tv Bloomberg Daybreak Asia Bloomberg June 12, 2017 7:00pm-9:01pm EDT
anchor: wall street pessimism set to spread to the asia-pacific. tech continues to drag all the market down. anchor: ge among the winners. the company veteran is known as mr. fix it. betty: big u.s. bank so with those regulations. yvonne: more optimism about prospects for china. honeywell says it is the place to be. we have got the world covered here on daybreak asia.
we will go to san francisco shortly for the latest on changes in uber's leadership. on thewe have our eye middle east with the crisis in vauxhall, later in the program. this is daybreak asia, coming to you from -- 7:00e: it is just after a.m. in hong kong. i am yvonne man. we escaped the typhoon in hong kong. a whirlwind of a storm. the selloff going global. it is hard to tell if this is a pause or meaningful rotation out of some of these growth stocks. betty: it seems to make perfect sense, right? yvonne, these big tech shares are the ones that have led the rally, so you can see at some point, investors would say "let us take some profit on these gains." the question is, what is the timing?
what gives here? that is what investors are tied to parse through in the next few hours. -heavy: some of the tech investors. that looks set to continue. let us look at how the state of play is into new zealand. plenty flat. the kiwi at 72.02. australia returning back from its holiday, could play catch-up. futures down 15.9 after the crude,at 7544, and nymex wti, up above $46 per barrel. watch the sunrise stocks. sony, nintendo, all fell yesterday. these are the names that have outperformed stocks, but they are vulnerable today.
futures pointing to slightly higher, but it looks like we go nowhere. 109.85. that is what we can expect this morning. this bleeding looks set to continue. betty: we saw that today in the u.s., where tech shares led the u.s. markets down. here is the boards and how we closed. all right across the board -- all red across the board. not to drill down on that tech theme too much, but that was the dominant theme. the nasdaq off .5%. it was big tech shares that got selling. of the that is getting nina melendez first with first word news. the new british cabinet has met for the first time as u.k. and european union officials failed to agree to a start date for brexit top. a meeting in brussels broke up without any firm commitment on when to begin the process.
officials say they are unclear about what the u.k. wants out of brexit and are increasingly frustrated about delays in getting around the negotiating table. the white house says it is preparing to release the results of an investigation into the impact of real imports on national -- steel imports on national security. it would take effort to stop firms from dumping steel at artificially low prices. the president can ask unilaterally, which could include restricting shipment. department'sury much anticipated report on banking regulation is to include proposals for revising post indicating they are more interested in scaling back the dodd-frank act than trashing it. the major target for the consumer financial protection bureau and the wall that stops banks making speculative bets with their own capital. jeff sessions will testify on
capitol hill on tuesday under pressure to explain his role in the firing of james comey. and contact he had with russia. sessions will testify before the intelligence committee just days after he accused president trump of lying. sources say he will refuse to discuss his conversations with the president. we will have live coverage of the session's testimony tomorrow at 2:30 a.m. in hong kong and 4:30 a.m. in sydney. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. betty: thank you. stocks falling in that selloff in tech shares. let us get over to su keenan with more on the action. let us talk about what happened today. some strategists will say this selloff was way overdue. and ran right into the u.s. session.
as you can see, the end of the day, we were not down that much. they like to point out that is actually a positive for the markets setting up the trade. apple was lower. it was one of the big five that were down and made 75% of the losses. gtx, it doubled. company went against the game. for the sector. let us go into the bloomberg if we can. g #btv 6208. look at the big drop in the blue. followed by monday, we had two drops in the sector over 2% this year. no similar big swings. higher, if you see. a lot of strategists say this
sector was due for a comeuppance . it was interesting to note that we did come off the low today. yvonne: you mention a bit about facebook, but it was five stocks that made up for most of the tech decline. facebook, microsoft, and alphabet. su which owns google. 20% year-to-date. if we go first to this rumor chart, you will see some of the smart money on friday, that is afraid to give to those. into the hedging going losses. you can see the huge spike in that white line, which shows the bearish options or puts that would take in in the tech sector in expectation that this is going to be the way the market played out. let us go into the bigger drops, and you will notice these today charts. microsoft, we are coming off the lows in the session.
microsoft was down 3%. it ended the session with less than a 1% drop. same pattern with amazon. you are looking at the two day chart. we were down on amazon, 3.5%. ended the day 1.5% lower. buyers came in, same thing with facebook. two day chart. it was down some 3.3%. it ended the day less than 1%. buyers were coming in. us look at g #btv 9305. if you look at the overarching picture of tech and the huge drops we have had going back to theearly 2000, today, monday session, not quite so bad in comparison, as some would say, and overdue. anchor: thank you so much. we will continue this conversation because it is interesting. you wonder if this is really
profit taking or any type of systemic risk. we have heard from wall street that we are not anywhere close to a correction so far, and the main reason is because of these tech earnings estimates we have seen from the analysts. they have been very bullish, so the key question is how earnings are going to perform. i have this chart. g #btv 9314. we see tech companies are forecast to grow the most in the s&p after energy. fundamentals are still intact here. the earnings growth estimates are still being revised higher. i will be a key question whether this tech rally can resume anytime soon. betty: what is also interesting, yvonne, is that even though it seemed like it was broad-based tech selling's led by these stocks, so she speaks, it really was not. speak, it waso not. we had ibm, for instance.
gopro, which has been battered. that rose. other oddball tech shares like to 3%. fitbit rose 2% it was not as broad-based as it might seem, just looking at the indexes. that might give some comfort to investors, saying that this is going to sort of played out as the week -- fade out as the week goes on. stocks su mentioned five that are seeing most of the pain, but also some of these trump trade's getting back. one other story we are watching of course is ge jumping on that announcement that john flannery the previous ceo. flannery is a 30 year veteran and has the nickname of mr. fix-it. trackinging in the man this story. good to see you.
what is this announcement? is it more of a surprise? we have seen executives saying this was in the planning years ago. >> it was a surprise and it was not. there has been talk lately that maybe we are getting near the end for jeff. he has been there for 16 years after all, so it is about time for him to maybe think about what else he wants to do, but at the timing was the real surprise. i do not think anybody really expected it quite this soon. maybe later this year, early next year, but it all came pretty suddenly. betty: that is right. what changes could john flannery initiates from the start? yvonne: what are going to be his biggest challenges than? -- then? >> he is going to do a very thorough portfolio review. he was asked to come in and be a first set of eyes, looking at all of ge's businesses.
it is something he is probably in a good position to do considering most of his career has actually been in ge capital, which they do not really have for the most part anymore. you know, he does not have these loyalties to a lot of ge's all-time manufacturing businesses that may be some other executives might have. in and lookcan come at what makes sense to keep in ge, and what does not. anchor: he said before that results speak for themselves. he certainly delivered results in his tenure there at ge, in the health care unit. is he too much of an insider? does ge need someone from the outside to come in and invigorate this company? rick: the interesting thing about john flannery is he has been there for 30 years, and a lot of ways, he is an outsider. like i said, he was in ge capital, and unlike his past she did not have a
long history on the manufacturing side, so he really can bring that sort of fresh perspective, and really has delivered fresh results. if you look at a lot of the hass along his career, he increased sales, increased profits, and now he is doing that in ge health care. anchor: thank you so much. we will keep our eye on ge and this change here at the top. clough. why hong kong millionaires say this is an a predictable era. yvonne: up next, a look at the fed meeting. this is bloomberg. ♪
potentially another ugly day here in tokyo. this is they break asia. i am yvonne man in hong kong. betty: it looks ominous. i am betty liu in new york. the fed is almost universally weekraising rates this with at least one more hike coming before the end of the year. we will discuss all of this and the prospects with steve. good to see you today. ok, so, it almost seems like everyone is saying that this is it and we are going to get the rate hike. the more shop would be if we did not get one this week, would-- the more shock be if we did not get one this week, right? >> correct. betty: let us talk about the odds here. the agar, something like 93% and above that we are going to get the height this week. if you look at the blue line on the screen, it is still sort of according tod --
fed fund futures -- that there will be a september rate hike. it dropped dramatically. why do you think that is? why are we so unsure of another rate hike? steven: in some ways, this is not new. in recent years, as the fed has wanted to raise rates, the market has been skeptical. the reason there has been skepticism is because of the inflation outlook. investors are confident -- most investors think that inflation will be soft and they will hold off. yvonne: you hit the nail on the head when it came to inflation. may, and ithis up in want to let our audience see. inflation on a 12 month basis, has been running close to the 2% objective. excluding energy and food, could inflation continue to run
somewhat below 2%? does 1.6%, 1.4% actually mean 2% now? isthere a risk that the fed saying quite flexible in their mandate when it comes to inflation? steven: the risk is that investors build on that perception. many investors already think that you're done you look at the fact that the fed has not met and inflation objective for eight years now, and they are continuing to persist in raising rates even though inflation may be no higher than last year, it is understandable why investors are not convinced the fed will treat its inflation expectations symmetrically. yvonne: what will be the change in the leverage? will yellen have to address the weakness in prices in march and april? steven: i think she will have to address that in her press briefing, talking about the fact that the labor market is tightening. we are not seeing much follow-through in terms of wages and inflation. it in our economic
projections. i think they will markdown there core inflation, but they are will probablyey lower that as well. that is indicative of the fact that maybe there is not as much tightness in the labor market as they thought. that is right. talk to me about financial condition that the moment. we continue to see financial conditions in the u.s. listen. 9221. a chart, g #vtb we continue to see that in the -- g #btv 9221. we can continue to see that. it is surprising given the fact the ecb has reduced their asset purchases. rates are very much low in europe if not negative. tighten financial conditions? steven:steven: i think you raise a key point.
this is one of the reasons the fed is persisting in raising rates for the time being because they see financial condition cannot really tightened at all. -- have not really tightened at all. if you look at the progrowth agenda, that kid lead to disappointment in the equity markets and bring stocks down. concerneda little bit that markets could price in a little bit more of a policy by the fed if the communications on wednesday are on the hawkish side. it gets back to this topic of inflation. will the fed be committed to meeting its inflation objective? betty: before we go, i want to bring in one more chart, the treasury yield chart. let us go into my bloomberg and just take a look, you know, at the right hand side, which is how low treasury yields have stayed. you are familiar with this. some of the really big bond bears say the treasury markets
are completely out of reality. is no reality to either yields should be this low. what do you say to that? steven: the counterargument would be that even if the ecb is sending signals that they are going to be backing off from their own qe, they will be purchasing for some time. we look at japan, and the bank of japan have a strong commitment to which the old control regime. both of those should continue to lead to demand for u.s. treasuries, and i think the low yields reflect the fact that despite with the imagination is trying to a compass come investors largely do not feel confident at this point that trend growth is going to be any higher in the future, and that is leading to rates being quite low. yvonne: thank you so much, steve friedman. we count down to the fed. much more ahead. a high-profile departure from uber after a string of complaints. we are going to be live in san
betty: this is daybreak asia i am betty liu in new york. yvonne: i am yvonne man in hong kong. uber has ousted its head of business. he was involved in at least two incidents of alleged executive misbehavior. they were investigated by eric holder. the directors met for more than six hours and approved all of holders recommendations. closestis ceo was his confidant. eric newcomer covers the company and joins us now in san francisco. where do things stand on the corporate culture cleanse?
>> we are expecting the recommendations of eric holder's investigation tomorrow at 10:00 a.m. to employees, and hopefully, the public will learn around then of how we have been getting a sense of some of the findings he presented in a private board meeting sunday, including this recommendation to get rid of a meal michael -- emil michael, bloom they have parted ways with. holders investigations on all sorts of issues, and we will hopefully find out more about that tomorrow. anchor: according to your story, you have been talking to sources saying that michael is not blaming the channel but the board for his downfall? eric: yeah, we talked to people emil michael. he had close to $10 billion, cut a company in china
and struck partnerships with automakers like daimler. he felt like this was a key executive who basically has seen the board abandoned him amid public scrutiny. there were all these very serious scandals that his name came up over and over again, and the holder investigation sort of helped piece that together. i think michael's people felt that he had been abandoned by the board, and had taken some blame for issues the legal team had been responsible for, but of course, there were all these scandals that the board looked at. anchor: eric, it seems like we have had these daily occurrences , telling us more about these departures now. we have the latest internal inquiry that led to 20 people being fired. are we expected to see more execs leave uber? eric: the main question right now is whether the ceo, travis kalanick, will take a leave of
absence. i will take three months. it does not see mike it is decided whether he will do it. it is up to him whether he goes. part of the problem is that there is no real leadership backing him up. it might be a management committee. he is really going to have to decide. we are hoping to find out tomorrow what is going on, but yeah, that is one of the lingering percent, whether he takes a leave of absence. newcomer, joining us from san francisco with the latest development out of uber stepping downael on his role. coming up next, the treasury department takes a softly approach to banking rules. what to expect, just ahead. this is bloomberg. ♪
anchor: rain, rain, go away. hong kong, we just got out of this typhoon number eight overnight. we are still seeing rain and winds to contend with this morning. hong kong lowering the storm signal to number three. the rainstorm in force this morning. this is bloomberg. i am yvonne man in hong kong. betty: the silver lining is you do not have that typhoon number eight. it is before and sunny and hot in new york. -- beautiful and sunny and hot in new york. markets closing lower across the tech with a big fall in shares. i am betty liu in new york. yvonne: first word news with
nina melendez in new york as well. nina: thank you. when it comes to tech, it seems not all shares are created equal. five stocks account for nearly three quarters of the fall and the nasdaq, down more than 2% since june 7. much of that is due to big falls for apple, microsoft, and google's parent, alphabet. the dow and the s&p 500 -- onl street is more bearish china after rebound in the past month drove equities to 2015 highs to a short interest for three of the biggest exchange-traded funds tracking mainland shares, which together hold $6 billion in assets, has climbed from march lows. they have to balance the prospect of tighter liquidity mscie. corruption watchdogs have found fakedents of faith data --
data into bing northeastern provinces. some companies and places in fought initial reports. they admitted to faking data from 2011 to 2014. president trump's proposed travel ban has been defeated in the second appeal as the supreme court considers whether to take up the case. the court of appeals in san francisco says the president exceeded his authority by suspending nationals from six most muslim countries without showing how letting these people in hurt the american interests. the white house says it is confident the supreme court will uphold the band. global news, 24 hours a day, powered by more than 2700 analysts in more than 120 countries. i am nina melendez. this is bloomberg. anchor: we are 30 minutes away from asia's first major market open. aussie and japanese futures suggesting they may follow.
mark cudmore, what gives here? this tech weakness is going to cause concern in the is a session. the tech stocks have been a bellwether for this rally during this year. the u.s. stock market rally this year. it is important to put in context that while there has been two days of sharp weakness, it is in the context of a massive rally for the previous five to six months. these are very small pullbacks. no one should get to concerned yet. it is important that while tech stocks fell, most finished far off. it is something people will be watching closely because and they are nervous about it, rather than reacting immediately today or getting too worried about it in the short term. anbang, you'll watch -- and mark, you watched the asian --
we have to talk about the pound. we did see it lower here as well given the developments we have seen, but also much reaction this morning after some reports saying some of the senior u.k. are holdingers talks about possibly backing a soft brexit. mark: i think that will really excite the market and there is a chance for sterling to get a little bit of a bid. people want to buy into the story that there is a possibility of a soft brexit. particularly, financial markets. markets are negatively affected by brexit. it becomes a popular story that there might be a chance for soft brexit. not change the font that is a long-term fundamentals for sterling remain very negative. this may provide short-term after, two-way volatility the negative trading we saw yesterday. yvonne: what is the range you will be looking at for pound, mark? mark: it depends on whether you
traded versus the dollar warriors sterling. euro are two big -- or sterling. sterling has a bit of a positive new story coming in. euro has many positive news stories, it is not trading that great off of those positive stories. not only do we have the great french election over the weekend, but we have italian elections, the popular five-star patty, who are eurosceptic, did very poorly. that centrist parties are starting to gain ground again suddenly means the eurozone should have much less concern for political risk on forward, yet you are not seeing the euro trade that well. euro sterling is more interesting today, and the fundamental story for sterling -- yvonne: thank you so much, mark cudmore joining us from singapore with what to look out for in the markets this tuesday morning. taking a look at the white house
. the trump administration may not be shaking up u.s. banking regulations as much as some had hoped.or others had the treasury department is expected to release its anticipated report imminently. let us bring in ramy inocencio to see what we might expect. we remembered in the last couple weeks or so, we have heard from the president saying he was going to do a big number. does not see much the case anymore. as january as early 30 when he said he would get a big hit on dodd-frank and everything underneath it. ramy: at least according to one person familiar with the report, a supposedly 150 page report, due out as early as the next few hours, it will center on a few things dodd-frank has created in terms of the consumer financial protection bureau, cfpb, as well as the volcker rule, which bars banks from using its own capital to speculate.
one of the big things does hone in on it in that it could lose power to examine its banks. givether thing is it would power to president trump or any president they are of to fire the director of that bureau, and with the volcker, there are a couple of changes for small things as well as big bang theory. this is a threshold in terms of the amount of assets. for small banks, the threshold to $10 billion in terms of assets, but for large banks, that could be raised even higher than the $50 billion threshold we are talking about. we are waiting for this to drop, but in the meantime, hop into the bloomberg terminal, because i want to show you what has been happening in terms of the trump reflation trade as it pertains to the s&p financials. here in the white, this is g #btv 7617. in early february, you see this line?
that is when donald trump signed the executive order saying that he wanted to have a review of dodd-frank. we see this pop. ever since then, we come off of those highs and we are starting to see this come up as expectation of this review is starting to come up. we are seeing this yellow line. the technology stocks over the course of today and yesterday losing steam. that is what we were looking ahead to in terms of where this could go. coulds does come out, we possibly see a bump in the s&p financial sector, but we are waiting for that to drop. betty. betty: how fast could these proposals happen? ramy: we are always wondering when this could be. as we have been seeing with the trump at a magician, and then, there is more talk. administration, and then, there is more talk. also, some of it is actually just the review pointing to problems here and there, where we want your address, what we
want to address, but there are no solution just yet. the white house has yet to approve a couple key regulators that includes a federal reserve, the federal deposit insurance corporation, as well as the cfpb. all of these things need to come together, and is the priority banking regulation -- is it the biggest one? we know regional and replace obamacare. we had infrastructure week last week. i could not see any headlines coming out of that. [laughter] ramy: there is a lot of things out there. this is just one more. anchor: thank you so much, ramy inocencio. uncertain times. ubs's hong kong ceo. what they say is an unpredictable era. this is bloomberg. ♪
anchor: we are counting you down to the asia's first major market open this morning. japan futures heading lower, looking to be a pretty lackluster session on the nikkei here today. dollar-yen also breaking above that 110 handle, now 109.88 against the dollar. anchor: indeed. betty liu in new york. yvonne: i am yvonne man in hong kong. in a survey by ubs, investment george e of the city's millionaires feel they are not working in a predictable times. the city is hosting a special event to mark the moment. steve engle is joining us from there. good to see you. tell us about the move. how is the feeling there this morning? steve: unpredictability. i think hong kong thrives on unpredictability. this is a very resilient city. handover, since the 1997. right here in this exact same
hall, 20 years ago, nearly to the date, we are having an early birthday party hosted by ubs and the many veterans association. we have amy lo with us. >> good morning, steve. stephen: a little bit of an early birthday so patient. .0 years a little bit of rain. that is not dampening the move, right? >> [indiscernible] is the most influential person. we have 1700 people coming today. guests fromerent different parts of the world. stephen: what is going to be the focus? it is not necessarily looking back at the last 20 years. is economic integration
happening. what are the next 20 years going to be from your perspective? ubs has been in hong kong for over 50 years. it is a positive growth story. amy: we have been planning for this event for over one year. our objective is basically to theg together the academia, experts and professionals from the private and corporate sectors to talk about what are the areas that have underpinned -- and to look at the opportunities there. we will have a different kind of panel. stephen: what are the people you're going to talk about? what will propel hong kong for the next 20 years? what has kept the going's banking and financial services and of course property. property is at record highs past the 1997 previous record high. there are risks out there. but also focusing on integration with the technology hubs of tengion across the board -- sengen across the board.
amy: if you look at the world economy, it has undergone significant changes. hasservice sector transformed because china is now the world's second-largest economy and biggest producer for commodities. but i am still very optimistic and positive, because as you look at the one belt, one road strategy, the greater barrier plan -- bay area plan, that will represent various business opportunities for asia-pacific and particularly for hong kong. stephen: absolutely. i have talked extensively to guests about the financing role hong kong can play for one belt, one road and other initiatives. but you are also focusing on
technology innovation. hong kong has tried to be a tech hub in the past with cyber port, but because of the property prices, it is very hard to incubate tech startups. across the board in shenzhen, they are doing that. shenzhen's gdp is a must the same as hong kong when it was just a fraction of that 20 years ago. how do you compete or integrate in such a high price environment mike hong kong -- like hong kong? amy: we have high-caliber people. we have some of the you disruptors around the world coming to hong kong for the form as well. i believe, at the end, it is how we work together to create a vibrant ecosystem here in hong kong. actually, the u.k.'s playing a role because technology and innovation have made is a priority for some time. we will announce the collaboration with hong kong x.
we want to encourage more successful startups in hong kong. we need different parties working together, for example, the business, government, and also all the startups, and create a kind of networking engagement platform. thehen: ubs survey, 80% of most recent survey of hong kong millionaires say this is an era of uncertainty. what are the risks to the property market and the potential bubble and bursting of that? amy: that obviously -- stephen: you are a banker. you should know. [laughter] amy: obviously. we will see some of this kind of risk. as i said earlier, we will still look at the potential out there, especially with all of this development strategies like one belt, one road. this is exactly one of the topics we are going to discuss in the economic panel there,
looking at the outlook of the market, the property market out there in the region, and particularly for hong kong. stephen: amy lo, ubs, hong kong ceo. best of luck on this celebration , 20 year birthday for the hong kong sar. betty, i think you are here 20 years ago? you were not even born 20 years ago. betty: you gave me away, steve. i was there, indeed. it was a very rainy day that day, steve. .tephen engle, outing me 20 years ago and hong kong. you can get a roundup of the stories you need to know including that one, to get you going in today's edition of daybreak. subscribers go to dayb . you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪
anchor: this is daybreak asia. i am yvonne man in hong kong. i am betty liu in new york. the fashion house questioned your says eight remains optimistic. speaking exclusively to futurerg, they said the looks bright following the election of president emmanuel macron. the french market is important. the election, we have a new president. i think this will be a very positive thing for the economy in france. reformswill start some in bringing for -- seeing some lows. things like that. i am positive about that. what will happen in the u k, we see, how they are going to do , butew government
generally speaking, i see there is more optimism. the only concern we have, the main concern we have may be in europe. teris problem -- the which meansem, security for the population and the tourists. for our industry, france will be visited by when people are coming and they feel confident. >> what is your outlook for the chinese economy and the chinese market right now? sectornow, the luxury seeing a rebound from the difficult years of the anticorruption campaign. how are you looking at the market currently? >> i know global statistics were did notus down, but we face this kind of the tuition. we have been constantly --
because of very consistent position in terms of product innovation, project quality, and quality of service,, so we have market share. ouror: now, that was exclusive interview with christian dior's sidney toledano. an attempt to attract new interest in the table unit. hoping to pay down debt. telecom --ased a billionhalf dollars. it has not decided whether to make an offer. betty: shareholders are resisting calls by active investor third point to spin off its aerospace unit, which has been dragging on earnings. shareholders were told not to
miss out on the fruits a recent investments in fields such as aircraft broadband. he told us honeywell continues to see china as a growth market. inwe continue to invest china, for example. it grows at 7% a year for a long time. it looks like maybe not that rate in the future, but even at 5%, 6%, that is a good place to be. betty: the first baby panda born at the tokyo zoo in five years. it sent shares of local restaurant operators soaring. tenko.sted to estimate puts the economic impact of the baby million.$240 we have a consumption problem in japan.
this could be the solution when it comes to it. betty: who doesn't love a baby panda story? anyone who does not smile at that story has a cold, cold heart. yvonne: all we needed was the video of the baby panda in our show. [laughter] yvonne: plenty more still to come with a this -- with asia's first major market open. that us bring in sophie kamaruddin. sophie: looking at what is going on with today's session, we are looking at more losses for asian equity markets after a sour start to that week with the tall malt we thought -- ult we saw in tech shares. this tuesday is looking like more of the same with teachers .ignaling a down day we have the dollar-yen hovering just below 1/10. this is weakness for the session
into your. focusing on what is going on with tech shares, there is caution overvaluation having this too far too fast in space. asian stocks in focus today after falling the most this year on monday.down 1.4% asian tech shares are up 29% year to date. samsung led the climbs on the kospi, down 1.6% on monday. it is down this year. while we did see that collapse in tech shares on monday, we have to keep in mind the broader picture when it comes to the space. take a look at nintendo. it sold 2.2% on sunday. it is one of the so-called .unrise stocks in japan investors are feeling optimistic when it comes to the games sector. goldman sachs raised nintendo's target, citing sustainable
growth in users. we could hear more from the game maker this week at the e3 presentation along with the likes of sony, which is expected to announce today. we will be keeping an eye on energy stocks today as well as new york crude holds gains above $46 per barrel, which helps u.s. oil producers advance overnight. we do have oil holding around that level before the u.s. government data this week is due to show us potentially the crude declines.s resume this setting off a debate about that concern around the oversupply a in the market, but we do have the likes of saudi anticipating the acceleration of stockpile globally will be reduced at a faster pace, so we do have futures little changed so far in new york after a citing in the previous two sessions -- a
hong kong convention center, the 20th anniversary of the hong kong handover back to china rule. i think investors have been caught off guard and were blindsided on friday after we , comey, and the ecb the u.k. at, but morgan stanley saying this was way overdue. we will see of the bleeding continues in the asia-pacific. stocks set for a fourth day of losses. nikkei 225 falling by .3% at the open after falling .5% the rise ande saw financials offset i.t. stocks. australian markets resuming trade today.
heavy kospi rising .1%. we are seeing some caution in the currency space. look at of their g10 currencies, the pound holding below 127. cabler investments say could make a run towards 120. the loony and canada on expectations the bank may hike hoveringd the euro around 112. base metals on the back foot. oil, new york crude holding gains above $46 a barrel after capping overnight. look at how dependent
emerging markets have become on shares. the line in white representing the i.t. sector, which has passed financials to be the biggest share of the index, and so the biggest driver when it comes to swings. companies making a third of the gains, samsung and make up the lines the share. we do have the kospi up .2%. samsung accounted for the biggest drag, but today, i.t. stocks down marginally, so perhaps investors and shaking off some blues around the text face when it comes to valuations in that sector. latest on the markets
there. let's get first word news now with haslinda amin in singapore. british met asew u.k. and european union officials failed to agree on a start date for brexit talks. the meeting in brussels broke up without any firm commitment on when to begin the process. eu officials say they are u.k. wantswhat the out of brexit and are frustrated with the delays. down,y immelt stepping as he 16 years dramatically reshaped ge but failed to win over wall street. be replaced by john flannery who oversaw a jump in profits in ge's health care unit. the stocks soared to the most in 18 months after the announcement was made. we canave a track record be proud of, a window on the
future where we can be better, build on our strengths, known as an execution company and deliver for all constituents, including customers, employees, and shareholders. we are the vehicle to get there. the treasury department's much anticipated report on bank regulations and proposals for revising posed crisis rules indicating the trump administration is more interested in scaling back dodd-frank. the ecb says eurozone and is less reliant on stimulus and that holocene are moving towards exit from the program. but still tooess,
early to discuss tapering. the ecb decided the risks to growth our balanced. we see downside risks, mostly coming from the outside, so risks surrounding the future of u.s. economic policies, and these are the risks we want to focus on. haslinda: global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. some breaking news out of crown therts, a lawyer for company saying employees detained in china have now been charged with promotion of gambling offenses. this has been more than a six-month ordeal when several employees were detained in china.
tried to crack down on overseas gamblers, paving the way for those prosecutions as the government is cracking down on casinos. crown resorts shares in sydney on pre-notice, so continues to be on a whole. we will get the latest out of crown results as employees detained in china have now been charged. the federal reserve, the only way the fed could surprise if it decided not to raise key rates. what is catching investors eyes is the statements from central banks that they are getting ready to raise their key rates after years of cutting them. kathleen hays is here with the latest right now. the fed rate hike is considered a done deal. you think investors are waiting to hear from fed chair yellen? >> she is getting a lot of
questions in the press conference after the fed decision on wednesday. definitely the rate hike, 25 basis points, to the middle of a range, that is what is in the cards. as the fed focuses on a stronger labor market, the unemployment level at the lowest in 10 years and dismisses softening in inflation. survey of inflation expectations tumbled in may. road, 2020,down the the expected inflation rate is 2.47%. let's put this into perspective and see what inflation is doing, this is the fed's main
gauge, the pce deflator briefly topping 2%, and has now fallen to 1.7%. 1.5%ore pce is now down to , so this is quite a move. found thef economists majority still see the fed doing two more rate hikes this year. fed's third hike is seen in september, and the balance unwind is supposed to start in the fourth quarter of -- first -- fourth quarter this year, so some time after september. what are the odds looking like now? you look at june, let's jump the june hike, odds at 98%, two thirds of the way down to the third line, 30 3%, those of the odds of the notember hike, the market
expecting anything after june, likehat does echo things brainard. that's part of the rational moving ahead, not falling behind the curve. thisat seems like the case week, but what does this mean for the bond market rally? is it really going to be over? >> terrific story on the bloomberg today about bond market doomsayers saying the end coming. inflation, let's go to a chart, , a near-term look.
you can see that range established between the the 10 yearne, now is below that 50 day moving average, a steady decline in the 10 year yield, and that is one reason why strategists and economists say this has got to turn around, and when it does, it could be violent. they still see it happening this year. >> what does it mean for other central banks? the bank of canada looking like they are ready to pave it. they got pounded by oil prices in 2014 and the economy has turned around and the senior deputy governor today talked about reassessing monetary policy and seeing if all the stimulus is needed as the economy's recovery looks broader. we just heard from the ecb inflation is moving
in the right direction, but they are not ready to do anything. it is interesting for someone like the bank of korea which said they could hike. one thing people have been talking about for countries like korea is that as the fed hikes more and more and the key rate goes above the bank of korea rate, will that encourage capital to leave the country? if bank of korea has to push up their rates, that will make it harder for people to finance those loans they hold, so the fed moves are definitely making it more complicated for some banks. i think this question will be raised more and more as the head keeps hiking rates and reduces the balance sheet, pressure on other countries to follow in step whether they need it or not. >> or be ready on the defense too.
thank you. the fed moves have been widely telegraphed for some time. on thes like asia is defense and ready to go with the rate hike expected to happen this week. the difference between 2013 and the taper tantrum are the stockpiles we see in the region. my terminal.t this shows the reserves for indonesia. dramaticallyged since 2008, and we have reached that record number when it comes to net reserves in indonesia. is wrong horrible because of the high level of dollar denominated debt service in local currencies, but you see the likes of china, fourth straight month of where fx reserves have gained above that $3 trillion threshold. allnesia, singapore, india, foreign reserves are being fortified. growth, high level
of exports and the flood of outside investment, that should be enough protection for asian countries being hurt this time around even if the fed decides to hike more aggressively in the second half for 2018 and 2019. plenty more to come as we look as qatardefiant tone says they have the means to defy opposition. this is bloomberg. ♪
china? let's get that answer from stephen engle's joined by his next guest. china love stability, but what is prevailing with all the geopolitical risks and the manage stability or slowdown in china as well is the uncertainty, and that is what thewhat to clients and millionaires that ubs surveyed. 80% of them say this is a time of heightened uncertainty. let's talk about the markets and investment strategy with ubs. thank you for your time. and will be the catalyst, what are the biggest risks right now in hong kong-china. remain risk on and continue to be invested. the markets have gone up a lot.
36% year tos up date and dollar terms. the market has gone up because the most likely scenario is one that is denying global macro economic conditions. broad-based,id, inflation is beginning to recover, but strong enough to be positive for revenue as celebration, but we can enough to keep central banks cautious. because of that, earnings will continue to deliver quite strongly in the next 12 months. >> even though the pace of growth has moderated a bit, you feel there is a reflation story for the global economy out of china? >> indeed. china is still reflate thing. it is not growing as fast as q1 when growth was strong, as high as 12% year on year, but we still think keep he i running at
5%, 6% is constructive for recovery and return on equity. >> let's talk about the stock market in particular. it seems as though the market shrugged off the moody's downgraded of china and hong kong. what is going to be the next catalyst or big event we will be seeing? msci is reviewing possible inclusion of h-shares in your review. what do you expect? call.is a close we are not holding our breath about potential inclusions of a-shares. mainly because the government is insisting on a preapproval do wes, so why then continue to be overweight in china? the key reason is because of .arnings earnings revision is running at the best pace in six years. if we look at you wish and's as
well, it is still running below historical average, so when you by d.ecovery, reasonable wade, and at the same time, the banking system we think is running at quite a robust pace. with that in mind, we are still seeing positive returns. the risk of overshooting on the crackdown on leverage? >> this is a very important point. the government has actually taken in the opportunity of strong growth to tighten credit conditions and deleverage the financial system. that is positive for the sustainability of the market, and the reason why we are reasonably sanguine is that the tightening has been orderly, and the government is moving from a position of strength. once growth were to recover in china and the rest of the world,
one should expect central banks levels, and monetary policy accommodation from the market. >> we talked about the potential inclusion of a-shares in the msci. #want to bring up a chart, 9280, showing the spread between what we often track for h-shares in hong kong and what a lot of global money managers look at, the msci china. the strife between these two is at a record high. are we not seeing the true rep representation? you brought up a very important point about china. this is a market that requires
active portfolio management because it is an economy in transition, and with transition there are winners and losers, but what you want is to be buying the transformation and growth in china, not trying to ize the debt. the new china loaded with tech companies and new economy sectors have outperformed the old china. sinceis 7.5% per and him 2011. num says 2011. >> a quick question on the bond -- they are finalizing the details, but it seems as though foreign money managers are not too keen on it right now. credit ratings
agencies in china, concerns about liquidity, do you think essentially that bond connect will pay off? this is the third largest bond market in the world. the connect program, implementation can be in issue, and the initial traction can be difficult. this is the case with the shanghai hong kong connect. it has been a hugely successful program. iso think the bond connect an important and strategic move, because there has to be a way for foreign investors to gradually buy into the chinese linkt and eventually the will be open and therefore gives the chinese households and chinese corporates an opportunity to diversify into a broader universe of instruments. for joining so much us in having us at your hong kong 20th anniversary
celebration of the formation of the hong kong sar. more coming up. an advisor to the cbrc in beijing in the next half hour. back to you. >> we look forward to that conversation. thank you. one feature on the bloomberg we like to bring to your attention is our interactive tv function that you can find going to tv . you can see previous interviews and dive into the securities are functions we talk about. you can also become part of the conversation. send us an instant message on the left aside of your screen, ask a guest a question. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪
>> welcome back. a quick check of the business flash headlines. a haltia 10 network and of the key shareholders decline to guarantee a new loan. they decided say not to back a 250 million australian dollar credit line to replace an existing overdraft in december. the network reported a first-half net loss of 232 million australian dollars. saying amack moran deal is in sight. plannedon is running as despite a strike that started on may 1. the government wants freeport to switch to a special mining license and divest a majority stake.
they account for nearly 30% of the weighting. the dow and s&p 500 are roughly unchanged over the same. . china's corruption watchdog has found incidence of fake data, the second announcement this year about unreliable figures. falsifiednies official reports according to the federal commission. provincehis year, one admitted faking data from 2011-2014. president trump travel ban has been defeated and a second appeal as the supreme court considers whether to take up the case. the court of appeals in san francisco said the president exceeded his authority by suspending nationals from six mostly muslim countries without showing how letting those people in hurts america's interests. the white house says it is confident the supreme court will
uphold the ban. u.s. attorney general jeff sessions will testify on capitol hill on tuesday. under pressure to explain his role in fbi director james comey and contacts he had with russia. sessions will testify before the senate intelligence committee days after james comey accused president trump of lying. sessions volunteered to of the, but sources say he will refuse to discuss his conversations with the president. we will have live coverage of the testimony tomorrow at 2:30 p.m. new york time, 4:30 a.m. in sydney. u.s.-china on relations as president trump has been weekend on the global stage. said that they u.s. is "mired in a political crisis" that could have far-reaching implications.
the u.s. withdraw from international agreements has boosted xi jinping's image. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. time to see how asian markets are shaping up. sophie: we do have asian stocks marginally higher, focus on the nikkei 225, down .1%. for eights accounting of the 10 worst performers on this benchmark, but today, telcos stocks and materials on the back foot a long with financials near the bottom of insurers pole after help to boost the financial sectors. the drop in telco is coming from softbank, losing eight points this morning. the i.t. space, swinging between gains and losses.
chip stocks in particular are dragging the i.t. sector lower, tokyo electron. semiconductors shares have been among the biggest drivers for the tech rally this year, but growing concerns they have sent hedging costs soaring. this is #9326 on your terminal, the cost of three-month options on the semiconductor etf has jumped to the highest since 2006 relative to the biggest etf tracking the s&p 500. you see that spike right here on the chart. that building anticipation over apple's new iphone has driven related chips and electronics shares higher this year. apples tumble had a knock on effect on suppliers in asia. when you look at the flipside,
tdk corp. on the rise, of 2.3% after falling 2% on monday. upgraded. was electronics components prices are expected to rise according to smbc nikko. managing gains, up over 1% so far. thank you. china set to open the doors to its $10 trillion debt market, but analysts think international investors are likely to be wary. tom mackenzie joins us for more on this. worry we hearthe from the international investor community are familiar when it comes to china. what is holding investors back? tom: none of these issues are
new and will not be resolved overnight. it is the capital controls and concerns over whether foreign investors will be able to get their money back out, then concerns over the amount of liquidity in the bond market, you would see 10% in u.s. bond markets, and conservative ratings about these credit ratings agencies and how viable those are. there are the current market conditions, and we have a chart that illustrates what is going , corporate bond issuance from 2015 until now. that corporate bond issuance has really fallen off, and in fact, they have seen a record cutting of bond issuance is by $29 billion worth of fonts sales being scrapped because of this deleveraging campaign and these pushed up yields, and you have seen these bond market sell off.
the current environment with all these longer-term factors will have to be worked through. they are conspiring to give foreign investors cold feet on this issue, and something that the chinese regulators and governments have been wanting to amend. they want to see inflows. abroad own lessonbraun th 2%, so clearly some way to go. is aboutow much it chinese foreign regulators having to win the trust of foreign investors? the regulators, government, and private enterprises like the credit ratings agencies come in terms of capital controls, there is concern about whether you will get to money back and there are not many tests cases that the authorities can point to. the chinese authorities say these capital controls are not aimed at foreign investors, but there is some more clarity they want to see there. countercyclical
factor the pboc has put into place around the fixing of the yuan that pimco has said has made it more difficult to value the currency, also weighing on appetite for chinese lawns, and you have the liquidity question, about 7% of what you see in the u.s. bond market and it is dominated by banks who have less incentive to buy and sell, so there is low liquidity, and then credit ratings agencies. there is not any trust in them to be quite frank that they are putting legitimate ratings on these bonds, that they're just not inflating them for the sake of clients. it is worth mentioning that m co. and goldman see lots of opportunity, but there needs to be more detail and transparency and these issues have to be worked out before you get bond investors piling into the bond connect. managing those
expectations as we did hear from charles lee and that bond connect is in that final stage with hong kong. thank you. a defiant toneng as the gulf crisis enters its a second week with no sign of the diplomatic solution to in the saudi-led blockade. the latest now from yousef gamal el-din from doha. diplomatic progress has been slow to resolve the worst crisis in the history of the gulf cooperation council. emir is trying to get them all around the table. qatari foreign minister says he has not seen specific demands from the saudi-led alliance, and that's why he does not believe there is a basis for a diplomatic solution to this problem.
u.s. secretary of state has been on the phone with leaders in this part of the world, and again, nothing tangible to reassure some of the anxious investors out there, and we see that reflected across asset classes. concern when it comes to the cascade of ratings revisions from ratings agencies, and that does have the bearing on the cost of funds and the availability of credit. s&p says qatari banks are strong enough to withstand some capital flight. operations bank says are under way normally and there are no disruptions to transactions domestically or internationally. the local stock market is up .8%. the plunge in qatari assets, the currency in particular. let's bring in my chart, #9327, the question was whether qatar
can whether this pressure without having to devalue its currency. in terms of the forex market, traders are thinking there is a big chance of a revaluation and are betting on a stronger riyal to the dollar. we are seeing it continue to weaken. they are betting for the stronger signal despite the fact we heard from the finance minister of qatar that has tried to be on the defensive, that they have enough financial ammunition to defend the currency and the economy a mid tos plunge, but when it came stocks, bonds, and the currency, he says it is an "normal" reaction to the moves given this diplomatic spat, so still defending this dollar-riyal peg.
yvonne: welcome back. banks bracing for a cash squeeze. go back live to the ubs and chinese manufacturing association of hong kong event. stephen engle joining us again. good to see you. to get some real insight into the chinese banking system. we have been talking about the differing views we get from both worlds, the western view of china and the internal view of china.
how bad is this debt pile and how much goodwill this deleveraging campaign half on the chinese economy, let's put these questions to the luminary in this field, the senior fellow at the asia global institute, chief aide pfizer to the cbrc, also a former central banker and financial regulator. you have the credentials. what is the risk in the chinese economy to its massive debt pile? >> i think you need to understand china from the viewpoint of the whole global context. the whole world is changing very fast indeed, and china is moving from an old the supply chain of energy, resource consuming andstries to provide goods services, mostly physical goods to the rest of the world. it is moving towards a service economy.
service economy moved to 50% of gdp. in the u.s., it is 80%, hong kong 90%, so china is moving towards a more middle income advanced economy transformation. transformation, you will see some funding requirements, and it is not deleveragingme occurs, but that is more due to the liability allocation issue. in china, you need to remember , so savings is 50% of gdp it is a matter of distribution between debt and equity. >> a lot of those savings when into risky wealth management products. >> you have the jump market in the united states, and look at what happened to those junk bonds. they refinance cable tv and i-5
infrastructure, so you need to understand china is going to create a disruption. industries need to be phased out. over the last five years, the government has been extremely good at phasing out excess capacity. now, there are some industries out there that have not been folded up the yet, but it is a matter of time. ofdo we know the full extent the bad liabilities come the assets underlying those traditional industries that are suffering, the state owned enterprises, the zombie companies? industryk the banking knows pretty well the bulk of it, but there is that part of the shadow banking area where the authorities are looking at it in great detail right now. that is where the enforcement and the crackdown has been
occurring. >> what is the likelihood of a banking crisis in china? >> i don't think there will be a banking crisis for the economy, but you will not be able to avoid some individual institutions having to be wound down. the deleveraging campaign coming you don't think that china is overleveraged? japan -- no, is japan over leveraged? at the moment, it is higher than china. >> that is a different kettle of fish. it has had 2-3 decades of stagnation. china is lending their way to stabilization. >> most countries grow out of their debt. you have real trouble when you are not growing. thea is still growing, first four months of this year, growing at 6.9%. >> do you trust the numbers?
other provinces, they have admitted to fudging the numbers. is 1/5 oforget china mankind, the second largest economy in the world. are you surprised that one part of the country is slowing down or even declining and a large part of the country is growing ? >> just north of hong kong, the region, is growing pretty good. .t is all high tech shenzhen today is the prototype center of the world with lots of new technology companies growing. >> that begs the question, shenzhen, the economy is now billion, hong kong is $321 billion. 177 billions
dollars 14 years ago, and shenzhen was $7 billion. find itss hong kong competitive advantage beyond financial services? >> you must understand that growth today is not stand alone. it is a cluster. sitting in the real growth zone in china and asia. geographically it is very well located, low-cost. the volume that you have means the marginal costs is fairly low. it is actually working very closely with the delta to help. look at the investment banking that is going on, helping chinese enterprises raise capital. >> is there a property bubble? >> the property bubble is worldwide. because interest rates are historically low, so i am a
great supporter of the fed adjusting back to normal. tohink when it adjusts back normal, property prices will adjust. >> what about the pboc balance sheet as the fed is unwinding it balance sheet? i want to bring up this chart, # assets of$5 trillion the pboc. so if the fed unwinds in a tightening move, the pboc has seen its asset file stabilize. do think they could start unwinding as well? >> up to a point. just as the fed has problems unwinding too fast, so is china facing this issue. bank, we cannot run away from the fact that globally central banks, their balance sheets are larger than before.
the chinese central banks balance sheet was increase because of the increase in foreign exchange reserves. now that there has been some decline in the foreign exchange reserves, the liquidity needs to be replaced by open market operations, and that is what is happening. look at the way interest rates are behaving. the interest rates are now following real market rates, which is exactly what the direction of reforms is doing, letting the interest rates reflect the market. they are doing a great job. for another't talk half hour if not an hour. thank you for your time on bloomberg television. ubs biging up from the birthday celebration of the 20th anniversary of the founding of the hong kong sar. yvonne: thank you. a great conversation there. you can get a round of the
yvonne: welcome back. you are watching "daybreak asi." " a sharpesponding to fall by cutting 14% of its workforce and buying back to million dollars worth of shares. of 100 full-time positions along with other cost-cutting moves will say $20 million a year. shares are down 24% in 2017 compared with an 8.5% gain for the s&p 500. reliance communications is attempting to attract new interest in its under sees cable unit. telecomg-based civic was in negotiations to buy the undersea cable assets in 2014 than $500 million.
areywell says shareholders resisting calls by third point to spin off its aerospace unit. the executive chairman told bloomberg shareholders that they don't want to miss out on the fruits of recent investment such as aircraft broadband. he also told us that honeywell continues to see china as a growth market. >> we continue to invest in china. it is growing at 6%, 7% year, but even 5% or 6%, that is a good place to be. yvonne: that is almost it for us here on "daybreak asia." time to look at what is coming up on bloomberg markets. >> we will talk about asian central banks in the pressure they may feel when and if we get this purported rate hike out of the u.s.
it has been pretty well flattened up. looking there, also talking about what's going on in tokyo. news conference, what will they be doing? what will they be announcing. at this in response to sony's new console. nintendo, the impact there. also, this conference taking place. yvonne: i am about to head over there for a panel. >> we have that drone manufacturer, steve will be talking to the chief executive about the future of drones. there we go. a red rainstorm warning here in hong kong. ♪
haidi: it's 9 a.m. in hong kong, london a.m. in sydney. 9 p.m. in new york. i'm hot -- i'm haidi lun. rishaad: i'm rishaad salamatrishaad:. this is "bloomberg markets: asia." ♪ haidi: asia-pacific markets put the brakes on text global slump, but the benchmark is led higher by sydney. rishaad: investors looking ahead to the decision from the federal reserve.