tv Bloomberg Daybreak Asia Bloomberg July 13, 2017 7:00pm-9:00pm EDT
top the agenda. in newi am betty liu york. it is just after 7:00 p.m. yvonne: it is just after 7:00 a.m. in hong kong. it seems markets are taking it as steady as she goes. you can also argue she came up more hawkish the first day. it was still too early to conclude inflation was well short of that 2% target. we did see bond markets reverse. betty: one thing we did come away from these last two days, is that the fed is watching inflation. it is something they are on high alert about in terms of whether they are going to hike rates again or gradually delay that. i do not know if this was a jab or not, when she was asked a question about donald trump's growth target she said 3% growth
would be great, but challenging. i want to pull up this chart for our viewers. much making how america great again is going to rely on americans. meaning, them spending at home. personal consumption, it has always been a big part of the economy. it has only gotten bigger and bigger and the gap has widened between other areas or parts of the economy that have traditionally propelled growth such as government spending or property investment. it is now consumption, personal consumption, that determines the future for the u.s. yvonne: we will see if that inflation data tomorrow coming out will be a game changer when it comes to where the fed goes. this will be crucial for the bond markets, as well.
asia-pacific markets will be ending this trading week. we are at two-year highs, kicking this off on the -- a positive market. downe seeing the nasdaq 0.1%. down 0.1%.50 the kiwi. the aussie at march highs after the very good trading numbers we got out of china yesterday. futures for equities market pointing lower. $46.rude, the iea said global demand could pick up. japan, looking tepid for futures, heading higher by 15 points. 113.36 for the dollar-yen. seeing strength here to end the week. a strong week for asia.
but we could be ending things on a limp note. betty: possibly. even though the s&p was within five points of the record, the dow on a high. fed chair janet yellen giving a note of caution. su keenan has more. >> techhead a rebound. yellen rally, day to coup. -- day two. it was the fifth day of gains for the nasdaq. this one served the most in eight months. target giving hope that they could have a come back. there is a lot of pressure on these retailers. most.el up the that has a lot to do with trump saying he will stop the dumping of steel.
what was the take away of the yellen talk? , andwindow of opportunity bankers ask on their -- act on their words. it means carry on. the cost of carry is interesting to note. this is the index, that white line. it has been coming back as we head to 2017. the emerging-market carry trade index has been popular in this environment. now is the time, is what strategists are saying. betty: what are they saying about the last two days of trade and the story in relation to the testimony? su: one thing that got attention, is yellen's talk on a sitting on cash. we go into the bloomberg one chartime, and this is a
about capex. we have seen bullish outlets for corporate spending. they have been reined in. the 12 month capex share in purple. box tells us it is jumping the highest level in 18 months, following the election. we have seen analysts more circumspect. we are now trailing 12 month spending to 69 per share. that is the lowest since 2012. note, to squeeze in a summing up what yellen has been signaling to people. >> she is withdrawing the punch bowl slowly. mario draghi is doing the same thing at some point. you are doing the same thing in london, and in japan with kurod
a. su: withdrawing the punch bowl slowly. yvonne: pulling punches, you could say there is a war of words heating up. the delta ceo weighing in on the qatar chief comments about their cabin crew. su: it overshadows earnings by delta. if we go into the chart you can see all the alliances under pressure. the ceo said he was appalled that qatar's insult earlier in the week, saying u.s. airlines ," and that a lot of the crew members are "grandmas." --y miss to their estimates missed their estimates. they still have a 10% stake in american.
you have seen this price rise on the expectation. american also has been very critical of the remarks coming from the middle eastern airline. yvonne: getting pretty testy, some of these comments. let's get the first word news with courtney collins. courtney: president trump says jr.'sn donald trump meeting was uneventful. speaking in paris after meeting donaldmanuel macron, trump denies the lawyer in question was connected to the government. president trump: i have a son who is a fine young man, a great young person, who took a meeting with a person in russia. nothing came of the meeting. it is a meeting most people in politics probably would have taken. courtney: republican leaders have released a new health care
plan to provide another 70 billion dollars to stabilize insurance markets. in an effort to win over party critics, they say the cuts are too severe. the republicans hold a narrow 52 -48 majority in the senate and face united opposition. will step down, to be replaced. 2008, moreme ceo in than tripling vanguard's assets. 48-year-old buckley becomes president immediately and ceo on january 1. has died after a long battle against cancer. winning the peace prize in 2010, leaving china's most prominent prisoner and infuriating beijing.
tiananment of the protests in 1989. he is the first nobel laureate since -- prison global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. trump'swhile president 3% goal growth -- growth goal is wonderful, many questions over the second day of testimony on capitol hill. let's get more from kathleen hays. she is in new york this morning. inflation in the balance sheet -- was there anything new? kathleen: i think what happened is, it has sunk into the markets, what has been a square in front of them for some time. that is, janet yellen has repeated what people have been
talking about, including other fed officials, that inflation is weak and the fed has to watch it closely. it was up 2%, back down to 1.4%. the president of the dallas fed saying he wants to see greater evidence inflation is turning back toward targets for them to stay on the fed hiking path for him to be on board. we have the former head of city fx. he made the point that it is not so much what janet yellen fed -- said the last couple days, but the market is weak. let's listen to exactly what he said. thinkthe markets inflation will stay relatively low, the growth is going to be not as strong as the fed thinks, so that the pace of hikes is not anywhere near what the fed thinks -- yes, they are going to
do the balance sheet withdrawal, lowthe commendation of inflation and slow growth will mean everything goes very slowly. they may never get to the terminal point. cpi friday morning in the u.s. is supposed to be reasonable, modest. a deviation on either side is something to be closely watched by the markets. inflation.all about betty: what did she say about the balance sheet? unwind,: it is going to she did not say when. she expectsnowledge to see balance sheet increase once the fed gets this underway. let's go to what janet yellen said. >> we want to make sure we balance this in a way that is not disrupt if the financial markets, in part for that
reason, we have tried to sit out increasingly clearly how we intend to proceed. kathleen: we will look at a bloomberg chart. i think it is a great chart, because it is explaining the relationship between the balance sheet and the treasury market, bond yields. let's start at the top. the idea is to show you the correlation that the fed funds rate fell. the white line, the qe, got bigger. that jagged line is volatile, treasury futures. it rose, people like that. it dipped back again. there is a broad correlation. the fed realizes they have to go slowly. a couple other things it yellen said, the opioid abuse in the
united states. becauseis looking this they think it is affecting the labor market and participation rate. gdp, i do notbout think it is a cliff. she said she would love to see it, but 3% could be tough with a low productivity and an aging population. betty: thank you, we will continue our conversation on the fed strategy. a former fed governor will be joining bloomberg markets: asia at 10:10 p.m. in new york. yvonne: do not miss our interview with robert kaplan, joined by our daybreak america crew in new york. betty: we will speak to cumberland advisors vice chairman. this is bloomberg. ♪
yvonne: this is "daybreak asia," i am yvonne man in hong kong. inty: i am betty liu here new york. we dig deeper into janet yellen's testimony with cumberland advisors' bob eisenbeis. and, kathleen hays. bob used to work at the atlanta fed and was director of research. give me your quick take of janet yellen, two days in. bob: that was not much in the way of surprises, as far as i was concerned. he essentially said we will change the balance sheet, we will start letting it winds down. we do not know when. but i think most people think it
will be september. and, we will go slow on rates. we will wait and see what happens. and, we are concerned about our inflation objective. think most people think it will be september. and, we will go slow on rates. we will wait and see what those three things are what you can take away from this particular round of discussions. kathleen: let's put it all together. you mentioned three things that intertwined, especially in the markets' mind. big, the sheet that is fed has sworn to reduce. let's look at this chart, it is a simple look at the balance sheet. $4.5 trillion. you can see the white line is treasuries. that is the majority, $2.3 trillion. the yellow bars are mortgage-backed securities. almost an equal amount on a gradual basis. what is your big concern? what is the number one thing we should be focused on if the fed gets ready to do this? whatthe real question is,
the interest rate impacts are going to be. what i thought was interesting when you look at the minutes this last june meeting, there was a wide divergence of views among fmoc participants as to what this impact will be, even with the little baby steps that they have proposed in their plan that they publicized. what you see, there is a group of people who are concerned about the fact that there could be a significant impact. there are a number of people who do not think there will be much of an impact. janet yellen indicated today she was not in that camp that thought there would be a big impact of movement. they can start and see. yvonne: she did mention about how she expects a rise in long-term rates with a balance sheet runoff. but we also heard mentioned from
the dollar wasow more sensitive in the short-term rate than the balance sheet. is she a lone wolf in that view? bob: the minutes suggest people are all over the map. i think that is born out when -- there is ae wide divergence of views. that is not necessarily bad. it is an indication that when you are in uncharted waters, reasonable people can and probably should be expected to have different views. the fact that they are not articulating them essentially is airing all of the issues. markets are taking what janet yellen said very positively.
at city fx, they said it is not so much what she said, but the market wondered how they could move much. let's look at this chart. inflation expectations, they peak and come down. thiso you think part of will play out? you deal with a lot of bonds. what will it be like for the bond market? bob: it will mean interest rates are probably going to be low for a wild. movement,ee a lot of particularly because the inflation numbers are low in the fed will because us about moving until they start seeing that inflation number pickup. i do not see anything wrong with 1.4% inflation. pose anteresting to counterfactual as do, how would greenspan be talking about things now, if there was not that inflation target in place?
you see a lot more emphasis on growth and focus on that side and those issues, rather than the inflation issues. betty: i want to pull up this chart. we have a lot of charts for you today. it is interesting to see the pink line, which shows consumption being a bigger and bigger part of the growth trajectory of the u.s. economy. it is fascinating to see how other parts, whether commercial investment or residential property investment, or government spending -- they are all converging and not budging much. it is first of all, consumption. it is first of all, consumption. at a time when we are raising rates on the american consumer, how will that even go higher? bob: there was a lot of concern about debt convergence --
-- burdens. bud what, if anything the fed is going to do about it. they are trying to balance. on the one hand, they do not want to see another explosion of consumer debt to the point where it causes another collapse. yet, they are concerned about inflation numbers. on top of it, you do not get the same amount of job creation from consumer spending you do from investment. because you have an accelerator affect associated with corporate investment. corporate investment has not kept pace. we have seen it in low productivity and everything else. we're looking at 2% to 2.25% of timeor some period until we get a pickup in productivity.
♪ handing over the keys to another international market. is ride hailing company canceling a merger with russia year after pulling out of china. eric newcomer has been tracking the story out of san francisco. why did uber cut a deal with yandex, and what are the terms here? last year pulled out of china and now is pulling out of russia. they were clearly behind. one leadd a two to over bookings. uber gets 36% over the company. took a lot and the
rest is for employees. uber have to kick in $225 million into the new company. but then he gets to cut off its losses. it spent $150 million over three years. this is an opportunity to take a big stake in the region without having to run the business. betty: is this the start of more to come? will they start pulling out of more markets? eric: that is the question. the u.s., north america, south america, really promising, major markets in europe, india, southeast asia. uber and their competitors want to see consolidation. whether uber tries to do a takeover or cut a deal, there are lots of questions. betty: thank you so much, eric newcomer on uber. up next, rivals reporting misting -- missing estimates.
detail straight ahead. this is bloomberg. ♪ these days families want to be connected 24/7. that's why at comcast we're continuing to make our services more reliable than ever. like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. yvonne: happy friday.
it is beautiful outside hong kong. morning, minutes away from asia's first major market open. betty: 7:30 p.m. thursday evening here in new york. markets did close higher. not as big as the rally we saw with janet yellen's testimony. the fed is paying attention closely to inflation. i am betty liu in new york. yvonne: i am yvonne man in hong kong. first up, fed chair janet yellen said president trump's
goal of 3% growth is admirable but difficult to achieve. in the second day of testimony, she said productivity growth is hard to find. and a rise of just 0.1% would be a good payoff. she said that the danger of another financial crisis remains. >> we increased our monitoring of the financial system for a broader range of risks. we can never be confident there won't be another financial crisis. steelmaking stocks headed for the best month after president trump repeated his comments to crack down on dumping by foreign competitors. speaking to reporters on air force one, trump says he may impose tariffs or quotas or both. countries including canada and china have been bracing for a commerce report on whether steel imports threaten u.s. national security. u.k. prime minister theresa may
announced her brexit strategy, sparking fury from scotland and wales. speculation that opposition could derail her plans. it will transfer e.u. laws onto the british books. scotland and wales say it does not give them proper powers and they are looking to block it. speculation rising that rex tillerson's diplomacy in the gulf may be bearing fruit. kuwait,alks in qatar, and saudi arabia, that produced ideas that could be a resolution to the diplomatic crisis. tillerson is heading back to washington, but there may be another round of talks next week involving the u.s., the u.k., and the saudi-led lock. -- bloc. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. betty: we are counting down to
some of the major market opened in the asia-pacific. here is adam haigh in sydney. -- that isis week not stopping some of the worry warts right now in these markets. adam: the story of the week has been a rosy picture for equities and the dovish tones we have been hearing from policymakers in the states, driving that emerging-market -- driving that. emerging markets having a good week, as well. again thisrencing low volatility we have been experiencing. still aroundvix, those multi-year lows, they expect to double at some point. which is a fairly bold call. they see it going to 20.
toy say that is a reversion the mean we have seen over the past few decades. they expect that will occur. they want to remind investors to not be complacent. the key problems remain the things surfacing this year, that equity investors are ready to look through. mainly geopolitics, the aging u.s., and the gradual with of stimulus from u.s. banks. they see that as a potential triggers for an uptick in volatility. yvonne: we have been talking about this tear on em stocks. you have been looking at key technical levels that are showing things stacking up in favor. is there more to go in this rally? adam: yes, it has been quite a rally. the msci emerging markets are now at 20% this year. look at this chart.
this shows the golden cross where the 50 day moving average is riding along the 200 day moving average. the last time we saw this msci gauge was back in 2010. it proceedednce, at a 30% rally over the subsequent 11 months. that is clearly a sizable move. what this does it show us is the momentum in the short-term continues to favor the emerging markets equities space. we are seeing money coming in, coming out of u.s. stocks, getting more global allocation. some people have voiced concern about tech devaluations from a short-term point of view. it is a close one to call. what the 50 day crossing the 200 does it show us, momentum is
with the bulls at the moment. yvonne: that seems like the case. adam haigh, thanks so much. expected to jinping attend they were conference this friday. reining in financial risk is likely to be on the agenda. they tackle credit growth, shadow banking, and an overheating real estate market. these have been coming around when it comes to financial risk. it seems like this year feels different. >> definitely, this is one of the biggest meetings. much significant, given so impetus and pulling from the financial system. this particular gathering started 20 years ago after the financial crisis. 20 years ago with led to the
creation of an insurance regulator. regulatored a banking and the up a sovereign wealth fund. this particular gathering is really important. the decisions that come out of it do count. we are ahead of the party congress. whatever they do this weekend may be put on hold until they get an answer from the fed. yvonne: how important are these conferences? we are looking ahead to the party congress, as well. are we likely to get a decision? kathleen: there has been debate in china about how to bring regulators to work closer, stocks, banks, insurance. we might see some improved coordination between the three agencies. at the put the pboc helm. pboc may get a
chance at that. they want a grip on shadow banking. and, the overheating housing market. they need better coordination, all around. yvonne: thank you. largest software services provider feel they cut back in i.t. spending. they saw profits dropped by 6% in the first quarter. for more on the challenges faced by the industry, our guest has more. one concern is the white house immigration policy. >> that is true, they do not have a workaround. the political environment is unfavorable. their opening a lot of u.s. centers and greeting u.s. jobs, a lot of people on shore which is not their model. it raises their cost, hurts their margins. the political environment is much more favorable in europe. a lot of what these companies are shifting toward is
outsourcing in europe. brexit has caused a lot of dislocation. when you're moving staff you have to move i.t. systems and that could cause outsourcing. betty: is that around the edges, the margins, in terms of being helpful? tell me what is really hurting them. >> cloud is an issue for every i.t. services company. at that is hurting their margins. traditional i.t. sourcing involves multimillion dollar contracts over 10 years. those are not coming anymore. clout outsourcing is cheaper. it is pay-as-you-go. betty: is that because of competition -- what are the reasons? pay-as-you-go, you do not sign a contract, that is not how cloud works anymore. it. is why companies love
yvonne: we are looking ahead to infosys earnings. will it be a similar story to what we saw out of tata? they have higher margin pressures, too. mandeep: what they have not done well is pivoted to the digital transformation. they started doing this five years back, make acquisitions around digital transformations projects. tata did that, to an extent. they get 20% of revenue from digital transformation. but they are way behind, and that is hurting them. they are starting to invest in those technologies, but it will take a while. yvonne: great to have you, joining us from new york. a look at the appetite for chinese takeovers in hong kong in the second half. we discussed all that is going on in the m&a space. this is bloomberg. ♪
♪ yvonne: we're counting you down to asia's first major market open. we see futures heading higher. we could be ending this week on a cautious note, given the run we have seen. this is "daybreak asia," i am yvonne man in hong kong. betty: i am betty lou, here in new york. m&a haschinese outbound dropped as the country clamps down on outflows. earlier this week, shipping offered $3.3 billion to acquire orient overseas. the deal would catapult the mainland chinese growth into the world's third-largest shipping
line. another -- our guest was an advisor to cosco. great to have you here. this deal is seen as a big tram four cosco. they are third in the world in terms of shipping giants. what led to this deal to be signed from both sides? shippinge two companies have known each other a long time. the same shipping alliance, called ocean alliances. they have a lot of similarities and compete in the same environment. there is a lot of synergy. given the transformation and consolidation in the shipping industry, this is the right time for the two of them to talk about in a day. given the transformation and consolidation in the shipping -- m&a. yvonne: hong kong may be falling
behind, overshadowed when it comes to that, as well. samson: i would say it is more of the former. shipping is the result of a series of restructuring onrcises, which ubs advised in 2015 and 2016. after that, it does create a world class leader in the shipping industry. restructuring,c they are making the company even more international than it ever was. yvonne: we have seen quite a few deals out of china that have been from regulators. what is different that can get the ok from u.s. and european regulators? haven: obviously, we can -- have to go through approval processes. but at the same time, we take comfort that shipping is a
global industry and we have had experience dealing with regulatory approvals from each side of the company. fact that both are in the same shipping alliance certainly helps when going through the approval processes. betty: as you say, big concerns about overseas deals by chinese companies. there is a focus on the big four. most are on the forefront of m&a . c asked lenders for information on these companies. is that having a chilling effect, or how much of a chilling effect will that have on m&a? samson: since the so-called capital controls that have been in place since november last year, companies are getting more
and more disciplines. if you look at the bigger data -- quite honestly, there is a lot of news and media about how it has dropped significantly. but if you look at the data itself, the first half of this year there was $74 billion. there the same period, was $129 billion. you subtract, they have not dropped all that much. theree noted this year, are a lot more billion dollar deals getting done and that china m&a market continues to be busy and robust. review, we believe
there will be more guidelines coming out of the 19th national congress. we will see if there will be some relaxation of the measures of capital controls. there continues to be a robust china anbang pipeline. betty: you are saying, still quite a lot of deals. perhaps the deals are smaller and fueled by that one major deal last year. we know that the regulatory haverities have the -- been worried about the outflow of money and the impact on the chinese currency. do you think that has been exaggerated? i believe that has been heavily monitored. i would not say it is exaggerated. we have seen how the results of been coming back. at the same time, there is a lot
of volatility in the market. when compared to all the other currencies like the euro or the u.s. dollar, they have been quite volatile. i would say it has an impact and people are watching a very closely. i would not say it is the main factor with the decline of m&a. betty: i know you mentioned the 19th people's party congress and maybe relaxation of these roles. does that mean that the m&a environment stays status quo until then, or will there be more drivers here? samson: there continues to be a lot of drivers between now and the fall. a couple of drivers you will continue to see, the hong kong-listed family-controlled businesses possibly looking for an exit. the reason is, as the china
outbound flow is monitored and scrutinized, chinese companies continue to look domestically. we see a lot of domestic news. and the chinese restructuring will make a comeback. we have seen rumors of the southern china mergers and asset injections into the market. we are also sing the private equity funds continue to be very aggressive, beating out strategic competition. we have also seen a number of conglomerates and offices looking aggressively and high cash flow generating assets, such as north america, the u.k., australia. we have seen a lot of china outbound activities in this region. like in southeast asia. some southeast asian companies have -- countries have become a hotbed for chinese investment. it is a pot -- popular hunting
ground this year. yvonne: how do you see this playing out? do we know how for these probes can go? obviously, we have to continue to monitor the situation. i would say the overall is not entirely a surprise. lots of companies have taken on a lot of debt, a lot of companies have been very acquisitive. sections we are going to conducted this year will be more discipline and strategic. it will be within our core sector. we will look at transactions not within, and the main drivers behind it. yvonne: good to have you, head of china m&a, joining us in hong kong. we like to bring to your attention our interactive tv
function. find us by going to dayb on your terminal. you can watch us live and see previous interviews. on the right side you can dive into securities or functions we talk about. you can save it to your own library. if you have a big question you want to ask for our guest, feel free to do so and send us a message. this is for bloomberg subscribers only. this is bloomberg. ♪
$400.ulus rift itself is the biggest quarterly increase in assets. assets under management at the second biggest u.s. manager jumped $100 billion. $1.6 trillion as of june 30. they had concerns about rising interest rates that led to withdrawals. reputation asng's a financial leader is being threatened. inquiries into corporate governance and insider dealing and market manipulation have more than doubled since 2011. formal disciplinary proceedings are outside 50%. least ant plunge of the dozen stocks highlights the problem. yvonne: just in time to tell you
about an out of this world buying opportunity. dust and tiny stones collected by neil armstrong in the first moon landing up for sale at sotheby's in new york at an estimated $4 million. lots to mark the anniversary of the mission. dust is the star of the show. over the years it has been misidentified and thrown in the trash. ouch, $4 million there. it away,less you put some will mistake it for dust under your couch. yvonne: how do you make a nice display for that? betty: plenty more to come with asia's first major market open just moments away. yvonne: let's get to the opens in japan, korea. >> looking lackluster if not positive. the best week for asian stocks
since march. tech shares led the rally on wall street. -- we want tos show you what we are watching. chip makers like samsung electronics, after the latest earnings report missed estimates, despite building anticipation for the next iphone. after the profit miss in the third quarter. overseas growth made up for a sluggish domestic market. that stock was cut to neutral at j.p. morgan after the slump in japanese profits. sydney, watch star entertainment. casino investors sold its entire stake. that is 46.5 million shares sold at five aussie dollars and seven cents apiece. looking to expand into las vegas. that is what we are watching
♪ betty: asia-pacific stocks enjoying a lead but it is fizzling out as investors await inflation data. yvonne: janet yellen facing the future, the fed dominating the second day on capitol hill. betty: chinese leaders discussing risk to the economy, shadow banking, and overheating property. yvonne: from regional airlines to a global player, the most aggressive dealmaker right now under scrutiny in beijing. betty: this is the second hour
of "daybreak asia." just after 8:00 a.m. we just got some breaking numbers right now coming out from singapore. these are the second-quarter gdp numbers. it shows a nice rebound quarter on quarter, up about 0.4%. it is under what economists .stimated, 1.1% but, and represents a rebound from -1.3%. also, 2.5% year on year. that is also below what economists estimated, matching in line with what was reported one year ago. numbers like this showing a rebound given the
strength of exports in singapore but still, below what economists had estimated. certainly, some headwinds. given the trade picture from china, we are still seeing exports remaining quite strong after some were saying that trade was resilient. let's take a look at asian stocks. i have a bloomberg chart here. channel and wesh are hovering over the two-year high. year. on the index this as the fed continues to stick to this dovish tone on inflation, that may be enough to not rattle investors. this could be "keep calm and
carry on." >> check out equity markets with the cost be up. the nikkei adding 0.2%. new zealand also climbing about 0.2%. a positive tone although we are anticipating a lackluster and to the week. after the latest gdp numbers were out, we have the singapore dollar easing some of the drop. generally, we are seeing a next picture. the korean won down after popping following the bank of korea's rate hold. the japanese yen losing ground against the dollar. looking steady in china. with thehe kiwi along australian dollar against the
greenback this morning. the australian dollar trading the highest since march. the commodities space is a mixed picture. base metals on the up. jumping on speculation that the biggest producer in china will deepen output cuts. copper continuing to slide and iron ore losing 1.5%. concerns over rising output from brazil and australia offsetting prospects of china importing one billion tons of the iron ore this year. for we are seeing declines crude. so, snapping the gains that we saw this morning. this as the outlook demand growth has been raised to the strongest in two years.
gold is steady after janet yellen says inflation risk is two-sided. u.s. futures signaling -- plus, wall street is going to kick of earnings season on friday. big banks starting off that agenda. chinese futures are hinting at again of 1%. overall, looking like a positive end to the week. betty: thank you. let's get to the first world news. his sondent trump says donald jr.'s meeting with the russian lawyer was uneventful and that most people in politics would have agreed to attend. speaking in paris after meeting a manual macron, he denied that the lawyer was connected to the russian government. >> i have a son who is a great
young man. he met with a lawyer from russia. it lasted for a very short time and nothing came of the meeting. i think it is an beating that most people in politics probably would have taken. >> france and germany have signed agreements to harmonize corporate taxes and bolster the standing of the european union. angela merkel welcomed president macron, giving europe new purpose in the face of brexit. she says germany is open to an expanded role for the rescue fund. in washington republicans have released a new health care plan that provides extra money to stabilize insurance markets in an effort to win over party critics. opponents say the medicaid cuts are severe. the republicans won a narrow majority in the senate and they
face opposition to passage. down andceo will step a replaced by tim buckley, veteran of the world's second-largest money manager. tripledmore than investments in he becomes president immediately and the ceo starting january 1. nobel prize-winning chinese dissident -- has died after a battle against cancer. winning the peace prize in 2010 made him a prominent political prisoner and infuriated beijing. he fought against party rule in china since the tiananmen square protests in 1989. he is the first nobel laureate to die in custody since 1938. , this news 24 hours a day
is bloomberg. the questions about janet yellen's future hung over her second day of testimony. she told senators that president trump's growth target will be challenging. kathleen hays is in new york for more. inflation -- what did we learn? reporter: we know that janet yellen and every official has made it clear that they want to be on track to start policy normalization when it comes to the balance sheet. acknowledged that even though the officials have said it is going to be well telegraphed and gradual, but it could have impact on long-term rates. sure that we make manage this in a way that is not disruptive to financial markets.
for that reason, we have said out how we intend to proceed. we are going straight to a chart. that is the balance sheet. now, it is up to $4.5 trillion. the yellow line is inverted. inthe fund rate was falling the balance sheet was rising, see the turquoise line? it goes higher. that is 10 year treasury futures. in other words, overtime, it looks like buying bonds and building up the balance sheet was geared to push up prices. what happens when they start unwinding? that is why the fed wants to go carefully.
was she more hawkish or dovish? reporter: she said about the same things she said on the first day. the market has seen a lot of dovishness. janet yellen got a lot more dovish. she said that the fed is watching inflation carefully in light of the readings we have seen. in other ways, inflation has moved away from the 2% target. very interesting that steve engle under who is the former head of -- thatys that he thinks people are seeing more janet yellen has talked about. inflation is weak. the market is coming to its own conclusion about inflation. markets think that inflation is going to stay low. that growth is going to be not
as strong as the fed thinks so that the pace of hikes will not be anywhere near what they think. they are going to do the balance sheet with zero but the combination of low inflation and slow growth will mean that everything goes slowly. they never get to the terminal point that they are going to get hurt reporter: rob kaplan will be on bloomberg friday morning in the united states. that he wants to see inflationidence of moving toward target. also on friday morning, the latest consumer price index report. not that important, however, it will be watched because the core number would indicate if the trend will continue.
inflation is what it is all about right now. yvonne: it feels like that is the unanswered question. janet yellen indicate anything about her job? reporter: she ate knowledge that on did acknowledge that wednesday. the senate banking committee -- she said she wasn't going to comment. many of the comments -- thank you for your service. probably trump wants to -- when her term expires -- who are the main choices? let's take a look. we don't even know if -- donald trump hasn't said this. kevin morris, stanford university. he knows about the fed. , couldbeen told
relationship with donald trump. john taylor. he is the guy that made the rule about -- look at unemployment. that will give you a broad indication of where the rate should be. , he was also treasury undersecretary under george bush. republicans like the idea of a role. was the head of the council to economic advisers under george bush and he pushed through the tax cut plan. that would make him look like someone that donald trump would want. cohn, former head of goldman sachs. donald trump treasures loyalty. he is the person considered in the running right now. a lot of people say there is a lot of the economists.
it would be great to have someone who knows finance, knows the markets firsthand. those are the people -- those are the pictures you should have in your head. yvonne: thank you. our conversation on the fed strategy continues. randy krasner joining bloomberg markets: asia in our hong kong studio this morning. that is after 10 p.m. in new york. don't miss our interview with robert kaplan on friday morning in new york. next, how emerging-market currencies have responded to janet yellen's testimony with jonathan kavanaugh. this is bloomberg. ♪
yvonne: the dollar steadied after janet yellen's testimony to congress after she signaled a gradual approach to the rate hike. jeff and kavanaugh -- jonathan kavanaugh joins us this morning. great to have you. plenty of tailwinds happening. >> it was obviously balanced in terms of recognizing that the fed is on a rate hike pass. at the moment, it feels like the energy markets are still in a sweet spot in the sense that global growth -- the fed is moving on the path toward interest rate increases.
nicelyis moving along and we expect that trend to continue. >> you have the west on some type of tightening path. what is going to be the effect on currencies? rates which will fuel riskier assets. what will be the driver? >> we're focused on the positives. in the u.s., we are still optimistic that we can see an upturn. the cycle still have some legs left to it. that leaves some export orientated economies doing a little bit better.
as you say, we have to be a little bit cautious with korea and taiwan. they have had close to $10 billion in inflows today. korea and taiwan are currencies that we like over the medium-term but we are not positioned with them right now because we would like to see a cleaner position. >> what do you mean, a cleaner position? see some oflike to the inflow momentum slide down a little bit. we do not feel it is a great strategy to be joining after the markets have already rallied strongly over the last six months. that is something that we get the sense that the goodness is already in the price.
believe -- tell me about the singapore dollar. it does show a rebound. the singapore economy -- we think it has recovered. there is still uncertainty as to how the outlook progresses, obviously. the external site is doing well. to seeties would like the domestic economy doing better. boosting employment growth, nasing wages before the looks to shift to a tighter policy stance. there are question marks around the outlook. valuation, we think it is still quite attractive on the singapore dollar. being more of a basket orientated currency, we think
the downside in the singapore dollar is quite limited especially with the euro on firmer footing. >> briefly, i want to touch on china and the chinese currency. we know that the government put down capital controls and they are worried about the chinese yuan depreciating even more. we just had a conversation with a banker who was talking about m&a and perhaps we might see a relaxation of some of the partyls after the congress and i'm curious if you think that is going to cause -- if they do relax, cause another decline in the chinese currency or have they got their stuff together? have they gotten it so they can stabilize a? >> well, i think you are right. ahead of this side of the party congress, i think that we are going to be in a stable environment. with a-- slightly --
stronger stance against the dollar. we have attached onto growth being better, etc. as you mentioned, the capital controls or the capital outflow pressures have really kind of come down quite a lot in 2000 17 now, i think there are two important parts to that. over the past few years, china has really ramped up offshore investment. i think that there was probably always going to be some natural slowdown in terms of that outflow pressure. at the same time, we have also chinese corporate reduce offshore borrowing by paying down the debt. been a strong capital outflow pressure in 2016. that has now started to slow down so, as we get into 2018, there is a sense that once we get past the party congress that we might see capital of the pressures pick up but i will be surprised if we turned to that in 2015-2016 so
in that sense, any depreciation in the chinese currency -- when they come back, it is still going to be more modest than what we saw compared to previous years. >> to for we let you go, talk about the chinese currency -- take a look at the rate of that. you can look at a decent return on this chart. you can see a 4.4% return. not nearly as gooders what you are seeing in eastern european countries. has --ne of these thinking about and incorporating -- we still see long see and age from current levels as being attractive. you mentioned some of the eastern european currencies which obviously offer higher nominal yields. he also have to bring the volatility into it as well.
they have been selling shares since last year and analyses to hold any interest in star entertainment. the owner of unit close says income internationally -- the owner of uniqlo says income has grown internationally. their store sales rose in japan but profits fell. theresa may is the same requirements for companies can show by sovereign countries -- it is proposed that shareholders in saudi aramco no longer be considered related parties meeting that deals they do or directors they appoint would not be subject to a vote by independent investors. they hope to raise $100 billion.
yvonne: it is a rainy morning on this friday in singapore. half an hour away from opening. betty: so different in hong kong! you are watching "daybreak asia." goalnet yellen says trumps of 3% goal is admirable that difficult to achieve. on capitol hill she said productivity growth is hard to find. she also said that despite improved regulation and oversight, the dangers of another financial crisis remain. we have greatly increased
over monitoring of the financial system. confident that there will not be another financial crisis. >> steelmaking stocks heading for their best we can four months. president trump repeated his promised to crack down on dumping by foreign competitors. tariffsid he may impose or quotas or both canada and china have been bracing for whether steel imports threatened national security. theresa may has announced her brexit strategy sparking fury from both scotland and wales and fueling speculation that opposition could derail her plans. the bill will transfer eu laws in 2000 19. scholar and in wales say it does not give them sufficient hours and they are threatening to block legislation. that.k. hasn't knowledged
it will have to pay divorce money as it leaves. a member of the brexit team says that the government will work with brussels to determine a sentiment. as much as $100 billion has been mentioned but boris johnson said brussels could go whistle for the money. has -- speculation that shuttle diplomacy in the gulf may bear fruit. officials say meetings in qatar and saudi arabia produced ideas that could be the basis for a resolution to the diplomatic crisis. he says the sides still refused to speak face-to-face and he expects the standoff to last a while. news 24 hours a day powered by more than 2700 journalists and analysts, this is bloomberg. yvonne: thank you. it is time to see how the asian markets are shaping up. let's get the latest.
we have janet yellen's testimony out of the way, giving the green light for equities. >> it looks like they could be living on a prayer on the second half. we are seeing how that is shaping up. asian stocks have in the past week since march. investors are playing the waiting game because we have u.s. inflation data on friday which will be scrutinized by investors on what that will mean for the policy outlook. overall, the mood is positive. we have energy stocks leading .ains in sydney as well as soul the nikkei 225 is easing momentum. this is despite the yen's weakness, the dollar-yen trading at -- the nikkei 225 is still rising for a fourth day. to correlate with a positive tone, the aussie yen -- this pair is maintaining its list up trend. we could be seen some hurdles on
tuesday and the boj decision due out on thursday. markets for now seem to be comfortable. both central banks are sticking to their prevailing script. looking at the gmm, at the commodities space, we have a mixed bag in base metals with aluminum rising as a chinese producer is looking to deepen its output cuts could iron ore is down 1.5% and oil dropping about 0.1%. crude still on course for a weekly gain as the international energy agency boosted its forecast for global demand growth this year to the strongest in two years. it gaining 3.5% this week. although, that remains in a bear market with opec versus u.s. shale conundrum continuing. rebalancing see
seeming less certain. for the most part, we are seeing oil doing well in recent weeks. betty: a little bit more volatile. xi jinping will attend a were conference on friday, with financial risk on the agenda as regulators battle shadow banking and the property market. stephen engle joins us from shanghai with more. it is a lot of the same but is there anything different in that they will be tackling? it sounds exciting, doesn't it? the national financial were conference or yeah, conference. i get it mixed up. it is quite important with xi jinping coming. he is going to push forward his priority, containing financial
risk. this year could be different because over the past conferences, you have seen the establishment of different regulators. because there has been regulatory arbitrage going on over the last few years a loving riskier products to be introduced, they are looking at consolidating these regulators under one roof in creating the pboc -- an office for coordination where you would put the banking regulators, the securities regulators, and the insurance regulators, under one regulatory office within the pboc to have more focused and anddination and cooperation regulation of the financial sector. that could be one take away as well. keep in mind, the longest-serving central bank governor china has ever had is
passed the mandatory retirement age for such a position so we could get maybe not publicly but you mightsed doors -- get a designation of who the next central bank governor in china will be. we were talking about the timing of all of this. we might not get a whole lot out of it. in the scheme of chinese party gatherings, how significant are these conferences? >> it is for financial priorities and tackling them. it was right when the asian financial crisis was happening. tackle that challenge to china. china was less integrated but when thist is
conference was established as well as the establishment of the first insurance regulator. they also started laying out the plans for recapitalizing the state owned banks. they set up the banking regulations as well. got the establishment of the sovereign wealth fund. as well as the after effects of the stimulus. this year is going to be tackling the over leverage in the economy. >> one beijing company is hna aoup which has gone from
regional operator to a conglomerate with facing globally recognized brands. let's get to our billionaire reporter. we talk about h and a and its beginnings but it has rocketed in value. what have you learned about this company? >> we were doing a bit of analysis, looking at ownership. trendnd a pattern and a of -- shares. of the 15 publicly traded shares,s with pledged 11 had more than 90% of shares pledged. it added up to $24 billion. >> what is the risk?
>> if they continue to decline, the lenders can ask for the collateral to be replenished. if it gets even more serious, there could be margin calls. >> there is nothing wrong with pledging shares. why focus on it? >> we thought it was interesting to look at because of the complexity of hna. of course, this speed of acquisitions. wet was interesting is that saw a pledging of shares in multiple levels. one example is the parent company.
social, and government benchmarks. i want to discuss all of this with henry fernandez. this social or corporate governance investing was seen as something like retail investors like to do -- doing social good. now it is institutional investors getting into this. how is that changing the business for you? >> quite a lot of change. japan is joining a prestigious group of countries that are beginning to move assets to more sustainable, long-term investor bases. environmental, social, and corporate government issues. , notargest pension fund
>> help us end this debate. >> it is very simple. the societies that we live in today have more access to information to institutions. if thisy are confronted is beginning to happen -- has been happening for a long time. with the intolerance of society to transgressions, you are going to see more outperformance of -- companies and lower performance are those during those transgressions. >> we have seen japan. how big of a market is japan for you? are you going to expand your
presence? >> right now, this part of our company is growing rapidly. pleased to be working on this. a lot of it started in europe and canada and it has gone into the u.s. and asia is still small but it is coming on fast. the other thing that we are pleased to be working with is the empowering of women in the amount of assets they are going to put into that. that is more unique to japan. i am curious about what you think about these dual class structures in japan. is that something that you think -- what is your opinion?
how much does that need to change? guest: this is a problem in the world nowadays. -- thealyst in the past stripped out the voting rights to public shareholders. at the moment, we are doing consultations with our clients as to what should be the right treatment for this. this is definitely already taken into account, so this is a big issue that is going on in the world. betty: in addition to being in japan, you also visited south korea and you spoke to many investors as well. you are assessing the new
government in south korea, how friendly are they going to be to foreign investors? what have you been hearing? guest: fair continues to be a commitment by the new south korean government to be open to investors. the big issue for global the inabilitybeen of the korean won to trade freely in a spot market around the world. been the major deterrent for the graduation of korea from emerging-market to developed market. any movement to liberalize that. it is obviously early days. tot was part of my visit understand if there was going to be any movement in that
direction so we could potentially renew our consultations on the graduation of korea but at the moment, i did not get any positive response. korea out of the watchlist for now. yvonne: great to have you as always. henry fernandez, there. we will talk more about esg investing later. you can get a roundup of that story and many more in today's edition of "daybreak." it is also available on mobile. you can also customize your settings so you only get the news on the industries and .ssets that you care about i ♪
a substitute. that is why you have multilateral alliances and institutions. multilateralism gives you scale and numbers. you need collective efforts. bilateral listen can be necessary but it is never sufficient. >> president trump characterizing this relationship as a guide one. of a disagreement is this? >> the paris agreement is a soft form of multilateralism. each country gets to decide for themselves. you set your own goals. if the administration wanted, they could have modified the goals. this was a way of saying, the u.s. is pushing back against globalism. there is lots of ways that we can act in the climate space . is probably result
greater than the actual result. have learned about the way the u.s. is engaging with europe? the u.s. cannot be a passive member of international organizations. what have we seen at these summits in those meetings? how does the president plan to work with europe? >> not terribly well. trade is the biggest area of problem. climate is another. there is a lot of suspicion about dealing with russia. pushing european allies about spending more on defense. we need to focus on what we are doing in the area. it will stay scratchy. larger-- it is part of a problem with standing institution and alliances. there was a meeting between
president trump and president putin. what is the goal when it comes to the relationship right now? what type of relationship when they have? >> it is going to be complicated. you have areas of cooperation and friction. the most important area is to work out cooperation on syria. russia might be open to that. they have an enormous return on a small investment. preparedans might be to play a constructive role. it is more difficult with ukraine and europe. a bigger problem is with korea. even if the chinese were to pull that, russia seems interested in moving in. that was the council on
foreign relations. time to tell you about that buying opportunity. tiny stones collected by neil armstrong on the moon are going up for sale at sotheby's in new york for an estimated $4 million. it marks the 40th anniversary of the nation. it is undoubtedly the start of the show. it has been misidentified and almost thrown in the garbage. can you imagine that? [laughter] yvonne: i could! pretty easy to misinterpret what that is. returnedtrong, when he to earth, he actually got them in an ordinary-looking bag.
there is a snapshot of him landing on the moon. also, a snoopy astronaut doll. think? you many gramsknow how of moon dust there are? 300. the former fed official will join us to go through the policy at the moment, looking at banking reform and the macroeconomic climate. also, this weekend, a conference taking place in china.
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