tv First Up With Angie Lau Bloomberg July 27, 2015 7:00pm-8:01pm EDT
♪ angie: u.s. stocks post the longest losing streak since january after china's dramatic plunge. oversupply and falling demand, returning to a bear market as producers as well the oil glut. after second quarter earnings fall. coming liveirst up, from bloomberg's asia headquarters in hong kong. good morning. i'm even oyvonne man.
we have this while day in china, down 8.5%. it sparked the selloff across the world. we are continuing to see extended those losses today, down about one third of a percent. spot iszealand dollar slightly gaining but we continue to see pressure on these commodities currencies. there are some forecasting that it could drop as much as 55 u.s. cents. we are counting down to the opening in australia, japan and korea. less than one hour away for japan, it looks like we will continue to see this selloff today. 25 closing 1% yesterday in tokyo. futures in chicago looking to another lower open today. the dollar/yen is weakening right now.
only one story -- the chaos in china. the composite plunged 8.5% yesterday while shenzhen fell 7%. it was shanghai's biggest one-day slump since february 2007 and it triggered a worldwide selloff. let's bring in david. we have seen it in the europe and u.s. -- this is not looking good. david: stock market turbulence provides intervention. you look at similar headlines. the effect was felt that just about across the world. europe started to sell off and then we had what happened in wall street. let's have a look at where we are. that is the today chart -- two- day chart. you have some indication on friday that perhaps they are pulling back support, just to see if they would run without
training wheels. that was a 3.5% drop. a horrible session in the afternoon yesterday. 8.5% -- of the worst days since 2007. before that was the worst day since 1996. theday before leader died. they had the selloff. did china withdraw support? , youu are on the ground look at the heaviest weighted and a second heaviest and then you look at the etf. this is what state backed funds started buying into. what we saw was when petrochina falls by that much, people get scared because where is the money going? yvonne: the industrial processing is coming in. the numbers were a big miss. it is contributing.
david: it is the perfect storm really. two other charts -- 30 day historical volatility. have markets come down? not really. we go back to 2005 here. that is a 17 year high for this gauge. that is the trouble during the global financial crisis. next chart, money market rates. is there liquidity in the system to support the market? two-monthve at chart here. the overnight repo raiate. there was a bit of come down late may and then that is when all the craziness happened in the first of july and then it came back down when beijing stepped in. basically, we're back to levels of early may. to latewe are back
june, early july here. yvonne: what do we expect today? david: i don't know. it is almost impossible to figure out what is happening. the fact of the matter is it certainly does not operate like a market. the only force that matters is what regulators do on the day of. you look at features like this -- he can only tell you so much. a better indicator is when markets open up in china. to some extent, it also has a forward-looking indicator. sometimes split-second ahead before it filters through into the index. very quickly, analysts in shanghai said the state will start buying back the shanghai composite falling below 3800. lo and behold, we are below 3800. yvonne: we will see how things go. thank you so much. set shockwaves
across the world. let's go to juliet. julliet: europe was waking up just this china was closing in all the selling was coming in. everyone in europe was saying what is going on? we saw the selloff continue. in fact, the biggest 2015 five they drop in the stoxx 600 is down 5.5%. you can see your basically follows with a lot of selling coming through. the american markets opened up and instead of focusing on the earnings and the start of the fed policy meeting, everybody is looking to the continued payoffs in china. we saw nine out of the 10 sectors in the dow jones close into the red. worries that this slowdown in china could start to impact on a lot of those auto companies under pressure. energy companies under a lot of pressure as well as they
continue to see this selloff in crude oil. look at the u.s. index -- down for .2% in the u.s. into the asian index. we certainly continue to see a lot of that selling. u.s. stocks posting their longest losing streak since january. continuing on that selloff from the last of -- from last week. 1.5% to its down by worst week in six months. a little bit of positive news in the pharmaceutical industry following some m&a activity. ingna is really weigh into the u.s. region. the nasdaq closing down by almost 1%. the s&p 500 was down by .5%. of course, this is really impacting on to currency markets as well. if we look at the japanese yen, what it did during the session yesterday, it is now down by
about .5%. moving a little higher at the moment. the euro also was quite in focus due to the selloff. the euro moved higher against the u.s. dollar but it is pretty flat at the moment. of course, the australian dollar is very much a commodity-based currency. the aussie had quite a big fall, falling from below levels of 73. yvonne? yvonne: thanks. we will get more on the top stories on our digital destination. bloomberg business brings the best of bloomberg news, business week, television and new digital content at one address. also on bloomberg.com, the countdown to a rate hike. why the fed is on track. plus, $32,000? no worries.
a three room suite in the sky. it is super popular right now. that is bloomberg.com. checking other stories and headlines -- crude losing more than 20% from a high inmate. may. as overproduction boosts the blut of oil. it is pumping the fastest rate since three decades and it is also producing at record levels. exports from southern iraq rose to an all-time high this month. the selloff in china hit copper again. prices fell 1.5% overnight and now trading at a six-year low. investors are worried the slowdown in the mainland will weaken demand. china accounts for nearly 40% of global copper consumption. gold maybe be losing its attraction for its biggest buyer. china imported 70% less gold from hong kong in june than the previous month.
purchases are now at their lowest in a most one-year and forcing switzerland to fall. gold has fallen almost 8% in the past two months. stock markets may have heard demand that buyers may be anticipating further price decline. let's go to earnings because china's search engine baidu is falling and extended trade. we have more on this. they are seeing profit growth, but what went wrong? guest: they are trying to transform from a company that targeted personal computer users to one that is trying to capture all the mobile users. we know that is a challenge. they are rolling out new products in their product catalog. they are trying to engage advertisers but it takes times and that is why the earnings are falling somewhat short. we have an earnings per adf coming in at $1.81 a share.
one dollars 88 was the average estimate. falling short on that and the revenue forecast missing estimates. the forecast for revenue is $2.93 billion. that trailed estimates of $3 billion. you see the big drop in the shares. after hours down about 6%. at one point, down nearly 10%. baidu is the biggest web search engine in china, but the ceo is a very clever guy. this company taking time to transform into the mobile internet search provider of the future and that means lots of ancillary businesses. yvonne: you talk about the investment side of this -- baidu and its rivals have spent a lot of money when it comes to these taxi hailing apps and now it seems like they may be investing in uber. zeb: they made an initial investment in uber, but as it formalizes its china division, baidu is said to be seeking a stake in that.
we don't know the dollar amount, but this is a competitive market and it makes sense you have the biggest web companies, internet companies in china backing the web-based taxi hailing applications. alibaba areieke backing another service. you have baidu backing uber. huge competition in this market, billions of dollars at stake and whbaidu sees opportunity. it seems more to come on this. the company and uber not specifying numbers. exactly a terrible situation for baidu. yvonne: thank you. coming up next, closer look at the global selloff and opportunities. we will have that when we return. ♪
yvonne: checking some stories making headlines -- greece talks stocks as the shutdown of the financial system enters its fifth week. officials from the ecb and the imf are in athens to hammer out reforms needed for a third bailout. prime minister alexis tsipras told party members debt relief is being openly discuss, although it is not in the formal agenda. restructuring will be necessary in greece. -- horsesurity forces remain on alert after 10 people were killed on an attack in a police station. officials are blaming pakistani militants. the most serious on indian soil since the prime minister came to power. pakistan's foreign ministry condemns the attack which could derail attempts to restart peace talks. the filipino president delivered his last budget
speech, highlighting investments under his of administration leaving his annual state of the nation address. he says the campaign against corruption has transformed the philippines and put it onto what he calls the straight path. the philippine economy has grown more than 6% since 2012 and credit ratings have risen. the slump in china's markets has been felt worldwide. u.s. stocks had heavy exposure to the country were driven lower. apple fell 1.4% falling its worst week in six months. alibaba in the red, down around 2%. the dollar also took a hit, four offor all buy y its 16 counterparts. marking its longest run of losses since january. wilbank.ng in wayne he joins us from virginia. thank you for joining us.
the big story is china. we saw the reaction in the u.s. and now we are seeing the longest losing streak this year for u.s. equities. if commodities do not find a bottom, what could happen to u.s. shares? are we expecting a correction or a bear market? wayne: it is interesting. if you look at the math, we only had a 4% correction in the u.s. back in september, people forget we had a 9.9% correction. almost a 10% correction which lasted 30 days and we came roaring back. upexpect -- the markets held well given what is going on in greece, china. so far, this is not even a normal correction. we fully expect we will get to 10% corrections. we have been waiting 1400 days for that. it would just be normal behavior for the market. yvonne: we saw what happened overnight in china. the worst -- second-worst drop
in history. are you surprised to see the u.s. shares that look as bad as some of the other markets around the world? --ne: you have this ongoing we saw a little bit of weakness in the dollar today. if you look at the dollar over the last 90 days, continues to be strong around the world. many times, there will be struggle overseas, we come back to the u.s. a lot of the damage on corporate profits has been related to those commodity material stocks you talked about earlier. you are seeing strength at of health care, retail, technologies. so far, u.s. is hanging in there very well. yvonne: some have argued that because of this bull run we have seen in retail and health care, it is reminiscent of what we saw in maybe 2007-2008. we are seeing the industrials -- should we be worried?
wayne: we think there are some cracks in the armor here which is why we are continuing to prepare our investors to see what they are going to see for the rest of the year. the s&p is flat. a lotta volatility going nowhere. we think this narrow market with facebook, apple, netflix -- the other market is not doing that well in terms of corporate profits. 5% down year-over-year for the quarter. this is a canary in the coal mine saying investors, be ready for a corrections of 10% to 15%. not enough to change the overall outlook, but maybe there is trouble ahead. yvonne: i guess the trouble we have seen in china as well as the commodities route. the last time you were on the show, you mentioned it was really hard to ride the wave of commodities. this plunge we saw in the shanghai composite, is it just a breather or should we be more
worried? wayne: we would be very concerned about the china market. if you look at the data from electrical usage to all sorts of numbers and data coming out that do not match up with the 7% published growth rate by the government. it is really hard to get real data out of china, but we know it is probably not going -- corporate profits are starting to disappoint. you saw that news in the last 48 hours. these big critical thinkers have gone negative in china in the last 30 days. we would be very concerned and cautious buying these falling stocks right now. yvonne: continue to be bearish on china. where are you seeing bullish sentiment? wayne: there is still opportunity on the yield sides. things like preferred stocks that pay 6% yield, short-term high-yield. high-quality u.s. stocks. the ones that are attractively
priced though. microsoft looks good. i would be very careful with amazon. it jumped 20%. the core u.s. companies are still ok priced right now. you just have to deal with being careful with what you are buying. yvonne: all right, wayne wilbanks. we appreciate your insight. next, modern-day slavery -- a new report suggests countries are making progress, but there are doubts. we will take a closer look after this short break. stay with us. ♪
president isurkish in china this week for a meeting with political and business leaders. analysts say it will be a chance for him to raise the status as an influential regional figure. we take a look at what is on his agenda. reporter: the present will be looking for help to kickstart the turkish economy and strengthen political ties. he will ask for more investments when industrial and commercial bank of china will take the bank for about $250 million. the two nations are in talks about a fed system deal. a large trade deficit with beijing and expects balance
trade with the world's second-largest economy, but it wants the narrow the gap. erdogan is hoping to attract more affluent chinese tourists to turkey. he wants china to ease its regime to make it easier for turkish businessmen and tourists. he also conveyed turkey's concerns over the human rights of muslim people living in china. protests you rub it in turkey amid reports they had been banned from fasting during the holy month of ramadan. claims beijing denies. relations have been strained because of this. the topic of turkey joining the shanghai five made,. y come up. whenever the president gets angry with the european union, he frequently threatens the joined the shanghai cooperation organization. so far, he has not followed through. as turkey prepares to host the g-20 summit, it will be interesting to see what comes out of the striis trip to china.
yvonne: the u.s. has given malaysia, cuba and saudi arabia an upgrade in its annual report on modern slavery. it sparked a debate on whether the rankings are swayed by political affiliations. let's go to our political correspondent. why the criticism here? reporter: take the case of malaysia. they were cited as forced labor for years. andd sex trafficking bondage has been a huge problem in the country. this upgrade in ranking has caused some to ask why now? malaysia is part of the transpacific partnership negotiations. its contingent on an upgrade in the ranking as president obama wants malaysia. thailand is not part of trade negotiations. it had a similar human
trafficking issue. a long-standing record -- the lowest. thailand was not upgraded. the question is the upgrade was allegedly motivated -- politically motivated? saudi arabia, the u.s. is trying to reassure its ally after the nuclear deal. the skepticism is whether it the three really deserve the upgrade based on their own record. has.e: thank you, returning tot, what their market. return.be live when we
yvonne: taking a live look from the icc building this morning. we are 30 minutes away from the opening of trading in australia, japan and korea. you are watching first up. ♪ the top story -- china's market regulators say it will continue to stabilize the market after the biggest one-day fall in more than eight years. the shanghai composite closed 8.5% afterfter --
general calm. csrc insured investors that they have not garnered support from the market. returned to a bear market after losing more than 20% since may. prices fell 3% on monday as overproduction boost the global glut of oil. the u.s. is pumping near its fastest rate in three decades and leading opec members are also producing at record levels. rose toin southern iraq an all-time high this month. baidu shares fell strongly after second-quarter earnings missed estimates. net income rose 3.3% in the second quarter and sales were up 38%. the founder has been spending more to expand its mobile services and online to off-line businesses. let's check in on markets in asia. response to this global selloff
after china falling 8.5% yesterday. new zealand continues to see losses, down about one third of a percent. we are talking about the opening of australia, japan and korea coming up in a half hour. japan signaling we could be singing continuing losses this tuesday morning. the 225 closing down close to 1% on monday. chicago futures pointing to another lower open today. 123.27.ar/yen is it was near the 124 line. following the collapse in chinese share prices, the focus quickly turned so the countries regulators who say there is nothing to worry about. let's go to david with more. nothing to worry about?
david: they put out a statement shortly after the market closed. essentially what they are trying to say is they are still in the market. they responded in two ways. wecourse, when china opens will see whether it is or not lip service. they stopped market support, despite most indications that they pulled their punches. the china security finance is still in the market and it will increase at the appropriate time. i'm reading from a statement here. based on a very short statement -- we get this on the screen. they will continue efforts to stabilize the market and prevent systemic risk. theyecond part of how
responded -- they were not ruling out the possibility that they were up to no good. they will be investigating and they will be punished. if they tested the waters, can they run without its training wheels, it obviously cannot looking at the collapse yesterday. analysts are expecting them to step in today. it will put the market above 3800. yvonne: talking about the imf -- they have talked about some of the interventions. urge: the imf said to china to withdraw measures. thingsrstand why these are needed in the first place -- to prevent what they call a wipeout, major disorder. prices should be allowed to settle through market forces because you look at what is happening. 1700 stocks are down. it was the broadest selloff
since 1997. the sharpest one-day drop in seven years. in terms of the number of stocks down and up, it was the broadest selloff in 18 years. what the imf is saying, let's try to make this look more like a market and not an operation. yvonne: 1700 stocks are down. 78 also up. that is not a good number. yvonnethank you. onto brent crude, because it has returned to a bear market, losing more than 20% since may. it fell 3% on monday as overproduction boost of the global glut of oil. let's bring in dan in houston. good to see you. this is the second year in a row that oil has been in the bear market because of this supply glut. what is going to change that now? dan: the only thing that is
going to change in the near future is if we stop making so much of it. saudi arabia and iraq both posted record crude production numbers in the month of june and u.s. crude production which risen more than 70% over the past five years has not tailed off as fast as people thought it would back when the price route started. in may, brent was in the high 60's and rebounded 46% from the low in january because people were thinking we would have a strong summer demand season and production would start to slow down and we would see the market rebalance. instead with all these record production numbers and people not being quite so certain what is happening with china's stock market and how that might affect the most important country as far as the mangoes, everyone is a little more bearish. yvonne: of course, there is the demand side of this and also the supply issue. somebody has to eventually blank with some record rates of
production. are traders optimistic about a rebound in prices? dan: not at all. bullish the most least they have been since december 2012. they have cut their long bets on crude and raised their short bets. they were getting right back up there and swinging for the fences a couple of months ago thinking we would be in these long oil phases but now everybody is thinking these low all prices -- oil prices are here to stay. yvonne: what about the corporate's, the oil companies? how have they fared? dan: as you can imagine, not very well. the companies that make up the bloomberg intelligence north america will producers have lost $100 billion in the last six weeks. -- they are not
expecting any rebound in prices back to the 100s anytime soon. the main thing you make is oil, that means it will be talked to make as much money. yvonne: more pain to come. thank you for joining us, dan. time now for a look at the other stories we are following. reporter: china has agreed to buy serious insurance for more than $2 billion. was only touted last year. one of several international firms looking to expand in bermuda reinsurance. the owner broker nearly 4% in new york trading. chinese investors are picking up more of new york. properties have bought six buildings on the operative east side to build condos. subway inn.ed the chinese investment in new york real estate has surged in
the past two years. one of the world's worst ranked airports in the u.s. has been given a complete makeover. new york laguardia airport notorious for poor design and lengthy delays -- it will be torn down with help by delta airlines. the first three-year phase will start next year at a cost of $4 billion. that is a look at today's top corporate headlines. yvonne: delta has agreed to buy a 3.6% stake in china eastern airlines for $450 million. let's discuss the deal with our aerospace editor, edward. nice to see you. what is in it for delta? edward: a couple of things. one of them -- they get a steak and a foothold in a market that will become the world's biggest over the next 10 to 15 years.
china eastern has a base in shanghai and delta wanted to go in and build a hub in shanghai. it helps in a couple of different ways off the bat. yvonne: was this deal a surprise to you? edward: no, in some ways this has been telegraphed before. anderson had set in the spring he was very interested in building a shanghai hub. messageemployees in a that shanghai was probably going to be the next amsterdam style hub. it was an overseas hub when it bought northwest in 2008 and it gradually continued to build up. he was very upfront saying that shanghai is probably next. he also was pulling down seating capacity in japan. you take those things together, you can see he would be interested in cozying up with china eastern.
china eastern is also in sky team, the international airline alliance that delta leads. some of the pointers were already out here before monday's announcement. yvonne: so, again, china eastern, they are the nation's second-largest airline by market value. what does this mean, this deal for delta's u.s. competitors? edward: delta is number two across the pacific behind united. right off the bat, it will put pressure on united because delta is larger. they are now going across the pacific. that is really important in the u.s. because it helps win corporate travelers. corporations, when they see airlines partner, it matters to them because they have frequencies and broad range of destinations. that will help delta and put pressure on united. american, since the merger with u.s. airways in 2013, has been
trying to expand across the pacific as well. american was a fairly distant third behind united and delta and now you see delta growing bigger. that puts more pressure on american as it tries to play catch up across the pacific. yvonne: all right, edward, joining us live from dallas. china attempts to control the market and it seems to have failed. will we see more intervention, when first up returns. ♪
yvonne: checking some of the stories making headlines -- the u.s. has upgraded malaysia on his list of modern slavery, raising questions on whether the rankings are swayed by politics. it moved up from tier three to tier two on washington's annual service -- survey of human trafficking. it is contingent on the conditions. a senate amendment and countries
with the lowest rankings. the british prime minister has the gun a four-day visit in asia by offering indonesia loans to finance infrastructure projects. david cameron met the indonesian president where they also agreed to step up security operations. singapore,ited vietnam and malaysia hoping to expand trade with the region. had an unusual dinner companion during his visit to ethiopia. the bones of a 3.2 million-year-old human ancestor known as lucy. the remains were on earth in 1974, one of the many important links of human evolution. the president was given the rare opportunity to touch the bone. let's go back to our top story -- china. shanghai markets plunged, sending shockwaves around the world.
let's discuss the impact on all of this with darius. thank you so much. obviously, you had a very dizzy day yesterday -- dizzy day yesterday. shares tumbled the worst thing a years. the second worst in history. how do you make sense of all of this? we are not sure what sparked this, what really triggered this. guest: there was no fundamental trigger, just rumors the government fullback some of this up or -- hold back some of the support -- pulled back some of the support so if a rumor like that manages the crash valuations by almost 9%, it shows how fragile the sentiment is. yes, evaluations remain fairly high in the second quarter but they cannot. they take any opportunity to do so.
if they panic, the officials will. it seems the government continues to believe they have to stabilize equity markets. in the long run, they may not be able to do it. in the short and medium term, they are because they have the liquidity to do so. i'm betting they will buy into the market and make sure they can rebound from the crash yesterday. yvonne: it seems like crash like that -- does this suggest the market is still too fragile without government support? where there are also reports that they stepped back. dariusz: absolutely. lawmakers are trying to see what could happen if they pull back support. they have been buying stocks directly. curious if they pulled back and if they have the power behind my back, will that
bring things back to normality? the lesson would be they have to support the markets not just for a few weeks, but for a few months and perhaps be on that. selling stocks by large investors expires and that will be the next fragile moment next year. until then, the government will decide his of what the market -- decide to support the market. yvonne: what do you expect they can be doing here today for the next couple of days as they try these unprecedented measures? they have frozen ipos. dariusz: what they have to do now is show up in the market and actually buy. not much else is left to do. they could resuspended unsuspended stocks. that is a possibility.
others say that would not be a good thing for the long run, because they could not get out of the house when it starts burning. that is not encouraging for new investors. whatever it takes they will do it because the implications of a massive continued downfall will be large economically and socially. yvonne: let's talk about the economic implications of the stock market. some people say they should not be able to connect the two. what does this have to do with wealth and consumption? dariusz: consumption was actually a strong point in the quarter. spending rebounded partly because they became wealthier in the stock market. now, obviously this is being taken away. it is also difficult for businesses to raise investment which is so crucial because they cannot do ipos. there is more pressure. it needs to be controlled.
the gdp growth in the first half of the year came from unusually strong activity from the financial services -- brokerages. there was turnover in the equity market. this impetus to growth will be taken away. it has to be replaced with something else. there will be other similar cuts to find spending. the government cannot afford to have another downside coming from weaker support -- consumers. that is why i am fairly certain they will come back and stabilize the market in the short-term. yvonne: the reaction on the currency markets as well. the imf is saying to china they need to do something to let market forces settle what is going on now. overall, do you think this will hurt the impact when it comes to china being included in this basket and what effects it has
in others? dariusz: it will be included this year, even with the equity market volatility. yes, the measures to restrict it but it isry positive, not important for them in the equity markets. perhaps they said something else. well distincteen with the imf in the past couple of years? i cannot remember. the other currency markets are not so much controlled, but by the derivative. it increases especially on the dollar buying side because people are worried china will be out of equity markets and it will weigh down other currencies. it will be interesting to see that.
that measures the price of the buying dollar itself. they are continuing to go up because the market is becoming increasingly secured thinking. that is one of the factors of t he derivative implications. yvonne: all right, china's overnight crazy sitting shockwaves all around. -- sending shockwaves all around. dariuszn, thank you for the insight. coming up next, find out why one japanese pharmaceutical company is reporting a very roasted quarter. ♪
you have a classic choice today. you are stealing a strategy. what do you got? stock, he look at the is going higher than i am. we are still taking to the skies. we are looking at -- what is th is? a 779? very pretty. the operating profit will be beating analyst expectations -- ¥13 billion. the highest rate of the forecast is that 10 million. more tourists walking in japan. yvonne: juliette, pharmaceuticals. forette: it has ointment shoulders -- i think i slipped back. deodorant ande
other products -- it was up and sales up 10% to ¥30 billion. hopefully, we will see more of that upward trajectory. industry group on focusing on -- aerospace. a majorrospace, aerospace company in south korea, they make parts and fixed wing aircraft. 120% gain. the latest earnings, if i can get the numbers right here, they came in ahead of expectations. 66 million does not seem like a lot, but if you look at the state of the industry, it is a big win because it surpassed analyst estimates. they earned 66 which is not bad.
john: i'm john heilemann. mark: i'm mark halperin. and with all due respect to boston, you are never that great a sports city anyway. kidding. ♪ mark: on the show tonight obama, , clinton, walker and obviously trump, but first, huckabee. in case you missed the news -- awry deal, holocaust reference, blowback. president obama and ed of the act in deadline, both made it clear how much they stand against mike huckabee's reference to gas chambers. mr. obama: to the comments -- i think the comments of mr. ck