tv Bloomberg Markets Asia Bloomberg December 6, 2016 8:00pm-10:01pm EST
to visit trump tower. the company will invest billions in the united states. haidi: and diamonds are one of rio's best friends. rishaad: the dow headed to a fresh record high, s&p within a whisker of a record as well. haidi: this is a reaction to the italian referendum, a very distant memory right now. things seem to be getting shorter and shorter, these major selloffs after so-called black swan offense, but we do have his optimism, but obviously a big day in asia. a bit of a disappointing read on gdp on the third quarter in australia. rishaad: straight to the markets, here's david. david: right. quiet start of the day, but obviously we have the aussie gdp
print. you have these lines out of the financial services commission starting to kick things off on what's likely to be a very busy some ofe of the go for these lines here, coming out of the south korean policymakers that have discussed ways in which they can alleviate the effect of rising yields. the dollar to debts of a lot of the south korean companies becomes more difficult to service. so they have discussed more possible responses to yields. they are looking at possibly, if needed, using a bond market fund to stabilize things, if needed. bold steps, if you will. korean won strengthening after what started off week this year. the south korean financial services commission. other big moves in the markets, aussie gdp 1.8% year on year, basically matched the most
bearish, or worst, estimates. if you are looking at the glass half-full, but it was a big miss , of course. aussie dollar's holding on to the weakness. markets basically flipped positions on the aussie dollar. have a look at the asx 200. an inverse relation here. that's on the way up. we go 54 point site -- 54.66. opened much higher, 5% or 6%. adr's of 3%. the meeting with donald trump gets them off on a fairly good footing, if you will, and the u.s. with this new government 3.8% for softbank shares. broader markets doing this. evening, asia time, of course, as we look at what is happening across markets. just about every market except new zealand is on the way up. i have talked about australia,
dollar-yen is higher. nikkei 225, 7/10 of 1%. atkets are just opening up the moment. let's give them some time to warm up. and we are looking to the open here in hong kong. also in manila. looking to follow the lead we are seeing across asia. yousef: -- mentioned, the aussie has fallen steeply after the economy posted its worst ddp contraction in seven years. rishaad: let's go to sydney. the week was expected, but not this bad. reporter: it was pretty awful, rish. half a percent of a contraction for the third quarter. the market was expecting a 10th of 1%, so you have a big decline , catching the economists surveyed by bloomberg by
surprise. and in the second quarter, we saw a revised growth of 6/10 of 1%, so that gives us on and relies number of 1.8% growth on year. -- an annualized number of 1.8% growth on year. you are looking back to the dark days after the financial crisis. the aussie dollar really stemming off the cliff after the release of these numbers. to be fair, though, the parity does expand after the tight election result. and resource experts failed to lift in that period as well. that was also a time when the iron ore price was not really going on either. there were a number of one-off factors dragging on the number, but still, half a percent contraction for the quarter really caught everybody by surprise. we have seenw something of a recovery when it comes to the iron ore price and other commodity prices, but we heard from the treasurer just a while ago. what has he been saying? believe he is still
addressing the media. i can see him there. accentuatingf by the positive, as he often does. he says that even that 1.8% figure is still above the oecd still better than the u.s., japan, and germany, but he says it does illustrate that australia cannot be complacent when it comes to growth. he really used it to make a political point as well. --said the demand support the demand's support our jobs and growth programs, so he is ,eally attacking his opponents saying they should be getting jobs and growth underway in australia. the government does not have a majority in the senate and just has a narrow one-majority in the lower house. one-seat majority in the lower house. if we see another negative number in the fourth quarter, that meets the definition of a
recession. australia has not had one of those in a quarter of a century. just a programming note, we are going to have the australian trade minister at 10:40 hong kong time, 1:40 if you are watching in sydney, or 9:40 in the evening in new york. reporter: president-elect donald trump has tweeted against a new target, air force one. he took to twitter to say a replacement order with boeing should be scrapped as the $4 billion cost is "ridiculous." boeing planes have carried presidents since 1940 three, when franklin roosevelt road a boat across the atlantic for a wartime meeting with winston churchill. president parkn geun-hye said she is prepared to resign in april. you are looking at live pictures out of soul. seoul.
she agreed to accept the outcome of an impeachment vote on friday. park could be suspended while the court rules on the constitutionality of the vote area -- of the vote. a five-year patent battle between apple and samsung still is not ordered -- still is not over after a ruling from the supreme court. it has ordered a review of samsung's $395 million fine for covering -- for copying aspects of the iphone. ebay, andcebook, hewlett-packard all made filings opposing apple. news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg. haidi: thanks for that. flight of the yen from china is starting to boost funding costs for banks and corporate's. to beijing. get
our correspondent has been looking into the story. tom, what is going on? reporter: the money markets are being steered high by the pboc, which is trying to pull back a corporate leverage and mortgage lending on account of the potential bubble people have pointed to it, but it is also because of you on outflows. follows -- outflows. we have a couple of shards. -- charts. the first one shows outflows. 25.7 billion u.s. dollars worth of you on outflows, the 13th consecutive month of outflows. it is expected that will continue despite the measures we put in place to curb capital outflows. this takes us to the second charge which looks at the trading in the repurchase market, which has added off -- a thirdf, down about since july.
is trying to drain some of the liquidity. this takes us to the main point, they third chart, which points to the rise in funding costs for the corporate bond -- for the corporate's. corporate bond yields have edged up. they are at 17 month highs. that raises the question of fears about defaults. we have already seen 25 corporate bond defaults so far this year on shore versus just seven last year, so those concerns are being ramped up as a result of these higher money market rates. tell me something here, tom, the latest foreign-exchange reserve figures are out later today. what are we looking for out of that? to moveit is 60 billion out of the dollar to them? yes.
the estimate is those fx reserves will fall by about $60 billion for the month of november. they are going to come in, the surveys suggest, at around $3.06 trillion as opposed to around $3.12 trillion in october. this is something of a gauge as to how much pressure the yuan is under. we know that the authorities here have been burning through those fx reserves to try to support the yuan while also putting in place those capital controls. we have heard of further measures to try to limit some of the megamergers we have seen this year, as there are concerns that some of those deals and acquisitions are being used to uan offshore. the nervousness of the value of yuan we are seeing, we saw yesterday morning data suggesting that it has fallen 820%. that -- 8.8%. but data was inaccurate,
there is a lot of buzz on social media with people watching that and being very concerned that they were going to see and have seen a repeat of what we saw in august with the surprise evaluation. lots of concern about the yuan. those fx reserves are definitely something to watch when they come out later today. comes at a politically interesting time if that ends up being a case -- ends up being the case. ahead, here why the rio ceo thinks that diamonds are his new best friend as he tries to turn the company's fortunes around. and why the music to his ears is metal. ♪
stephenson has defended its $85 billion deal for time warner, challengewill help cable and hastened that development of five g networks -- hasten the development of 5g networks. thetime warner ceo says deal will allow for more development of online content. manus: -- haidi: the touch i has raised the pressure on its chairman. it is also said the group has violated its own corporate guidelines by forcing him out. in response, tata says he is no longer on the payroll. the world'sgle is biggest corporate buyer of clean energy, and expects to run its entire company on wind and solar power by next year, expecting to
meet or concede -- or exceed consumption in 2017. oilrecent dramatic fall in prices has accelerated google's clean energy program. modesty -- commodity indices have recovered this year. our next guest says this trend is likely to continue. rishaad: wayne gordon is the executive director for commodities and fx at ubs wealth management. are we over the worst? guest: i think we are, rish. i think the worst of it was earlier this year, when we thought the world was going to end and china was going to have a large landing. since then, metals have started to recover. the trump of fact has been very strong, whether that actually has a fundamental movement -- rishaad: can i just interrupt you, because we just got the ton fixing, 6.88 as opposed
six point 85 -- as opposed to 6.85 yesterday. it seems to be going where the dollar goes, and essence. what's interesting when it comes to the weakness in currency, that has been driving the sentiment towards is really remarkable commodities rally we are seeing in futures. look, i would agree, but we have to remember that commodity prices are generally denominated in u.s. dollars, so what has been remarkable to us is that this is one of the few times in u.s. history where we have actually seen commodity prices rallying at the same time as the u.s. dollar. partially, that is around inventory being very low going into this up cycle of industrial production, but on the other side of it, we have also seen inflation the getting to also come back into the picture. yes, the chinese yuan is going of the impacts on some
commodity currencies, particularly the australian dollar. overall, we actually think that the u.s. dollar will find bye weakness in 2017, driven three or four factors. that can be the next leg up for commodity prices, in our view. is simply a function of so much being priced and so much optimism being priced in, perhaps as many as three rate hikes. yeah, i think the u.s. dollar story is a couple of gotors, which i will through. first, we expect real rates in the u.s. to drift into more negative territory over the coming six months or so, and that will be at the detriment of the u.s. dollar. we also think that the tax cuts, etc. that are being proposed by president-elect trump will lead to higher fiscal deficit, and
that will be negative for the u.s. dollar. and yes, we have seen a spike in yields in the u.s. treasury, for example, which has also dragged up a lot of other things as well, pushed down gold, as it would turn out, so precious metals have suffered under that. nonetheless, we still see quite good growth across emerging markets. as we go into growth of next be broadlyshould positive for commodities, even though the u.s. dollar will probably start to go the other way. i think the interesting thing, though, when you talk about the yuan is we actually have the yuan going a little weaker against the u.s. dollar. we see continued policy pressure down on the yuan, even though we see it rolling over the u.s. dollar in the next several months. liking goingre you into 2017? we have had a lot of calls of the rally we have seen an iron ore, coal not looking very good.
but in terms of industrial metals, is it going to be the party continuing? , we canrom our side probably see a little bit of a step back in the short term, particularly around things like copper, which are run very hard. at least in the short-term, we like a relative trade of long nickel, short copper, but generally speaking we think the base metals will still perform quite well going into next year. but the main drivers about performance in the commodity index, we think, is going to the oil. we also think industrial precious metals, things like platinum which have really been absent from this rally entirely. of a pickup init gold as real rates go through the negative in the u.s. we also like the precious metals, and the outlier to all of this is going to be agriculture. agriculture has very little priced in, and i'm a for example, if we get a drought --
ad, for example, if we get drought going into the first half of 2017, it is possible agriculture could rally hard indeed. we have to remember that agriculture is about 35% of the broader commodity index. we think those factors are the key drivers. metals have had a very good run, and we can see it continuing to move a bit higher as the u.s. dollar weakens, but generally speaking, the big uptrend we have seen in metals recently could also be starting to run out of gas a little bit. haidi: we are going to have to leave it there, but always a pleasure. rishaad: softbank's chief executive does the hard sell with president-elect donald trump, policy -- promising some $50 billion. ♪
haidi: southbank's boss has met president-elect donald trump in new york, and he says trump is the man to restore america's fortune. rishaad: the billionaire may play a role in the tycoon's plan. agreed to he has invest $50 million in the united states and 50,000 jobs, and he is one of the great men of industry, so i just want to thank him. thank you very much. shares jumping at the open. let's see how they are trading in the tokyo session. rishaad: they were up 4%, actually. there we go. haidi: what do we know about this potential investment that has attracted so much publicity? the $50 billion is coming from his son, the softbank ceo. tosays this is going to go
startups and companies, which is in linwith all his other radius investments. money, sources are saying, is going to come from this tech investment and that he is trying to raise money for, and they are trying to raise $100 billion. now, sources also say that this money is not intended for m&a deals. that includes deals like t-mobile. [indiscernible] rosalind: you could, but apparently it is not for buying other companies, it is for investing in new companies. this meeting with the president-elect does put him on a positive footing with donald trump. tweeted, he would not do this if we had never won the election. he said after the meeting he would like to celebrate trump's presidency, because he will offer deregulation.
word,lation is the key because when you think back to sprint,n his son fought they were considering buying t-mobile, and regulators bolted 's numberof the u.s. three and four biggest mobile carriers being brought together, so that was dropped. administration would be warmer to that particular deal, and we did see sprint and t-mobile shares closing higher yesterday. rishaad: tell us about this investment fund. it is $100 billion and includes saudis as well, doesn't it? has not been specified, has it? rosalind: no, this has not been specified. that $45 billion of this 100 billion dollar total comes from the saudi government, the public investment fund, $25 billion from other investors. roz, thanks for coming.
♪ this is a bloomberg's market: asia. rishaad: let's start looking at what we have for the moment. prospects in hong kong looking positive. a tale in from the dow, record lows. haidi: talking about the yuan having another significant low week. we had a significantly longer -- stronger setting yesterday. this story has caused quite a stir. a couple days ago we had an industry quote from showing up. if you take a look at the shot is bloomberg shows you exactly what happens and you can see why traders almost had a heart
attack because we had at one point seen the yuan closest around 7.5. saying: we have a couple we will see the yasiel at 7.3 at sometime next year. it is all to play out at the moment. that's get over to the shanghai-hong kong market. david? david: let's go through the opening numbers and we will take you to some of the key scenes in china and also south korea because we are seeing some movement in the currency following policy makers. composite flash. shanghai 6/10 of 1%. it's have a look at the numbers up and down. not really. let's wait for this to get underway. every single spot at the moment is out, again, let's wait for this to get warmed up. a few things i want to mention. more or less expected over the weekend, six .8. .t was closer to 6.85
there is the move up in dollar offshore. closing in on 6.90. the reason i bring this up and it is also the fact that they are injecting 70 billion run in the back into the system. the reason we are talking about is tom mackenzie in china was talking about the fact that you were getting rising yields and rising rates, essentially. obviouslynd he will see more expected for the pboc to flood and try to alleviate all of the money coming up. all of this really ties together when you get the latest report of the reserve's. the reason i bring up how to look at this chart, it is another way of looking at the relationship between the outflow and weakening currency. csy.is your inverse the red that you see, that is a very clear correlation. that is the real weakening
getting china stepping and, perhaps trying to smooth out the flows. you are looking at the forecast, looking at clearing 60 billion u.s. dollars for the drawdown. this is from the previous month. 2014 to was back in about a trillion renminbi. that is going to come out today. gdp 1978. one thing before i go, have a in dollare reversal 1, 1171 is the level. is theyy are saying have talked about ways to alleviate the impact of rising yields and they are ready to take old steps similar to what we always hear from the boj, ready but has not really pulled the trigger. this will reverse some of the earlier weakness we saw. just a few things to watch as we make our way throughout this trading session.
haidi: thank you for the, david. rishaad: let's get to the first word news headlines. australian dollar dipped after the economy contracted further than expected last quarter as government spending fell and imports rose. gdp shrank half of 1% from the previous quarter when it gained 0.6%. that is the worst contraction since 2008. morrison says australia can never take photographs. stake in long beach, california. they reported career airline owners has struggled to raise the funds needed to buy the u.s. assets. idders and thedidde korean private equity fund. oil gaining full ground after slipping from a 16 month high as opec pumps a record amount in november.
it is shifting to which non-opec producers after meeting up in vienna saturday. they are hoping nonmembers will agree to cut another 300,000 barrels a day. investors who correctly called the oil market in 2008 says he is bullish. >> i think the market needs to be complacent. i think they have been satisfied by the gains this year. deal has not been very stimulant. pretty farshould go to 60 or 70 this year. >> november is supposed to be a freezing month in the northern hemisphere, but it was not in the sea ice in the arctic has fallen to a new low. scientists say it covers 3.5 million square miles, 300,000 below with the records showed in 2006. some arctic air was 10 degrees celsius warmer than usual and seawater four degrees higher
from the ice forming. global news, toy for hours a day, powered by 2600 journalists and analysts in 23 countries. this is bloomberg. haidi: thank you for that. rishaad: a quick check on what is going on with the prospects of the indian trade deal. see with one we interest rates going up two cents -- 2/10 of 1%. haidi: widely expected to cut its key rate. kathleen come we have economist saying the band is putting more pressure on an economy that is already moving's desk losing steam. that is an interesting juxtaposition, certainly one that suggests if the reserve bank of india was even thinking about gdp not quite as strong, maybe we should cut with this vector of a cash crunch hanging over the economy already making
a big difference for indian businesses and consumers, it is likely they will. we have 26, 33 economist looking for a 0.25% cut. let's take a look at one of our charts, 14.90 and what you see on their is the rate that is now at 6.25% item also see a 10 year bond deal. that has been falling as well, and if you get a bigger cut, the bond yields could cut through even 6%, a first as we head into this very important meeting. the big question of the monetization, hurting growth, 500of the cash comprised of nodes being taken out of the economy come a big surprise is coming on the back of gdp which was already disappointing economist and investors. taking a look at another chart showing you two measures of
india's growth. gdp is the white line, the one most people are familiar with, 7.3 rising in the third quarter. then you have another measure that the use in india the gba and it is actually slowing down to 7.1% and is expected to rise at 7.3 and i think the problem when you look at the chart, india was a sort of jagged but move toward higher growth has stalled and of people are concerned for the global economy . again, most people looking at of the5 cut and one most accurate forecasters from iifl is looking for the more aggressive cut and when there was a surprise cut october 4, nobody expected by the governor when he took over the r.b.i., he was the only person looking for it. kathleen, how that of a total of this whole monetization
drive taking on india's economy? kathleen: it is not clear but if you see the news story, the pictures, and remember that 86% of consumption in india is done through cash coming you can understand when suddenly so removed, it makes a big difference to businesses and consumers. shehedn sachs has slasg india gdp numbers. this survey occurred after the november 8, ninth announcement from prime minister. previously people were looking for 7.8%. you can see it is a big difference. areasr --rur world al areas hit hard. here is what the analysis shows. far less chemistry over the first 51 days after the move is announced, a 10% drop in economic activity but as cash,
>> we will see the banks with composites boosting bank output. there is a wealth of fact were the wealthiest indians who are the ones most targeted by the government are going to lean on poor indians for smaller accounts, maybe pay them some fees to channel the money for them. but online, that impact according to bloomberg intelligence is only going to take 0.0. 2 percent of gdp. they are seeing a 7.5% from a little bit lower than the 7.7% they were forecasting. ours from now we are expecting the r.b.i. to cut. rishaad: nice one, kathleen. joining us from new york. haidi: we will have more analysis to ahead of the r.b.i. decision a little bit in the next hour. john sebastian told bloomberg television he is interested in expanding. rishaad: he was talking to our
colleague jonathan ferro asked whether prices would seek the philosophy of value. that whatvery clear we mean in terms of value come i will give you an example in the context of working class. volume need here is the is an outcome. what we are trying to optimize in the next three years, and the input is about the cost position and the profile. up volume will be an output or down but it is not the primary driver force. >> how does that shape you going from here? there was talk about the diamond business spinning off. talk about the things you may look to sell to spin off. >> what we want is what we described, large, low-cost, expendable assets. i can give you a few examples.
we have the legislature in canada on the back of energy. it is about the roadside business and about some of the copper assets. u.s. forome in the example in california which has been producing for the last 100 years. those of the qualities are interested in. i would love diamonds to be very expensive. that is a priority area. we have continued to dispose $1.3 billion of assets. we have a strong bond issued. we have down the road only one asset. >> i know you are restricted to what you can say about it. there are investigations recently that we do not have to go into the details but for you in the company, and does it speak to the darker side as a
new ceo, getting to go out and address? is it something you worry about? >> that is a good question. let me step back. i have been in the wall for five months traveling the world and everywhere i have been, i have met some outstanding people and are is why the topic you referring to is challenging for us. the investigation is with the authorities in the u.s., the u.k. i take integrity in the code of conduct very seriously, very seriously. it is nonnegotiable. let's talk a bit more about that with the commodities reporter. rishaad: david, the growth has been focused, so is it is surprised to see the chief pushing diamonds is an
area of investment. it does not seem to sit well does it? david: it is something of a surprise. it was only back in 2012 with a were considering the sale or potential ipo of diamonds per unit. it abandoned the process a year later saying it cannot find a buyer for the right value. he and his then, with assor both sounded more bullish tone about diamonds, seeing more opportunities at least from asia's rising middle class that they say is likely to be continuing to buy more jewelry and gems. analysish we had the saying the diamond sector is probably turned a corner and forecasting higher prices next year. in that sense, it is not a surprise. rio wants to have a diamonds unit, it has to look for the growth and investment because
they are both reaching the end of their lines, the argyle mine is due to close in 2021 and the ine of canada looking to close in 2024 some investors will be needed. haidi: david, where does the growth opportunity come from? have we seen the portfolio? david: it is fairly interesting. it was only back in august that rio plan to walk away from its key the relevant project in diamonds, the thunder aspect in india. they had talked about it, a very perspective operation but that was beset by bureaucratic delay and they also had issues with the tiger habitat involved there. from that ind away this not committing exploration to diamonds.
diamonds are only 5% of its exploration budget would suggest it will have to be an acquisition. as you heard there, the company is targeting world-class assets, so clearly, it is a decidable deal. look, we are seeing some mma in the diamond sector. yes, mna could be righted. rishaad: david joining us for melbourne. airbnbtaking a look at which is quietly building his business and china, saying it can succeed where uber could not. this is bloomberg. ♪
the moment, having a look at more government relations. looking at what is going on. the thing, what is the market going to be like for these rentals and china? what is uber doing differently? has spent $2 billion at least from what we know of in two years, rushing into the market. they were coming up against the big guys, right? doingbody knows everyone things on we chat that there were two competitors in china against uber, company backed by alibaba. uber when and at the time and they were fighting the two competitors and in response to ber they joined and you really got squeezed out of the market. they ended up exiting the market, basically selling or merging, if you want to call it that to debate chinese domestic players because they cannot
compete with the big guys. what has airbnb done differently? they have partnered with those big guys that are making the big plays, right? in february they partnered to get airbnb embedded into we chat. rishaad: that makes sense. stephen: number got squeezed --uber got squeezed out. in 2014 they teamed up with alibaba and major cities for tourism promotion and also probably most importantly, as of today, they are starting to store their local information on chinese space servers. that is to comply in advance of a new national loss coming out this summer that pointed companies to open up. rishaad: certainly. stephen: you have to play by the local rules and that is what they are doing. let me run through the competitors because they are not
the biggest, they are not like uber in that sense. they are number three if not further down. there is the largest of 450,000 plus home listings. they are looking, airbnb china looking to buy into the to your rifle which has 100,000 listings. they have a lot of work to do. rishaad: thank you. haidi: still ahead, australia start up on a mission to a band the elitist world of wine. rishaad: they are trying to do that from california where we will speak with the cofounder, on the way. ♪
online. rishaad: joining now is the chief executive. thank you for coming along, justin. tell us how it all works. justin: thank you very much. we launched in 2011 as you said. it is basically based on three kind of points, duration value and culture. the cure ration peas, we do not try to have every wind for everyone. -- wine for everyone. the try to make every premium wine a superpremium wine and focus on the top five. that allows us the super focus. the second part is the value proposition because we are funneling all of our values through a hundred number of lines which gives us buying power over anyone in the market. haidi: justin, is it fair to say you are targeting a specific demographic because you talk about culture.
i look at your website and it is pretty hipster, if i can call it that, a lot of the appeal lies branding.he market of it you are not looking at a mainstream audience. justin: it is interesting. i think the brand is definitely tied to younger audiences. the numbers tell an interesting story. our sweet spot is probably in the 30's, 40's age bracket, male skewedkind of . we do have a lot of people that are younger and older than that but i would say we are this week spot of mid-30's to 40 years old and definitely male skewed by the business is about telling stories about wines. we are very passionate about wine. we have always been. i brother-in-law and cofounder when we started this was all about democratizing wind. we wanted everyone to experience great wine and not just be seen it tasted by what we kind of
referred to as the elite of the wine space. tothought everyone deserves try great wines so we wanted to do that and bring that to australia first and now we are really excited to be launching overseas, singapore launched last night. that was at 8:00 p.m. and it is going to investor already. we are really excited about the future. reading justin, i was the website and what you do, and it struck me as one of these traditional wine clubs but it is online. no, it is -- there is a subscription part to it, but definitely not a traditional wine club. what we are trying to do is discover interesting wines. we do not go with the big guys. we will take lots and lots of wines, generally in the premium end of the market and then because of our buying power, we enable us to do tremendous deals. a sickly when we are focusing all of the buying power through
a limited number of wines, it means we can pretty much by the entire amount of wine for that year from the winery and that gives us tremendous buying power and allows us to do offers that are pretty much unseen anywhere before. haidi: justin, quickly, we are really curious, what is your unique selling proposition for this business? justin: i think it comes down to the two things i touched on which is the cure ration piece. we try the winds so you do not have to. we try thousands and thousands of wines to get to the top 5% that we love. we do not sell in the winds and we do not love and we buy more than anyone knows because we are so focused and it gives us a value proposition. the third piece is the culture piece. we are about the no bow ties and b.s. around wine. we are about providing great wines for people and opening of the wine world to the rest of the audience. rishaad: justin, great talking
♪ i am rishaad salamat. haidi: i am haidi lun. this is "bloomberg markets: asia." ♪ haidi: the flight of the yuan raising funding costs, the equivalent of $25 billion leaving the country. rishaad: the worst gdp contraction and eight years. haidi: the latest to visit trump tower, investing billions in the united states.
focused rio adjust its on diamonds. haidi: we are in day two of this post-referendum rally. juliette: a second consecutive session, most asian equities moving higher, but the yen holding around 114, supporting japanese equities, the nikkei up .4%. also, a strong rally and australia, up .7%. despite the third-quarter gdp miss, a reaction from the aussie dollar, but crude to stocks well supported, although gold players coming under pressure. look at the hang seng, movers coming through. up 2%, theing hsbc,
highest level since august 2015. this is one stock on the back -- front foot of this trump rally, up about 10% since the presidential election result. you are seeing weakness from property developers in hong kong today. flat on the shanghai composite, reservesor china fx come expected to comment at just over $3 trillion. i want to show you got sharp drop from the aussie dollar when third-quarter gdp numbers were released. this is the first contraction since 2011, so a downturn there. 74.28. latest reading on china's foreign exchange reserves is expected to be released at some point today. haidi: it comes as the weaker yuan spurs a rise in capital
outflows. has been looking at this story in detail. we are expecting it anytime today. what are we expecting in terms of these numbers? yeah, chipping away at that pile. le are in expecting it to false by a significant amount of. this is something of a gauge as to the pressure the renminbi is under come all and light of the expected fed rate hike and a strengthening u.s. dollar. we know capital controls are being put into place to support the currency here as well, and the fixing came in at its lowest for the yuan-dollars since
november 11. these are all playing into concerns about where the yuan goes from here. we saw that articulated yesterday morning when the eye icap published some misleading data. rishaad: we are seeing more yuan outflows, a story we keep reporting on it what are the implications for funding costs and some of those corporate and china who have waged up in debt? significant implications for them. money market rates have been edging higher because the pboc has been tightening as it pulls back on that corporate leverage and mortgage lending. another big factor are those yuan outflows.
they say for the month of november, yuan outflows at 20 25.7 billion dollars, a third consecutive month. they expected to continue despite capital controls put in place. theave seen trade in repurchase market, repo rates, have come off a third since july 2014, and the repo rate benchmark has edged up to 2.5%. corporate'sans for are yields up to 17-month highs, and the is significant because it puts into question whether we will see more defaults already this year. 25 onshore bond defaults versus seven last year. tightening conditions and continuing outflows suggests it will be a difficult environment
for china corporate and there may be defaults in the months ahead, in 2017. haidi: bracing ourselves already. dollar: the australian taking a kicking after the economy posted its worst quarterly gdp contraction in seven years. haidi: let's get through the numbers with paul allen in sydney. bracing a week read. >> much worse than the .1% estimated by the 26 economists surveyed. a big reversal on the second quarter, where we saw growth of .6%. it gives us an annualized figure of 1.8%, so the first quarterly decline in march 2011. the aussie dollar falling steeply on the back of that. in its defense, it is a backward looking number. bank said itral
was expecting growth to be weaker. it was taken during the fight election when we saw the government returned with a one-seat majority. -- exports and government spending were also ak, and the third-quarter miss and the resurgence and the iron ore price, so there were one-off factors that contributed to that bad read. has the treasury, scott morrison, been saying about all this? >> he often starts off press conferences trying to accentuate the positive, and this time was no different, pointing out australian growth rate was above japan,d and higher than germany, and the united states. here is a little of what the treasurer had to say. >> despite 25 years of consecutive annual economic growth, we can never take our
growth for granted in this country, ever. supportshe growth that our jobs, our incomes, our wages . the number of hours we can work, the sales are businesses can achieve, and in turn, the revenue that is needed to support our schools, hospitals, medicare, pensions and stressful -- social safety net. it all comes back to growth. >> the treasure went on to have a crack at his political opponents saying this demand support for the government jobs and growth program, and called opposition parties to rally and support the government. it has been 25 years without a recession. ofwe have another quarter bad numbers, that is the definition of a better session. -- of a recession. haidi: paul allen there for us
in sydney. rishaad: right, later on, 40 minutes until we talked to steven ciobo. let's get you up to date with the rest of the day stories and first word news. rosalind: the south korean president says she is prepared to resign in april over the undue influence scandal. she met her ruling party and agreed to accept the out, of an impeachment vote in parliament on friday. if 200 or more lawmakers vote in favor, park could be suspended while the court rules on the constitutionality of the vote. president elected donald trump has focused on a new target, air force one. he took to twitter say a replacement order with boeing should be scrapped as the $4 billion cost is "ridiculous." the administration has been saying government specifications
have pushed up the cost of the plane. slipping from 16-month gains after opec pumped a record amount in november, attention shifting to which non-opec producers or joint rusher when they meet in vienna on saturday. the cartel is hoping nonmembers will cut 300,000 barrels a day. an investor who correctly called the top of the oil market in 2008 said he is bullish. >> i think the market is complacent. fundamentalsnt in since may have not been priced in, and this opec deal has not been priced and yet can we should go pretty fast to $60 or $70 next year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thank you for that.
rishaad: this is what it looks at the moment, an hour away, looking at we've there. we are giving up some of the more pronounced rises on that futures contract on the nifty. just about flat at the moment. times pretty volatile when it comes to indian equities with this cash crunch. the reserve bank of india widely expected to cut rates when it meets today.
let's get a preview with kathleen hays. rishaad: prime minister lamothe demonic is ban, this age in, putting pressure on an economy losing emphasis. is it all down to this cash crunch? been, there have disappointing gdp figures in india, the third-quarter's not at as expected, so some now looking at the fourth quarter, away, 82% of the cash people can't pay workers, making it tough for rural farmers. sentiment, right? let's look at where the key rate is in india. let's look at the bloomberg chart number 1490 on your terminal. ,he white line is the repo rate down to 6.25 percent, and there was a surprise cut from 6.5% to
6.25% when the governor took over. bond yields have been falling, bonds routing, down almost to 6%, another move in the next couple of hours could fuel that rally a bit more. the question is what this means for the economy, and also to put this into perspective, we want to see where the economy has been. let's go back to the bloomberg and look at 1874, measuring to measures, global gdp, the white to 7.3% in the third quarter. the white line is the companion measure. you can see the turquoise line, , it has kind of flatten out, a weak global economy and
more. so, .25 percent cut is what bloomberg sees. most accurate forecasts and surveys is looking for a .5% cut , but the only one who foresaw the cup last october, so we are watching this closely. haidi: how much of a toll is this the monetization drag taking on the economy? impact, thoughs not all bad. theirdman sachs cut forecast to 4%, bloomberg consensus survey is down to 6.5%. bloomberg intelligence is pointing out that these numbers are may be too drastic because he says there is going to be on offset to the cup to economic going to gets are cashed in, deposits. there has also been increased purchasing of goods by retailers
and wholesalers that could boost the economy. the interesting thing he put on , within his own party, d monetization survey shows 90% supporting it, but you true, aif this holds 10% drop in economic activity is offset, they say over fiscal year 2017, only .2 percent will be taken off gdp. for now, the expected rate cut and we will see what happens next. haidi: kathleen hays with us in new york. rishaad: right, let's stay in with that and bring in dbs. the thing is, we have a slowing , quite a lot of weakness in the moment for the rupee because of the dollar strength.
it leaves us in a bit of conundrum. >> very true. everything else in isolation, the indian central bank need not really cut rates at this point because of external uncertainties. the rupee has recovered ground, but still weak in the d monetization stage. there is little need to cut, but where the story gets muddier as because of the do monetization initiative. economic activity has taken a hit. it has been more pronounced on the quiddity, so i think the central bank needs to take a supportive stance, but the market is split, most people expected cut, and that's where we need to see guidance there is from thecient clarity
central bank. we have downgraded our two-year forecast, and i think the hit will be worst in the december .uarter you should see the momentum come back, a temporary problem, but the central bank will need to take a better stance this time around. arei: do you think there longer-term problems that would result in more downside risks, state assembly a collection's and the first half, political concerns of instability there, potential delays when it comes to reforms? i think to begin with, this particular move is entirely unexpected, that this should also be seen as part of it broader reform agenda to limit
corruption, to limit unaccounted money, to build up the tax base and white in the collection, so i think this scene together with , you also sawons an income declaration scheme, so to that extent, this particular move the bank note ban is a medium to long-term positive, big given the disruption of economic activity for two quarters, the progress on reforms might slow down, especially gsd. the winter parliament session is ongoing, and there is not a lot of work getting done. we have only a week more to go before the session closes, so there is a risk that of the reforms might go slow, and then you have state elections. so multiple things to work around, but i don't think gsd will get postponed
forever. implementation is still possible in the second of have -- second half of the year. the need to make sure supply of bank notes are made ample. ,wo quarters, a bit of pain december more acute than the march quarter, then after we should see a recover. and reforms will continue, so gsd does not get delayed beyond the second half of next year. rishaad: stick around, if you would. about whatill talk to expect from mario draghi when the ecb meets tomorrow. this is bloomberg. ♪
i think the market to a certain extent has begun to anticipate that. haidi: that was janis capitals bill gross on the increasing expectation that the ecb will have to rein in its bond buying. rishaad: we will get comments from mario draghi. us in singapore, from the dbs group. the pressure is on him after that italian rejection of constitutional reform to do more, perhaps extend qe. what is your view? >> absolutely. in as put the ecb balancing act. you have signs that growth is picking up. thenirst three quarters, inflation showing signs of life. political uncertainties in the backdrop. , and then we ok have the a time referendum.
the way this will be interpreted by the central bank is to say yes, the recovery is taking hold, but we should be wary of what is happening on the political front and a broader china front as well, growth, and implications on demand, so that will be taken as external headwinds. that's why the central bank needs to remain on course with their qe program. we do think the qe program will be extended by six months from march 2017. the quantity of purchases however, we should begin to see some scaling back there, so 80 billion to 60 billion cut back. it is still an accommodative policy, it is just the scale has been pushed that, and after the second half of next year, we could see more that back,scaling
tapering, and so forth. communication will be extreme important, and i think that is where the ecb's tone will be important tomorrow when they meet. along with the attire and referendum, we have german elections, netherland goes to the poll as well. i think very uncertain backdrop politically, but need to trade that off with what is happening on the domestic front, growth and inflation. aidi: communication is always complicated and delicate factor when it comes to ecb meetings. if there is a risk he will not deliver, we saw what happened last christmas, complete market carnage, when markets were disappointed by what mario draghi did. the pressure from these expectations, he is limited in what he can't do. >> certainly.
last december, memories are pretty fresh. clear if not this week, then probably january when they do extend. the ecb has been challenged by , officials emphasizing that the monetary policy the verge and story is at play here, the growth differential between the u.s. and the eurozone, but that does not mean the ecb should have easy policy. communication is important, but the ecb has been noncommittal, specifically mentioning whether they will taper or not taper.
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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. tom: these are the first word headlines. the australian dollar dips after the economy contracted more than expected as government spending fell and imports rose. gdp shrank .5% from the previous quarter when it had gained .6%, the worst contraction since 2008. the treasurer scott morrison said that they must never take growth for granted. korean air lines has dropped its jihn.or han the korean line owner group had struggled to raise the funds
needed. a group comprised of hyundai merchant and msc and the korean private equity fund. the woman at the center of the korean undue influence scandal has been ordered to appear in parliament. they began a second day of hearings. says she park geun-hye is prepared to resign in april over the scandal. she met with the ruling party and agree to accept the outcome of an impeachment vote in parliament on friday. monetary authorities in myanmar are bracing for a slide in asia's worst-performing currency , falling 10% against the dollar in the past six months. an official has told bloomberg the central bank had little scope to outer what he called a rough drop, set to worsen if the fed hikes next week. myanmar's economy is set for the world's fastest expansion in
2016. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. haidi: this is "bloomberg is "bloomberg markets: asia". i am haidi lun. rishaad: do we still have gains in place? juliette: we surely do. i want to show you some movers, particularly strong gains in hong kong. this is on its share buyback program, up by another 2%. semiconductor manufacturing up 146% in hong kong. no real news on this move, so perhaps an erroneous trade. we have seen a strong rally in tokyo trade. i look at the overall market
picture, most markets tracking higher, particularly australia, up .6% despite the weaker than expected gdp. a weaker yen helping out the nikkei, up .4%. a little currency fluctuation as well,won today south korea taking bold measures to stabilize markets if needed, according to korea's financial services committee. up by .1%.pi we do have china's foreign fx reserves coming through today, expected to fall by $60 billion to 3.06 trillion dollars, weakness from some of those state-owned companies today. if we look at the bond market, a mixed picture, australian bonds rising, yields falling, down by two basis points to 2.79%, but the japanese 10 year note,
yields stronger there. haidi: thank you for that. rishaad: softbank boss masayoshi son has met with donald trump in new york and says that he is the man to restore america's fortune. appear theould japanese billionaire may play a role in the tycoon's grand plan. >> he has just agreed to invest $50 billion in the united states , and 50,000 jobs. ofis one of the great men industry, so i want to thank him. >> thank you. >> thank you very much. been: softbank shares have basking in this enthusiasm all day, jumping at the open. taking a look at how a closed ahead of that lunch break, 3.6% higher. rishaad: what do we know about this potential investment? rosalind: $50 billion from ceo masayoshi son going to startups
and new companies. bloomberg says the money will come from this one hundred billion dollar tech fund that masayoshi son is trying to set up with the saudi arabian government, but we are also told that the money is not going to be used for mergers and acquisition, so that means deals like t-mobile. this is an early meeting with the president-elect, and it has put masayoshi son on somewhat of a positive footing with him. donald trump tweeted, masayoshi son said he would never have done this if we had not won the election. he said that he would like to celebrate trump because he were advocated deregulation, so a lot of feel-good factor going on there. deregulation is key, because masayoshi son dropped the bid after u.s. regulators halted the idea, and the trump
administration seems far more likely to give the green light for this to go ahead. haidi: what is this investment fund? rosalind: they are trying to build the money for it, but $45 billion from the saudi arabia public investment fund, $25 billion from softbank, and $30 billion from other sources. haidi: on that story for us. rishaad: let's go to rio tinto group chief executive jean-sébastien jacques. he told bloomberg he is interested in expanding the diamond business. haidi: he spoke with our who asked whether arising prices would see rio tinto scrap its policy of value over boy him. >> what we mean in terms of value and volume, i will give you an example. this is our business in australia, what we mean here is volume is an outcome. what we are trying to optimize
is the free cash flow for the next 10 years. cost position and capital expenditure profile. it's up or down, but not a primary driver for us. >> how does that shape your portfolio going forward from here? can you walk us through your portfolio, the key assets, and the things you may look to spin off? >> what we want is a world-class portfolio, large, low cost assets. i can give you a few examples, the iron ore business. we have aluminum in canada. uxite business.ba in california, it has been producing for the last 100 years. more timeve to have
to be explicit. that is a priority area. to refine theued portfolio. we have a strong balance sheet. ourill continue to refocus portfolio so that 10 years down the road we have only world-class assets. >> a delicate issue and you restricted by which you can say, but several investigations around rio tinto. doesou and the company, this beat to a darker side within the culture of rio tinto that as a new ceo you have to address? >> that is a very good question. let me step back. i've been in the role for five months, traveling the world, and everywhere i have been, i have met outstanding people. that's why it has been challenging for us. i can't say much more than what is included in the press release
because the investigation is with the authorities in the u.s., the u.k., and australia. what i can say for a fact is that i take integrity and a code of conduct very seriously, nonnegotiable, and we must do the right thing going forward. haidi: let's talk more about this with david stringer in sydney. rio tinto's growth has been focused on copper, iron ore -- in melbourne, i should say. continue. rishaad: go on. you are asking the question. to seeis it a surprise diamonds is what they are focusing on? of aok, it is something surprise, and certainly to flag diamonds as a priority area for growth. it was only 2012, when rio tinto was considering the sale of its diamonds unit, or ipo. it seemed to be committed to
ridding itself of the business. that process was halted a year later. we have heard more bullish signs from rio. the company talks about the growth in demand for more diamonds as the middle class across asia looks to buy jewelry. amro, theirn forecasters are saying diamonds have turned the corner and prices are expected to rise next year. also, the fact is that if rio tinto wants to keep a diamonds unit, it needs new growth. it has two key mines, the argyle mine in australia, due to come to the end of its life by 2021, mine in canada that has a couple of more years left, due to close by 2024, so they will need to invest in new growth if they want to be producing diamonds. something, does
rio have growth options in its portfolio or does it have to do this in organically, get out there and buy another company? look, it looks like merger and acquisition will probably be the most likely option here. the reality is that the development covered is kind of bear. rio did have a key diamond project in india them a bit back in august, it said it would walk away from that project. the company spent at it long ,ime lobbying narendra modi talked it up is a big prospect in the diamond sector, but that thing had been stymied by bureaucracy, tied up in lengthy delays, and rio walked away from that. also, it is not committing a huge amount of exploration for diamonds, just 5% of its exploration budget this year, all pointing to merger and acquisition as a route to growth.
economyustralia's contracted the most in eight years last quarter as construction and government spending slump. we saw the aussie dollar fall .5% as a reaction. rishaad: let's look at the country's economic prospects with steven ciobo from jakarta, where he is having talks with indonesia. a quick reaction to that number, and of course your colleague mr.
morrison did not want to use the "r" word, but you will have no choice but to, so what was your reaction? look, the number is disappointing. we have put a strong focus on making sure we are doing all we can to boost australia's economic growth, and trade export deals are a key part of that and that is why we will be focused on locking into place high quality trade deals between australia, south korea, china, and japan. not deal, is down, but are annualized growth rate sits above the oecd average, the second-highest out of the g7. haidi: how much are you banking on this recovery and commodity prices to be the next driver in terms of the rally we are seeing , how much are you hoping this will carry through 22017? well, we are not forecasting it in. it is not a key driver in terms
of government numbers. ofasury has made a lot assumptions with respect to commodity prices. the stronger that commodity prices are, the better that is for australia. what we are also focused on is a government is making sure we continue the diversification of the australian economy and drive non-mining related investment into the australian economy. around seen good numbers education exports, services exports, tourism exports, and those are all key drivers for australian jobs. to thei want to move on free trade arena as we have been talking about at the last few times we have spoken. has this sentiment, the focus shifted from tp onto getting a better deal out of rcep? we can walk and chew gum at the same time, so to speak. what i am focused on is
continuing to build on the strong bilateral deals that we've been able to build over the last couple of years. indonesia is one of australia's very close neighbors, population 250 million, 50 million middle-class indonesians, anticipated to keep growing, putting into place and ambitious, high quality trade deal with indonesia will be good for australia and export growth, indonesia as well, and goes to the sentiment that exists with respect to these trade deals, you want a win-win outcome, and that's what i'm focused on. rishaad: that's just it, do you need to have a multilateral trade deal if you are doing these individual deals with all these countries you just mentioned? was there any point in tpp if you could do these individually? well of course multilateral trade deals remain the holy grail and produce the best outcomes because you get
consistency across the board, but we also have to be realistic about the challenge of multilateral trade deals. difficult to secure. australia's strategy has been pragmatic, multilateral, regional, and bilateral. we will not be left waiting to achieve an outcome on a bilateral since what we pursue a regional or multilateral trade you, so i will continue to pursue the best deals that i can for australia, bilaterally or multilaterally. haidi: i believe australia currently has seven trade young negotiations. what are the priorities for the country now in terms of trade? this deal with indonesia is my number one priority. it is the area i put most focus and time on. i'm here in jakarta for three days as part of ongoing discussions. i met with the trade minister
for indonesia, lima, peru, so we have very high level engagements, focused on living up a high-quality quality trade deal between indonesia and australia am a by the middle to the end of next year. we are also pursuing trade deals with the european union. our negotiators are engaged in regional economic partnerships. we are waiting to see what happens with the outcome of the tpp, so we have a number of different pokers in different fires. rishaad: you are there in indonesia, progress with respect to that, but what of the sticking points at the moment? as a generalok, rule, i don't provide running commentary on trade negotiations. what i would say at about australia's predisposition is that weto rcep
want a comprehensive and high quality trade deal. we are very forward leaning, liberalize trade, a high level of ambition with respect to services and goods yield the best outcome. we are pragmatic and recognized there are challenges at the domestic level for different countries involved in the negotiations, so while australia is ford leaning, we also want to get a good quality deal. haidi: minister, you said we you -- said you would push for the tpp deal.iven it is unlikely that ratification will be rich, so will you continue to push domestically? theciobo: we need to give americans time. it appears less likely than likely at this point in time, months in only nine with respect to a 24-month process with respect to tpp.
it is important the americans have time to consider all the pros and cons of ratification of tpp. australia will continue to pursue our domestic processes, so i think we have to give that time. it is too early to call it a day. there are a lot of big benefits that will flow from the tpp if we do reach the threshold you referred to, and i hope we will get there. rishaad: very quick one, minister, theresa may on the phone to you asking if you have any experienced negotiators that she can use? british pmi beat the to the punch and made the offer on australia's behalf. i met with liam fox and australiathat given and the uk's friendship and long-standing ties, big investors in each other's countries, we are focused on what we can do to provide some support if they would like it from australia, but we are also
going to have preliminary discussions about possibly looking at a trade agreement with the year k when they formally leave the european union, but we have to give them time. rishaad: thank you for joining us. steven ciobo there. boosting thet, banks, why the donald trump presidency is giving vendors a reason to beecher four. -- a reason to be cheerful. this is bloomberg. ♪
withad: you are back "bloomberg markets." the chief executive of jb pork morgan and bank of america making bullish forecast. , a bankingtion conference in which the ceo of j.p. morgan chase and bank of america both concede that trading revenue for bonds will likely be up by 15% in the current quarter. j.p. morgan says this is "obviously much better than last year." indicating that bank stocks have surged because donald trump's policies will unleash business, and that will boost the economy, and that will spur lending. let's go into the bloomberg at 1501, here is what much better
looks like, the rising profit projections on the right side show what ceo jamie dimon was predicting before the election, and now we are seeing a straight shot higher. the same was heard from brian , 15% gain seem right for the current quarter. he did say investment banking was solid, but not up to what it was last year. let's look at the stock performance since the election for bank of america and j.p. morgan chase, the same upward rise. it is not just the view there will be growth in lending ahead, but the fact there could be reduced regulation on banks that is spurring this kind of into the stocks. meanwhile, a decision widely followed on wall street, the supreme court indicated or cleared up what had been by many on wall street a muddled view of what insider trading was. youru hear a tip from
body, roommate, friend, and law and act on it or don't act on it, is it really insider trading? the top court in its first insider trading ruling in two decades said this is a simple question and unanimously came in on the results that you can go to jail if you receive a tip that is non-public, and if you give a tip, even if no money exchanges hands. haidi: up ahead, angie and david will be with us to update the big stories of the day so far. let's go to angie for a look ahead. is weakening, according to a weaker parity from the pboc on the yuan than yesterday. reserve,on the federal
three .6 trillion versus octobers figure, and how much china has had to spend to level given the u.s. rally. that and a whole lot more. rishaad: right, getting straight to the market action. around the coming across, tailwinds from new york, a nausea dollar taking a hit, vastly weaker than expected growth numbers there. haidi: that's right. we have the ecb meeting and the rbi decision as well. pretty muted gains across the board. ♪
♪ announcer: from our studios in new york city, this is charlie rose. charlie: we begin with china -- donald trump's unprecedented call with the taiwanese president has put u.s.-china relations into sharp focus. it was the first time since 1979 american and taiwanese leaders have spoken in a break from diplomatic practices. trump said it was a routine congratulatory call, but on sunday night, he criticized china's military and economic policies in a series of tweets. in china, an editorial warned the united states risked a