergence has been something we have been living with in a number of different forms, nearly 10 years. i would still say it is a good thing that the u.s. is in a position where they are thinking about putting interest rates up. that says the u.s. economy is doing at her. is also in a divergence he situation. economy is not terrible, it
is just not growing as quickly as the bank would like. twice in the first few months of the year. we think they will stay at 2% for some time. fed are thinking if the does raise rates, then hopefully strengthen the u.s. dollar little bit, that will weaken the australian dollar and the reserve bank does not need to do anything further. quickly, at the end of the day, rba rate does affect the financial sector. -- a lot of really volatility in the banks recently. how do you think that will how banks and lenders do in australia? thingsi think a lot of affect bank share prices. that is the expectation
after i will also change some of the credential rules as well. i think that has been more significant than the interest rate cuts. angie: good to know. thank you for joining us. national australia bank chief economist. thank you so much. coming up, the new outbreak of airline rivalry that has air new zealand shares tumbling. extension for the jet. we will have that story when "first up," returns. ♪
angie: the australian airline jet star unveils plans to expand. let's go over to paul allen in sydney. is there a capacity were brewing? it certainly appears the market is expecting something along those lines. the qantas ceo and new zealand's prime minister will give a press conference in auckland in a few hours. something big is obviously in the works. it is an expectation jet star will enter the domestic market. there are only flying on five routes between the main centers, so that rumor is it would have
smaller regions as well. new zealand pulled out of some regional routes a couple months ago. , and newa gap zealand's domestic market is very small and expensive, and littered with examples of failure. it will be interesting to see if jet star can succeed where others have failed. angie: we are watching this one. thank you for that. lots more to, on "first up." at the singapore airlines training center. we will speak to the ceo of singapore airlines on its strategy and how it is shaping up to position the carrier for the future. ♪
angie: it is 7:30 here in hong kong. but right now it is 9:30 in sydney with a live look at the sydney opera house. let's see if australia can continue its gains after snapping three days of declines yesterday. from the minutes away opening of trading there and japan and south korea. you are watching "first up." the top stories this hour. the fed has signaled a pickup in the u.s. economy is keeping it
on track to raise interest rates later this year. after wednesday's fomc meeting, -- janetling said yellen says gradual tightening will happen. she also said she anticipates conditions could support a rate rise in 2015 but there should not be too much focus on the first hike. singapore airlines says it wants to restart direct flights to the u.s. after stopping them two years ago. speaking exclusively to says fia --he ceo sia is in talks with airbus and boeing to develop new technology. he says they need to find a commerciality -- commercially viable aircraft. officials from eu nations including germany, saying they are bracing for breakdown in talks over the greek crisis. is prime minister says he
ready to receive responsibility for the consequences of rejecting a deal with creditors. the last chance to seal a deal in luxembourg. shery ahn has the latest. reporter: talks between greece and creditors have gone nowhere. finance ministers are meeting in luxembourg to try to come out with a deal. that is happening today. it is being billed as a last chance for them to agree on this bailout deal that could be worth as much as $8.1 billion. say,s tsipras is ready to the great know. he says while they assume the responsibility for saying no to a continuation of catastrophic policies, but he says it is not just about greece bearing the fallout from failure to achieve but others too. more problems out there. take a listen. if europe insists on this
incomprehensible option, if its political leadership insists, bear the must there cost of development i will not be beneficial for anyone in europe. reporter: of course, the markets are not taking it well. you can see the athens talk punching. they plunged more than 3% yesterday. the hole league it has been plunging -- the whole week it has been plunging. angie: is there any chance, any sense of rake through in the latest meeting? reporter: not at the moment. the officials have been downplaying expectations of a breakthrough. the european union official anonymously telling us, discussions on greece will be very short because creditors don't have a really much to review. european commissioner for economic affairs also saying the
meeting will be difficult. there are still issues to be resolved on sales tax rates, pensions, and the deficit. with only a slim chance of anything happening, everybody is looking forward to that summit happening there stand friday next week. that is where the focus is at that moment. for alexis tsipras, he has been busy. he just spoke on the phone with the european commission president. he is also meeting with the russian president vladimir putin fighting -- friday. angie: angie: how are countries preparing for what may happen? reporter: everyone is making a contingency plan. the german finance minister says they are setting up contingency plans in the event the deal expires, the dutch finance minister saying for the european union in general. angie: thank you. let's check in on markets this
morning on greece. new zealand, a fractionally lower, despite gains on wall street. dollars spot 68 u.s. cents. we have first quarter gdp data showing ain, slowdown. we are also counting down to the opens in australia, japan, and korea. closed a 25, left fifth of 1% down. futures pointing to a slightly higher dollar yen. slightly weakening. chinese wares have become the biggest foreign purchasers of u.s. houses, taking the top spot from canada. buyers from china spend more than 20 out -- $28 billion on american homes in the last year. chinese homebuyers lean toward more expensive properties with an average price of $800,000. but it is a different story for chinese homebuyers in china.
that is because property developers are offering pretty impressive incentives to move a record stockpile of unsold new homes. stephen engle joining us for that. what are these property developers offering, and how urgent is it for these developers to shed inventory? reporter: that is a big problem. this is shanghai alone, the inventory has risen over the last five years. inventory nationwide at a three-year high, 166 square miles of excess inventory. that is about seven times the size of manhattan. notn incentives, these are new in china. it is a highly competitive business to get people into their flats and not competitors. the problem is the shaky finances and crippling debt loads so many developers have.
among 25 major developers, only to generated positive cash flow in 2014, while combined net debt jumped to a record hundred $48 -- $148 billion. this is in contrast to the absorption rate. allows the excess inventory through price cuts to be absorbed into the market. what you are seeing is it is starting to come down. slowly starting to come down. angie: what incentives are we looking at? reporter: if you want to look -- live in a purple dragon concept house. equity ratio at 75.7% at the end of 2014. that is the highest in a decade. grand, they are letting buyers walk away completely, giving all money back if they
decide to do so anytime before they get the flat delivered. that's pretty drastic. angie: thank you so much for that. look at the a corporate stories making headlines. the next chinese company heading home. shares surged in the u.s. after an eight point $2 billion takeover bid from a group of investors that include the ceo. premium to the previous close and values the company at $10 billion. it is the 11th chinese company to get a bit in the past two and a half weeks. u.s. wherelead the the -- to china. usda planning japan's first yen bond. $56 million and could happen as early as today. the offer comes as tensions between beijing and tokyo ease.
singapore to frankfurt have been trying to attack citizen grand as china pushes -- attract citizen grand. korean carmakers have edged out japanese competitors in a quality survey in the u.s. for the first time in nearly 30 years. auto companies have fallen below the industry average in quality. kia,he, followed by jaguar, and hyundai. those are the top corporate stories. i'm yvonne man. singapore airlines says it wants to revive nonstop flights to the u.s. talks with airbus and boeing on developing an aircraft with new technology that would enable it to do that profitably. haslinda amin eking exclusively the company'sbout new strategy to take on competition in asia. look at southeast
asia, all of the economies are fairly open in terms of the agreement, especially singapore. that encourages completion. we have no issue with competition. asia,so see in southeast proliferation of the operations. which is not quite at a pace you see in north asia. you just have to see how many are operating in this part of the world. the two fundamental changes, proliferation as well as the message by the gulf carriers. the part especially in of the world. haslinda: having said that come are the glory days of double digit profit margins over? >> i don't think so. i think what we have done is the vision for the future is precisely to ensure that companies have a good growth going forward. vistara ins star --
india. they will have a huge middle class as well. we'll be able to tap into those traffic and allow it to grow. sia will also benefit. haslinda: i want to touch on the u.s. market. we just talked about how sia is at a disadvantage because it is unable to fly directly to the u.s. airbus andtalks with boeing for possibly a new model that would enable you to do that. where are you in talks and how optimistic are you? >> the main reason was this lack of viable intermediate points, and that is largely because the concerned are not giving us the rights. currently, there isn't really a viable aircraft that could fly nonstop. butsed to fly the 8345, that is not efficient enough.
indeed, we had been talking to the oems, airbus and boeing, to try to get them to make an newraft on -- based on technology to offer a nonstop flight from singapore to the u.s. discussions are ongoing. haslinda: any feasible timeframe? >> as soon as possible. manufacturers are telling us, you need some time. i can't give a timeframe until they give me indications. have aa: you seem to comprehensive strategy in place for singapore airlines for the long to come -- time to come. when you take a look at the share price, investors don't seem to be buying into that story. sia stocks down 5%. -- pacific of which up 17%. what have you got to say to shareholders? >> i would assure them they
should see growth coming in the next few years and they should start to invest more. haslinda: so the shares are undervalued? >> i would think so. please, encourage everybody. [laughter] angie: that was the singapore airlines ceo speaking exclusively with haslinda amin. coming up next, staying on track. the steady and -- aim for a gradual liftoff since the dollar to a three-week low. more on the fed reaction after this short break. ♪
various ports around italy. more than 40 people were arrested. a tiger that broke loose after hasre flooding in georgia mauled a man to death. it came one day after authorities have said all of the escape tigers were accounted for. the zoo director has taken responsibility for that misinformation and believes the tiger cub and a hyena are still at large. muslims around the world have mark the start of ramadan. in previous years, different countries start at different days due to varying interpretations of the lunar calendar. this year, saudi arabia all the way to egypt and iran to indonesia, declare fasting will begin from sunrise thursday. back to the top stories. the fed has signaled it is on track to raise interest rates later this year. peter cook has the key take away from janet yellen's address.
its latest today policy meeting in washington, the federal reserve moved a big step closer to the interest rate increase since 2006. the timing remains in play. fed chair janet yellen says further has been made, improvement on the labor market and more confidence in inflation is moving back to the 2% target. but not enough progress to pull the trigger on a rate increase right now. byno decision has been made the committee about what the right timing is of an increase. it will depend on unfolding data in the months ahead. certainly, an increase this year is possible. we could certainly see data that would justify that. latest projections reveal 15 out of 17 policy makers anticipate increases. the funds for christ implies to rate increases by the end of 2015. yellen strip -- stresses a focus
is not good, he wants to raise them gradually. promise there will not be volatility when we make a decision to raise rates. what we can do is to do our very best to communicate clearly about our policy, and our expectations to avoid any type of needless misunderstanding of our policy that could create volatility in the market. reporter: on other issues, yellen said a greek exit would have repercussions for the european economy and global markets. even though the u.s. only has limited exposure, the spillover would be felt in the united states. it is the domestic economy here that remains the focused. peter cook, bloomberg, washington. angie: let's see how the markets reacted to the fed announcing.
joining us now, richard from global markets. she will trysaid to avoid volatility but cannot promise. you believe that? guest: she has done a masterful job. she has only been in the job for a relatively short space of time, but she has successfully signaled how the markets reacted. this: even greenspan said is unprecedented and who knows what will happen. guest: at the end of the day, they are data dependent. at the moment they don't want to get markets to price rate hikes that is too aggressive. they want to price a slow sequence. that is what they have achieved. angie: where do you think the u.s. dollar will go? guest: i think the noise to signal ratio is wrong. it is probably still a strong dollar.
but it is hard to affect the current environment. it reminds me of 2013. the major economies as a group look ok. in asia, we probably have some vulnerability. even in the last couple of days, strong numbers out of the u.k., weak at of new zealand. the dollar has treated strongly in asia. i think that pattern will continue. angie: also looking at the aussie dollar as it plays out against the fed story. also the domestic story. guest: the domestic story looks ok. it is not fantastic but it looks better than it was. it flatlined. shifts policy chief -- away from a tight credit policy toward something that seems to say, let's stabilize the economy. that helps the commodity story as well. ,t is a bit of a lifecycle commodities driven by different dynamics. for asia generally, the rates are still having this uncomfortable problem that fans
are going to hide. the u.k. looks like they might hike. a higher cost of capital that will cost more in the region. angie: europe is interesting, because inflation is zero. their goal is just under 2%. everybody still likes europe, but isn't this a worrying sign? guest: it is, but let's remember the collapse last year was faster than what we saw during the asian crisis. then it was a major economic event. it is still fading through into inflation numbers. by the end of this year on basic exelon, european inflation will be back above one because commodity prices will stabilize. in gdp terms, europe looks like it will do somewhere between one and a half percent and 2% this year. which is not often, but not a deflationary bust either. germany is doing 3% and some parts are doing close to zero.
but for europe overall, i think that idea that there was going to be deflation rebuffed has been discredited. angie: what about short bets. maybe in asia? guest: we are looking at currencies where you have weaker fundamentals. that means korea, thailand. it probably means malaysia. but there is a flood valuation there. angie: good to see you. head of global markets research. coming up next, a ceo steps down and now a reading cut -- rating cut. could australia's biggest grocery chains be a big market mover? find out when "first up," returns. ♪
australia and south korea. reporter: taking a look at the world's longest -- largest shipbuilder. they have not had a great month. downtown percent. they take orders from january to may were down 38%. i'm curious about the stock. securities raised it. the chair isn, considering running for fifa presidency. angie: interesting. david: he has my vote. angie: anything interesting david? which i'm watching stock -- and we started trash talking. [laughter] you have to swing for the fence. it didn't trade yesterday
-- lastthe last bit was i checked it was at 3800 already. we do say much. -- see a match. conspiratorial whispering here. david: very rude. taking a look at woolworth. australia's largest supermarket, shares down 13% already. the ceo stepped down yesterday. hours later, they cut the ratings outlook from stable to negative. salesg -- saying store are negative trend. could be good and very interesting for the stock exchange. that is the verdict.
mark: i'm mark halperin. john: and i'm john heilemann. and with all due respect to pope francis, the world is definitely getting hotter. but you are pretty hot yourself right now. ♪ john: ok, happy national eat your vegetables day. a handful of new polls in battleground state provide a snapshot for the clinton campaign and that picture looks like it has been taken without instagram filter that is kind of brown and gray. let's go to the big board where ohio governor john kasich lead