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tv   Bloomberg Daybreak Asia  Bloomberg  June 11, 2017 7:00pm-9:01pm EDT

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♪ >> markets are assessing the fallout from the u.k. and tech selloff, turmoil the fed coming up this week. >> theresa may embraces conservative rivals. half of u.k. voters want her to quit. trump renews his attack on james comey, tweeting leakswere cowardly --
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were cowardly. boj governor kuroda likely to win a second term. economists say he is the only possible contender. >> we have the world covered here on "daybreak asia" and go to london and discuss the fallout from the u.k. election. >> rick perry in beijing talking clean energy and the paris accord. our exclusive interview of little later. this is "daybreak asia" coming to you live from bloomberg's u.s. and asian headquarters. we have the u.k. of election out of the way, but uncertainty here to stay. theresa may hanging by a thread as prime minister as she tries to string together some kind of coalition party. the dup still in question. the pound taking it on the chin.
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mostound falling the against g10 currencies come especially the canadian dollar, -pound getting a bit. the only exception is the yen and the new zealand dollar. pound seeing pressure, not a lot of reaction to surprise appointments in may's cabinet. theresa may fired when she took power, so showing how weak her position is. >> and karma too. you would have thought that dominated the markets more given how much pent-up anxiety there was. in the u.s. markets, we still onaged to squeeze out again friday, the dow up 89 points, the s&p unchanged, but it was
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,ech stocks, major tech stocks falling in pieces. you see the composite index fell 113 points, down almost 2%, the largest drop since 2008, so a mixed session, and only more topsy-turvy this week. raising the question of whether we are seeing them bubble bursting in the rally or the markets. fed, and bojoe, this week. let's look at the state of play in the asia-pacific. australia closed for the queen's birthday. the kiwi still seeing pressure against the dollar right now. stocks flat an hour into trade. down to the open in tokyo and seoul, korea. a bid for equities on
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friday, .5%, but heading lower in tokyo today on the nikkei. keeping that defensive stance on the yen, extending three days of weakness. the boj facing pressure to strategy. exit it could be a slow day and asia with malaysia and philippines also closed on holiday. >> quite a few markets and closed indeed. let's get to first word news with tom mackenzie in beijing. tom: thanks. new opinion poll say half of u.k. voters think theresa may should resign after her election performance. she has vowed to stay on with the dup agreeing to work with her. michael gove is back in the cabinet less than the year after being fired by theresa may after the brexit vote. boris johnston led the campaign to take the u.k. out of europe. across the whole
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of the conservative party, i believe that is important. this is a government governing for everyone. i am pleased that people from across the party have agreed to serve in my cabinet and we will get on with the job of government. the french president seems headed for a landslide in the legislative elections as voters rally around their new leader. will take about a third of the vote, which could result in winning about 450 seats in the 577 seat national assembly. majority toealthy push through tax and labor market reforms. has renewed his attack on former fbi director james comey, tweaking that his leaked comments about their white house talks were "cowardly" and suggested they were illegal. onf sessions will speak
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capitol hill on tuesday about alleged russian meddling in the presidential campaign. in lightt is important of james comey's testimony last week. north korea says it is moving closer to firing an intercontinental ballistic missile capable of hitting the united states mainland. recent tests have shown the military is not far away from such a weapon despite president trump's pledge to prevent that from happening. the u.s. said in a drill that it successfully intercepted and destroyed a mock icbm over the pacific. the political drama in the u.k. met losses for one of asia's richest men. they were among the biggest losers in hong kong as the slump in pound cut the value of the u.k. earnings. bid to percent after conservatives lost the majority in parliament. c.k. hatchets and generated 3
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6% of pretax earnings from the u.k. last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. theresa may's failure to win a majority in parliament and election she called for herself is casting a shadow of uncertainty over the economy. keepof the weak enough to the boe monetary policy on hold this week? kathleen is here with more. thatve seen politically the election result was bad for theresa may and her party, but economically speaking, we see these forces when you have lower growth, higher inflation, and a weaker pound. a weaker pound and so much uncertainty. forgeresa may palling to ahead and get on with brexit negotiations which start on june 19. herhe polls suggested, power, her influence, scenes diminished.
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it seems diminished. people who are not her best friend say she is unlikely to survive as prime minister until the end of the year. no one knows what happens next with theresa may, and no one is counting her out just yet. if you are an investor or business, it will certainly hit you. brexit seems less likely as she tries to form coalitions and move something through with the eu. she will probably have to soften her position. this is happening when the economy was on the weak side. take a look at gdp. first quarter of this year, only 0.2% growth. the estimates before this election results were not getting as strong, still on the weak side. let's put it into perspective. i don't think we want to get to doom and gloomy. some people are saying for
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example, at least we know the worst risk is diminished, the hard wreck said risk, maybe something more palatable will be negotiated and benefit the u.k. the u.k. economy survive the eu referendum last summer, volatility, a weak pound, but the u.k. got through it. s&p saying no need for an immediate ratings change. bloomberg intelligence points they are pointing out that business investment in the more sensitive to uncertainty than it is to consumer spending demand, so you cannot diminish the added risks on the u.k. economy, but again, does it make it worse? we don't know. the u.k. economy was already slowing down. >> you are right.
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be an thought it would apocalypse it brexit happen, but here we are. what does this mean for the boe, that they don't do anything? >> bloomberg intelligence does not see a rate move until next year. they will hold policy steady again. when mark carney speaks it will be the first time since anyone from the boe has spoken since the election result. in addition, inflation. let's jump into the bloomberg and look at u.k. inflation, going from bad to worse, #6974, core inflation the white line from headline inflation the turquoise line. theably closer to 3% as pound continues to weaken and import prices get that much higher. in the u.k.,rking you are not only worried about your job, look at your paycheck.
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#92 79, we are seeing that even has inflation moves up, that turquoise line, what is happening to wage growth? it is flat and starting to fall again. this is not a good indicator for where gdp is growing with we gdp , not just for consumers. , butmay hurt theresa may the fact the economy is not quite as good as it was. who do you blame? blame the person sitting at 10 downing. >> thank you. the potential market implications even more with our guest for this hour, the managing director of equity , steve, isrm -- so this going to be a turning point for the market? pretty think we will look at this months later and say we survived it? >> i think we will say we survived it.
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the bigger picture, this is happening all over the world. voters are mad. governments all over the world are not doing their job. there is a lot of noise in london and what have you, but the voters are quite upset, so trump got elected on that basis. could lose it because of that, but you are seeing it all over. >> does that have market implications? longer-term, markets go on interest rates and products, what have you. we have been able to survive political leaders with problems, so that is not the big issue. i am much more worried about , corporate profits, if the fed raises. >> why are you worried about deflation? >> we have deflation in energy, in retail sales, soon to be deflation in health care. commodities down.
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most hard commodities are at new lows, so 70% of the world is operating in a deflationary environment and we are pushing on a string to try to improve it. simultaneously, we will raise rates this week. our rates are higher than seven other countries worse than the u.s.. i rates are 2.20% and going up this week. italy and spain have lower interest rates than we have. it is mind-boggling. and japan and great britain. >> so you are not a buyer? >> the market is ok. i think what happened on friday, which started tuesday -- i don't know if you saw the market on tuesday. they started to hit the fang stocks, weighted a day, then hit it again. >> it culminated friday? > it >> it did. it was a many crash in some
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names. remember where you are coming from. happy increased in the market is from those names. 44% of the s&p in those six names, which is the highest ever in history. it is like when i was doing this in the 1970's, the nifty 50, now six. they are accounting for a tremendous part of the market. >> which is always dangerous. so they had decided to take them down. they will probably rally tomorrow, then i would not be surprised that later in the week they get hit again. think people are saying this was the signal of the burst of the tech bubble? a sustainable rotation as well when it comes to value and growth?
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we have been talking about the u.s. election and have seen a lot of that fate as of late. >> i don't think the fangs are overly priced. they are overly owned. that is a big difference. multiples 25 or higher, depending on what accounting you use with gap or non-gap, but the market is between 17% and 20% in general. , think this is a crowded trade except for tessa which doesn't have any real fundamentals, and i think fangs will correct, as they should, and the market will figure the rest out. >> how do you feel about europe at the moment? everybody seems to be quite long when it comes to eurozone equities right now. do we look at the u.k. more closely given that we may not know who the prime minister will be in the next six months or so are what brexit will look like? >> that is what you have to take into account.
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i am a specialist in the u.s., so i always think the u.s. is the best place in the world. i also worry that this north korea thing is getting out of hand. 250 miles further, and we are in deep trouble. europe is fine too. they have some great companies and are doing well. i am not that worried about europe. i just prefer the u.s.. >> thank you. you will be back with us later on in the show. plenty more to come here. this is bloomberg. ♪
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>> we are counting down to asia's first major market opens. dollar-yen also seeing some strength this morning for the dollar against the japanese currency. this is "daybreak asia" and i am
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yvonne man. >> we are back with steve kroll. to some ofet's get the calls to happen the markets. what to do you like here? >> we think the fed will raise rates this week, which will help the financial stocks, which have been going back-and-forth. they had a big rally after the trump election. now they have pulled and because people have realized net interest margins aren't going up as fast as they thought. also, jamie dimon mentioned that second-quarter numbers are questionable. >> trading revenue numbers. >> there has been a pullback. when they started to hit the fangs, they came into the financials. >> why do you like them? it doesn't sound like we will get huge rate prices. >> we will not. when the rest of the market is
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22 times earnings, most of the banks are 10 or 12 times earnings. they represent value and will continue to do quite well. >> you are not worried about the trading revenue drop? >> i think it is affecting some, but we preferred the regional banks to the trading houses like j.p. morgan, but they have underperformed the last couple of years, so we think they will outperform clearly the fangs and some others. >> are you a buyer of any of the fang stocks? google, a holdy on amazon, and a hold on facebook. buyers?o not huge >> on any weakness, we would get themexcited, but some of are crowded and ahead of themselves, but great companies. yields,talking about you mentioned before, the forecast for higher yields
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continues to come down, especially the 10 year treasury. how much lower do yields have to go before it starts to impact stocks? downthink yields coming all over the world have helped stocks for the last couple of years. i continue to believe that the 10 year will traded 2%, even though we get a fed fund increase on wednesday. , it is because i don't think think the deflationary spiral that is going on in certain areas is amazing. i think rates will continue to come down, and i think that will continue to put a floor on the equity market in the u.s., and in some cases outside the u.s.. about theou mentioned fed this week, we are still seeing some uncertainty about what will happen after that. do you think janet yellen will soften where she thinks will rates will go?
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what is your case? she will be pretty authoritative on this one. i think she will be wishy-washy on september, and december is a tossup, depending on what is going on in the economy. the latest at economic details, some auto companies are saying there is a buyer strike going on in autos, and you are seeing that in the stock. you are seeing retail sales, how it is cooling off. it has not been hot all year. we see some other areas that are starting to slow down. energy now is making a sudden backwards move, so you have three big areas in the economy slowing and there are some areas like housing which is continuing to do well, and all the people that work in some of these lower end of jobs are getting good price increases from the minimum wage, but the wall street
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numbers are coming down dramatically. the typical person in wall street used to make much more money, and now those numbers are down 30% come up 40%, and 50%, so the asset management financial business is going to a real correction. those are the counter trends you are seeing going on. low forrates will stay a very long time, even with the fed raising the fed funds rate. >> stay with us. i know you will be sticking around. one feature we like to bring your attention to is our interactive tv function at tv . you can watch us live and look into any securities we talk about. check it out at tv . this is bloomberg. ♪
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the reason may is holding onto her job as u.k. prime minister after the conservative party lost its majority in
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thursday's election and facing calls to resign now. may is working as to push ahead her brexit agenda. , great to from london have you. parliament now. over the weekend, the prime minister forced to admit that she has yet to strike a deal with the dup. can she move ahead with this coalition? >> she won't have a deal until monday because the dup never meets on the sabbath, coming from a religious group. i think it is highly unlikely she will get a deal or at least a stable deal. >> so does brexit still mean brexit? upset,e this electoral some saying this is the rejection of theresa may stance
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on brexit come of it than you have eurosceptics and conservatives who may push for a no deal. who stands to win in this discussion as she tries to counter and square all these different views? >> both main parties now have accepted the inevitability of brexit. the question is whether it is a hard or soft rights it. putting it briefly, i think we are now pushing towards a softer brexit, especially with the dup coming on board, who want a relatively open border with the republic of ireland, with the success of the labour party come up with the feeding the electric about brexit in general, beginning to realize the will be major financial costs, and i think that this community. shouting loud about the financial terms, so we are moving towards a harder brexit -- softer brexit, i think.
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>> what is the chance we could see a second election? >> pretty strong. i think jeremy corbyn -- >> we
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♪ yvonne: 7:30 a.m. monday morning in hong kong. signalring a storm degree in a few hours' time. are half an hour away from the open. betty: it looks ominous on the horizon. 7:30 p.m. in new york, just sweltering in new york city. finally only summer. the markets closed mixed on friday. i am betty liu. yvonne: i'm yvonne man. you are watching daybreak asia. let's go to first word news with tom mackenzie in beijing.
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governorbank of japan is seen as increasingly likely to get a second term ahead of a policy meeting this week. he is the only possible contender after his current term runs out next april. none of the economists see a change in policy, and the vast majority don't expect any change until after his current term ends. reports from japan say shinzo abe may invite xi jinping for a state visit next year. the news says he will go to china earlier for a groundwork trip. it will be the first visit to japan since 2008. the leaders met win shinzo abe went to china last year. germany is warning that the saudi-led isolation of qatar could lead to war.
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they say the situation could rapidly deteriorate, though there is still a chance for resolution. turkey is pushing ahead with a military base in qatar saying it is for security of the whole goal, not 1 -- goal, and -- specific country. this seems to be done by the end of ramadan. russia wants to work with the u.s.. spokeay sergey lavrov with rex tillerson on saturday and they agreed to negotiations. reports say differences are emerging in the trump administration. the trump president said he supports the isolation of qatar while tillerson said for saudi arabia to step back. warren buffett's lunch fortune raised $2.68 million in even a sales. they have chosen to remain anonymous. million for a record. they will eat at a new york
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steakhouse. the money helps the homeless in san francisco. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ the u.k. prime minister theresa may is refusing to quit, clinging to power is quite almost half the voters saying she should go. be reflected in the markets. the latest from the macro strategist live from singapore. same volatility this week? >> yes. we are seeing a bit of that already, not too much, but the sterling is the weakest so far. definitely investors are looking for any opportunity they can to sell the pound on any rallies. it remained long-term quite negative in the structural current. now this political uncertainty is another excuse for the
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traders to hit the cell button. -- sell button. yvonne: we are watching the bank stock rally. do you think this will happen with futures, in asia? looking at the kospi and taiwanese stocks? mark: those are two main areas where you will see impact. korea and taiwan are tech heavy. whistle make traders slightly start of thehe asian session. they wonder if this is a sign of stops in the u.s. talks. steady bull in a market, and people wonder if the volatility of friday is an early sign we are seeing the bubble start to pop. so it might be early to jump to conclusions, but the markets will be nervous until we see renewed strength. betty: i want to get back to
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u.k. and the fallout and how we are digesting and dissecting the outlook. we had someone talking about the boe and how they will likely not do anything despite the inflation risk. how will they hold on and keep hands tied? mark: that is a good question. at the marvin -- moment, they will not do much, but it is one of the main concerns. is aroundin the u.k. 2.7%, which is a bizarre market pattern. rates are near zero. they will be forced to hike later this year, but not anytime soon, not with this much uncertainty. we need to get more clarity first about what brexit negotiations will look like and whether any sort of compromise might be comparable. get some talks at the end of the year. until then, the boe will do nothing. much, markso
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cudmore, the bloomberg macro strategist. on can follow all of this the markets live blog. that is mliv go. you can get a run down in one click. there is testimony from expert editors. speaking about your investments, let's look at what to expect in the week ahead on wall street. a lot of economic numbers, also washington. su keenan is here with the details. wednesdayta we got on , the federal reserve likely has already decided to raise rates. they are expecting the meeting on wednesday, a second increase this year. the big numbers of consumer retail prices, retail sales probably cooled in may from a month earlier. probably the reason these
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significantly slowed down from last year, this will be out on wednesday. the consumer price index as well, probably little changed. it will be steady in may, largely because of gas prices. in terms of commodities, a focus on gold now. 502, what we have is the recent pattern on the far right hand side. gold is seeing three weeks of selloffs even as the maker of -- macro drop and the news with capitol hill of comey and trump supportive of gold. we are seeing a bit of a selloff as gold has slipped. weeke: and is another busy or president trump. su: he will likely to steal headlines on wall street and main street. he tweeted on sunday and has become a habit of doing this
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that he believes the former fbi had testified, jim comey, was cowardly. he is also anxious to testify himself and believes he should be able to testify in sworn testimony. he will likely show comey to be the leader -- leaker. comey did admit that he did leak some document. attorney general jeff sessions is expected to be on capitol doorsuesday behind closed as opposed to a televised event. president trump will also answer questions whether he will be leading -- meeting with theresa may. the white house saying there is no discussion right now. betty: thank you so much. i want to bring back our guest host, director of equity research.
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anticipation,uch so much commodity information. in the end, he did not impact the markets all that much. and thehink this issue whole cloud around it will pall onpall -- cast a the market? >> not really. we talked about comey, who won? trump or comey, and i believe the lesser outcome was that neither one really one. the u.s. as a country lost. intoe seeing here 140 days an administration, and we are still hearing noise about things that should have been taking care of a long time ago. betty: and is not market moving. steven: trump has a very good cabinet, and rex is great. but they may guys,
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say they are doing things and show on television, but everything is backed up. this goes back to what i said with theresa may, it is happening all over. on the lack of productivity government, that is why these elections are all changing dramatically at the last minute. betty: the right people out because of frustration. sue mentioned commodities. are you a buyer of gold? steven: i have not really been for gold. the reason gold is short-term the back down because economic data as she mentioned, retail sales, auto sales, have slowed in the last couple of weeks and months. the gdp number looks lighter. the payroll was lighter. we are going to a bit of a softer patch. that puts pressure on gold short term. if something happens in washington, hopefully not, or
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north korea goes further, gold will do -- betty: more attractive. i want to talk about oil. after getting $50 a barrel and then going below, it sunk even further. i want to pull up this chart that shows energy inflows and outflows. it is g #btv 9259 for the viewers. if you look at the chart, it has been interesting to see inflows into the etf even as we have seen oil prices decline. for the first time since last quarter, steve, we are seeing outflows in this energy etf. it raises the question, after hitting a low $80, people are like, throw in the towel. steven: i can't comment on why people go to etf. some of the energy companies are attractive and have high-yield.
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when they announced the opec agreement, people were excited. they did not look at details. opec said they were going to cut production 1.6 million barrels a day. but they left out india and nigeria. libya and nigeria produce about 3 million barrels a day. so the net increase in oil production worldwide like 1.4 million barrels a day, plus the u.s. has come on much quicker. that can be a real reason oil is having a couple getting a footing here. -- having trouble getting a footing here. oil --ow we have the greatest oil supply in the world even with opec production. betty: it is true they are not holding back at all. stay with us. kroll, we will be back with much more on daybreak asia including the u.s. energy
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secretary rick perry says qatar is an ally, but delhomme must be strong on terrorism. this is bloomberg. ♪
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♪ betty: we are counting down to asia's first major market open. japanese futures looking just a bit softer, down 0.25% below that 20,000 level on the nikkei. yvonne: this is daybreak asia. i am yvonne man. betty: i am betty liu. thene: germany is warning saudi-led isolation of qatar could lead to war. they say doha is ready to expand concerns. rick perry told bloomberg that while qatar has been an ally,
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all countries must take a strong stand against terrorism. : yes, sir. i think it is important for all of our allies and our friends to really take a strong stand against militant islamic terrorism. the idea being any country, and i don't know the details. qatar has historically been a friend. my home state has an engineering school at the education city as a friend. emir andr mer -- current emir are people we have a personal relationship with. i don't want to delve into and area i don't have a deep of understanding as i think it takes to address this issue at this time, but globally it is
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fightant that we are in a against individuals who would do harm to our citizens. tom: even if it means blockading a u.s. ally. : i will leave that to the state department folks who have information and intel. there is countries involved that our friends. we will sort this out. tom: i don't know if you got a chance to watch the testimony of the director james comey. we have got a situation where we have comey accusing the white house of lying, the white house accusing kobe of lying. who are we to believe? rick perry: it will sort itself out. i am confident the president will choose an appropriate and i think his decision to let mr. comey do something else is appropriate as well. question with the
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uk's election results, looks like at this stage it may be a hunk parliament. -- hung perelman. -- parliament. looks like theresa may's future is uncertain. given how much prime minister building aested in relationship with president trump and your administration -- suggest that will the administration on either side is not going to have an effect on the united states and the united kingdom and their relationship. specialbeen in this relationship for a long time. we will be partners. we will be in it together regardless who is leading, america and great britain. we will be standing shoulder to shoulder. betty: and remain allies. that was tom mackenzie's exclusive interview with rick perry. final thoughts with our guest host, stephen kroll.
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also have asked him about the harris climate accord -- paris climate accord. he said the same as the president, right decision. as an investor, how do you look at that? steven: that does not bother me, rick perry. when he was running for president or governor, he was very smart. he will figure everything out. waterne was watching the will see you have gone up six or seven inches. i don't know the ins or else of co2and outs -- and outs of warming, but there is a problem. i think trump and his people and rick will take care of it eventually. yvonne: are you an investor in clean energy?
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steven: not really because i think the price of oil will continue to be challenged. as i mentioned before, supply, and it would move over the next 10 years to cars that will not use gasoline, i think the fuel price will be challenged. i would love it if it was attractive. everyone should use the energy, but it is not for a specific company. yvonne: great to see you, thank you so much. steve kroll. we have great news on japan numbers. aonne: seems like it was sizable miss for may, falling 3.1% the month of april. economists expecting a rise of 1.5%. this is a dramatic come down. we saw this coming because last
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month's data, there were companies trying to cut orders nearly 6% in the second quarter. the yen did weigh on business sentiment. if you look at industrial production, getting final numbers this week, those are still very much in positive territory. we see the jump for profits in the first quarter, so there might be something for japan to raise capital plans in the second quarter. betty: we are still waiting for the ppi numbers. we don't have that. the in person -- the expectation is 2% year on year. that would be an indication of where inflation goes in japan. we will report those numbers as soon as they crossed the bloomberg terminal. you can get a roundup of the stories you need to know to get your stories going. bloomberg subscribers go to day be go. also available on bloomberg mobile. you can customize settings so
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you only get news on industries you care about. the dismal machinery ordered numbers in japan. this is bloomberg. ♪
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betty: japan just released prices for may, and here they were flat. no change. rosemists surveyed said it 7.1%. your on your -- year on year coming in under what economists had estimated, 3.1%. they had set 2.3%. dogsuestion that dodges -- japan, where is the inflation growth accelerated inflation growth? the u.s., plenty of big stories coming up this week. we are covering them all on daybreak asia, including central banks.
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we have the boe, the boj, and the fed meeting. that will be huge. the fed is back in focus, traders saying they will raise the benchmark interest rate by a point of a percentage point. that would be the second increase this year. we are watching key economic numbers on retail sales for may, but let's look at what the fed's mandate is. jump into the bloomberg terminal . inflation and at the same time, implement in the u.s. -- employment in the u.s. 9244, you can see on one front to have got the employment now down to 4.4% were the jobless rate is, but they are missing the mark when it comes to inflation. they are not at the inflation target represented by the red line.
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dogging japan is also dogging the fed in the u.s. is that they need to get to inflation targets in order to accelerate the interest rate increases. you are watching the boe, boj and other central banks. yvonne: the national bank of switzerland. all three meeting for monetary policies. , it is kindthe boe of dismal for theresa may and mark carney. how will the address this from economists that he will keep a record low? the honk parliament -- hung might not do much. you have to look at policy diversions we have seen. they the question whether we are getting into a convergent or divergence right now, seeing the basis points.
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the rest of the central banks, the boe and boj, keeping things unchanged. on thursdaym kuroda how inflation is below the target, but last week we heard about the boj recalibrating on the asset purchases. also the bce buying less bonds. balanceit comes to the sheet unwind, are we all going in that same direction? the fed is taking a big lead. betty: interesting to see that divergence, which means the money continues to come here in the u.s. that is a brief look at what we are watching here this week. looking at trading in japan and korea moments away from now. this is bloomberg. ♪
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♪ mixedan markets face a day after the tech selloff and the political storm oi in brita. institute of directors says business confidence is plunging. >> sterling comes under pressure while u.k. consumer spending fell for the first time in four years. >> disappointing factory floor in japan, producer prices staying flat. >> this is the second hour of
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"daybreak asia" coming to live from bloomberg's u.s. and asia headquarters. we are continuing to assess the fallout from the u.k. elections. machinery orders and the for producer prices lackluster. ongoing discussion about inflation of course with the , continued political uncertainty with theresa may, her position as prime minister seems to be in doubt right now. ass this by her more time she tries to string along this minority government with the dup or is her job on the line? we are seeing minimal impact
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since friday, but let's look at the market open in seoul, and tokyo. bit of quite a uncertainty to digest from that weekend where theresa may is trying to hold on to what she can. cable at 127. seeing more sheer for the euro, snapping a three day drop -- cheer for the euro, snapping a three day drop. the fed said and to introduce policy decisions. the euro range bound at 110. we did see that slump in april machine orders out of tokyo come although producer prices were
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unchanged in may from april's pace of growth, so we have the nikkei giving up gains. we do have the tech weighted down, possible pressure from the selloff on the nasdaq. u.s. treasuries are lower, down .1% for now. let's take a closer look at the tech space. facebook, amazon, netflix, alphabet all falling on friday. sunrise look at the stocks in tokyo, they are doing much better. #9281 on youris terminal. they have outpaced the benchmark
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topix and help to push it above 1600 earlier this month. the overseas potential of the sunrise stocks are having investors reassess their outlooks. nintendo switch sales has seen the stock of ball over the past 12 months outperforming their group, the line in purple. i want to check what is going on with the kospi, falling after a two day rise on friday. we are watching cybersecurity's stocks as the central bank says it is ready for an imminent hacker attack. the north is said to be closer to test firing a missile with the potential of hitting the u.s. mainland. i.t. stocks leading the drop of 1.3%. thing to watche very closely. let's get to first word news. business optimism in the u.k.
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has plunged since last week's elections. survey shows 57 percent of business leaders are pessimistic about the economy over the next year. is back in the less than a year after being fired by theresa may after the brexit vote. and secretary boris johnson led the campaign to take the u.k. out of europe. fromhave brought in talent across the conservative party. i believe that is important. government that will be governing for every one. we will be getting on with the job of government. >> the french president macron seems headed for a landslide in legislative elections as voters appeared to rally around their new leader. his party could take a third of seats in winning 450
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the 577-seat national assembly. toneeds a healthy majority push through his tax and labor market reforms. has renewed his attack on james comey, tweeting that he leaked comments about the white house and were "cowardly" and suggested they were illegal. will speak on capitol hill on tuesday about alleged russian meddling. he says that it is important in light of james comey's testimony last week. u.k.olitical drama in the means losses for one of asia's richest men. has devaluedown u.k. earnings for li ka-shing. katie hutchinson -- cd hutchinson generated a third of
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its earnings from the u.k. last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. prime minister theresa may's failure to win a majority in parliament is casting a shadow of uncertainty over an economy that was already weak enough to keep that the 08 policy on hold this week. -- the boe policy on hold this week. politically speaking, we know the election result was that for theresa may and her party. what does this mean for the u.k. economy? to separate the two, but the political , aertainty and turmoil survey shows businesses getting more cautious -- i'm looking at my bloomberg now, a report from andy hartwell saying the outcome is theresa may is damaged and
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unlikely to survive. that count and other financial markets will recalibrate away from a hard austerity ande on a softer brexit. so many comments and analysis as people try to figure out what to make of something we don't know what it is yet. another thing that is important, a hard brexit seems unlikely now. this is happening when the u.k. economy was already slowing down. let me illustrate this for you. was .7, notgdp wonderful, but first quarter zero point two, and as men's before we got the election results were going to remain fairly tepid. sound too doom and
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, ifmy, the hard brexit risk diminished, maybe that is good or makes it seem less uncertain and maybe now again an outcome that is better for the u.k. in terms of jobs and businesses than it would have been before. survived the referendum last summer, so could it be worse than that? see.ll s&p sees no need for a ratings change right now. however, bloomberg intelligence theting out that data shows u.k. economy is more sensitive to economic uncertainties than it is to consumer spending. increased uncertainty makes them pull back even more than if consumer spending was slowing, which it is in the u.k., so a lot of pressure on the u.k. economy right now. among percent growth is the lowest of the g7, weaker sterling, so how will mark
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carney countered these inflationary forces? raisewill certainly not interest rates. they meet on thursday and are supposed to hold policy steady again. mark carney will be speaking and making a next donation after the meeting, the first time he has spoken since the election. it will be interesting to see how he factors that into the economic outlook, if at all. the inflation problem was already there, and imports get more expensive as the pound weakens furl or. , the whiteat #6974 line is core inflation, the turquoise line is headline inflation, far right hand side of your screen, 2.4, 2.7, this is heading towards 3%, but mark carney said he expected this acceleration. the problem is paychex aren't rising. if things are more expensive and you are not making more money,
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you will probably not spend that much. , i love simple, clear charts like this. they tell the story so well. the same turquoise line, inflation, how about that white line? that is the wage growth, and it tried to move up, but has moved down again. does it fall further? we shall see. hold steady,boe but also new economic forecast an interesting to see if they revised gdp lower and inflation higher. >> business confidence is going to go down after this, right? otherl-bank diversions, central banks making decisions, and it looks like we are the only ones rising. everybody is holding steady and recalibrating outlooks. >> the fed forging ahead. a 25 basis point hike.
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maybe not too many details on the balance sheet reduction, but in the big press conference, janet yellen will be peppered with balance sheet questions. we just heard goldman sachs in asia say earlier on daybreak that the bank of china could move in rapid succession to tighten their policy of debt, so we know there are reverberations around the world, including asia. no change of policy, but a hand to they are starting xit strategyheir e and start talking about how they will communicate that. they already talk about the boe. big of russia has a meeting, not expected to move, but if we do, we will be back your with all the surprises. we shall see. see. shall kathleen hays with the watch on central banks. we continue our focus on the follow-up from the u.k. of election. how asian relations may change under a weekend theresa may
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government. the pound faces headwinds as some traitors are betting on a softer brexit. we get numerous outlook for sterling next. outlook for sterling next. this is bloomberg. ♪
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is "daybreak asia." >> theresa may was left with a hung parliament. our next guest sees sterling strengthening by year's end due to a softer brexit. he joins us live from singapore. the u.k. needs is more political uncertainty, but let's assess the fallout we have. #9243, we have seen moves in the
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pound, 2% drop in sterling, that is more during the brexit vote. some thought a hung parliament with knockoff 7% on cable. i think the general view is that this uncertainty we are thesethrough will lead to softer brexit narrative gaining some traction. the election results clearly show that people are in favor of the hard brexit that prime minister may was pushing for, and from here, we think a lot of the more negative and harder brexit narrative has been priced , and as we progress, we do with thee negotiations europeans to start on a hard footing, but as we go to the process, we think it is more that we get some
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transitional deal and the market prospect toy with the proces of that softer brexit. it is probably only a single digit chance now, but we do think that can continue to grind up a little bit, and that should be a supportive factor for sterling. to the degreends that a hard brexit could be softened under a minority government. isn't there a bigger chance we could get a disorderly brexit as well? the eurosceptic and conservative party seem to be stronger in terms of the other conservatives in the party. also backed brexit as well, so can the tories maintain that hartline when brexit talks again? >> it is quite interesting. the dup, some of the quotes from the leaders in that party
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suggests a hard brexit is not good for anybody, but domestically, some of the and doointments in the new suggest theresa may is trying to solidify her position in the party and has reappointed michael gove, so there is a disconnect between the two, but we ultimately think the voice of the people does suggest that people did not vote for a hard when they voted for the weerendum, so we do think will meet in the middle somewhere. it may not be perfectly in the middle, but it will be away from the edges, and that is essentially where the market was pricing and looking ahead of the elections. even if it is a small shift away from that hard cliffs edge, this improvement, so that is what we are expecting, and that should be a support for sterling.
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we are also quite negative on the u.s. dollar. that is another function of our positive sterling outlook as we head into the end of this year and next year. you about thesk dollar. let me pull up a chart. it is our bloomberg terminal , which shows the one-month and five volatility of the pound. on the right-hand side, that candlestick, you did see a lintels like in the volatility come a but not quite what we saw and earlier with the brexit what we sell there with that jump in volatility, so the fact that you are talking about a softer brexit means you think volatility will stay muted? in the short-term, this level of uncertainty could keep
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sterling volatile intraday, but the moves we saw around brexit should not be repeated. much more u.k.-centric political dynamic that will not filter into other asset classes. people will not the reevaluating the outlook for growth. this adds a little uncertainty, but will not generate additional uncertainty that had not already been in place around the brexit negotiations. >> before we go, what do you think will happen to the dollar after what seems like the fed is going to do this week, which is raise interest rates? yeah, this week, it is well priced and the market is looking for a 90% probability of a rate hike of this week. we are not expecting strong hints for a september follow-up, but we expect the dots to show one more rate hike, so there is
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a disconnect between the market and obviously the fed outlook. in the current environment, we might get dollar strength later this week, but we don't think it will be long-lasting. it is a story about a stronger euro as we head to the rest of this year. >> thank you so much for joining us. one feature on the bloomberg we would like to bring to your attention is our interactive tv function at tv . and seewatch us live previous interviews and dive into the securities or bloomberg functions we talk about. of the become part conversation by sending us instant messages during our for bloombergs is subscribers only. check it out at tv . this is bloomberg. ♪
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>> a quick check of the business flash headlines. strongly as the battle for its flash memory chip unit heats up. sources say western digital is planning to raise its to $18 billion and will table the offer by thursday. that is when toshiba said it would announce its preferred did her. andiba says it prefers cash once of japanese buyer to keep the technology at home. to sell a 14% stake anke after a bitter ownership row. up cash and may smooth the way for a backdoor listing in china. >> uber directors are to me to
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discuss removing a senior executive close to ceo travis kalanick. hadllow executive improperly obtained a woman's medical report after her claims of rate by an uber driver. -- rape by an uber driver. >> president trump has renewed his attack on the former fbi director. up administration is gearing for testimony on capitol hill with jeff sessions on tuesday. ramy inocencio has the week ahead. sanctions, sessions, and steel. we saw james comey take the stand in front of the senate intelligence committee. now jeff sessions will be here .n tuesday
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he will try to defend the white house and this probe of alleged russian collusion and trying to push back against what james comey has said. looking at what the questions will be, it will be revolving around the handling of james comey's firing and looking at the potential meddling by russia in terms of the u.s. elections. one special thing is session zone recusal from the russian probe. you remember when mr. comey talked about this. said he expected mr. sessions to recuse himself. he did not say why, which raises questions into why he could not go into that. he will be looking at the resignation of mr. sessions. he himself had offered to resign in the past, but right now he still works at the pleasure of the president. looking ahead to wednesday and
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thursday, the senate looks at possible russian sanctions linked to iranian sanctions. so far, 55 senators have signed on to this lindsey graham says that the president does not sign on to this will only he would be "betraying democracy." that will happen wednesday or as late as thursday. >> when he came to steal, that will be on the agenda with wilbur ross expected to announce protectionist measures. >> that's right. it has are defend teas from last week when says they might be rolling some things out in terms does cheaption, steel imports translate into national security risks? if that is a yes, that could be a recommendation for higher .ariffs this is #7929, chinese steel
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production is the most relative to the u.s. as well as the world. su: thank you. >> coming up, we discuss growth. this is bloomberg. ♪
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which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. >> 8:30 in singapore. looking beautiful and the lion city. half an hour away from the trading there. york, it wasw humid and hot and sweltering. news.get to first word thank you. the latest data from japan's factories has disappointed. .achine orders fell 3.1% economists had expected .5% gain. up 2.7%, well short of expectations of a 7.3% rise.
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producer prices were unchanged from march. the boj governor kuroda is likely to win a second term ahead of a policy meeting this week. a bloomberg survey finds a third of economists saying he is the only possible contender after his term runs out. said theye economists see a change in policy and the vast majority don't expect any change until his current term ins. germany warning that the saudi led isolation of qatar could lead to war. the foreign minister is reported saying the situation could rapidly deteriorate, although there is still a chance for resolution. turkey is pushing ahead with the military base in qatar, saying it is for the security of the region not one specific country. i'm caressed those the impact must be resolved by the end of ramadan. russia says it is willing to
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work with the u.s. to resolve the qatar crisis. foreign ministers but with rex tillerson and agreed negotiations are the only way forward. differences are emerging within the trump administration and the president says he supports the , whileon of qatar tillerson: saudi arabia to step back. the half-brother of kim jong 120 thousandng dollars when he was killed in kuala lumpur airport. he had also met an american suspected of links to u.s. intelligence four days before he died. malaysian authorities believe he may have been paid for information, although there is no record of any bank with the draw around that time. -- withdrawal around that time. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you. asian markets so far this monday morning, it seems like this
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rally and sell off is feeding into the kospi at the moment. sophie: it is having a knock on effect in seoul, korea and tokyo. 1.8% for the nikkei 225, offsetting the rise in energy and financial shares. tech stocks dragging on the kospi, the likes of samsung, as k hynek's, the biggest laggards. local media reporting samsung has lost qualcomm's chip business. let's check in on moves for korean cybersecurity stocks, pulling up this board for our viewers to show you how they are moving. falling this morning. this is the bank of korea's says it is ready or an attack by hackers.
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taking a look at the fence related shares, a mixed picture so far. after the north says it is closer to test firing a missile that can reach the u.s. mainland. >> thank you so much. sophie kamaruddin with how the markets are trading at the open. the former vice chairman of goldman sachs in china says there is little to hold back the country's growing debt pile. about how the policy has helped to fuel borrowing. think china's debt, the size and pace, increased significantly in the past decade. 2007, china's overall debt to ,dp ratio was only 100 or 2%
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about average for emerging market economies. now it is as high as 260% and is still rising. that the deaths are domestic. most of the debt is domestic. secondly, the debt seems to be financed from a high savings rate in china. that is true, but the thing is china's savings rate cannot be so i forever. there is a very unique reason behind china's high savings rate , that is relating to the one china policy -- one child policy. when the one child policy was implemented, the ratio of chinese family sees shrank, driving up the savings rate, but going forward, those families
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will have a lot of people retiring, and when that comes, you have a surge in china's elderly dependency ratio, which will inevitably drive down the savings rate, so the challenge for china is 5-10 years from now, we will see a much higher debt level, but much lower savings rate, so the disadvantage in china will increase and the advantage will decrease. we need toe the time think about from now. has madew gdp deleveraging broadly a priority. there is over investment, overcapacity, but growth might be slowing a bit. you mentioned markets might be stressed, so there is a trade-off if the chinese government tries to tighten its credit policy, maybe move
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towards taking steps. where does that leave the pboc? >> the chinese government has announced the pursuit of a neutral monetary policy come not too expansionary, not contractionary either, let the fiscal policy be more expansionary. policy,it is the right but when it comes to implementation, china's monetary policy is still quite accommodative. you see money supplies still growing, 13%, but the slowing gdp growth and inflation still muted, so you have access money -- excess money to finance the economy. unfortunately a lot of that is going to the profit market, pushing up stock prices, so china is facing a dilemma. ,f growth is slowing too fast
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you may have unemployment implications and also an , inosive increase in debt bad loans, so china needs to maintain some kind of growth rate, but the thing is when you maintain this growth rate through reform, through money printing, policy stimulus, chances are you will increase risks going forward in the future, so this kind of practice , some people call it kicking the can down the road, cannot be sustained forever. >> so what will happen? >> ultimately china, and i hope after the 19th party congress, china will be more determined to implement some key economic reforms, including but not limited to first state owned enterprise reform, who borrowed
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a lot of money. a lot of debt is owned by esso theirand -- soe monopoly should be abolished and the economy were open to private investment and even to foreign investment, which actually foreign investment even a decade ago promoted china's productivity growth. so reform is to be pursued without further delay. fiscal reform is also needed. i think there is a huge problem and the relationship between central and local governments in china. why are property prices so high? why are so many state owned enterprises borrowing money? veryof the borrowing is a transparent way because of local government support. government gets only half
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the fiscal revenue, but they are responsible for three quarters of expenditures. to meet the discrepancy, they jack up the prices artificially and one land prices to be high, so any local government measures confront property prices must be halfhearted. they always want higher land prices. that is a very big reason behind the skyrocketing property prices in china. the other is according to chinese law, local governments cannot borrow up until recently, so what they did is create financing vehicles to borrow to bypass the law and borrow in a ok quade it creates shadow banking in china. it reduces the transparency.
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that will be very risky going forward. former vicethe chairman of goldman sachs for chinese investment management speak to kathleen hays. coming up, how does asia see relations with the theresa may government? the chinese maisie doubtful value there. he will ask live. this is bloomberg. ♪ -- we will ask live. this is bloomberg. ♪
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is "daybreak asia" in new york. ministry saideign beijing will continue developing ties with the u.k. and hopes brexit can be appropriately resolved. ofna is high on the list countries theresa may helps to strike a deal with once it leaves the eu. great to see you. if i was the ceo of a chinese
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government, what does a hung parliament and the u.k. mean in terms of where i position myself? individual of companies and looking at individual commercial deals, not necessarily because they have specific investment goals for specific companies, so if it is attractive, like certain london properties, that will be affected, but in terms of broader government strategies for china, i think they will take a pause and wait and see exitritain negotiates its from the eu. >> do think that seems to be ,ading away at the moment theresa may and a much weaker position and sing a softer brexit? we did not get the doom and
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gloom we thought with the brexit referendum, so does that make the u.k. appealing to beijing? >> i don't think beijing is going to assume what will happen in the brexit negotiations. am sure they were surprised at the brexit vote, so it will be wait and see. for all they know and we know, theresa may may not be there for a very long time, so it is all up in the air. >> there is a lot of uncertainty here right now, right?i want to pull up a chart of the pound-yen. asshows the pound continues we saw friday and today to fall yellowding towards that line, a key technical level, the 200 day moving average, which is not great for the country, but i
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wonder if chinese companies look at that and say it is cheaper in the u.k.. might we now start stepping up perhaps some of our m&a activity in europe, and in particular the u.k.? foreign exchange markets move up and down. andou are a big company looking at the treasury side, you will take a longer-term view ,n sterling, on the renminbi and china right now is clamping down on the renminbi leaving china, so all that will factor being clinched at a slower pace. >> it does not sound like a huge announced coming out from china and looking at opportunities here. what are some of the biggest opportunities? given there are risks
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this softer brexit perhaps, but what are some of the opportunities for the asian companies and chinese companies in china? >> actually, property is very attractive in the sense that chinese companies like to invest in property. they pushed to the hong kong property market really high. think they will go for it if they see something good regardless of the political situation in flux right now. does beijingint look at these brexit talks and say i don't think the city of ,ondon will be that viable non--china, non-asian for their offshore renminbi. we need to see another election? what is the tipping point for beijing to make that decision? >> i think it is during the
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negotiations. britain hangs onto this immigration resistance, which means there are going to be problems with access to the eu market, and access also for the financial institutions, because if they don't have access, they will be considered foreign institutions under the eu law and in the eu market, so beijing at theke another look strategy of allowing the city to take pole position in the race for the offshore renminbi. >> if not london, could it be europe? >> it could be. i think they would prefer london. many't see that german-speaking chinese financial experts. they would prefer london. countries -- so
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it is hard to tell. seeing this debate about the pboc taking one step forward, two steps back when it comes to the liberalization of the renminbi. we've heard about this new currency fixing mechanism. capital controls continue to be in place. are we not making much progress? >> yes, the problem is whenever the government decides to do something, they do not seem to understand that there are consequences and side effects, and theu stop this demand is there, it will come out elsewhere, so black markets if you control who the banks can lend to and a what rate. the same with the decision to control the exchange rates for the renminbi.
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one last question for you on political relations. now there are some concerns with theresa may a lame-duck prime minister, how do you think that will of factor relationship with the top leaders in china? how do the top leaders a few heard now? leaders canhinese take a broader view of a country then who is leader at the moment. i don't think the person relationship or rapport matters that much for the chinese when deciding the bilateral strategies. they are very hardheaded. now they will take a look and see whether agreeing certain policies with theresa may will translate into parliamentary approval, so the personal relationship is not all
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that important. >> thank you so much. you can get a round up of that story and many more to get your day going in today's edition of daybreak. bloomberg subscribers go to dayb on their terminal, also available on mobile on the bloomberg app. this is bloomberg. ♪
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>> this is "daybreak asia" in hong kong. lloyd blankfein, jamie dimon, and others have criticized president trump's move to withdraw from the earth's climate change deal. rick perry says they are wrong and acting more for political reasons. with tomexclusively mackenzie of health of paris decision and cooperation between the u.s. and china. it is not just an interview story. it is an economic development story, energy being at the heart of it. american lng into china is an extraordinary opportunity for obviously thee at shale revolution has changed the entire landscape of energy.
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lng will play a very important role. that you get any closer to china signing long-term contracts for u.s. energy? >> we were able to share with the vice premier that our ability to deliver lng was very natural. our desire to be a participant in this market is very strong so the will is there, and i think both governments will come together working with the and find some great opportunities for american energy coming into china. >> you were right to want to stay in the paris climate accord america's has reduced role and we are seeing china and europe step into that for it now. you who were in the
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must stay in position don't have a little bit of reality to your view, which is i could argue round or square. at theld stay in, but end of the day, the administration made the decision, and i agree with it. when you look at the cost versus the benefit from being in the agreement, it was not worth it. jamie dimon, lloyd blankfein, exxon, they are all wrong on this issue? >> they are. they are coming at it from the politically side rather than the reality side. we will continue to be leaders in clean energy. that will happen. that was the u.s. energy secretary rick perry speaking with tom mackenzie. the latest business flash headlines. airlines topping $59
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million as it prepares for a shareholders meeting in hanoi. the carrier plans to invest $130 million in new projects and will raise capital in the fourth quarter. thecompany hopes to raise number of passengers by 10% to 22.6 million this year. >> a rise in full-year profits for qatar airways. income rose to $529 million. the state own carrier added 10 carry 32 million passengers, a rise of 20%. >> that is almost it for us here on "daybreak asia." i'm to look at what is coming up. u.k., borisfrom the johnson saying everyone -- tripe, the was
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challenge for the leadership of theresa may. butveryone is backing her, george osborne saying she is a dead woman walking. rishaad: we will discuss that. also, from the university of hong kong, professor of european studies on the election over the weekend. macron has this landslide victory and the ability to govern unimpeded. biggest hotelhe groups in the world joins us and about 45 minutes. ♪
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♪ it as 9:00 a.m. in hong kong. i'm haidi lun. rishaad: i am rishaad salamat coming to you from bloomberg's asia headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: tackett leading a should down as investors weigh the impact of the u.k. political drama, sterling paring losses after its biggest fall in a month. rishaad: theresa may clinging to power by embracing bitter
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