tv Bloomberg Daybreak Asia Bloomberg June 21, 2017 7:00pm-9:01pm EDT
♪ >> asia-pacific shares under prussian. investors fearing inflation will be harder to find. u.s. stockpiles remain above average as reduction resumes in libya. >> uber begins the search for a new ceo. most senior posts are empty. it looks like a self driving car company. >> the u.s. and china disagree
about north korea. pyongyang makes a surprising offer. we have the world covered on "bloomgberg daybreak: asia." we go to washington for the latest on the u.s. and chinese diplomatic security dialogue. >> later we have an interview with the chinese ftc president live from bangkok. coming to you live from our bloomberg headquarters . >> it is that oil complex we have to be worried about. first it was wti, now brent crude heading into a bear marke t. some opec nations are considering deeper out put cuts. >> and they have to extend those cuts even further. you can see that build up in the oil market. we have hit that moment where suddenly everyone is paying attention. >> let's see how the rest of
asia will be handing out. -- be panning out. flat on the index 50. cash rate unchanged. rates will not move for some time. futures are positive after an ugly day on the asx 200. the aussie not doing much at 75 51. 82.t falling at 44 we will look at the asian session. lower after half of 1% down on the nikkei 225. 111, spot 35. we will see if asia takes another beating.
looks like we took the brunt of it yesterday. perhaps we could see more recovery and a tech rebound certainly helping things. >> let's look at how wall street settled just a few hours ago. after taking heat on oil prices. tech the second-best performer on the s&p, helping the index close pretty much unchanged. dow industrial average down about 57 points. sectors in the s&p down 1.6% on the fall in oil prices. let's get to first word news with courtney collins in new york. courtney: brings it dominated -- brexit dominated the u.k. program by theresa may. thew bills to ease withdrawal from the european union. it telestrates the prime
minister's weak position since the snap election, forced to ditch unpopular proposals and sticks to bills she thinks she can win in parliament. the saudi stock exchange market jumped the most on three catalysts. the promotion of the king's son to crown prince. previously enacted benefits would be restored to workers for the state. banks with the biggest winners, although all members of the index advanced. the mexican finance minister says the central bank is probably near the end of its tightening cycle and may be able to cut rates by the end of the year. told bloomberg inflation is likely to slow below 4%. he sees a couple more rates hikes before borrowing costs come down.
with the markets are seeing is potentially another couple increases each year. it's starting to predict interest rates could be going down. -- takata isected expected to file for bankruptcy. stock slumped 25% when it opened wednesday. 's airbags are linked to 17 deaths around the world and triggered the recall of 100 million vehicles. its japanese credit rating the lowest since its global default. analysts in more than 120 countries. this is bloomberg. ♪ >> as we were mentioning the action on wall street, u.s. stocks fell as oil's worsening
slump weighed on the industrial space. sue in new york has more on what moved today. >> you had the strength in biotech. that offset the slide in energy stocks and industrial. that is why you see a little green in the nasdaq. let's go some of the spotlight stocks. advanced micro devices. it exploded in the wednesday session after releasing details on that new super chip and the companies using it. lenovo, the list goes on. biogen was moving high as the trump administration signals softening extent -- softening its stance on drug prices.
fedex part of the e-commerce boom. e-commerce is fueling deliveries. fedex announced they will spend 16% more on capital expenditures. many strategists say that is a boost for investors. . as a question as we -- here is a question as we trade close to the s&p. overvalued?oo we are looking less bullish on oil. g#btv. in terms of the big stock, 284. expensive? i will try this one more time. g#btv, 284.
here we go, now you're with me. strategistent formally with wells capital management said, what would it look like if we combine the s&p index with strategist yields onn your treasury? treasury? would it be higher or lower tre? would it be higher or lower than the average pricing in the 1960's? we are right near that yellow line, pretty much the average from the 1960's. far from expensive is the answer. that is an interesting data point given all the talk about overvaluation off the big bull run we recently saw. >> it is all about perspective. crude oil remains in the spotlight. in the last month, down over 10%. etf action, investors are doubling down. what is that about?
su: another bloomberg chart, g#b tv 275. what you see here is that people jumping intosu: etf's his counterproductive -- is counterproductive when hedge funds have been reducing their bullish bets on oil. less and less bullish on oil. that is depicted by the white bars on the top. the price of brent on the bottom box is also coming down. parcel thepart and reflection of the price. take a look at the latest price of crude, below $45. you have a lot of people jumping on the etf as a that on prices -- as a bet on prices. >> all about oil today. more about that with our guest
is coming up. -- guests coming up. china hitting back at president trump's tweets, saying that beijing had failed to rein in north korea. the chinese minister says it's efforts have been indispensable. >> rex tillerson met with chinese official for security talks. reiterated to: we china that they had a diplomatic responsibility to exert much greater economic and diplomatic pressure on the regime if they want to prevent further escalation in the region. >> let's cross over to washington live and speak with our bloomberg news editor derek wall banks. after both sides have made their comments, what are the actions followed after this? ofi think it caused no end consternation and questioning
when president trump tweeted 140 characters or less foreign policy that china had "tried," past tense. that drove a lot of questions to say, is this the end? president trump had been saying that the u.s. will be letting china have space with north korea. the death of the university of warmbier,tudent otto people in washington saying unequivocally that north korea killed mr. warmbier. his death has raised a lot of questions whether that is working. that tweet prompted no end of questions, leading to the chinese response tonight. >> it was interesting to hear from rex tillerson and jim mattis. they were speaking for chinese help when it came to north korea.
we are trying to get clarity. thatard reports from seoul the north has made a surprising officer. the ambassador to india says pyongyang will halt weapons tests if the u.s. ends wargames with the south. speakss hard to know who for who and north korea. obviously the guy at the top speaks for everybody. but it is an open question. the american society is skeptical of north korean office. -- korean offers. the american side is of the belief that north korea tends to operate cyclically, that they will escalate, people will put pressure, then they will deescalate and ask for favors, etc. until we all get dizzy and fall down.
that is where we have been for a while. maybe that is that cycle. i am seeing questioning from the koreans about the terms of this, and whether there will be any action. koreansi think this administras looking for action. words are very nice, but the opinions capitol hill lawmakers have been telling us is that otto warmbier is dead and is not coming back. no words at this point will change that. we will look forward next week to see how south korea will play engine this. still ahead, slicing up the pie. chip visits could keep the technology at home. >> foreign minister to i run to expand iran wants cuts.
>> taking a live look outside tokyo this morning. we are coming down to the asian first market open. japan futures unchanged at the moment signaling we could see modest losses at the open in tokyo. this is "bloomgberg daybreak: asia" live from hong kong. slumped worsening. brent falling below $40 per barrel and joining west texas into this they are market. concerns about raising supplies are negating opec attempts to drain the global glut. fge andand chairman of former energy adviser to the prime minister of iran joins us
from singapore. walk us through what is been happening in the last 48 hours. seems like there is plenty of oil and these opec cuts aren't doing much. it seems that the opec compliance is more than 100%, but there is too much oil on the market. the key factor is u.s. tight oil. it is not 100% bigger than what opec expected. at the hundred thousand dollars growth. ria, libya from nige -- there is too much oil on the market. we need a 700,000 barrels per day cut in opec to bring the price back down to $50 per barrel. betty: we have also heard from the iranian oil minister overnight saying that some members are concerning more
cuts. will all members be on board in this? everybody gets together and the saudi's may have to cut $500,000. the only one that will have to swing down substantially is saudi arabia. saudi production in november 2014 was 9.5. the saudis can afford to grow back 500,000 barrels to be back where they were when they started going up through their market share policy. i don't think they have a problem the same way as it was in november. yvonne: how likely will they do that? fereidun: i think very likely. if you don't do it, prices will sink down to $40 or more.
day again. g#btv 297. the 50 day moving average falling down to slightly below that 200 day moving average, which will signal that brent crude prices are likely to fall further. what prices are we looking at as we lose this momentum? are we looking at a take action price, wait and see, or is $30 where the bottom is for some of these countries? as long as the price of oil is $45 or more, the u.s. producers can keep their nose above water. if it goes below $45, they will be in trouble. it is sustained for an amount of time. if to get prices to hit $40 per barrel, you will lose production on tight oil. opec cannot wait. to have to cut production to lift the price. if not then the bear market will push the price even lower than $40 per barrel. yvonne: he mentioned the newly
and how hewn prince, has been the architect behind foreign policy. the question is what he will do with this consolidated power. do you think he could be hesitant about cutting production for the saudis given that this could benefit iran at the end of the day? tensions between those two nations are high at the moment. fereidun: when it comes to oil, they see yee to eye. this conference is decisive. i think he will have no problem cutting production. betty: thank you so much for joining us on the big story for the markets. sge.founder and chairman of
yvonne: this is "bloomgberg daybreak: asia." after months of speculation, finally inching closer to the toshiba sale of its memory business. freeing up cash that it needs to pay its creditors, putting it back on the path after huge losses from its nuclear subsidiary westinghouse. we are joined by our asian technology editor. who makes up this consortium of
buyers? >> the consortium is two japanese government-backed funds, the innovation network corp. of japan, and bank of japan, as well as bain capital out of boston. there will be minor players. essentially they won over another consortium led by broadcom. the key part of it was the participation of these state backed funds. they are the ones that essentially running along with them the japanese government's stamp of approval. that is why they were announced as the preferred bidders yesterday. toshiba has stated they will try to reach a final agreement with them next week by june 28. bain consortium make it easier when it comes to getting regulatory approval?
what is the timeline? reed: definitely -- as i mentioned, the japanese government is wary of key technology moving overseas, especially to china or south korea. so really the participation of japanese investment in some form essentially reassures everyone and helps the deal go forward. in terms of deadlines, final agreement within one week. after that, closing the deal with due diligence and hurdles is for march of 2018. money ontoiba gets its books, it will have trouble being listed under tokyo stock exchange rules. betty: what about western digital? will they get in the way of a steal at all? reed: western digital was wary
of the toshiba memory chip unit going into the hands of broadcom. broadcom is out of the picture now. the question is whether toshiba will continue its efforts to block the deal. they have an injunction they have asked for. i think a hearing on that is in mid-july. anything can be worked out. presumably the buyers have agreed to go into final negotiations, have considered the legal risks to be not too huge. there are questions whether western digital will remain in the next or -- in the mix or not. yvonne: what about that should dismiss and -- the chip business and plans for restructuring? reed: chip business will lead a lot of restructuring going forward. this is a capital intensive enterprise. a question is whether private
yvonne: its 7:30 a.m. thursday in hong kong. 30 minutes away from asia's first major market open. a little bit clearer today than it has been. yvonne: i will call that good so far. p.m. wednesday it the big apple where markets closed, relatively flat today. tech shares rebounding helped gain solid gains for the nasdaq. betty: you are watching "bloomgberg daybreak: asia"
coming live from our headquarters in hong kong. let's get the first word news from courtney collins in new york. courtney: mark mobius says emerging-market stock prices remain good value. earnings are growing. he told us developing nations developing -- nations technology shares are increasing. he hopes india and brazil can on an beijing's impact sdi indexes. -- msdi indexes. >> it is now 26% of the way, which is ok. this will not happen overnight. it will take a number of years. the good news is that hopefully india and these other markets will grow so that they will begin to balance out where china is. that remains to be seen. betty: the man who built wonka
into china's biggest developer is stepping down as chairman amid a tussle as control. shi becomes vanke's top shareholder. that compares with the gains for rivals china everglades and country garden. amazon is said to be ready to sell nike shoes through a brand registry program to keep fake goods off the site. sources tell us that will let nike have greater control over its products, making sure counterfeit goods are offered by third parties. the idea sent shoe retailers tumbling. foot locker, dick's sporting goods and jv sports all slumped. president trump is sliding down the bloomberg billionaires letter as his office properties bring in less cash than creditors expected. his net worth now at $2.9
billion, down from $3 billion one year ago. the calculation relies on data compiled from lenders, mortgage documents, market data, and a new financial disclosure released just last week. global news 24 hours a day powered by more than 2700 journalists in more than 120 countries. i am courtney collins. this is bloomberg. betty: let's get more on what should be watching. trading is underway in asia. the new zealand central bank cap rates -- kepts rates on hold. rates are fairly dovish. where does that leave the kiwi? >> we did see an initial pop off statement in the kiwi dollar against the u.s. dollar. it has come off a little bit. this is largely an agreement from the market that inflation is relatively anchored.
they are clear on rates being on hold through this and next year. a usual policy stance at this point in new zealand. -- leavess further -- little further upside for the kiwi dollar. it has done well since the last decision in early may. the kiwi is up 5% in relative terms against the u.s. it has had a good run at this point. it feels like a lot of that is baked in. the governor is keen to get weakness into the currency. he is hoping for that to give a followthrough to growth. his term ends in december. in the final few weeks of his term, it's interesting to get a feel for how policy will start to shift into the new governors term.
betty: the kiwi has climbed 5% since that last holocene meeting in may. tech stocks are outperforming what you would see in the u.s. why is the valuation discount continuing to grow? adam: as you said, performance has been very stark. its valuation discount is pretty big right now. : of this chart on the bloomberg terminal, -- pulling up this chart on the bloomberg terminal, this shows emerging market tech shares relevant to the nasdaq. 30% is almost twice what you saw two months ago. this is in the concept of samsung and tencent. stops still in a good -- stocks
still in a good place. yet you can still buy these at 35% discount. -- a with that rally in tech shares we have been seeing, that is not enough for some people. we heard from mark mobius saying he would still be 18 fire. -- be a keen buyer. betty: thank you, joining us live from sydney. we are taking the latest out of uber. sources saying it is planning to appoint david toshiba -- tr
ujillo. find a newb is to ceo after his resignation. we have been following the developments from san francisco. let's tackle the ceo question. are there any names being thrown out? we have heard sheryl sandberg of facebook, but she is on everyone's list. >> i think it is way too early to know who will replace travis kalanick at number. -- at uber. he stepped down last week as a temporary leave of absence, but last night u.s. time he resigned amid pressure from top investors of uber. at uber, you maintain this very empty leadership bench. they are looking for a ceo, coo, -- thengineering, cfo
list goes on. the company is in turmoil. they have seen a lot of turnover. coo -- obviously ceo and they are all very important, but ceo would be money the most important replacements. uber is noted in these stories that it is a mess internally, but the company is still humming along business wide. >> they continue to bring in more money. they also spend money on subsidies and other methods to keep revenues up. , the travis stepped down company is being run by a committee of 14 top executives, which i can't imagine is the most efficient way to run things.
i think the effort among the top of the company will go into trying to find replacements and the right management to bring it forward. the company never talks about when they want an ipo. maybe sometime in the next few years, there is an expectation that uber will become a public company. yvonne: i was going to ask you about that. is anyone talking about the ipo at the moment? been theer has always poster child of that company that didn't want to go public. resign, evenck though he retained a lot of control of the company, theoretically he would not be as vulnerable to being pushed out if it had been public, but we saw the same thing. pressure after months of scandal and controversy, the ceo was pushed to resign.
it was his choice, but obviously there was some discussion that led to his decision. i think they will go public sometime. i don't think anyone expects it to happen this year. yvonne: thank you so much. certainly every day has been a new development at this company as they are sorting out things internally. won a feature we would like to bring it to your attention is our interactive tv function. you cannot only want us live -- dive intoive, but bloomberg securities and functions. you can be part of the conversation by sending yvonne and i messages. this is for bloomberg go>.cribers only at tv< betty: why have investors been holding off on making deals
betty: a beautiful look outside tokyo this morning. it is supposed to be getting hotter in the city. we are looking at the major market open. not much going on with japan futures, going nowhere this morning. this is "bloomgberg daybreak: asia" live from hong kong. betty: global mergers and dealmaking is heading to its lowest activity sense 2013. the $1ntly crossed trillion milestone amid the divergence of stocks and m&a in the u.s. let's discuss the outlook with co.'s staffer.
we have been talking about the now times of m&a, and people are saying with all that is going on, should the fed raise rates? m&a activity has fallen off the cliff. will have to continue? -- will that continue? >> i might quibble with that assessment. we believe at bain that this is a healthy market for m&a. betty: you would think that htough. >> it is my job to advise companies. let's break it down a little bit. what you think about the critical requirements, we believe there are four. the first is liquidity, and that borrowing rates are manageable. the second is that there is enough stability in the country
that ceo's know what is coming down the pike. the third is a regulatory environment that is conducive to deals, and forth is a tax environment that is predictable. liquidity and borrowing is strong. altogether we think this is a fairly healthy market. back to your point about the numbers, the 2017 numbers are indeed lower than 2015. over the last 20 years, this is still a well above average market for m&a. yvonne: i want to bring up a chart on bloomberg. this is g#btv 308. i don't know if you can see it on our screen. let's pull it up. it shows the inverse correlation between political uncertainty and m&a volume. when you see political
uncertainty, like here in 2016 spike, m&a activity actually falls. if i reading this chart correctly, we are at another point where political uncertainty is on the rise and m&a volume is on the decline. do you buy into that, that correlation between the two? dale: actually i do. i would argue there are a few other factors. particularly i think about the regulatory and tax environments, and the ways those can impact m&a. imagine you are a business development manager at a fortune 500 company and are thinking about doing a deal when you cannot predict what your tax obligation will be, when it could swing 10 or 15 points based on predicted regulation. you don't know what the cash
flows are. you need some predictability to have comfort you are valuing assets in the right way. i believe there is something to that correlation. it is a function of what is going on in the start market as well. are ceo's feeling some hesitation on these companies that are less affordable these days? dale: there are two things worth talking about that i don't think that enough press. one of those is a strictly regulatory structural thing. we call in 2016, the u.s. treasury rewrote the tax inversion rules that limit the types of deals that can benefit from those. there were a number of deals in 2015 that had as a key part of their thesis, text conversion. -- tax inversion.
not only were they a lot of those deals, but those were dealsals, $40 billion that no longer make sense anymore since the treasury rewrote the rules. that is one thing. the second thing is that we are in a period of absolute capital abundance. it is very easy to get money. it is very easy to raise debt. we look at how cfo's are operating, they still operate with a psychology of capital scarcity. that means they are not always making investments that they might ought to make because they are keeping their hurdle rates higher than they need to be given the abundance of liquidity. that applies to the m&a market especially, when deal and equity values are going up and i'm keeping my hurdle rate higher than it should be, predictably
it is harder to make those deals pencil out. yvonne: does the u.s. stand as an outlier? in europe, despite brexit, we are seeing m&a deals of these days. japan also looking for growth abroad. dale: there are different stories as you walk along the globe. europe is up, asia is up, u.s. is down. there is not a consistent story across the globe. yvonne: chinese m&a appetite -- has that changed? it doesn't seem like they are backing down on capital controls. dale: it is hard to imagine that won't have an impact, as the chinese government considers outflow of capital from china. it's hard to imagine that won't have a downstream impact on outbound m&a from asia. dalee: thank you so much
stafford, during this from d.c. more breaking news on uber. betty: uber director bill gurley is set to step down from the board as well. ofwill be replaced by one benchmark's big investors, behind some of the changes we have seen. kalanik ultimately resigning from the company. yvonne: staying on the board, but at a diminished role. we have more on bloomberg for the shakeup on the board. to forget our exclusive interviews later on. the thailand stock exchange president will join us at 8:30 hong kong time, 10:30 if you are watching out of sydney. betty: you can get a roundup of the stories you need to know to get your day going. bloomberg subscribers go to dayb
yvonne: this is "bloomgberg daybreak: asia" live from hong kong. betty: boeing beat airbus in an air show for the first time in five years. it won orders and interest for about 370 planes worth up to $2 billion. airbus managed to hundred 29 planes. -- 229 planes. asian investors were particularly attracted. toyota is having to play record incentives to keep the camry ahead of the field in the
u.s. the new model goes on sale next month. it will cost $900 more, but feature $4000 more in extras. the camry has led sales in 15 years and has escaped the sales drop off suffered by rivals. sales are down 12% as roomier suvs ruled the road. betty: apple said to be revising relations with the music industry by cutting record label share revenue from streaming. the agreements between apple music and itunes with current agreement expiring at the end of the month. the new arrangement would bring apple closer to the rate. the recording industry group thanks to pay streaming services. yvonne: news corp. says the company is in advanced talks with facebook about situations to its content online. the ceo robert thompson has been exchanging with mark zuckerberg
on content. at an industry conference in italy, thompson criticized the walled garden from facebook and google. betty: george clooney seems to lead a charmed life -- fame, fortune, a beautiful wife, baby twins. he also sold the tequila company he founded with friends for $1 billion. it being bought to expand its lineup in a fast growing sector. it will pay $700 million upfront . clooney says he may celebrate with a shot or two, a billion dollars shot. yvonne: you can have more than just one i think. betty: i don't think he will give up acting. yvonne: plenty more still to come with asia's first market open moments away. betty: we are watching sydney,
tokyo, and seoul. >> oil traders don't have much to celebrate. brent joining wti in a bear market territory. that pushed u.s. energy shares lower. we saw increases when it came to biotech. that could lend support when it comes to the asian session. we are seeing a set up for an open of higher gains when it comes to scipio, -- comes to sydney.eoul, and the story that doesn't end. takata shares have been hit on suspension of its bankruptcy -- suspicion of its bankruptcy. we could hear more about its bankruptcy on june 23 or 26. after ending its antitrust probe, amazon japan is reportedly planning to boost its
independent courier firepower by about 10,000. the market leader fell 7/10 of 1%. the japan's e-commerce scene has grown, with a penetration rate lower than the u.s. and u.k. amazon u.s. has been catching up. japan its second largest overseas market besides germany. we are watching the trials of employees in shanghai. the casino operator is retreating from asia in the wake of arrests. the hong kong office appearing to be the only asian office that remains open. new ceo john alexander. that is a trading flux we will be watching as trading gets underway in japan, south korea, and japan. toshiba very much in focus.
yvonne: asia-pacific stocks under pressure again as oil's worsening slump hit industry and industrials. investors fear inflation will be harder to fight. below $40 ang barrel to join west texas in a bear market, u.s. stockpiles remaining above average, production resuming in libya. yvonne: the u.s. and china disagree about north korea. pyongyang appears to make a surprising offer. betty: a bank under stress again. the top 34 face new tests, but
the fed expects all to be above the minimum requirements. yvonne: this is the second hour of "daybreak: asia" live from bloomberg's asian headquarters. i'm yvonne man in hong kong. betty: i'm betty liu in new york. joining yvonne for the week. we have been talking about energy, oil prices the big focus. i'm looking at how oil futures are trading in asia. they are showing a slight rebound from the fall, the declines we saw earlier in the u.s. trade. we saw wti crude falling to bear, now brent. yvonne: the market seems to just this is not even about fundamentals. you are just catching this at the moment. whether it does have any kind of contagion effect. it seems to be quite limited so far. take a look at the global demand, still relatively intact. it is more about supply than anything. copper as well still on a tear this month.
usually that is a good proxy for how the economy globally is doing. we will see how things look. we saw the brunt of the pain on wednesday in asia. let's see if we will see that continue. let's get the latest with sophie kamaruddin. sophie: despite the slump in oil prices, that perhaps is not putting a dent in sentiment in the equity state and asia. we do have copper on the rise, up over 1.5% in shanghai. perhaps to be seen more as a barometer when it comes to global economic health. the correlation between oil and stock volatility has been seen easing, so perhaps we are able to shrug off what we are seeing in the oil. oil futures are still signaling weakness, the likes of exxon and chevron contributing most of the decline. asia's stocks could lend some share given the rally we saw in biotech and tech shares overnight on wall street. we do have japanese shares marginally lower, a drop for a second day with the yen little
change. korean stocks are snapping a two-day decline. all the shares are up -- aussie stocks are up .2% after falling 1.6% on wednesday. shares in wellington and kiwi dollars are on the rise after the rbnz indicated no plans to raise rates anytime soon. are centralat banks in the philippines and taiwan, no change expected. we are seeing some weakness in , like thee -- aussie canadian loonie given the drop in oil. more losses could be seen ahead. crude could be seen to and weighen crosses on u.s. 10 year yields as risk appetite phase. we are seeing a slight rebound in brent and crude for now. brent holding on for losses
below $45 a barrel, down nearly 20% from a january high, which pushed it into the bear market. a downward track that might not end soon. earlier this month, futures signaled the formation of something when that 50 day moving average fell below the 200 day. the last time we saw this formation was in the second half of 2014. that is what sparked the collapse in crude prices. the losses we saw overnight for oil coming despite u.s. stockpiles falling for the 10th time in 11 weeks, the lowest level since february. investors seem to be waiting for more declines as supplies remain above the seasonal average. iran, by the way, has said opec may consider more cuts. something else for traders to consider. betty: thank you so much, sophie kamaruddin on the markets. let's get to the first word news with paul allen in sydney. : uber is said to be
appointing someone to the fold to replace david waterman as it seeks a new ceo after travis kalanick's resignation. sources say he was picked because he is familiar with the company's innerworkings. we are hearing director bill gurley is stepping down to be replaced by benchmarks matt kohler. ceo, boomer new needs a cfo, chief marketing officer, and general counsel. reports from japan say the state funding will take a majority stake in toshiba's chip unit to keep the technology at home. the new k news -- the nikkei news says it will buy 50% of the stock with the bank of japan taking 16.5%. the remaining stock will be divided between bain capital and sk hynix inc. to file forpected bankruptcy either friday or monday as its debt obligations towards its cash holdings. stocks slumped on a percent when it finally opened on wednesday.
takata's potentially lethal airbags are linked to at least 17 deaths and have triggered the recall of 100 million vehicles. it's japanese credit rating is at the lowest level before default. saudi stock exchange benchmark jumped the most since 2015 on three catalysts. following the promotion of the king's son to crown prince and also a news that previous benefits would be restored to state workers, making the watchlist for emerging market status also helped. banks were the biggest winners, although almost every sector of the 172 member index advanced. china has rejected president trump's view that it has failed to rein in north korea. he tweeted he appreciated the president's efforts but "it has not worked out." observers took that to mean washington is looking at other options. beijing says behind-the-scenes moves have been indispensable. north korea may have changed the
game, saying it might halt weapons test if the u.s. stops were games with the south. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. the federal reserve may still be looking to raise rates at least one more time this year , but that is not stopping the bond market balls from betting against the whole idea -- bond market bulls from betting against the whole idea. we see the fed, they are set on raising more rates and reducing its balance sheet. bond traders, still not buying it. kathleen: this is like the fifth year in a row this has happened. you start the year, the fed is ready to raise rates and reversed policy. bond traders say, i don't know, i'm going to keep buying bonds. so far pretty good trade this year. the question now of course, can the fed really keep hiking rates and start reducing the balance
sheet if inflation remains weak. the latest thing is the crude oil market falling into a bear market, a supply glut that persists. prices continue to fall. what do they do? , nothelp curb inflation what the fed or any other central bank wants to see these days. let's look at the bloomberg, #btb 63. we are looking at the fight against crude oil prices falling. this is the white line. it was up above 2% year-over-year on the cpi, now has fallen below. brent crude, also falling. you can see how those two lines broadly follow each other. of course, moving on to the next part of this chain of events, falling inflation, low oil prices, that was the bond rally earlier. we had a guest on bloomberg television, and here is what he said. >> the fed is not terribly
concerned that inflation is not continuing to go higher, but they do not want to see it continue to erode. the one sign of inflation the market has waived in front of it every day are oil prices. they have been heading in one direction for a while now, and that is having a big impact on the bond market. kathleen: we know what bulls are like when you wave a flag in front of them. patrick harker, another voter on the federal open market committee, speaking today. he wants balance sheet reduction to start in september, another rate hike, but he says if inflation continues to erode, maybe you can't move in that direction. he is echoing charles evans from the chicago fed, also rob kaplan from the dallas fed making the same kind of statement -- can't raise rates if inflation is moving in the wrong direction. now,cb deflator is at 1.7% supposed to be a 2%, moving in the run direction. the rate hike odds have also
moved lower. september odds now at 21%, december rate hike odds at about 37%. far from even a 50% that at this point. bond market bulls continue to doubt the fed. betty: adding to this bond ball speak, bull fire so to someone at pimco saying there is a substantial risk for deflation. kathleen: he says the fed has a substantial risk for a hawkish mistake. here are some of the key points about what he has said in his blog posted earlier. he says that right now, the u.s. economy could be just one shock away from a deflationary scare. the fed basing rate hikes on phillips curve, the idea that low unemployment is going to boost inflation is questionable. if it stays on this path, they could submit low inflation expectations, the last thing the fed wants to do.
let's take another look at the bloomberg chart, #btv 5900. you see measures of inflation breaking even. the breakevens are breaking down at the two-year level, the white line. turquoise is the five-year break even. 10 year yield you can see is the yellow line. it is also heading lower. you can see how the fed is flirting with the thing it wants to avoid. that is what a lot of people are saying, hike rates to avoid inflation, maybe you will cause the next inflation. he does say in his piece that one of the legitimate concerns the fed has is keeping inflation bubbles --uel asset excuse me, keeping interest rates low, because people reach for yields and take risks they shouldn't take. that is one reason for the fed to be concerned. yvonne: we have got three central-bank meetings in asia the next several hours. we just had the rbnz several hours ago. what is expected out of thailand
and the philippines? kathleen: let's recap the rbnz a little bit. they did hold their rates at a record low. they did not protest against the strong currency as some thought. graham wheeler is the head of the rbnz, also signaling they are not going to raise rates for a considerable period. he thinks inflation will move lower. another said bsp is also meeting. no policy change because inflation has decelerated a little bit. gdp growth looks lower. taiwan's central bank also seen on hold. they have got a stronger currency that is suppressing inflation, so no change expected. a central banks can surprise, so we will see what happens next. yvonne: kathleen hays, thank you. still ahead, waiting for their health check. take a look at how u.s. banks will do in the annual stress test. betty: trumps criticism of china's role in handling north korea hurt ties between washington and beijing. a are going to talk to
yvonne: "daybreak: asia this is live from hong kong. i'm yvonne man. betty: i'm betty liu. china has hit back hard at president trump, saying his efforts in north rea have been indispensable and played an important role in seeking peace. yvonne: in response to president trump's tweets, which said while he appreciates the efforts of presidency in china to help -- president xi jinping in china to help, at least he knows china tried. joining us is the associate professor of chinese studies at young state university joining us live from seoul.
we're still trying to get clarity on what the u.s. is asking from china. you saw that tweet from the president saying thanks but they are going to wait on their options. then you have jim mattis, rex tillerson at this meeting speaking for china's help in reining in north korea. who is the prevailing voice? >> the best reaction is one chinese expert, quoted as saying we don't assume that president's tweets speak for the administration, which is indicative of the confusion over what signal to take. at this point, i think we do have to assume that that tweet has something real behind it and that we are moving what president trump is signaling, that we are moving into a new phase in terms of how his administration approaches north korea and there are no longer going to use this strategy of
hoping beijing is going to solve the problem for them. yvonne: that's right. at what point does the usa, we are going to go at this ourselves? the death of otto warmbier has sparked outrage in d.c. is that going to be the catalyst for the u.s. to act on pyongyang alone? >> there is a lot of balls in the air right now, as is often the case in the korean peninsula. i would not forget south korea. another thing going on is the president here, moon jae-in, is heading over to washington soon for his first meeting with president trump. another angle to this is if the united states stops running its , thise through beijing could be a shift to working more closely without south korea -- more closely with south korea, which has not had a government during the time donald trump has been in office.
this is the first opportunity for the united states and south korea to work on this since trump has come in. some people are leaping to a conclusion, if trump says we are no longer waiting on china, it means he is going to order military strikes. there is a lot in between those two steps and one could be working with the south koreans. betty: it absolutely could be. as you rightly point out, south korea has been meandering along in their own internal controversies, but they seem to be back on track. partt to play for you one of what rex tillerson, secretary of state, said about the situation in north korea. reiterate to china that they have a diplomatic responsibility to exert much greater economic and diplomatic pressure on the regime, if they want to prevent further escalation in the region. betty: you mentioned there is a
lot in between doing nothing to military strikes. what about some economic measures against china, for instance, to get them to do more on north korea? could we be looking at even the u.s. imposing sanctions on chinese banks, for instance, as a way to get them to do more? >> and that has been on the table for a while. that would not be surprising. the u.s.-china relationship is a big one, as you all know, in economic terms. i'm not sure if the trump administration can make those kinds of decisions, initiating what could turn into this trade war that some have feared over north korea issue. chinese pressure, they actually have been gradually stepping up their pressure on north korea for a variety of reasons.
it does have a role to play, but pressure from china is not the solution. ifondly, it is effective united states is talking to north korea and working on a deal. in the absence of that diplomacy, it really gets you nowhere. i think maybe the trump administration has realized -- betty: i want to mention we are looking at donald trump at a rally in iowa. fact glowing from the continues georgia and to be on the campaign trail, so to speak. john, before we go, has trump kind of boxed himself into a corner where military strength is a very real option here in north korea, as he did in syria? >> no, i don't think so. he has left all doors open with north korea. he said he would be honored to meet with kim jong-un, so he is leaving the negotiation door open.
he probably thinks it is effective to have a credible military threat backing a new diplomatic initiative. i think there are many directions this could go, and it is too early for us to know where they're going to head. yvonne: john, thank you. from sk hynix inc. yonsei -- from university joining us live from seoul. trump has called the trade deal between u.s., mexico, and canada a total disaster and said he would rip it up. an exclusive enter with that fits with an interview with bloomberg, mexico's finance ministers says there is room to modernize nafta. >> we are in the process of modernizing it. he says we are going to renegotiated. we could put some other objectives to it. if one looks at the north towards theion,
airports, railroads, highways, electricity, oil and gas pipelines, there is an american region where if you look at the infrastructure, it is difficult identified the voters. one could argue whether that came about because of nafta or whether nafta came about because of a real dynamic that made the north american region something that made sense in and of itself. mexico has a lot of free trade agreements but none of them have resulted in the level that the north american region has seed. -- has seen. it complements our economies well. napster brought it to life and naftad it along -- brought it to life and prodded it along, but it is difficult to argue it was nafta contingent. there is a core dynamic between our economies that make it reasonable to trade, to integrate, to have markets, to participate in the global economy as a block.
the largest bloc in the global economy will continue to be, for the for seeable future, the north american economic block. we think there is space to modernize nafta. we think we can do better. many things are happening today that would be natural to include in an integration program either that don't exist or that don't have economic capabilities of putting it on the table, and now we do. i think there is opportunities for canada, the u.s., and mexico to come out with a better integration process. happens. dialogue consensusing to a that it makes sense for us to find agreement on the basis of what has already happened that has been positive. we want to continue to see
competitiveness and dynamism. --wendy you expect agreement when do you expect agreement? >> from the perspective of uncertainty, which many of the indicators show the uncertainty and anxiety about the mexican economy have been reduced dramatically. i think that is already happened. this group of possible outcomes has rebounded by the economic reality behind the integration process and the desire for parties to release ache -- to reach a constructive and positive agreement. betty: that was mexico's finance ministers speaking exclusively to bloomberg's matt winkler. some big names coming up on bloomberg. on "bloomberg markets: middle east" we will hear from a mumbai billionaire and talk about the shakeup in saudi arabia, isolation of guitar, and oil prices. yvonne: peter smith also joins us from berlin at half past 3:00
yvonne: a quick check of the latest business flash headlines. merkel is jumping as a push into the cloud picks up momentum and sparks a fourth consecutive quarter of revenue game -- gain. the cloud business grew in the fourth quarter as sales topped estimates. the ceo says the cloud hypergrowth in expanding oracles profit margins and the company expects earnings per share growth to accelerate i. atty: toyota has tumbled in rating of quality.
yvonne: 8:30 and singapore, looks a lot nicer there than in hong kong. we are seeing more sunshine here in the morning. half an hour from the open of trading in the lion city. i'm yvonne man. betty: and i am betty liu. you are watching "daybreak: asia ." let's get to the first word news with paul allen. paul: veteran investor mark mobius says emerging-market stock prices remain good value despite the rally as prices are cheap and earnings are growing. he told us developing nation technology shares are still attractive as earnings increase. he hopes india and brazil will be able to offset beijing's growing influence after its inclusion on the msci indexes. >> useful because you have all
these etf's that need to have a benchmark. it is now 26% of the weighting, which is ok. overtime, that it is not going to happen overnight, it is going to take a number of years. the good news is that hopefully india and other markets, brazil, will grow so that they are waiting will begin to -- so that their weighting will begin to balance out. who made china's biggest developer is stepping down as chairman. metroves after shenzhen emerged as a white knight last year and has now become the top shareholder. share price has remained static since it face the hostile takeover in december 2015. that compares with enormous gains for rivals china ever grand and country garden. amazon is said to be ready to sell nike shoes directly through
our brand registry program to keep fake goods off the site. sources tell us that will let nike have greater control over how its products are sold, making sure counterfeit goods are not offered by third parties. shoe retailers tumbling, foot locker, dick's sporting goods, and the u.k. sports direct and jd sports all slumped. president trump is sliding down the bloomberg billionaires latter as his office properties bring in less cash than his creditors were expecting. his net worth is now put at $2.9 billion down from $3 billion a year ago. the calculation relies on data compiled from lenders, mortgage documents, annual reports, market data, and a new financial disclosure released last week. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. yvonne: thank you. time to see how the asian markets are shaping up on this thursday morning.
here is sophie kamaruddin. sophie: the slide we saw overnight in oil is easing, crude up .3% trading at the 42 spot 66, helping ng shares in sydney, which is helping the benchmark snap etude a drop. miners -- snap a two day drop. miners also gaining as metals like copper are on the up. gold is rising for a second day at $12.50 an ounce. stocks are bucking the regional trend we are seeing as pharma and medical equipment players are rising in seoul and tokyo. u.s.rump bump we saw in biotech stocks perhaps translating into the asian session. telco and ip stocks are also gainers in tokyo. the energy sector in japan under pressure, down about .6%. the rebound in oil not translating just yet. japanese small mid-caps have
been on a tear, climbing to new records this year, up 18% year-to-date compared to 6% and the topix. that is the line in blue. we just deck has risen for five years straight. says&p see nico analyst the market is not yet look overheated with the pe only has 17 times. as nbc has changed its overweight call on the sector and says attention should be paid to small mid-cap stocks that have lifted since the second half of 2015. it looks like the index would like to continue its upward momentum. betty: thank you so much, sophie kamaruddin there. power companies are dominating ipos in thailand this year, making investors wary. yvonne: haslinda amin is at the stock exchange of thailand event in bangkok today. good to see you. why is power so hot right now? hot because they
are trying to raise funds to build the likes of how the plants -- trying to raise funds. it will remain hot. ,f you speak to the president she joins us this morning. the power sector will continue to drive the ipo market in thailand. why is that so? >> an agreement of the power plant. used theginning, the project financing. revenue is coming. [indiscernible] how big will these ipos be? billion. about 1.3 a lot of ipo is coming for this year. ais year we are targeting
billionaire investor for the new ipo. haslinda: what other sectors will drive the ipo market? >> we are seeing that thailand [indiscernible] this is a very old hospital but they are coming by the next two months. theseda: apart from sectors, you are also targeting startups. how viable is that and what is the thinking behind that? other countries like singapore are also trying to attract startups to ipos in the country's. >> you have to know that thailand is a small country and we have small entrepreneurs. 2 million least micro-smb is including the start up.
that is why we are introducing the new platform. and platform we call live this is going to be [indiscernible] we are going to launch it this year. we already have about 600 of these products that we are involved with and should be in the first test. haslinda: you are very optimistic about the performance but so far it is the worst performer in all of asia. surely you must be concerned and what can be done to lift the performance of the stock exchange? >> in terms of the index, we night not be very good, but in terms of the fundamentals, the was 21% year on
year. last week, 26% year on year. thatan see fundamentally the listing company has been doing very well. this is in terms of the economic growth. we are sure that our fundamentals is very, very good. this one might be in the short-term keep waiting for good news, but i am sure once the second quarter result comes out and the whole year comes out, we will see that the fundamentals of the company are very strong. haslinda: isn't the country's growth is a concern for esters -- concern for investors underperforming the likes of malaysia and the philippines? countries, ioring think last year they lacked
performance but this year, people do the comparison, they will see the thai market is not cheap. companies have not been doing only the thai business. we are expanding to be a regional and global business. 46% of the revenue come from offshore. listed say that the thai- companies are not linked with economic growth in thailand. haslinda: there is a lot of talk about a stock connect for china, like one hong kong has. is that part of the plan? are you in talks? what can we expect? >> this one i think is too early to say. haslinda: are you interested? startingms of we are to do marketing together, the
event in china, and to see how interested the chinese market into the thai market. haslinda: do you see that materializing, though? >> so far, i think we need some time. market isf the thai still very small in terms of the interest from the chinese. we are seeing we don't have any connectivity but in terms of the session between thailand and china, we can do it without any connectivity. haslinda: there is so much uncertainty in the market. what do you view as the biggest challenge for the tide stock stockge -- for the thai exchange? >> everything we are seeing is [indiscernible] thailand has had a lot of changes in the past five years. our market is very resilient to change.
we are sure the private sector has been doing that and we are doing very good. we are trying to expand the market that was defined by , weness and also outflows can see the index involving the sustainable thai-listed companies has been number one. haslinda: the question really is whether it is resilient enough to cope with the upcoming fed rate rise. so far it has been pretty stable, but, in other rate right -- rate hike this year and possibly next year, can the markets cope with that? >> we can see how the fund rate affects the market. in terms of the thai market, the combination around the investors in thailand, we have foreigners about 25%, the rest is domestic buyers. that is why we are seeing that ofhave a good combination
local and foreign participation. that is why i still believe our market is [indiscernible] haslinda: thank you for your insights today. yvonne, betty, she is very optimistic about the s.e.t. betty: it is huge indeed. thank you so much, haslinda amin speaking with the stock exchange chief. yvonne: coming up next, veteran investor mark mobius says he is not worried about a financial crisis in china, even if some have concerns about the strength of the markets. we are going to hear more on his views. this is bloomberg. ♪
these stocks are going to have a bigger role in everything from etf to retirement plans. yvonne: veteran investor mark mobius told bloomberg he hopes brazil and india will offset china's rising influence. >> i think it could get too much very soon, because if you calculate where it could be based on the current market, could be up to 40% of the index. when you have that kind of waiting in the index, it could be too much because you are ignoring so many other countries. >> is the idea of an investor to be aware of that and as much as you are able, not the benchmark? does this make the msci emerging markets index less useful as a benchmark? >> it is still useful because you have all these etf that need to have a benchmark. ting, 26% of the weigh which is ok.
this is not going to happen overnight, it would take years. the good news is that hopefully india and other markets, brazil, theirrow, so that weighting will begin to balance out where china is, but it remains to be seen. >> you said china still remains were top pick. there are still voices concerned about some kind of debt event in china, the real estate sector. do think investors are confused when they look at the risks in china? actually the risks are not the restrictions that china puts on the control economy, but actually the liberalization and calibrating that wrong. >> a lot of people think if they look through the eyes of investors from u.s. and europe, it looks pretty bad because the leverage in many cases is very high. none higher than u.s. leverage. if you look at the u.s. economy,
it is quite leverage as well. the differences it is a planned economy. major banks are owned by the government, so they can litigate any big problem. in the meantime, they are going to be -- there are going to be bankruptcies and problems along the way. the government will allow that because they want to teach lessons to people who have gone too far in any direction. you are not going to see a big crisis. i don't see that. >> they can contain the pain that does arise. mark: exactly. as i said, citibank, bank of america, and all these other banks of america were owned by the government, and that is the case in china, so they can litigate and take measures to prevent bankruptcies. betty: that was the always colorful mark mobius, templeton and emerging markets executive chairman. the top u.s. banks are facing new fed dress test with the --
said stress tests. yvonne: the goal is to ensure the banks have enough capital to withstand the shock of another financial crisis. remy inocencio looking into this. but can we expect? ramy: i am happy to be the bearer of good news, because bloomberg news is estimating the 34 banks undergoing the is stress tests are expected to come above the minimum capital requirement in case of a possible disaster scenario outlined by the fed. what does this actually mean? this is what it means on your screen. in a possible disaster scenario, equity prices as we know them could plunge by as much as 50% by the end of this year. as for unemployment, that soars to 10%. right now under 5%. the deals with the biggest banks, at least $50 billion in assets. to give you a frame of reference to last year when we reported on
this, all the banks did do well, they all passed, all 33, but morgan stanley actually came up a little short. 4.9% in terms of the leverage ratio. the minimum is 4%. state street as well as bny mellon came in within 2% of the minimum as well, so they were also just under the radar. looking ahead, we are expecting results coming in at 2:30 p.m. eastern time, when the fed releases its results. 4:30 p.m. is when the embargo lifts and we can talk about it. betty: that is part one, but if they don't do well, it is not exactly game over, right? ramy: exactly. we are talking about the dodd frank act stress test. next week wednesday, there is also something called c-car, the comprehensive capital analysis
revealed. -- analysis revealed. what we are looking at is last year's ccar. all the banks did pass except for morgan stanley which got conditional approval. the question is whether banks can withstand losses in a possible disaster scenario and still pay out dividends as well as buyback stocks. if they don't do well in the first round, they can adjust their numbers so they can try to pass the second round. again, morgan stanley was the one last year, in yellow on your screen that got conditional approval. two foreign subsidiaries also failed, deutsche bank and another one there. we will see how they failed this year. the expectation is most banks will be expected to be approved so they can release dividends or do buybacks. that is out on june 28. tomorrow dfast and a week from
now ccar. yvonne: you can get a roundup of the stories you need to know to get your day going in today's edition of "daybreak" for bloomberg subscribers. go to dayb on your terminal or smartphone in the bloomberg anywhere app. you can customize the settings to get the news that you care about. make sure to check it out. this is bloomberg. ♪
yvonne: that is a live shot right now in singapore, beautiful weather. 28 degrees celsius there. is "daybreak: asia" live from hong kong. yvonne: a quick check of the latest business flash headlines. billing at the paris air show for the first time in five years. it won orders and interest for 370 planes worth up to -- airbus managed to hundred 29 planes worth about a $9 billion. asian buyers were particularly active as regional travel takes off. most orders came from leasing companies, which had more leeway to delay delivery. betty: toyota is having to pay record incentives to keep the camry ahead of the field in the u.s. when a new model goes on sale next month.
it will cost $900 more but feature $4000 in extra's. the camry has led u.s. sales for 15 years and has largely escaped the sales drop off suffered by rivals. deliveries are still down 12% this year as roomier suv's increasingly role the road. yvonne: news corp. says the company is in very advanced talks with facebook about descriptions to its content online. ceo robert thompson says he has been exchanging thoughts with mark zuckerberg on recognizing the value of content. earlier at a conference in italy , he criticized the digital walled garden used by google and facebook, claiming they restrict free movement of customers. betty: apple said to be revising relations with the music industry by cutting record labels' share of revenue from streaming. sources say it covers agreements form apple music and itunes with current agreements expiring again of the month. the new arrangement would bring apple close to the rates spotify page labels.
the recording industry grew almost 6% last year thanks to pay streaming services. yvonne: george clooney seems to lead a charmed life. fame, fortune, baby twins. he has also just sold the tequila company he founded with friends for $1 billion. casa amigos is being bought to expand lineup in a fast-growing sector. they will pay $700 million upfront with a further $300 million over 10 years based on performance. clooney says he may celebrate based on a shot or two. he usually does commercials, right? betty: anything endorsed by clooney is -- yvonne: always good. that is it for us on "daybreak: asia." time for a look at what is coming up on bloomberg. -- bloomberg's george clooney, right? again.r do that oil prices, of course.
that is what we are seeing right now, a cantankerous situation, which essentially means we have got -- we are going to discuss all this with a wells fargo global economist. it seems like the path of least resistance right now for oil is essentially to the downside. we have breached 45 for brent as well. yvonne: they are saying 30 for wti. geopolitical tensions changing the house of saud as well, not really impacting. what else have we got coming on? haslinda amin is in bangkok. yvonne: she just did a great interview with the president of the stock exchange. rishaad: we have got the thai
industry minister, talking to him about their infrastructure push. they have airports equipped to take 35 million visitors per year. they want to get that up to 90 million, so that will cost a lot of money. we will ask how they do it. we do have haslinda doing that. we will be taking a closer look at corporate governance in china. offformer boss being carted or having tea, i don't know. what is going on with on bank and corporate china. betty: always a hot topic. thank you so much. we will see you in a few moments. this is bloomberg. ♪
♪ david: what propelled you to one want to join this company? brian: i always wanted to work for my dad. david: did he say you could start at the bottom and work your way up, or did he say you could start at number two? brian: that is what i wanted to happen. david: did anybody say is he ready to be president? -- n: david: have you ever had problems with your cable? brian: sure. david: is it intimidating for the cable repairman to come to your house? >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪ david: i don't consider myself a journalist. and nobody else would consider myself a journalist.