tv First Up With Angie Lau Bloomberg September 18, 2016 7:00pm-9:01pm EDT
♪ >> security stepped up in new york, the hunt continues for the manhattan dumpster ballmer. >> warning signs, banking stress and china hit a record in the first quarter, underlining the threat of growing corporate debt. >> boj continues its asset and rate policy to avoid a strengthening yen. >> a rush for the release of the note seven, including the faulty batteries. >> this is "daybreak asia".
it is just past 7:00 p.m. >> it is just after 7:00 a.m. and hong kong. happy early monday. this week is all about janet yellen and governor kuroda taking center stage. it seems like the boj might overshadow the fed this week. >> that's right. it was an interesting time. last night, we saw some hand in hit manhattan. more on that later. just to see how things are kicking off so far. consumer confidence and new minutes ago, aew recovery in the third quarter. the kiwi dollar flat. meets later this week, but
no change expected. australia, five straight weeks of losses. we could see a soft open in sydney today. we are seeing a lot of dollar strength since friday after that better than expected inflation for august. japan futures are pretty much flat, yen holding on. 102.26. what will we watch in new york ?two week ramy: ramy: two words, the fed. we have to talk about the bombing. how is that potentially going to affect trading?
linkght now, there is no to international terrorism. it is being prosecuted as a terrorist event. , lowerrd street manhattan, but not near main sections. 830 p.m. saturday, a device went off, spreading shrapnel, bystanders hurt, property damage. and i'm detonated device was found by the fbi, describing the device is a pressure cooker-type situation with wires sticking out of it and a mobile phone attached. that mobileelieve phones were involved in both devices. as you can see, there was panic in the area. separately hours earlier, there had been a pipe bomb in neighboring new jersey that has
added to the anxiety. the fbi investigating these. there have been 1000 police added to new york. united nations assembly will continue on monday. they don't believe there is any chance of immediate threat, but want to take every precaution. ramy: it is good that no one was killed in this event. there were at least 29 people injured. one of them seriously. let's do a recap on the business side of things. downy, markets lower, across the board. what is the story? >> the fed hanging heavy over the market. it is pretty much wait and see. lower across the board. a lot of the movers were having to do with energy. energy was down it on friday. bank stocks lower ahead of the mover fed. big
, unitedrs like oracle technologies. loyal really the big story, down because we did see some speculation about nigeria and other countries bringing more supply on, adding to the clot fears. the fed hanging heavy, what are we expecting for a rate hike this week? >> they are expected to stand pat. on the eve, the market solidifies their view. behind a fedrgency move given the fact that inflation has remained tame. there will be a couple of reports out, but not a lot, a light week economically. a housing will be the big focus.
thelso have the tail end of final days of the democratic and republican debates, the first one happening, but the final leg of this presidential race. if you look at the consumer confidence gauge, very interesting chart. uncertaintyg record about the outlook for the next 12 months. economists say that could have a lot to do with the uncertainty about this election as we head into the final weeks. yvonne: we will look ahead to that. fed, the boj, focus on central banks in the spotlight this week. observers can't agree which levers the bank maypole, some expecting a complete overhaul of stimulus. analysis indicates a further rate cut is highly unlikely.
we will be in tokyo for that decision. is there anything we can say with confidence? >> will they take rates further below zero? we look at two things. we are looking at the yield curve. i have the chart here. it compares the curve before the july policy meeting and where it is now. two things worth noting. yields are up across the board. this is just about the case anywhere else in the world as well. more telling for japan is that blue box. up until auary and few weeks ago, that curve was actually inverted, which basically indicated that they may -- that the market was expecting the boj to cut rates further. what has happened since then his distortion, the market started to price that out.
now, there is more upward slope if you compare the green line to the yellow line. in other words, it reflects market expert patients. -- market expectations. the yield curve is one thing we are looking ahead to, but there is another forward indicator that says cuts are less likely. >> we always talk about the functions that show you forward rates and currencies. let me bring another chart up. this up thisbring because the market started to price in less expectation -- chances for the boj to cut rates further. what you see, those circles, those of the boj meetings. the first when you see on the left side of your screen was a big surprise.
the red one, that essentially was market expectations before the july meeting. it was -.2%. we are a little higher than that. is less you that there probability that the market is pricing in that rates will be taken further below zero. let me check my function very quickly and show you how that looks. there we go. it is very confusing, but the part you want to focus on his right here, where rates are at the moment. rates are expected to fall, but not as much as july. thank you so much. looking ahead to what may with happen the boj on tuesday and wednesday. first word news. reports from algiers say opec may call an extraordinary
meeting if members reach a consensus on strategy. they are optimistic about the upcoming in formal talks, which are described as "consultation, not decision-making." russia will also be at the talks , fanning speculation that a deal to cap output may be agreed. over at the reserve bank of australia, he has been that the bank for his entire career since 1980. he was deputy governor under glenn stevens. he faces the challenge of matching his two immediate predecessors on inflation known forut is also concentrating on asset bubbles and financial imbalances. putin has held the victory of his united russia party with paul's giving it almost half of the vote in sunday's parliamentary election. remainsonal popularity high, lifted by a surge of patriotism after russia annexed crimea in 2014 and despite
international sanctions pushing the economy into recession. turnout was 40%, down from 60% five years ago. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. ramy: the a long bills are sounding. a warning indicator for banking stress hit a record in the first quarter, highlighting the risk from ballooning corporate debt. tom mackenzie is looking into this. what is that indicator saying? about thee talking credit to gdp cap, the difference between the credit to gdp ratio in china and the longer-term trend. the bank of international settlements which measures this says the number in the first quarter hit 30.1%. that is the highest level that
it has been since 1995, when data started being collected by bis. this is higher than 41 other nations and the euro area. 10%says anything about usually points to risks for the banking sector. a blowout like this suggests that a full on banking crisis could be looming. you mentioned this financial crisis looming. is it inevitable, a banking crisis in some of these banks? many analysts have said for quite some time that a recapitalization of china's banks will be on the cards in the next 2-3 years. many analysts simply debate what that level with the -- level will be. there is a lot of concern
amongst analysts that the bad loans ratio is much higher than the official number. the official number is 1.75%. bee analysts say it could more like 20% for china's banks. we know nonperforming loans have been growing in the second quarter, increasing by $6.8 billion. there are a couple of factors that play to china's hands. the banking sector is largely state-controlled and oversee debt levels from china banks are relatively low, so that gives the government some leverage. pboc says capital levels will remain strong even in a severe shock. some new signs of banking stress. thank you so much. ,till ahead on "daybreak asia" not expecting to see a rate hike from the fed this week or year. john sloan joins us to talk about market sentiment.
down to are counting asia's first major markets to open this morning. sydney futures are unchanged. you are watching "daybreak asia" . in hongi am yvonne man kong. falling to more than a three-year low, beijing's toasury holdings declined $1.2 trillion in july, a drop of $22 billion on month. official chinese data suggest fx reserves were little
changed. takata aiming to shortlist buyers. the company could itself of for sale as it deals with the biggest ever safety recall. kkr is said to be among the suitors, as well as the carlyle group. it comes as general motors looks to delay the recall of one million vehicles fitted akata airbags. they are saying certain designated models are less risky than those linked to death and injuries. will continue to conduct a long-term study. the week ahead will be the busy one for central banks. looking for clues ahead of the
latest fed and boj decisions. let's look at the key events i had this week. good to see you. we see a slight majority expecting the boj might do something this week, but should they be waiting for the fed? >> no, the fed is probably going to wait until the end of the year. that gives the boj scope to do something if they feel they need to. i don't think they will do anything this week. i think we will get the statement that the current stance of policy will deliver the inflation they hope it will. japan is then monetary policy has reached the limits of its effectiveness. any further decline in and just rates could be counterproductive as households more as the return goes down. yvonne: they might the steepening the yield curve, going further into negative rates, but do you see any risks to this has you see the
commitment to buying more bonds? they areave shown happy to have the yield curve steepening in short term rates come down. the whole framework they have for how qqe works is by depressing long-term interest rates. depressing yield curves runs against that policy. likely alternative to doing nothing would be what people have discussed, some kind of flexibility on asset purchases, going away from an 80 tree and are hard target to a range, a bit like tapering off, but then cutting short-term interest rates to stop on deals from rising. the likely combination of those two moves would not work. you still end up with higher bond yields and a stronger yen. yvonne: they will not call it tapering in any way. what would is steeper yield curve mean for the yen? it seems like we are staying on the sidelines.
these are the options traders, yen will goe the next. where do you think we can go from here? is so much uncertainty on the japanese and fed side. i think people broadly and asia is clients are on the sidelines, trying to sort out the macro risks. the story for the yen is a current account surplus. any further monetary easing could increase that surplus by convincing people to save more and invest less. that's what we have seen, yields coming down, household saving more and businesses and not investing. surplus willccount grow and provide more support for the yen. ramy: i want to ask you about fed funds futures. that also happening as the boj is meeting.
what are your thoughts on what will happen over tuesday and wednesday? p do want to bring up my wir function for bloomberg users. we have a probability of a hike of 20%. it has fallen from a week ago, 30%. four months ago, 58.5%. are you in the majority where you think the probability of a hike is about 20%? >> we feel it is unlikely they move this week. they would have to have been talking up rate hikes much more aggressively. it seems the fed was preparing for a rate hike, then we had a few speeches that took that away, so i don't think we get a move this week. what we get is a statement that tries to keep the bias in that direction, the odds of a rate hike in december of, and as long as the data does not disappoint, i think we will get a rate hike in december.
ramy: the algiers meeting coming up next week. more oillike with supply coming off because of syria and libya, the prices off. do you think they're going to throw oil in? it is unlikely that we get a credible commitment to take supply down. we real story on oil is that have taken enough supply out of the u.s. relative to demand, and this market has been calibrating already. an expectation for oil prices to grind higher over the next year or two is a reasonable one. i don't think we get a strong commitment to take supply down. ramy: it does not seem like that. ahead, did the rush to
yvonne: this is "daybreak asia". i am yvonne man in hong kong. samsung's news, desire to beat apple lead it to russian the release of the galaxy note seven smartphone, including the new battery that can overheat and catch fire. suppliers were given tighter deadlines despite the phone featuring a range of new features. tell us about the competitive rivalry between ample -- apple and samsung as we know it right now. and samsung are the giants in the mobile phone industry.
it the past five years, they have banished all major competitors out there, motorola, once the leader, has been bought and sold a couple of times. nokia fell by the wayside. so these two have emerged and have then fears competitors in the space, and they have a becauseted relationship samsung also supplies components to apple, including panels, chips, and other kinds of things, so they have a long, contentious relationship, particularly in the smartphone area. who have been arguing about is the more innovative company for a long time. yvonne: it seems like reporters inside accesssual to samsung to understand how things backfired with this battery crisis. tell us more about that. >> that's right. inside access got to the company and saw that
earlier this year that at samsung realized the new iphone would not the as breakthrough and innovative as phones in the past, and they saw that as an getrtunity for the note 72 consumers attention because they felt like it was a really good phone, so they decided to press ahead with lots of new features including iris technology recognition, and also a battery that had more capacity than in past years and was also faster charging, so they were really loading up the features. they also decided to introduce it earlier than last year. this time they moved up that unveiling by 10 days and push hard for the deadline. our sources are telling us that there was a rush to get the phone done at that time, and as we know there were problems with batteries that came out after that.
yvonne: we are now just 30 minutes away from the first major market opens in the region. we are starting this week on a beautiful note. ramy: looks beautiful over there. 7:30 p.m. sunday here in new york where markets look set to start the week down. s&p 500 futures are down just a little bit. it has been a roller coaster ride in the past week. closing friday down. i'm ramy inocencio in new york. yvonne: and i mean man in hong kong. you are watching "daybreak asia ." let's get the bloomberg first word news with juliette saly. juliette: new york city
officials say saturday night explosion in chelsea was an international act, but so far there is no terrorist connection. 29 people were injured in the blast on west 23rd street. a second potentially explosive device was discovered nearby and a pipe bomb exploded earlier in new jersey. police say there are no up just links between the three. in china, further concerns over ballooning corporate debt. the country's credit to gdp get which stands at a 15-year high exceeds all other nations. that is according to the bank for international settlements. readings above 10% signal elevated risk of banking strain. shinzo abe says the bank of japan should continue with asset purchase and negative interest rates to prevent the yen from strengthening further. hamada defended the qe
program, saying there is a lack of available japanese government bonds. global news 24 was a day powered by more than 2600 journalists in more than 120 countries. let's look at how the asian markets are shaping up. haidi lun is on the markets. it is all about the central bank this week. haidi: there is only one story in town when it comes to these markets this weekend. it is the plethora of central bank activity building up to this crescendo. let's get to the boj first. david has been talking about the latest comments from hamada, saying, continue with qe, with bond purchases. markets, its to the
is anyone's guess as to what they can do. a lot of analysts think we're going to see another week of continued volatility and caution because investors are split in two camps. that thencerned potency of monetary policy, the effectiveness, and potentially the downside of what we could be building up to a dangerous bubble, whether that argument is going to come into play. japanese markets are closed today. australian futures are looking like a pretty flat open. as we getof cautious, closer to the bank of japan and the fed meetings, in terms of the fed meeting, this chart coming out from goldman sachs is saying, in terms of the market pricing, the fed has never hiked with the exception of 1994, when there's been market pricing less than 70%. we are still at 20%.
if you are looking at the fed, there's a lot more to be done in terms of guidance. other central banks around this part of the world have a lot going on as well. potentially, there is the risk of an upside surprise, given that inflation has been trending lower. bank indonesia could be cutting their benchmark rate when they meet on thursday. the philippine central bank as well. fed is oneurse the of the things we are going to be watching. oil is also on the boil as we get closer to that opec meeting in algiers. word is it might lead to a formal meeting. what are the details? touted ass has been an informal gathering. the secretary-general has come out and said to algerian media that this is an informal gathering, but he's optimistic that some sort of agreement could be struck that would yield
a further formal meeting of opec members. we have had a little pressure coming through on new york crude in that friday session. by 1.2% at $43. certainly we had revised projections from the international energy agency, continued decline when it comes to major emerging markets like china and india. we will be watching the price of oil as trading resumes. ramy: haidi lun on the markets. markets around the world will be focused on the central bank double when he this week with the federal reserve and the bank of japan due to announce their latest policy decisions on wednesday. kathleen hays is here with a preview of what we can expect from the fed. it seems that markets still are not expecting a rate hike this week. why is that, despite inflation
having risen? >> august cpi exceeded forecasts. let's jump into the bloomberg and see why. the core cpi, the line coming in, in the white, it is up about 2%. the pink line, the 2% target, what is that bright yellow line doing? that is the fed's main gauge. it is only rising 0.8%. that 0.8%, far from 2%. that is one reason the report on friday didn't make much difference. recent data has been week. if retail sales are week in august, can the economy grow at 3% plus in the third quarter? also, we saw a lot of week manufacturing data. world interest-rate projections, only a 20% chance of a september hike. the odds of a december hike, back of 50%.
ramy: what do fed watchers expect? >> it is so much like the markets. let's look at the results from this bloomberg survey. 50%conomists surveyed, seeing a september hike. 54% see the december hike. 55% say the fed will signal stronger intentions to hike in the near term. maybe explaining why some economists say the fed is going to be on a hawkish hold. yvonne: i guess they should be looking ahead to those revised surveys of economic projections. that may be the focus. how are the dot plots playing? >> every quarter, the fed looks at gdp and inflation. everybody says where they are thinking rates are going to be. let's look at the terminal. in december, the fed was looking
for four rate hikes by june. the majority, just looking for two rate hikes. 2017, that isor the middle of that chart, was looking for three. if the fed doesn't like this week, i guess everybody has to change their dot for 2016 to one hike, maybe zero hikes. the fed was so wrong at the beginning of 2016 on how many interest-rate increases it would do this year, you kind of wonder. will they still be seeing three interest-rate increases, two, maybe even one? those dot plots are going to create the headlines. yvonne: thanks. let's stick to the fed now. we will wait to see if there's any chance of a rate hike this month. the idea has been ruled out by bny mellon. haslindae to
amin. >> i don't think any time soon. that is a somewhat personal opinion, but also somewhat based on the economics of the situation and the measures that she's looking at. my own sense is later this year, december. i don't see it happening september or november. i think the central banks around the world are all being very dovish. i think that is causing each one of them concern as to when they try to do something. in europe, we further lowered rates. the british further lowered rates. japan is talking about lowering rates. haslinda: your own personal opinion, should she be moving now? there are opinions out there saying 25 basis points will make no difference. even 50 makes no difference. >> i think low rates for this long are detrimental to economic
growth. it is killing the savers around the world. pensions can get the returns they are looking for. i think long-term it is very problematic. we would love to see not only the fed, but other central banks around the world really look at monetary policy. i think monetary policy by itself is not going to generate the kind of economic growth we are looking for. haslinda: you've had this persistent lower rate environment. you had to waive fees. how do you make money, grow your earnings, in such an environment? >> it is a real challenge. we said to ourselves internally that we can't wait for rates to move. we have been engineering our company and our business model to not count on interest rates or foreign exchange volatility for lots of different market sectors.
then of course we are attacking the cost structure of the company. haslinda: how much clarity do you have in the next 12 to 24 months? what are the risks you see? >> i think uncertainty is causing a lot of volatility in the financial markets. whether it is brexit creating another level of uncertainty, interest rate and when they move, the pace of technological change is an uncertainty. i think what we have to do as leaders for our companies is embrace that uncertainty and help our employees, our staff, the markets, understand how we are going to overcome those challenges. ramy: that was gerald hassle speaking to haslinda amin. coming up on "daybreak asia," live at the investors remain hong kong throughout the morning to hear from another -- a number of key guests.
yvonne: we are counting down to asia's first major market open this morning. there be six weeks of consecutive losses? futures are pointing to a soft open today in sydney. you are watching "daybreak asia ." ramy: a quick check on the latest business flash headlines. the mayor of london is trying to ease concerns about so-called brexit as he continues his tour of north america. he is hoping to strengthen ties with other major cities and says london will always be open for business. >> my point is very simple. we have an opportunity to reconfigure our relationship
with the eu but also recognize america, canada, australia, japan, india, opportunities as well. yvonne: iran expects washington to grant licenses that should clear the way for the purchase of more than 200 new planes. iran is upgrading its fleet and agreed in june 2 by 80 boeing jets. that follows a $27 billion agreement with airbus for 118 planes. airbus jets have more than 10% of american content and require export licenses from the u.s. hollywood, the warner bros. drama about the heroics of a us airways pilot who landed his plane in the hudson river tops the box office for a second weekend in a row. the movie which stars tom hanks held off competition from a new blair witch project. the new bridget jones film placed third.
all right. investors forum kicks off in hong kong today. asia's longest running brokerage and investment group is celebrating its anniversary. live now to the event with angie lau. what is the main theme of the event this year? is a very interesting year. the new normal, what does it all mean? 1400 investors are converging right here at the clsa conference, the 23rd of this historic house, just marking 30 years in business since yesterday. that was the big anniversary. we've got the man of the hour, jonathan slone, the chairman and ceo. i guess you are the ringmaster for all this. it is a different year, isn't it? jonathan: the consequences of
the financial crisis of 2008 are still spreading out. we have interest rates ready to rise on the states. we get something in december as well depending on how the numbers look. it is a very tentative market. angie: your economists and analysts, they are very much independent. at the end of the day, there is even some discrepancy between some of your people as to whether or not we see a rate rise or not. you do have inflation surprising to the upside, but at the same time, still a very unstable u.s. economy. jonathan: i think the economy is very weak. if you listen to what chris would is saying, he's a deflation is. economists,n to our they are going to tell you the direct opposite, that things are better than you expect, the numbers are going to be stronger
, that we are going to get that rate rise. i think it is more difficult to think about what happens in the election. donald is going to dismantle a lot of what we know about today's economy. i think the markets are ignoring a potential problem. angie: what do you think he will be able to do? jonathan: i do think there is a possibility that he does get elected. if that does happen, he's going to question a lot of the underlying assumptions our economy has worked on since post-world war ii. angie: part of that is reforming the tax code. across the board, you ask anybody, the u.s. tax code is mind-boggling. it is actually not a bad thing that he's looking to simplify it. jonathan: it is not to say that his critique of some things are not correct, but i think the policy prescriptions of just throwing out -- again, since world war ii, we've had relative peace.
you have a world order that has recognized what that world order is. he might upset that. just as brexit has really challenged -- angie: isn't he part of the momentum? jonathan: he's definitely part of the momentum and not unique, though i think he is unique in some ways. angie: what about china. how unique is it when the pboc maintains the renminbi rate? [indiscernible] jonathan: i think what the bank -- you areys is that going to see a little bit of movement. they stabilized the economy. i think you are going to see a little better growth than people have been expecting. everybody was saying a year ago, slowdown, disaster. he has been able to manage that. time, 30 years, long
congratulations to you guys. this is a very different environment even for financial firms. how as it impacted you and your ability to affect business? jonathan: the most important thing is that, when jim and gary founded this, they believe that research and analysis and telling the story of asia was something you wanted to do. the other consequence was regulation and the way the market structure has evolved. information low is on the out. getting analysis to your client is not seen as the best thing for the marketplace anymore. i think that is a terrible travesty. the marketplace needs to fight back against this move to more homogenization. angie: always good to talk to you. congratulations on the 30th anniversary and also kicking things off at the clsa conference.
there you have it, it is the new normal. we've got a lot of incredible guests. back to you. ramy: thanks very much. we will have more from the clsa investors forum in hong kong throughout the morning. don't miss our interview with nobel laureate joseph stiglitz. coming up, bloomberg goes top gun. we got a special report from the skies above guam as u.s. forces host their biggest ever wargames in the pacific. ♪
they say they are delaying their open and putting their market into an inquire state. it seems at this point that the data is not displaying accurate market data in a limited number of securities. that is when they prompt this action. usually, this is not going to affect all participants, but they believe that it is in the interest of the market to provide all participants the opportunity to refresh their market data. the asx to delay their market open on this monday morning. no word yet on when we are going to see that. meantime, president obama's so-called pivot to asia has prompted rising tensions with china, which is also intent on being the major player in the region. china and russia are holding joint wargames which coincide with the biggest ever u.s. maritime drills in the pacific. correspondent stephen engle reports from guam.
>> it is simulated wartime. the tarmac is a traffic jam of bombers and fighters. we know who has the right of way here. 135 strata tanker is old school. this one was built in 1962. it is still a vital part of u.s. air superiority. in asia, where china is strengthening its capability and north korea is extending nuclear weapons, extending flight time is critical. airtimeut refueling, would possibly be cut in half. >> as they go and dog fight, they burn fuel much quicker, and we allow them to continue to fight, allowing them to extend their training time and maximize their time in the air. >> we've got to go fill up some birds right now.
>> the refueling station in detail is cramped quarters. >> here she comes. >> thank you, sir. >> they call it parking. the supersonic f 15 basically crawls up to the pump at 360 miles per hour. they need to keep it steady. only about 10 feet separate the two aircraft flying over the pacific. just make sure he didn't kind of pop up. our biggest threat right now is ourselves. because of situational awareness, maintaining that positive separation from the other tankers, the other receiver, and our receiver. >> the fighters get their fill fast, at 3000 pounds of jet fuel a minute. some 88,000 pounds
of fuel this day, but we too got low on gas and had to skip a scheduled rendezvous with a bomber and head home, where we did intercept the b1. stephen engle, bloomberg news, anderson air force base, guam. ramy: pretty cool stuff. great video and great reporting by our own stephen engle. i wonder if he's going to need a copilot for next time. i definitely want a ride on that one. that is it for me. yvonne, asian trading day is just getting underway. s&p futures right now are trading up. they were down about 0.4% on friday. yvonne: and we've got japan closed, asx delaying their open, so we've only got korea coming up in just a couple minutes. we will watch what comes out of
♪ yvonne: security stepped up in new york as the hunt continues for the manhattan dumpster bomber. stress signs, banking and china hit a record in the first quarter, a threat of growing corporate debt. samsung's need to beat apple lead it to rush the release of the note seven? welcome to "daybreak asia". happy monday to you. i am yvonne man.
korea.open in seoul, things are pretty quiet. a bit of drama for aussie traders this morning. >> you would imagine traders are jittery given the central bank bonanza this week. a little glitch when it comes to the asx. opensx has suspended the of the session, put in a quiet state. times when this has happened, it is due to a technical error. given the asx and austrian , even if it does not affect every single stock, we have seen this happen before. traders are on twitter
a computeras been glitch, but we are waiting for confirmation from the asx and when trading will resume. futuresoment, aussie were looking at a flat open, coming off multiple weeks of losses. holidays,is back from resuming trading today, marginally lower, down by .1%. new zealand trading, up by .3%. we are expecting to feel the jitters given the boj and the fed, two big central-bank meetings. from the bojts saying don't lose your nerve when it comes to qe, keep going
with bond purchases, negative interest rate policy. to retreat from that would risk going back to dark days. so very interesting to see what we get out of doj. of currencies and commodities, we had the aussie dollar coming back a little bit. .75, seen as resistance. china property prices at 9:30 a.m. hong kong time. if that is positive, we could see the aussie rally. thing we areher tracking, a rebound after the friday slump, some concerns about the resumption of shipments from libya and nigeria , some geopolitical issues they are holding up shipments, but more importantly, comments from the opec secretary-general saying this upcoming meeting in algiers is just an informal have
during, but is optimistic that if they can get consensus when it comes to stabilizing prices and the oil market, that could yield a formal meeting, which would then give a better chance of any sort of accord when it comes to a supply cap. wti, $43.70, so new york crude up. also taking a look at the japanese yen. japanese markets are closed today for respect for the aged. that demographic is possibly japan's biggest issue. the yen flat at the moment. some dollar strength to contend with. not just those two central banks worth mentioning. kiwis,, rbnz, the
expected to hold despite flagging inflation pressures. there is a chance we could get a move from rbnz, but also central-bank decisions from indonesia. inflation is nowhere near that 3% to 5% target. the central bank of the philippines also meets this week. yvonne: thank you so much. we do have an update from the asx, trade will remain in the in enquire state. we could be getting more information as to what led to this delay. additionalty has security personnel after the blasts that injured 29 people. be act does appear to
terror, but does not appear to have international links. a city on edge, what more do we know? >> they do not believe there was any sign of an international terror link. more importantly, no reason to believe imminent further threat. nevertheless, a huge police presence. take a look at some of the of thes, the aftermath saturday blast, a lot of panic in the city. it is not a mainstream area such street, square, wall park avenue, but a device exploded, shrapnel went everywhere, 29 people hurt, one seriously. there was a lot of property damage. blocks away, police found a non-detonated device, a pressure cooker-type device. they believe both devices may have been from -- connected
because they both had cell phones attached. you are seeing video of the point of impact. you can see people reacting to that. the anxiety and the city was increased given that a pipe bomb in new jersey, not clear the correlation, but the fbi looking at all this, the governor putting 1000 state police and troopers in the city. will continue with its general assembly on monday, emphasizing there is no terror a threat or international group attach, but this is a precaution as they investigate. yvonne: some scary moments. homeland security, terror threats back on the front burner as well. thison central-bank watch week, a lot going on, especially with the fed. what can we expect? >> at the end of the meeting,
there will be an announcement. most likely keeping rates where they are. that is the general thinking on wall street. there has been a lot of fed but there is dubs, no urgency at this point for them to raise rates. it it willly enough, economically, a couple of reports on housing, construction. they are expected to get a lot of attention. importantly more the final stages of the presidential election taking shape. the presidential contenders will be facing off in a debate, the first of three, and this is really going to be significant, because the polls show it is almost a tie between the two at this point. also, take a look at the special bloomberg chart which shows consumer optimism or outlook for
the next 12 months. the uncertainty about that is at its highest and economists are saying this has a lot to do with the presidential outcome. yvonne: the polls still suggesting it will be a dead heat when it comes to this election. thanks. first word news. reports from algiers say opec may call an extraordinary meeting if members reach a consensus on strategy later this month. the secretary-general says he is optimistic about the upcoming informal talks, which he described as "consultation, not decision-making." russia will also be at the talks, fanning speculation that a deal to cut output may be agreed. fill a blow officially takes over at the reserve bank of australia today. he has been at the bank for his entire career. he was deputy governor under glenn stevens since 2012.
he faces the challenge of matching his two immediate predecessors on inflation targets, but is also known for concentrating on asset bubbles and financial imbalances. samsung said to have rushed production of the note seven to take advantage of weakness and apple's latest iphone offering. sources say the company decided to accelerate the launch of its new smartphone, and that may have played a part in the battery problems. separately, samsung has sold stakes in several companies to free up money and focus on its main business. the total value of selling its shares in various companies came out to $890 million. theident putin has held victory of his united russia party with examples giving it half of the vote in sunday's parliamentary election. his personal popularity remains high, lifted by a surge of patriotism after russia annexed crimea in 2014.
turnout was 40%, down from 60% five years ago. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: the all alarm bells are sounding in china, warning indicators for banking stress hit a record in the first quarter. it is highlighting the risks from ballooning corporate debt. what is that indicator saying? it is another red flag for china's banking system. what we are looking at is the credit to gdp gap. this is the difference between a credit to gdp ratio and the long-term trend put together by the bank of international settlements. the number for the first quarter hit 30.1%. says anything above 10%
banking risks to the sector. we have a chart that shows this pickup. it is much higher, that 30.1%. suggestsof this size there is a possibility of a banking crisis that is now looming or china. yvonne: all right, what does this all mean when it comes to this looming crisis in chinese banks? is it all but inevitable now? havemany analysts predicted that china's banking system would need a recapitalization in the next 2-3 years. thosebate amongst analysts is how much that recapitalization will cost, billions or trillions. one estimate is $1.2 trillion.
there is a lot of concern about the level of bad loans, higher than the official number, 1.75%. some analysts say it could be close to 20%. in the second quarter, byperforming loans increased $6.8 billion. it is important to underline the fact that china's banking system for the large part is state-controlled. the government control, obviously, and the ability to bring in some of these debt levels and oversee debt -- overseas debt is relatively low. there are some ways the government can mitigate these risks. the pboc said that capital levels, even if there is severe shock, remains relatively high. this above 10% level china has been at since 2009 and has not yet had a crisis since then.
of the they quick check latest business flash headlines. china's holdings of u.s. debt have fallen to a three-year low as it continues to shore up the yen. 1.2 trillion dollars in july, a drop of $22 billion on month. official chinese data suggests fx reserves were little change that month. china remains the biggest foreign u.s. creditor, japan and saudi arabia taking second and third. shortlist 2-3 potential buyers. itself upy had put
for sale as it tries to deal with the auto industry's biggest ever safety recall. sources say it has asked bidders to submit proposals this week. kkr and carlyle group are said to be among the bidders. general motors looking to delay the recall of one million vehicles fitted with takata airbags, asking regulators to push back the recall by a year, saying certain models are less risky than those linked to death and injuries. s -- test included back to back policy decisions in japan and the u.s. set to dominate market attention this week. our next guest does not expect a fed rate hike this year and says it is unlikely that boj will make significant announcements. let's bring in mark matthews. he joins us live from singapore. great to talk to you.
you are expecting nothing from the boj or fair this week? to partially retract that statement. i don't think the fed will hike now or anytime between now and the end of the year. withpart is correct, but the boj, i think -- they are going to cut rates. i can't really say what the reaction of the market will be because it will probably be in conjunction with a package and a review of past policy that will be complicated, but i do think the boj will cut. yvonne: boj will cut. talkinge also been about a steepening yield curve, particularly focusing on the long end for the boj. do think that will of the fears that the market has right now? be in i said, it will conjunction with a larger
package, which is difficult to predict, because within the boj there are nine board members, and some of them have basically said they would like to cut rates, so that's why i say they will probably cut rates, but the broader package will be in conjunction with the government, and there is a lot less accord. markets,ll impact the i think we have to wait and see. , as youall right mentioned about that divided fed , we do start to talk about the bond markets when we see steepening yield curves not just in japan, but also the u.s. and europe. do you see any movement of the thishat could spur movement in the bond market, where we see a steepening yield curve towards the longer end? their bond yield was the one that started to rise first rack in july. in retrospect -- first back in july. in retrospect, that was a
warning signal we would get the same thing happening in germany, then the united states, but i think yields are still very low. banksion, the way central look at it, is still benign. if they looked at other measures of inflation, they might be more inclined to be hawkish. for example, the united states personal consumption indicator is clocking in at 1.5%, so we should watch these yields closely. crosses 2%, that would be a sign of a more meaningful change, but i think now we are just a little bit below those kind of red lights. yvonne: obviously with the steeper guild curve, definitely going to impact currencies. you said the dollar rally is something to watch. do you think it could get a boost ahead of these meetings? >> i think that the dollar will probably appreciate versus other
majors for a variety of reasons, not the least of which would be the rising political uncertainty thatthe u.s. election, and is strange of course because it is the u.s. itself that could be impacted, but we have seen in the past that when there are risk-off events, even if they him and eight from the united states, it is the dollar that strengthens, but not meaningfully. dollar index could inch up to 100. we are in a range bound market for most asset classes right now. it is not a bear market or a bull market. ground,certainly rage but we are seeing volatility pick up. didging market inflows pause for the first time in 16 weeks or so, so do still think there is room for developing nations, particularly in this part of the world, to advance until your end?
>> i do. the first isns, that fund managers only have 8% in emerging markets. the emerging markets are 12% of world market cap, so they are underweight. the second thing is china is getting better in all of the numbers. in august, better than expected with the exception of fixed asset investment. the state council said they will be sending inspection committees out into the field to try to accelerate projects that have more junioruse officials don't want to be accused of corruption, so people are still underweight these countries. china has put in a bottom and the economy is accelerating again. those are two reasons why they can be fine. stocks,we do see currently valuations high, fixed income riches will well. where are you seeing opportunity besides china then? well, i would just stick with
china, if you don't mind. within the emerging market asset class, you have had this massive convergence and performance where brazil is up 65% in dollars year to date, so if i was one of those fund managers who only have 8% of funds in emerging markets and i was looking to take that back to neutral, the natural place to go is china because the economy is getting better, but also a cheap market. mine, but broadly speaking, stocks and bonds are expensive in the larger parts of the world. yvonne: we will leave it there. mark matthews had of asian research. talks timingroup as it battles to shore up its finances. we will be in singapore live with details coming next. this is bloomberg. ♪
yvonne: they market update, new zealand and korea trading after the asx decided to delay its open this morning. supposed to get an update, but nothing yet. is the assumption this could be a computer glitch of sorts. we will watch on when that open will happen. mayor of london easing concerns about bragg said ofhe continues his tour north america, hoping to strengthen ties with other cities, saying london will always be open for business. brexit as an use opportunity to reconfigure our relationship with the eu, but
also recognize america, canada, australia, japan, china, india as well. yvonne: summer bonuses in japan which had steadily been rising have hit a nine year high. a major suggest employs companies got a boost of more than $8,000, while services and energy producers saw a 50% increase in bonuses, son manufactures and steelmakers took a 10% cut. it has sued over claims misled investors over growth prospects. the company has failed to live up to 2014 promises, which included hitting 550 million users. twitter had 300 million users as of june. that case is seeking class action status and comes as twitter is struggling to compete with snapchat, instagram, and other platforms. coming up, a cautious note about the state of the world.
♪ a 30 a.m. in singapore, half an hour away from the open of trading there. you are watching "daybreak asia" . ♪ yvonne: first word news. >> new york city officials say saturday nights explosion in act,ea was an intentional but so far no terrorist connection. in the blast.red a second potentially explosive
device was discovered nearby, and a pipe bomb exploded earlier in new jersey, but police say there are no obvious links between the three. banking stress in china, warning level rose to a record, raising concerns over ballooning corporate debt. credit to gdp gap at a 15 year high of 30 .1% exceeds all other nations. readings above 10% signal elevated risk of thinking strain. noble group says it is still seeking an investor as it for dexia could take another two years to return to profit. the trouble commodities trader maintains it is on track by cutting jobs and selling shares. factors have seen shares slump over the past months. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg.
yvonne: let's get back to markets. we are still waiting for that aussie open. that's right. we're waiting for an update from the asx, more detail about what exactly is going on. sources say it is a technical glitch at the asx that has resulted in the start of the trading session being halted and ire asx placed in this enqu state. it has been due to technical glitches in the past, and we are waiting to see when that will be updated. orderly,ne of the most well organized markets in the world. few stockse even a were data is not updating, they will shut the market down and stop it from trading.
we are still waiting for news out of sydney. the fridayigher in session, but it has been many weeks of losses when it comes to the sydney stock situation there. take a look at new zealand, up by .25%. korean stocks also bounding from that softer open, up high .2%. we are in the wait and see mode. consumer staples doing quite discretionary as well. speaking, we are waiting, central-bank action dominating the agenda, the boj, the fed, but also other central bank decisions coming from the rest of the region, rbnz, central-bank of the philippines, and indonesia, all meeting this week, so a huge week in terms of monetary policy. there was a note from goldman
sachs suggesting that if you look at the history of when the fed hikes, there have been two occasions, both in 1994, but other than that the market pricing has always been above 70% for the fed to hike. the take away is they will have to do a lot more when it comes to guidance to get the markets set. by 1.51%,ectronics up resuming shipments selling the note seven. we also have further losses when shipping,o hanjin this as the company reports it will sell more than half of its ships. so much.hank you sources are telling bloomberg that samsung's desire to be apple lead it to rush the release of the galaxy note seven smartphone, including the new batteries that can overheat and
catch fire. suppliers were given tighter deadlines despite the phone featuring a range of new features. very interesting to see samsung electronics playing catch-up, but still rising in the session so far. howstory goes to show intense this rivalry between samsung and apple really is. >> that's right. these are the two giants in the mobile phone industry. they have had a long and complicated relationship. beyond competing in the mobile phone business, samsung is a big supplier to apple, components that apple uses in its phones, ,nd they have also had lawsuits accusing each other of violating intellectual property, so they -- apple has accused samsung of copying its phones, and those lawsuits went on for years, so
it is a complicated relationship and the rivalry is very intense. given: how reporters were some unusual inside access to samsung to understand what led to this battery crisis. what did they learn? was it too rushed? >> right. our sources told us that earlier this year that samsung executives got a sense of what the next iphone was going to look like, the one that just came out, and their perception was that it would not be that inspiring or have any breakthrough innovations, the formfactor remaining the same, which it did in the end, and they saw that as an opening to impress consumers with new technologies and new features in the note seven, and they came out with a phone with strong reviews when it hit the market in august, consumers liking the new features, and it seemed like they have this opportunity to leapfrog apple, then of course the battery fires started. that led to this recall, which
led to additional problems, especially in the u.s., where regulators were critical of samsung announcing the replacement program before the was any process in place to get those funds recalled. yvonne: obviously there was a lot of pressure it sounds like for the suppliers. what are they saying about the note seven development? the suppliers say it is not uncommon to have these rushes before a deadline, but they told us that the tight deadlines this time were tighter than before, that samsung was putting more pressure on them as they were changing specs and details, so this time was more difficult, more challenging, then it had been in past times. we also talk to the wireless operators that either phones from samsung, and they said they did get the normal amount of time to test the phones. they don't typically test
batteries, instead attending connections in making sure the phones are tuned appropriately for the networks. they said they had the standard amount of time. yvonne: how damaging will this be long-term? that seems to be the big question. thank you so much live from tokyo. the bank of japan in the spotlight this week with policy meetings starting on tuesday. observers can agree which levers the bank may pull, was some predicting a complete overhaul of stimulus. analysis in the case of further rate cuts is highly unlikely. it is safe to say that someone will be disappointed about with the boj will do. david: what really through the market off was this review. they arele were saying reviewing to find a perfect reason to do a complete about-face. we are looking at two things,
the yield curve and ford currency rates. thatboth of these show is it is unlikely we will see a rate cut this time around compared to the probability before the july meeting, where a lot of people were disappointed back then. have a look at the yield curve. what it shows you first is a steeper yield curve. years, now it was 15 only 10. , focus on those two boxes on the left side. what we have seen is after the us in january by taking rates to zero, a distortion was created by -- the curb was actually inverted, the blue box right there, so what we
have seen in the past two weeks is the market has started to price out that distortion, so it is now an upward sloping curve, something normal, if you will. that is one thing i want to note. if you look at zero up until the seventh here, people are expecting rates to be higher compared to expectations. yvonne: no one suggests that were seeing better growth. it is all about central banks. what other indicators you are looking at may actually show we might not get further rate cuts. david: when you look at ford rates, for example, what we want to look at his ford rates in the forward rates in the currency.
the circles indicate when this meetings took place, boj meetings. the first is the big surprise, which is why market expectations were brought lower. it calculates implied policy rates for central banks. , in red circle back there the days before the july meeting, people were expecting a further rate cut, generally speaking. it didn't happen. we had a spike. at the moment, we are higher than where we were in july. we are looking at less that the boj is going to take rates further below zero. it is this bit right here. that's where we are, follow my mouse. that is your implied rate. you can see this bit right here, still downward sloping. we are still looking at lower rates ahead. the ground inon
tokyo as the decision comes up this week. raised its earnings outlook twice this year. it's ceo is still remaining caution peers joe kaeser spoke with bloomberg at the summit about life after brexit, negative rates and a new era of adaptability. we have to make sure the company becomes more adaptable. , faster,sarily bigger but more adaptable, because in the future, speed has become faster. uncertainty is even higher. it is a very tough environment because everyone is after efficiency, not so much capital spending. there is a lot of uncertainty in the marketplace because of the geopolitical tightness in the world. 2017 will be yet another
complicated year. you say you continue to be concerned about geopolitics. what impact do you see on your sales and earnings? >> when we laid out our guidance 2015,16 in november people ask me what is the single biggest concern about achieving your guidance. is the competition, technology? i said it is neither. it is about this geopolitical environment which gives a lot of uncertainty to our customers about investing into the future. into new don't invest manufacturing, renewable energy, new health-care technology, these are our revenues and bookings. unfortunately i have to say i wish i was wrong at the time, but if i look back from then to
today, the geopolitical uproar has been rising. >> we have brexit. how is that impacting your business in the u k and your decisions for the future? >> we obviously need to deal with what the u.k. people have been voting for. it is not all terrible. know whate do need to the milestones are going forward. i don't need a yes or a no about the brexit. i don't need to know exactly what it is. all we need to know if this how long it will take until people make certain decisions about something. so it is a concern, but we need to deal with it. there are much worse things out there. >> like her hats negative rates. and newu have money
yield, what does that tell you? temporary? the new normal? need a freshould look from the capital markets about what is a desired yield. with the negative rate environment, what will be your priorities for cash? >> invest, invest. invest into opportunities, innovation, requalification of our people. hadne: up next, china's debt reaches epidemic levels. talk about it next. this is bloomberg. ♪
allows the asx to manage individual stocks. statement, the issue affected its trade platform. a competing stock trading system has also delayed its usual open due to that glitch in the asx. we will give you more details as they come in. ringingbt alarm bells as a warning indicator for banking stress hit a record in the first quarter. angie lau is standing by with our next guest. set to release report on shadow financing and the risks it poses. interesting stuff. angie: absolutely. it is a serious issue. of aee had warned liquidity trap, shadow financing something that is in focus. let's talk to the man who has been taking a closer look at this.
when you look at shadow china, it's hard for investors to wrap their head around, but it is important. why? >> shouting financing allows the bank to get around regulation. these are the riskier credits. they are potential bad debts. hal manageable is it? -- how manageable is it? 3.7% to 4% there is of gdp in the shadow financing system. this is a pretty big number altogether. angie: if the pboc needs to bail out chinese banks, which a number of economists we surveyed
think is an increasing $500 billion to trillions of dollars, where does china shakeout? a lot ofis transparency here. up istimates to clean it gdpt 10% of gdp, and 4% of for shadow financing, so a total of 14% of gdp. the government's balance sheet is strong. short, the government has a strong balance sheet to absorb it if they needed to. ngie: the other issue is the rnb. or if it tries to control, it will cause the pboc money as well. where do you forecast the rnb to go? >> we have the renminbi
depreciating another 2% this year. continues -- and more importantly, you went from a stock market bubble, now a property bubble, and this is too much liquidity in china. angie: they tried to control the property bubble. they did. all that money fled into the equity market. now it is returning to the property sector. we are expecting property prices today. do think it will surprise to the upside? slower month, then things are just heating up. all major cities up 2% month on month. the risky part is that things thatetting so expensive property investment continues to slow. you get the negative part of high prices, but property
developers are not investing. angie: are they not investing because there is less liquidity? that is not what we have seen. >> it is a combination of things. very expensive. also, you have a lot of inventory. we have 4-5 years of inventory. maybe a healthy number would be two years of inventory. they need to worry about the leverage. angie: how does china break its addiction, the leverage, -- be deleverage. aboutthey are serious supply-side reform, that is de
the mayor of london has wrapped up a trip to the u.s. and canada. tom keene caught up with him in new york, where they discussed intolerance towards muslims and their integration into western society. >> there are some people, so-called isis and some on the right, who say western liberal values are not compatible with mainstream islam. i say that is nonsense. it is perfectly possible to be a westerner and be a muslim. there are tens of thousands of proud americans who are proud muslims. of proud millions brits, proud muslims, not perfect. there are challenges, issues. by giving the impression that muslims are not allowed in the usa, giving the impression that being western is incompatible with being muslim, you are
playing into the hands of isis. the usa has this remarkable history, this remarkable legacy, of being a beacon for tolerance, diversity. why would you at these difficult times in the world give the impression you are closed? give the impression that muslims are not welcome? what kind of message does that send? i have friends and family in america. a fantasticca is country, and i want to build bridges, not walls. >> where would you take donald trump? him tould introduce proud muslims. there are cities across the world where you have proud generations living side-by-side, integrated lives, breaking bread together, falling in love with each other. yvonne: that was the city of london mere speaking to tom
keene. that is it for us on "daybreak asia". "trending business" is up next. talking to joseph stiglitz. also, very much active in trying to shape the brexit debate and advising members of the brexit camp. looking at that. then chris woods on the boj, the big central bank this week deciding on rates. the fed as well. chris was is calling haruhiko kuroda, cozzi --
♪ it is monday, the 19th of september. this is "trending business" with me, rishaad salamat. ♪ rishaad: we will be in the, singapore, and sydney this hour. alarm bells ringing in china, banking stress hitting a record. three times higher than the accepted danger level. listed noble group looking for investors, saying profit could be two years away, the stock has lost 90% since 2011.