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tv   Asia Edge  Bloomberg  September 12, 2016 12:00am-1:01am EDT

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angie: the global selloff in amids and bonds rumble on questions of the benefits of loose monetary policy. astension rises in korea seoul says the north is ready to carry out another nuclear test. plunges the most years after telling
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people to switch off smartphones immediately. >> hillary clinton cancels a trip to california citing pneumonia. her departure from the 9/11 commemoration has sparked health concerns. i am manus cranny. lau in hongangie kong. it is midday. welcome to bloomberg markets. we are taking a look at the markets in the asia-pacific. it is really a selloff right now. manus: indeed. what we have got is a real decoupling of risk. is it the beginning of a taper tantrum? the fed in hype, the bank of england on pause. really unsettling the markets. stimulus, the dissent.
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what you have got is the 30 day correlation at the bottom of your screen between bonds and equities, turning negative. utilities dropped. the 10 year government bond yields spiked higher. you are seeing equity and bonds relationships moving in the same direction. havesive plays as yields collapsed. of ar this is a sniff dissent from central banks. angie: you can say that again. we are looking at volatility. here in asia as well. all you have to do is look at the global picture, where the msci all country index is down .4%. you can see what the bonds are doing right now throughout the rest of the market. i want to bring you into
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bloomberg right now. i want to show you what is happening in the asia-pacific regional benchmark, the asia-pacific benchmark here. dive out this precipitous downward as we bring that up on my bloomberg terminal. subscriber, all you have to do is xap go and check it out. let's get more on the markets with juliette saly. juliette: not a great day for asian investors. a near 3% drop on the hang seng. hot -- hong kong stocks falling from a one year high. insurance stocks are doing a lot of the damage. shanghai off by over 2%. by a being weighed down big fall in sense on electronics.
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$20 billion in samsung's market cap since thursday. that is having a 2/3 impact on the kospi. nikkei, a bit of a mixed picture on economic data. australia is being hurt by the downturn in commodity prices, off over 2%. new zealand, down 2%. there are no stocks in the black. have a look at the volatility in the new zealand market. the selloff in new zealand is rare in terms of magnitude. it has only happened three times since the global financial crisis. the blue line shows the move today, four standard deviations from what we would normally see. quite a lot of volatility in u.s. markets and asian markets
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too. i want to show you the bond markets. we are seeing in japan yields coming under pressure. storyis an interesting rally.e 2015 bond willsays the bond rout pass and he remains committed to his staff despite the recent surge in yields. -2.5% yields across the board in japan. this is samsung in korea. more than 7% drop. .6% drop we saw7 on friday. $20 billion lost from samsung's market value since that note about the note 7.
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a lot of these batteries have been catching fire. 7s ispplier for the note being sold off quite heavily in korean trade. the japanese yen is strengthening, as i mentioned. up .2%. equities, aboutof this aobut -- dollar weakness. fed, ahead of next week's meeting. brenard is usually dove-ish. some are saying she could be hawkish with some of her comments. angie: let's check in with first word headlines with paul allen. paul: hillary clinton has canceled a two-day campaign trip
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to california amid concerns about her health. she left a ceremony for the 15th anniversary of 9/11 and appeared to stumble as she moved towards her vehicle. she released a statement saying she felt overheated but was fine. doctors saying she was diagnosed with pneumonia. north korea appears to be preparing a nuclear test in the number three tunnel at the pyongjang test site. the north carried out its fifth explosion on sunday. it has test fired several ballistic missiles in recent days. south korea is within range. samsung is tumbling the most within four years amid troubles with it smartphones. users have been urged to turn off phones to stop charging them.
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airlines around the world have warned passengers not to use the phone on flights. samsung has announced a recall of all 2.5 million phones shipped at an estimated cost of $1 billion. hanjin's shipping bottleneck has eased, after it was granted protection from creditors. it has finally begun unloading cargo. hanjin stranded $14 billion worth of cargo at sea. provideir has agreed to loans. global news 24 hours a day. i am paul allen. this is bloomberg. manus: thank you. head ahead, japanese bonds for the worst quarter in 13 years. we will discuss the reason
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behind the move later in the show. japan changes of tactics, trying to be more transparent. this is bloomberg. ♪
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♪ manus: welcome back. you are watching angie lau. manus in london. that is one of those classic moments in the script where it says i read anything. welcome back to bloomberg markets. we are trying to get up to speed. alexis tsipras has repeated a
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call for debt relief, saying the country needs stability. an opinion poll shows his left-wing government is trailing conservatives with a general election next year. bailout inspectors are due in athens this year after warnings from the eu that greece has fallen behind in reforms demanded by creditors. volkswagen plans to returned to the bond market as it tries to move on from the emissions scandal. theceo says that while company's finances are not back to precrisis terms, it intends to reenter the debt market before the end of 2017. the scandal pummeled its stock price and credit rating. as -- asks witnesses to
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share with videos and photos of what went wrong. incident thels the most difficult and complex failure in the company's history. the falcon 9 rocket was engulfed in flames, and a cause has not been established. angie: we have had something of a mixed message from japan today as different indicators of capital spending came in above and below analysts. boj may be adopting a new medication strategy. shery ahn has the story for us. the numbers were a surprise when it came to machine orders, which rose instead of falling 2.5%. arrived aboveit
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estimates of 0.2%. you have to take the numbers with a grain of salt. angie: i am so sorry. we have some microphone issues here. please be patient. you can hear her through my microphone. it is exciting. techs.check our we know we can hear the chief market strategist. ahn has been talking about machine orders' comeback for japan. does that shift policy? does that change things for the boj? >> i do not think one piece of data is going to shift policy. the indications we have been
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hearing is that one of the reasons we are seeing a risk for semantics in the cash markets is we are going to see a continued shift in the yield curve. they will be happy to see banks pushed up a little bit from that yield curve. perhaps we see inflationary forces coming through. do not seent, i those numbers changing from the with monetary policy coming up at the meeting. the authorities will be welcoming those numbers. is essentiallyet on nerve on the talk of risk and reward. what do you expect from the bank of japan? you sound convinced they will deliver. perhaps not shocked at all. cleariously, it seems
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that negative interest rates are not going lower. they have not delivered the inflationary boost the abe government would like to have seen. are we going to see an operation twist model? we will see the opposite of what is happening in the market. everyone has been talking about the continued steepening of the curve. banks benefit from that move in inflation, in the curve. from a currency perspective, most developed markets, you tend to get a steepening of the curve that translates into currency strength. perhaps japan is the exception. we are in uncharted waters with how currencies are reacting. i do not expect a huge amount. anertainly don't expect increase in the qe program.
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the current assessment is one thing they could look at. manus: as we look at the marketnship between the and the global bond market, that coalition has gone up from 5.56 %. do you think the extension of these steepeninger -- steepeners is set to continue? >> a great question. you look at the coefficient between the jeb market and the bond market. there is probably -- look at the jgb market, which is at the
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epicenter. that is a driving force. both of markets have ramifications on the u.s. treasury market. we are seeing a steepening on things like the australian bond market today. but i think it shows very clearly just how much of an influence central banks have had on flattening the curve over the course of the year. even the modest indication they are going to remove some of that stimulus has everyone looking to sell out from the long end. that is having implications now, in equity markets. the premium for the discounting or increased factor being used in the factoring for present value. presentusing the net value for equity markets and cash flow value. that is lowering these stocks.
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in -- can i just jump chris. can i just jump in? what strikes me, and i want to get your impression -- is this one of those moments when markets have taken a healthy rain check? stimulus will not last forever. there has to be an interim period of fiscal response. has this got the marks of taper tantrum 2013? >> it is too early to say. let's have a step back. the europeans especially want to push the fiscal channels. they have done a great job of lowering corporate spreads. we have seen european corporate raising money at negative yields. can they grow their company because of what the ecb has
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done? the sovereigns have low borrowing capacity, but can expand on a physical level? not so sure. i think your point of view here is an interesting one. everyone is asking themselves -- we know valuations and fixed income have become outrageous. can it go further? that is the question everyone has to look at. is this the start of a taper tantrum? perhaps. at the same time, it is an early start. that is why we are seeing things like equity coming under pressure. also, in the corporate bond market. is the federal reserve going to raise rates to take heat out of those markets? that is why everyone is looking to hedge portfolio structures. it is a two-day affair at the
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moment. but has this got further to go? perhaps it has. that is why we are seeing a lot of anxiety in the market. it could be the start of something bigger. manus: if we are hoping for anxiety, we are going to get t shirts made up in the office that though world can be dictated by work function. this is the probability of a rate hike correlated to events. brenard, the last voice before september. data and thet the long positions, the market is rebuilding. from the fed actually
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correlates to a weaker dollar. far cleverer a man than i. the yen is going to benefit. i do not see a september hike. the federal reserve likes to raise rates when there is a 60% plus probability priced in. the 20% suggests we will see some volatility creep up. i am not sure the fed is as concerned as it has been about raising rates and keeping volatility subdued. i think if they are purely data dependent, they will not be raising rates this year. we will go back to where we were in december of last year, when there was vulnerability. perhaps. that could reduce some of the frosting this in the bond market
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. what happens to the dollar, i think it spikes against certain currencies, such as aussie, kiw i. what happens with euros is a different thing. i think they should hold off until next year. i do not think they should raise. manus: chris, thank you for joining angie and myself. what do we have planned for monday morning? the ranks of the former subordinates of xi jinping ensnared in a corruption campaign. details to come. ♪
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manus: you are watching bloomberg. i am manus cranny. angie: i am angie lau.
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another big fish caught in china's anticorruption net. tianjin is the latest snared in the corruption crackdown. we have stephen engle with more on that. you have spent your entire career reporting on china, in china. what is the significance? huang xingguo is the top acting official in tianjin, a poster child of investment-led growth of the last 20 years, incurring huge debt in building that manhattan like business district, which is empty. there have been other investigations. three tengion officials not
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including huang have been caught in various probes. the mayor and acting boss have been detained. we expected to be for investigation of what the central investigator says is significant violations. he is a former subordinate of president xi jinping. angie: how does this affect the upper tier of leadership? stephen: it could be a message to other cadres across the country jockeying for positions and promotions i had of -- ahead of a leadership shuffle next year. the politburo will be named.
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this could perhaps be a warning if you want to be promoted. angie: thank you for all of that. coming up, the winners and losers of brexit. that story coming up next. ♪
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angie: it is 1:30 in tokyo. a live look at the city skyline over imperial palace. it may be sunny there. but clouds are looming. topics index heading for its steepest decline in nine weeks. ♪ angie: the top stories on bloomberg markets -- a selloff of global stocks and bonds
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continues. every stock on the hang seng is falling among questions of loose monetary policy. manus: samsung is following the most in four years. $20 billion in market cap gone since thursday. users were urged to turn off note 7 smartphones and stop charging them due to the risk of fire. samsung announced the recall of all 2.5 million phones shipped offar at an estimated cost $1 billion. angie: hillary clinton has canceled a two-day campaign trip to california amid concerns about her health. she abruptly left a ceremony for 9/11 and appeared to stumble
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getting into her vehicle. she released a statement saying she felt overheated but was now fine. her doctors say she has been diagnosed with pneumonia and was dehydrated. markets are thirsty right now. juliette saly, what is going on? juliette: lots of selling. a lot of markets closed for the holiday, including malaysia and the philippines. wish the rests stayed closed. we are seeing widespread selling. the hang seng, down almost 3%. no stocks in the black at the moment. this is falling from one year highs. we are seeing significant weakness from financials and insurance stocks, similar to japanese equities. shanghai off by over 2% despite some bullish calls.
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goldman sachs said you should be buying into the market. they see some upside. is weaker by 2%. samsung is really dragging on that. we have seen further weakness on the nikkei and the yen strengthening on the dollar. fedar weakness ahead of comments coming through. new zealand is having one of its worst sessions in terms of volatility since the global financial crisis, down by 2.6%. let's have a look at samsung. wiped as it warns against using the note 7, which has been recalled. let's look at some of the other
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stocks we are watching in the region. the battery supplier for these note 7 devices is continuing to be sold off today. there has been some upside in the insurance space. 11-week high to an after its key cash rate was left on hold. australia, significant weakness in the energy space. continuing to see crude fall. wally parsons is the worst performer on the asx. talking about the insurance space in japan, some moves coming through on the insurance at the bottom.s this is rising on speculation that the bank of japan may have a few surprise tricks to flatten
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the yield curve. angie: thank you for that. well, the u.k. vote to leave the eu could have some winners in asia. britain will have to deepen relations with the region. who stands to gain the most and why? >> china, japan, and hong kong. they have the strongest trade links with the u.k.. they are sending delegations across asia and to india to cut a free-trade deal. britain is saying they're open for business and identifying asia as one of the key regions to do business. that is why china and hong kong top the list. manus: what are the direct links between the u.k. and asia?
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we have the historical relationship that we are familiar with in terms of hong kong. what are the other direct links? how strong are they? >> good morning. our colleagues at bloomberg intelligence went through some key metrics, such as tarrifs. the uk's a big exporter of financial tariffs. with shanghai increasingly. intoook down the list foreign direct investments. japan is a big investor in the u.k., especially in the manufacture of cars. there are other sectors like tourism. torists do love the trips big ben and the like. , there are japan and hong kong on the top of the
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list to benefit from the u.k. revamping trade ties with asia. manus: just hold that for a moment. it shows you the relationship with china. jinping was at the g-20. the whole powerplant issue in the u k curried great favor with china. this -- could this debate shaket access? >> that is a sensitive topic. havell not know until they announced nuclear energy plans. bridge and wants to push for as many trade deals as a can. and the philippines probably have the weakest link with the u.k. right now. those are markets that need to
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be worked on. we are at an early stage. article 50 has not been triggered. the u.k. has yet to leave. all these details have yet to be worked out. a numberast, there are of countries in asia that would be happy for any opportunity to do trade with one of the world's biggest economies. manus: thank you for joining us this morning, andrew. cracking story on the trade relationships between asia and the u.k. let's get first word headlines with paul allen. ul: banks moving out of london after brexit may find it harder to find other suitors. amsterdam rates are low. banks are considering this
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person employees across a number of european cities. bmw is planning a restructuring of its executive board. the company will also combine marketing and sales operations for bmw and mini. the company says it is changing its electric car strategy to take the game to tesla. the board is expected to approve new models at the end of the month. malaysia airlines is talking about offloading six a380 jumbos, saying the double-decker's are no longer needed. the carrier is negotiating with airbus to add more seats to make the planes more attractive. 0hey will become the first a38 customers to cease flying the planes. 2400l news powered by
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journalists in 120 countries. this is bloomberg. manus: hillary clinton has canceled plans to campaign in california monday and tuesday. sunday, she left a 9/11 commemoration ceremony earlier. video showed her apparently needing help to get back in her car. ros, this is really unsettling for the markets. we understand she is suffering from pneumonia. ae markets had priced in clinton victory ahead of the polls. this health question is going to raise some questions, isn't it? rosalind: it is already raising questions. she is not going to california. she is going to miss fundraisers, an appearance on the ellen degeneres show. she and donald trump attended this event at the 9/11 memorial at ground zero. she left early.
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that may have grabbed headlines already. then you see this video on twitter, the one you see right now. stumbling to show her and needing help getting into a car. it has reignited questions about health on social media. clinton said she is recovering nicely. she was diagnosed with pneumonia sunday. she was given antibiotics. rest,ant to allow her to but it will not stop people from commenting about the issue on social media. one person saying, can you explain to me how hillary's health was trending at number one and then vanished? playing out on platforms like aboutr, concerns suppressing information. another saying, the more you get focused on health, the less you
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are focused on trump's taxes. another saying, what if hillary is generally ill? it is an important question. angie: another question in terms of criticism is that they knew she had pneumonia. they were not public about it. they were not vocal about it. what do her opponents have to say about it? rosalind: sources say he is not going to do anything. essentially, they are going to remain quiet. is trump hasegy the ability to dominate the news cycle, but that sometimes means he can hinder his own progress. it covers up clinton's weaknesses. perhaps it is better to remain quiet. the handling of this issue of her health threatens to erode
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what confidence people have in her, which is already uneasy. this will perhaps play into voter concerns. angie: such a finely tuned campaign schedule and election cycle. this is not good news for hillary clinton. ros, thank you so much. coming up, bond trader surprise week of data.otal that is coming up next. ♪
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angie: hp is said to be betting on copiers as it looks for new areas of revenue. sources say it is planning to announce new machines for corporate customers. xerox dominates the market hopes to take hp
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more of the $55 million business. they are making a push into 3-d printing. we are also looking at hyundai saying it will start testing car sharing services with fuel cells in its home market later this year. the program is expected to expand to five cities after 2018 . the car sharing service will cell carswith 16 fuel and electric vehicles. self driving cars may lead to a drop in insurance costs eventually. premiums may fall more than 40% by 2050 as automated vehicles become more widely adopted. aon says insurers need to assess the impact of automation.
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auto insurance accounts for a most 50% of global premiums according to aon. market'se bond complacency over the empress flow of stimulus was shaken friday as prices surged around the world. 30 year government bonds in the u.s. suffered its biggest two-day selloff in more than a year, close to 2.39%. is the global bond rally over? kathleen hays filed this report. >> the bond market is finally reacting to a steady stream of remarks from top fed officials suggesting they are getting ready to raise interest rates. still a question of when, but heading in that direction. it started with janet yellen when she said the case for a rate hike has strengthened. stanley fischer echoed that you. air grows in cramped -- eric
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aboutratz gave a speech the case building for gradual rate hikes. let's jump into the bloomberg and look at the world interest-rate projections. hike are upttember to 30%. fedy, there will be three speakers closely watched by the markets, starting with dennis lockhart, president of the atlanta fed. he has been relatively upbeat on the economy, looking for a stronger gdp growth in the second half. if he continues in that direction, it would not be such a surprise. kashkari will be talking about banking. he will not give us any clues on
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monetary policy. it is governor brainard everyone will be watching. she is typically dovish before and interest-rate increase. the markets learned she would be speaking. thate sounds hawkish, could be a sign the fed is trying to get people prepped for a rate hike in september. our bloomberg intelligence team is saying it will not happen in september. it will be december if at all this year. the last survey of economists shows only 17% are looking for a september rate hike. if the fed were to move next week, it would be out of character. i am kathleen hays for bloomberg television in new york. manus: our next guest thinks the movement in the bond market is more about the ecb and bank of japan concerns than the fed.
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an analystnow is with mizuho securities. correlation in has unnerved global bond markets. >> but i think it is too early to say the boom is over. we have hadreasons, a couple days of volatility in the bond market. but we think that is a short period. most of the central banks in the world continue to be in easing mode. england. of even if we do get a 25 basis point hike, we do not think that changes the landscape. morgan stanley said this morning that even though treasuries are the cheapest they have been for months, used to
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want to be looking at steepness. >> we would probably disagree with that. certainly, given the moves recently, the curve is more likely to flatten. the reason is continued hunt for yield globally. u.s. treasuries are tractive to offshore investors. angie: what about the rush to gold markets when it comes to fixed incomes? what is most attractive for yield searchers? >> the answer is in the question . anything with positive yield at the moment, which is one of the reason that u.s. treasuries look attractive. other markets we look at, the chinese bond market. the australian bond market looks attractive. i think we will become very complacent.
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post-brexit, there was this hunt for yield globally. bond markets had three months of rallying. overall, that has made investors complacent. in the last seen couple of sessions is not such a bad thing. it is a bit of volatility in markets. angie: volatility is back. mark reade, thank you for joining us. we are going to continue our chat with mark reade. this is bloomberg. ♪
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angie: welcome back. i am angie lau in hong kong. manus: i am manus cranny in london. let's bring back in our guest, izuhoreade of m securities. you said the market moves are
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probably due to the ecb, not extending qe, rather than u.s. concerns about a fed hike. the german bond market, we are above the zero plimsoul line. whet the return appetite? will it run further, higher? >> there are investors out there who, rightly or wrongly, there is a positive outlook for bonds, 0% yield remains attractive given expectations in capital gains. there arelds, investors that will be attracted to the market. manus: sorry, go ahead.
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angie: it was very interesting. let me jump in here. we saw reporting season in the rearview mirror. when it comes to the sale of asia,enominated bonds in we have seen massive inflows. >> from the corporate side. corporate debt is very attractive to fixed income investors. any credit spread is attractive. market,sian credit there has been a lot of inflow to whet the appetite. manus: on the corporate side, whatever phrase you want to use, there is a reassessment of risk, isn't there? what is the propensity in high-yield to take a pause along with corporate bonds?
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there has been a huge fear of issuance here. you are seeing negative issuance here in europe. >> when it comes to all risk assets, looking at equities, high-yield investments or credit, it all comes back to the overall yield environment. a low yield environment, investors are willing to push the envelope with the risk they take. that is the case for risk assets generally. i think what we see in the next couple of weeks from the bank of japan is crucial not just to bond markets, but global risk markets generally. how far up do yields go? >> look, even if central banks it is not in their interest to see yields go higher. the world economy is fragile. we may see a little adjustment, but overall if they get too high, they will come back in.
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angie: back from the stratosphere. thanks so much for that, mark reade. that is it for us on this edition of bloomberg markets. manus: next is
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>> ahead of the bank quiet time frame. as the campaign discloses suffering from pneumonia. firm urgeskorean turning off smartphones immediately. we are far from perfect. >> the cfo tells


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