tv Bloomberg Daybreak Asia Bloomberg July 19, 2017 7:00pm-9:00pm EDT
♪ betty: new highs on wall street areas what is set to spur the gains in asia. winning policy statement from japan and europe area yvonne: a rocky start at the u.s.-china talks. washington slams china for its trade, both declined to comment. betty: trump tells congress to delay the repeal and replace of obamacare. yvonne: elon musk looks at passenger trips into space. he says travelers will have to
be brave. this is "daybreak asia," live it from bloomberg's u.s. and asian headquarters. i am yvonne man -- i am betty liu. yvonne: and i am yvonne man. it looks like we got a little bit more drama coming out of the u.s.-china dialogue. it seems like the gloves came off in terms of the trump administration side. have to wonder what happened behind closed doors. would havehought we an action plan in the first 100 days. it was quite tense, both sides canceling their pressers. will we go through with these tariffs? what is the relationship now between xi and trump? it seemed they were getting along swimmingly well at mar-a-lago. to have another
golf outing to warm up relations again. [laughter] yvonne: we thought this would be a very choreographed event, not too exciting, but we got more fireworks than expected. the pessimism in the markets, wall street, record after record we break. asian markets, equity markets solidly in the green. not the case in new zealand, let's take a look at the nzx 50, trading 7/10 of 1% down on the index, happening after five days of gains. the kiwi, .7352. back on an uptrend after inflation turned a soft. aussie job numbers coming up this morning. it will take just an inch higher. the aussie remains the big story, 6.5% higher since june. it almost feels like the rba hiked its cash rate, but it did not. u.s.ng closer to 80
cents. japan had its boj day. we do see yen higher leading up to this decision this morning. 111.88 for the dollar-yen. euro traders ahead of the ecb, as well. the yenains a given strength for the nikkei 225. kuroda coming up hours before the ecb. talking about central banks, records on wall street. we seem to be more routine now. betty: they absolutely are. it seems like central banks are a little bit of an afterthought when it comes to the u.s. markets. at this moment, investors are primarily focused on earnings. let's pull up the boards here. you can see the markets closed higher. every single sector in the s&p
gained, energy leading the way, s&p up 0.5%. the nasdaq higher by 0.6%. let's get to first word news with courtney collins. first up, the congressional budget office has upgraded its estimate of the impact of the strict repeal of obamacare. a number of uninsured people would arise to 32 million by 2026. president trump told senate republicans that health comes before a holiday. he said they should stay in washington and delay their summer recess until a replacement for obamacare is passed. president trump: we have to repeal and replace obamacare. it, but the best israel peel and replace, -- is a repeal and replace. the u.k. will be
expected to pay to leave the european union. they said london must hand over $100 billion, the equivalent of $115 billion, to walk away. so farhe highest sum mentioned, after the u.k. admitted it would have to meet its obligations to the european union. bank of america told investment leaders to halt investment with a china grew. sources say the bank is joining citi and morgan stanley, steering clear of hna because they cannot get enough transparency. we are told the bank of america decision could still change. china's largest property deal has taken a twist. the group stepped into by hotel assets dalian had planned to sell. they will hand over $6.5 billion for wanda's themepark projects.
there is scrutiny around their business around the world. 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. u.s.-china first economic dialogue is off to a start. wilbur ross criticized china over the trade imbalance, where both governments canceled scheduled conferences. more from the sarah mcgregor in washington. it seems these meetings started off a very tense. do we know what the biggest sticking point was that ultimately led to a cancellation of press conferences from both sides? sarah: yes. i think why this meeting was remarkable, these talks happen on an annual basis. rehash ofrebranded, a
economic dialogue. normally these produce a long list of objectives, cooperation to work together. but they movet, the ball forward on the relationship. this year, we do not have one. the news is, no news. secretary commerce wilbur ross spoken fierce terms about the fact china needs to take concrete steps to reduce its almost $350 billion trade deficit with china. betty: are we reading too much into this cancellation of these two press conferences? or, is it a new turn in further deterioration between the two? sarah: what we do know is that markets are reacting -- a few stocks rose today, such as u.s. steel companies.
is a firing of relations and the trump administration follows through potentially with fuel imports that come from china, that could be good for the u.s. steel industry. there is something to be said for the fact that press conferences were canceled. the relationship got off to a big to do when president trump met president xi jinping at mar-a-lago in april. now we do not even have a statement. betty: we do have a statement from steve mnuchin and wilbur ross, but it did not say much at all. what does this mean, because there will be another meeting, i am sure, between trump and xi. i forgot, xi does not like to golf.
so there was no golfing at mar-a-lago. but still, they hit it off at that beautiful dinner. do them two have to meet again for improving relations? sarah: there was a statement from the u.s. trying to acknowledgment trade deficit and working cooperatively, but there was no joint statement. the joint statement was the important one, it shows what they may have achieved. talk after real these talks that comes right after. we have seen trump speak in harsh tones about the cooperation the u.s. is getting or not getting on north korea from china. we are a decision on steel imports. while we do not know what is next, the people relationship between the leadership, we do
know there are looming irritants in the relationship. those may speak for themselves. mcgregor, thank you for joining us in washington, covering this meeting between the two. someone who has been watching this on the sidelines, the to see you,-- good live and in person. want to read part of that statement from mnuchin and ross. the short statement, the theence i want to read, principles of balance and reciprocity on trade will continue to guide the american position so we can give american workers and businesses an opportunity to compete on a level playing field. boy, is that water down or what? >> absolutely. betty: it says failure all over it. >> the trump administration came into this dialogue with an
aggressive agenda and everyone was hopeful we would get results, results, results. it is the art of the deal, so let's make a deal. meanwhile, 100 days have passed and all we have is that the u.s. is on the offensive. america is on the attack, once to get rid of the trade deficit. the same time,t greater support in the north korean issue from china. betty: they are not getting it, though. jesper: that is exactly right. we have a standoff now. if the next step were to be, god forbid, a trade war -- betty: [indiscernible] isn't, let's hope it that could completely unsettle not just asian markets but global markets, because disruption to global chain -- trade would spell disaster. betty: i want to pull up a chart, come into my bloomberg.
it is the investor point of view on this. etf's has beenl day and 200 the 100 day moving average. steel tariffs are to come -- is that the right back here? if, god forbid, that were to come, for the steel industry in america, there is an obvious windfall that will happen. but the bigger indication -- players, thero macro hedge funds will begin, if the trump administration is prepared to go ahead and impose tariffs -- which could start a trade war, that would be very, very unsettling. why would they stop at steel,
and not go to the next couple sectors? yvonne: and would it stop it china? president trump has accused trade bout -- imbalances with germany and japan. how vulnerable is japan? trump come on japan, has been very kind. you have seen none of the harshness of the statements you have with germany. --nically, that corporation the cooperation between japan and the united states is the best bilateral we have so far. there is very little gold that wantslittle that americo in terms of pressure from japan. but they do want something from china, they want access. secretary ross was very clear, he wants more made in america exports to the world's
fastest-growing market, which is the people's republic of china. nobody in america is going to make that statement. the american car industry is not interested in selling more cars to japan, because the japanese car market is not a growing market. yvonne: stick with us throughout the hour, to tell us more about the boj. we have big-name guests coming up on bloomberg television from unilever's -- week: and after that week to a ceo, bill mcdermott at 6:40 p.m. in hong kong. ♪ yvonne: don't miss our interview with --this is bloomberg. ♪
yvonne: this is "daybreak asia," i am yvonne man in hong kong. betty: i am betty liu here in new york. the central bank wraps up its two-day meeting. a keeps its foot on the monetary accelerator to feel a faster rise in inflation. bojleen hays is that the for us. any change expected at all? policy -- the policies that matter? i think what people are waiting to see is even a hint that governor kuroda is opening the door of the bank of japan to any kind of shift on the policy he has had in place since 2013, aggressive monetary stimulus to boost inflation.
i am sure he would say we are winning important battles along the way. he turned 20 years of deflation year over year. the target is 2%, a long way is -- ways away. maintain yield curve control, target the 10 year yield at zero, and by bonds up to $80 trillion a year to keep that objective met, day in and day out. will they need to make a concession and trimmed their target? a little bit. to a certain extent, could the boj tout some success -- five straight quarters of gdp growth is significant growth in the right direction. job to applicant ratio is up and wages are starting to rise. one question i think he will get
is about this shift in the amount of bonds they are purchasing. they do not have to buy as many, there are not as many pressures. and will he formalize that in their policy? the voices speaking out against the boj and etf purchases are growing louder. do you think the governor is listening? kathleen: i am sure he is listening. will it make a difference, we will see. the head of the japanese stock exchange is a critic now of the bank of japan's etf purchases, saying it is bad for the stock market. take a look, here is a quote from the story. it is not good in the long run. it means constant distortion. criticism of the plan is not unusual. this makes it more serious, is the tide turning against the boj?
week, another great story from our bloomberg team in tokyo about bank of japan officials getting more concerned about this. the japanese anchors association coming out against it. the etf line has doubled since 2010, they are earning a lot more. will he pay attention? we do not know. he said the boj could alter its program, it would be unthinkable to let go of that tool now. yvonne: kathleen hays, stick with us. 'st's ring back wisdom tree jesper kroll. you see they own 70% listed in these etf's. how sustainable is this? jesper: the etf purchases are what they call a pko, a price-keeping operation.
if the market is down by more than 1% in the morning session, like clockwork, the boj comes in to score the price. that stated policy part of the to put it under asset prices so that the retail investor gets greater confidence that indeed the japanese stock market is going to be sustainable. from that perspective, there is a policy objective that is clear. it is to boost asset prices and help the overall inflation objective the bank of japan has. yvonne: this shows what you are talking about, the outright purchases coming from the central bank. you see this growing in the past couple months. ramped up, especially in the september 2016 time. corroded did mention after the june meeting that boj could in theory cut etf purchases before
reaching its inflation target. is that still unthinkable, in kuroda's eyes? i think that is extremely unlikely. that is effectively admitting the past policy was a mistake. the bank of japan will continue to stay passive aggressive and do absolutely nothing. the key point being, like we have with the bond market purchases, maybe you do not need ¥80 trillion of the bond purchases anymore in order to keep the zero rate target. if the japanese stock market does continue to be did out by domestic buying, by japanese insurance companies and retail money supporting the market, you will not get these bids that require these ¥6 trillion of etf purchases. ofs is heading that warchest ¥6 trillion, that will stick with us another two years, by
the ¥6 trillion, that is subject to market conditions. betty: i want to bring up this chart which puts the boj in relation to what is going on with the other central banks. this is our chart on the bloomberg, 5548. you can well imagine, the yellow line is the 5 -- said rate creeping higher since 2016. we expect that will change possibly with the ecb and the bank of england, as well. given there seems to be more talk -- we talked about this yesterday, the lower for longer by the fed, maybe we will not see the yellow line step up. what position does that put the boj in? jesper: the position is simple, japan has its own objectives. to hit atctives are least 2% inflation. they are nowhere near that.
it is about the synchronization and decohronization upling. financialglobal crisis we had this synchronize policy. central bankers were the responsible people in the room. politicians could not ask for a variety of reasons. central bankers acted responsibly. now, different markets are having different exit strategies. from japan's perspective -- corroded made this clear -- kuroda made this clear, the day had to force0 we japanese bonds back to zero. the bank of japan is doing something very aggressively that is no longer in sync with the
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hong kong. minutes away from asia's first market open. beautiful day outside victoria harbour. betty: gorgeous there in hong kong. it was hot and humid, if you like that kind of thing in new york. it is 7:30 p.m. thursday here in new york. we close higher. liu, here inu, -- new york. yvonne: i am yvonne man. you are watching "daybreak asia ." >> talks between the world's two biggest economies at a rocky start, with the u.s. it is
sizing china for its trade imbalances. rossrce secretary wilbur complained the trade gap -- about the trade gap in unusually blunt terms. the open criticism is a change from the past where publicly the two sides pledge cooperation. the supreme court dealt a further blow to president forcing theml ban, to accept people with grandparents, cousins, and other relatives in the united states. the court plans to hear full arguments on october 10. the president's march 6 executive order has been criticized for unconstitutionally targeting muslims. the investigation into the trump administration's links to rusher will hear testimony from donald trump jr. he will be to a senate committee next wednesday, along with paul manafort. the pair and the president's
son-in-law met a russian lawyer, hoping for damaging information about hillary clinton. a new bloomberg poll has bad news for wall street titans. the survey shows most americans have an unfavorable view of the big banks and their executives, and distrust of the wealthy more than they admire them. efforts tol street's regain trust since the financial view theewer than 1/3 industry in a positive light, virtually unchanged. 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. --ty: it is wednesday here there is back-and-forth with global shows confusingly. stocks surging on earnings of strength, the s&p and nasdaq hitting records for a second straight day. joining us on set is su keenan with a more. each sector in the s&p rose
today. the s&p hitting a record, nasdaq, as well. ng stocks back in a big way. earnings were a dominating fact or. and talk of a merger in the media sector. let's look at the close. we are not seeing large moves in numbers. let's go to the standout stocks. that is where you see sizable moves, notably in the scripps that is the company talked about for mergers. there is also a big move in the entire sector for that. morgan stanley is notable. in all the financial stocks there has been a downward move as a result because whatever good news they reported in market earnings, the focus has been on the weakness in the core unit. reported wastanley that they blow up the trading revenue and beat goldman sachs.
that was the headline that carried the day forward for them. negative quarter weighing on that stock. if you have a chart you can bring up for me -- the question as we hit these record numbers in the nasdaq is, are we back above the levels of the dotcom boom? the answer is, yes. around see the peak 1999, 2000. a lot of the players back in 1999 are not there. but you talk about facebook, amazon, netflix, they were all hitting records yesterday and today. google, owned by alphabet, the only fang stock not hitting a record today. betty: on housing you are showing the rise in steel stocks in anticipation of possible tariffs. also, higher oil.
su: housing is important, with construction taking place, it is a four-month high. we are seeing the getting of the year video. we have come back from a lull there. permits, as well, higher than expected at 7.5%. as we talk about what is going on with oil, that is a story of a rebound on the day. it could be situational in that we had a decline in the inventories and so we had an oil rebound. the bigger question is about the glut. anytime you have a draw like we did in december, it will be bullish. below $50 since may on oil futures. steel, the entire group getting a big pot. the report should be positive for these stocks because of the tariff you mentioned. relationship between the
u.s. and china -- we are watching earnings, qualcomm gaining the spotlight in after hours. a steep profit decline in the coming quarters. anything to do with apple? su: it could have a lot to do with apple. the licensing fail is where the profit decline is. it underscores their dependents on their largest customer. apple has stopped paying. the division that collects fees for use of mobile technology is sinking by as much as 47% in the current period. that is a huge percentage. that will drag down overall revenue as much as 13% in the er, the quarter that ended september -- ends in
september. what is interesting is the legal scuffle underscoring these of it -- other problems. yvonne: more now on trading underway in asia and how it plays with the rest of the region. adam haigh is joining us live it from sydney. you have been looking at the bank of america monthly survey of investors that shows money pouring out of u.s. equities despite these rallies. where is all this money going? it is very interesting in the context of what we have been hearing. we keep notching up record after record of u.s. stocks. this closely watched bank of america survey, they manage more than $500 billion in assets. a really serious pool of money managers. there are underweight position in u.s. equities is the biggest
since 2008. the least amount of u.s. equities they were holding since the financial crisis. that shows us -- told us a few things about valuations. this showsrt here, us the disparity between the u.s. market in the japanese market, where we have seen an outperformance in japan. money wasne faces going into with investors increasing their overweight position in japanese stocks. the relative value trade is people finding plenty more value in japanese companies. still plenty of run, we had a pullback after the initial enthusiasm around -- a few years ago. waning performance in japanese equities for some time. they're coming back to life with more money flowing out of the buying in more places
like japan, europe, emerging market equities. betty: japanese investors are once again on the hunt for yields. this time they are looking at india -- what is the appeal? it is a long story of japanese investors struggling to find returns. they have been reluctant to add money to the domestic stock market. getting mediocre returns from their local bond market. investors they have as far away as the brazilian bond market. this time, they are targeting indians stocks. the index in india has been on quite a run the last year, the best performing market in asia. it is a well-worn story of an improving economy. modi really invigorating enthusiasm to get more money flying into the equity market. here, thising chart
really gets that one of the key things for why japanese investors are targeting india at the moment. that is a relative columnist of the currency. you can see the rupee within that tight range this year. part of that has to do with the fact that the r.b.i. the central bank has got inflation under control. mod economic growth policies people are getting behind has driven sentiment and these japanese household investors are struggling for returns just shows you there looking further and further afield to get access to better returns. some may question the timing, given the rally we are seeing in indian equities this year. perhaps it is not the best time. it shows us japanese investors are prepared to pay up for earnings growth they expect in india. betty: interesting, thank you.
u.s. going to japan, japan going to india -- what do you think of all that? jesper: it is very, very straightforward. , unfortunately, stands at a valuation premium. but america delivers. the earnings growth is there across the board. as long as the federal reserve does not spoil the party by increasing interest rates to sector, the corporate delivering returns for investors will continue to stay strong. japan is at the opposite end. japan is a value play in the world economy. very different from the past, where japan had huge premiums and term of -- terms of the very differentvaluations. investors,g to u.s. everyone understands the rationale that there is a good
value story. but people are worried japan will not deliver the earnings growth. i think they are wrong. betty: what do you say to them? jesper: it is straightforward. what people are missing in japan is, there is a domestic economic recovery going on. how can you have an economy like you have in japan, where now bad credit growth is accelerating? around 2% bad credit growth. -- taking on new mortgage debt. there is a new leveraging cycle and i think analysts are wrong. they expect earnings to grow between 12% and 50% this year in japan. i think they will grow around 25%. that is where the fire and power for performance will come. betty: fueled by financials in japan? jesper: yes, the financials are important.
they are the most undervalued sector, from my perspective. also, capital goods. importingmpanies now older growth and doubling compared to a year ago, because china is on fire, from a japanese perspective. the blue-chip export sector will be leading performance in japan. yvonne: but we still have negative rates in japan. 10% -- howield at will that be bullish for financials? jesper: you make an important point. the net margin compression was at its worst last or when the bank of japan introduced negative interest rates. 10 year mortgage rates dropped from 1.5% to 0.6%. who will make money from that? that is why the banks last year with a big underperformers. now we have a cap, so net interest margins will not be expanding. but volumes. are actually
growing -- volumes are actually growing. yvonne: for interest rate differentials -- we see diversions between the boj and major central banks, are we assuming that will underpin the yen? jesper: i think the yen will be a week currency. whether the dollar will be a strong currency depends on the u.s. economy, depends on janet yellen, and yes, trump will have to get something done. betty: certainly does not look like it for the dollar. jesper: i take a different point of view. it already trades against of the yen. you go up the staircase, down the elevator, everyone is in shock like on friday, weaker than expected u.s. data. the dollar basically the kleins. but from that perspective, dollar-yen going back down in dollar going up to $1.25 is a
betty: this is "daybreak asia," i am betty liu in new york. yvonne: i am yvonne man in hong kong. a big day for central banks around the world. we already spoke about the bank of japan, but the ecb is that with a decision later. for more, let's get with our chief correspondent on the hong kong set. we are talking about shanking balance sheets. and another bank raising rates
for the first time in seven years. asian not joining in on this party, is the boj likely to change that? definitely something of a divergence. seen more withy the bank of japan. it would be a surprise if they want to signal some kind of a tapering of their asset purchasing program or a significant divergence from its program.ulus expectations are that the boj may go soft on its forecast, and that it is here to stay in japan for some time. any hawkishness or a move toward reining in just yet. yvonne: we have a chart to show you what you're talking about. isseems the bank of japan bucking this hawkish tilt.
actually, this is not the right one. let's throw out a question to jesper. you talk about a 2% inflation target for japan. if it does not actually happen, do you think kuroda could be reappointed? is a goodthink kuroda bet he could be reappointed in february next year, to have another five years. the reason is straightforward. number one, he has done a very good job in the sense of coordinating policy with the japanese government. that is the key issue. by now, everyone in the world understands that money alone does not fix structural problems, does not fix growth problems. it is a coordination between fiscal policy, monetary policy, and structural policy. that is what is needed. from that perspective, kuroda
has done a fantastic job. toty: i want to get back enda, but it want to focus on the ecb. what i thought was interesting it, ifund manager said you are looking for a bond route, it is not going to come from the fed, it will come from the ecb. they are the wildcard now -- do you agree? jesper: it is, indeed. europe will have accelerated wage inflation. from a central bankers perspective, where disinflation come from? good prices go up and down. mostly they are falling because of technological progress. whether wage inflation is in france or germany, they do have strong bargaining positions. from their perspective, i think you are right. the ecb could be the wildcard in tapering and raising rates more than anticipated. we are seeing possibly
more hawkishness from the ecb. what would change the mood and have asia turn hawkish? see a spikewere to in food prices for whatever reason or if energy prices, oil started accelerating. or wage increases in the developed markets. it would of course put pressure on the central banks to rein in or taper stimulus. but we are not there yet. india is backing loan sanctions. china is keeping rates at record lows. australia has been tightening because of the appreciation of the exchange rate. there are factors when we could see have the central banks in asia would have to change gears. it does not seem those ingredients are in place yet. yvonne: if there is any asian central bank you think could be joining in on this hawkish party, what would it be? jesper: it could be the people's
bank of china. importantwe have an party leadership reshuffle coming up in october. if there is, from china, a more pronounced commitment to ease fiscal policy, it could indeed be the central bank of job -- china that is the first to hike. koll, thank you for joining us, the wisdomtree ceo. and enda curren in hong kong. speaking of japan, getting the trade numbers coming in quite short. a shortfall in terms of missing the estimates. the trade balance in japan billion. at ¥439 the expectation was for ¥488 billion.
year on year growth was 9.7%. imports at 15.5%. that is also above what economists had estimated. --per, iraq you up, but jesper: it is doing well. the reason the trade balance came in his because imports are not sucked into the economy because the japanese economy is recovering. betty: just like you said. for real this time, goodbye. [laughter] jesper: thank you. betty: this is bloomberg. ♪
parts ofs while moving asset management operations to dublin. 300 jobs will transfer to various cities, including paris, with 200 going to frankfurt. yvonne: india has approved the sale of a $4.6 billion in hindu petroleum to the biggest oil and gas explorer. theill make oil and gas number three refiner after indian oil and reliance industries. the cabinet back to the plan to create an oil giant capable of weathering price volatility. betty: asset group weighing plans to balance operations. restructuring with several tech units, the group may have smaller operations that would not fit the strategy. has beenhairman seeking to revamp the group since joining earlier this year.
plenty more to come with asia's first major market open moments away. yvonne: let's get the latest from sophie kamaruddin out of sydney, tokyo. we are seeing equity futures buoyant? >> another day, another record. wall street sending asian futures to the upside. we will be watching for reaction to the latest trade balance out of japan. nikkei futures up 1/10 of 1%. sydney set to open higher before june job data. board, watch how alcoa beat second-quarter estimates. we did get more numbers this morning. petroleum out with its quarterly results. did --ce, the ceo resigned.
neuheisel one: wall street looks at this burger gains in asia-pacific. investors await policy statement from japan and europe. betty: a rocky start to u.s.-china trade talks. beijing slammed in unusually terse language and both sides canceled their public pressers. yvonne: apple wins recruits in its patent battle with qualcomm. iphone makers in asia are joining the fight over fees. betty: bhp's new chairman flags changes to the board.
ken mckenzie is on a global roadshow to reassure investors. yvonne: this is the second hour of "daybreak asia," live from bloomberg's headquarters. i'm yvonne man in hong kong. it is just after 8:00 a.m. betty: just after 8:00 p.m. in new york. i am betty liu. moments ago, we had trade numbers showing smaller than estimated surplus, ¥439 billion, the expectation was ¥488 billion. exports quite healthy of 9.7%. what was interesting was imports, that is why the surplus. came in lower. up 15.5%. ,s we heard from yasser cold that is another sign that domestic demand is increasing in japan and investors are missing the story. yvonne: seems like we have seen a similar case with domestic demand in china as well. moremport figures could be of a bright spot and we are seeing in the export side. to break down how this plays in,
the u.s. in particular, a point of contention we see between u.s. and china, kind of broke down. they cancel their press conferences. where does it go from here where comes to trade tensions with the u.s.? maybe germany and japan as well. let's get the chart here. that ifof goes to show there is some type of point of contention, it could be in the yen. you see the dollar rising against the yen since mid-april. even when you see the greenback falling against a broader aspect of currencies like the euro, canadian dollar, mexican peso, even the remembeimbi. these countries all have trade surpluses with the u.s., so maybe japan is more vulnerable. betty: possibly. seeing 125 there for the dollar-yen.
seeing a lot of weakness in the currency, almost a race to the bottom between the two currencies. yvonne: let's get the latest with the market open in tokyo, seoul. equity investors are humming along to queen "don't stop me now" because we have seoul and sydney on the up. the nikkei up about .1% even though we got a miss on the trade balance when it came to estimates. exports posting a seventh straight yearly rise. the nikkei 225 rising even though we are seeing you did volatility options -- volatility. options are at a 12 year low. we have stocks not joining the party. this is fletcher building shares , plunged on that benchmark. belowwi is trading just an eight month high as 73.62. the aussie is rising along with bond deals a head of the june jobs data do out later this morning.
overall the risk of a potential repricing of the ecb as well as what is expected out of the boj meeting, that is not dampening risk appetite. after stalling overnight, we have the euro adding .1% this morning and the yen up .1% against the dollar trading at 111.81 as we see traders pare their euro longs. mario draghi is key when it comes to the trade and where the paris its relative to the 200 week moving average. that is the line in yellow on this chart. that provides big directional lead when it comes to the coming weeks. we did see some position adjustment after the pair failed to cross this line last week. even a subtle shift in town when it comes to the ecb could spark volatility for this pair. a test of the 200 week moving average could also be in play for the aussie dollar if the june jobs data offers up more evidence of an economic revival.
the aussie has risen about 4% since the last round of jobs data and a 24% rally in iron ore has provided some support for that currency. iron or trading at a 10 week i. that could also test the 200 day line, although the metal is sliding today after a three-day gain. metals certainly in focus given how we have seen potential with tariffs from the u.s. in the metal space. yvonne: we have got breaking news now. toshiba, which is trying to close out the deal on its chip unit, says it is facing damages and a lawsuit over this accounting issue, which caused many of these problems. toshiba saying the lawsuits come from six overseas institutional investors and that the total damage is sought now totaling about ¥117 billion. again, six investors -- six overseas institutional investors claiming damages over the accounting issue at toshiba.
you can see the stock right now down about 2% after these headlines have come out. we will keep our eye on that story. let's get over to sydney now, where paul allen has the first word news. paul: thanks, betty. the congressional budget office has updated its estimate of the impacts of a straight repeal obamacare. it now says the number of uninsured people would rise to 32 million by 2026. president trump has told senate republicans that health comes first. he says they should stay in washington and delay summer resets -- recess until a replacement is fast. pres. trump: we have to repeal and replace obamacare. we can reveal it, but the best is repeal and replace. and let's get going. paul: sources in the gulf say the u.s. and you can put forward proposals to end guitars
diplomatic isolation during secretary of state rex tillerson's visit last week. they include the groundwork for direct negotiations based on the accord that resolved in earlier dispute in 2014, as well as new measures to counterterrorism. qatar is accused of supporting extremist groups, something it denies. china's largest property deal has taken a twist. a company has stepped into buy some of the hotel assets that were planned to be sold. rnf will pay $2.9 billion for the hotel, while the other will hand over $6.5 billion for tourism and theme park projects. the deal comes with one company under scrutiny for how it has financed an acquisition spree around the world. france has raised the stakes on brexit, putting a figure on the so-called divorce bill the u.k. will be expected to pay to leave the eu. a minister says london must hand over 100 billion euros, the equivalent of $115 billion, to walk away.
that is the highest some so far mentioned and comes after the u.k. finally acknowledged it would have to meet its treaty obligations to the eu. the uk's top diplomat is in japan to discuss post-brexit trade with an economy that has played a vital role in british manufacturing. boris johnson will meet business leaders and investors, including nissan and toyota, who employ thousands of workers at their u.k. plants. the british government is hoping to persuade them to stay in the country despite the uncertainty of brexit. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. yvonne: thank you. as the bank of japan wraps up its two-day meeting, expected to make no big policy changes, but possibly open the door to small policy alterations. the focus quickly turns to the ecb, which wrapped up its meeting later on today. let's bring in the bloomberg
global and economic policy editor kathleen hays. she has got a big day ahead of her. good morning to you. let's start with the news this week about the growing criticism of the boj's etf buying program. we heard from the japan exchange ceo this time. did.een: we certainly thanks to the untiring efforts of our bloomberg news team here in tokyo. they have been all over the story this week. the latest story they are breaking, as you just said, mr. kyoto saying he is now wondering about the wisdom of the bank of japan's etf purchases. he basically told bloomberg news it is bad for the japanese stock market. look at this. it is not good in the long run. if you keep buying 6 trillion a year, that means constant distortion. it is not so unusual to hear questions being raised. it is unusual for a high level japanese executive to say this publicly. that makes a much bigger
impression in japan. the question it also raises is, is the tide is starting to turn in japan against the etf buying? earlier in the week, the first story broken by our team, bank of officials, some of them also growing concerned. the head of the japanese bankers association has criticized publicly this program where the boj has doubled its etf purchases since 2010. they now own 71% shares of the listed free-floating shares in the japanese stock market, 2.5% of overall capitalization. what does mr. kyoto see? declining volatility and less volume, not good for his business. the bank of japan altered their policies lightly in 2015, turning the purchases more toward broader, away from the nikkei index. mr. kyoto also sang etf does not need help anymore, the industry is no longer in its infancy. thernor kuroda said after last policy meeting, maybe we could change the policy of it, but it would be unthinkable to
do away with it altogether. jasper coal in the last hour saying the bank of japan is not going to do anything because if they do, it would be admitting a policy mistake. he thinks they will continue to be passive aggressive, keep the ¥6 trillion as a possibility but not make any public changes yet. betty: let's take a look at the broader questions of inflation and yield curve control. what about tackling those issues? we are going to get more answers and insight into that? kathleen: very good question. answers and insight maybe we will get because that press conference -- which i will be attending in this building behind me -- he will be answering questions for a good hour from reporters on every aspect of this. bank of japan is not winning the inflation fight yet because it has not hit its 2% target. the key rate is 0.4. the key short-term rate, -0.1.
they will keep the 10 year note yield tethered to zero. they will keep buying bonds up to 80 trillion here. will they claim success on gdp, growth, jobs? certainly gdp growing five straight quarters has not happened in over a decade in japan. one thing for sure, people are saying including jasper cole, that the bank of japan is going to continue to reflate. it is moving off the track with other central banks that are trying to head away from that track. >> for the bank of japan, it is very simple. japan has got its own objectives. these objectives are to hit 2% inflation. we are nowhere near that. it is about the synchronization, decoupling of monetary policy cycles that we are seeing. this is something that markets are going to have to come to grips with, in my view. decoupling indeed.
governor kuroda is likely to signal. we are going to keep our monetary policy gears turning. will he give any ground? reporters will probably ask about the fact that the boj is buying less bonds than it was. they do not have the upper pressure on yields. we will see. betty: the european central bank, the ecb, wrapping up its policy meeting today, announcing his decision after the boj. what is expected? mario draghi, head of the european central bank, has a delicate balancing act. he does not want to disavow the markets of the notion that the ecb knows that sooner or later it is going to start walking toward the exit door on quantitative easing, bond purchases. by september, they are expected to make an actual announcement and start the policy in january. half of the economists surveyed by bloomberg said he might announce some kind of using e
, quantitative easing bias. others say, no, he is going to wait until jackson hole, the symposium at the end of august -- when he is giving a speech, similar to 2014 when he signaled a move toward reflation and more bond purchases -- star signaling that that is what the ecb is going to do. i think that is the nuance, the kind of nuance that could mark a moving from the ecb's meeting later today. yvonne: still ahead, blunt criticism and canceled media briefings. we have got chinese and u.s. trade officials all in a half as their washington talks got underway. yvonne: it seems like the case. bank of japan tried every tool in its get to boost inflation. we will have former boj executive director next to look
yvonne: this is "daybreak: asia" i'm yvonne man in hong kong. betty: i'm betty liu in new york. we are getting headlines right now, breaking news from senator mccain's office. john mccain, as we know, he has been recovering in the hospital. according to the hospital, mccain has a primary brain tumor that is associated with a clot. he is recovering from surgery. his underlying health, according to these headlines, is excellent. the issue of concern was "completely resected by imaging criteria appear go there has -- by imaging criteria." there has also been a statement from his office. yvonne: they are saying what you
were talking about. recovering from surgery, underlying health is excellent. mccain now reviewing further treatment options. we will continue to follow those lines. we heard from mitch mcconnell yesterday on the senate floor speaking about senator mccain, saying that he will be back soon. ok,ooks like he will be a according to lindsey graham as well. let's switch gears now and talk about the boj. the bank of japan wrapped up a two-day meeting. they have been talking all morning about keeping the foot firmly on the monetary accelerator to fuel a faster rise in inflation. let's get the latest from kathleen hays. she is at the boj with our next guest. kathleen: thank you so much. outside the bank of japan, a two-day meeting is wrapping up. this is one of the four meetings a year where the bank of japan issues its monetary policy report.
that is why this gets potentially more attention, because this is the opportunity at the very least to shift the dials on their forecast for growth, inflation. we have a guest who knows exactly what it is like to be inside the conference room at that bank where the bank of japan's meeting now. let me introduce kazuo momma, executive economist at a research institute, a former assistant governor at the bank of japan. welcome back. great to have you. set the stage for us. day two of the meeting. is there any big issue they have grappled with or did they sit down and say, we are not changing anything, we are going to keep policies in place, let's have lunch and leave? what is the big issue they have to decide? , the far as the market economy continues to grow at a reasonable pace. there is no motivation for the boj at this moment to change the policy. probably they are going to
confirm their maintaining control. yield being 0%. probably keep to rates up a bit. at the same time, they will probably be back down, the inflation forecast. they have to probably get it from fiscal year 2017 from 1.4% to around 1.10%. maybe they have to push back the to fiscal year 2018-2019. kathleen: how significant is that? someone who does not know central banks might say, that does not sound like much to me. for people watching the central bank closely, how big of a concession? does this signal that governor kuroda is gently starting to take us to a point where some
time he will say, we have got a long-term goal of losing inflation, someday we will get to 2.5%, but take the attention off the target and more on the fact that they are growing the economy and making slow, steady progress on inflation. >> i think governor kuroda and the boj in general is not recognizing how slow the movement of inflation might be going forward. they're going to acknowledge that. the mandate for the boj -- press theing to mandate of 2% inflation going forward. kathleen: etf. some big stories broken by our bloomberg news team in tokyo. bank of japan officials getting concern, the head of the stock exchange saying it is not good for the stock market. is it time for the bank of japan to say, we don't need to buy etf? governor kuroda does not seem to want to do that. why keep buying etf?
>> one of the elements in the boj thinking that -- for them toifficult get the elements that are similar. also the distortion that might be perceivable he in the market is still manageable. that is the idea of the boj. they could tweak the composition of etf down the road, but i think it is difficult for them to decide, completely reduce the amount of the etf in the future. bankeen: european central also wrapping up its two-day meeting, no change expected. people are wondering if mario draghi will tilt hawkish, not signaling he is ready to slow down bond buying, or even more hawkish. what you expect and what does it mean for bank of japan? >> in june, mario draghi already changed the communication. i think this time around, mario draghi will stick to the current
tone of communication. also, it depends on the development of inflation in the euro area and the many people in the ecb, they're going to see over there as well if the inflation is very slow to improve. i think in the immediate future, the ecb might be fairly limited for the boj. it all depends on development over there. kathleen: the whole world is trying to boost inflation, tough right now. bank of japan press conference, governor kuroda will take questions for at least an hour. what is the most important question a governor -- a reporter could ask? him think they should ask why the boj thinks inflation is so low. i think this is the fundamental -- in my view, there are elements
this -- besides the economy itself. it is interesting to know how the boj thinks about no inflation. kathleen: as i said, it is a problem all central banks seem to be struggling with right now. kazuo momma, thank you very much for joining us. oxecutive economist at mizuh research institute, former assistant governor at the bank of japan. we will be back soon with more. betty: kathleen hays there with kazuo momma. you can follow more on this story and all the day's trading on our markets live blog on the v.erg atmli you can get a rundown in one click and there is commentary from editors. this is bloomberg. ♪
>> a quick check of the latest business headlines. spotify is being sued by an independent music publisher. capital.5 billion in without ensuring copyright holders are paid appropriately. they say spotify should pay for the enduring infringement. >> elon musk say people who want to travel on his rockets will have to be brave. the falcon heavy rocket will experience in norma's stresses and has been difficult to test on the ground. they are working with nasa sending astronauts to the iss. >> there is a lot of risk. a good chance that vehicle does not make it to orbit. set expectations accordingly.
>> 8:30 in singapore. >> i'm betty liu here in new york. you are watching daybreak asia. >> after disclose being toshiba is being sued, suits relate to the company's accounting problems. $80latest suits are seeking million in damages, total of $1 billion. john's office has confirmed he is being treated for a primary
brain tumor. it was discovered during surgery to remove a blood clot in which the 80-year-old is recovering quote amazingly well. talks between the world's two biggest economies made a rocky start as the u.s. criticized china. wilbur ross complained about the trade gap an unusually blunt terms. the criticism is a change from the past where the two sides normally pledged cooperation. supreme court has dealt a blow to president trump's travel ban, -- to accept people cousins, aunts and
uncles in america. a new bloomberg poll has bad news for wall street titans. most americans have an unfavorable view of big banks and their executives, and distrust the wealthy more than they admire them. fewer than a third of voters view the industry any positive light, unchanged over the succeeding years. on paul allen, this is bloomberg. asian market shaping up so positivity ineing terms of equities. >> despite that we have asian higher, theing highest in a decade ahead of those decisions.
we have the yen and the euro higher against the dollar. levelro at the 1:15 coming off of the august 2015 hi we solve this weekend. edging closer to that key level as it looks to test that 200 week moving average. cautious and a subtle change when it comes to language could spark volatility. traders are wary when it comes heressible intervention ahead of the boj. it has been regarded as a key breakeven point for korean exporters as they compete across a bunch of industries. that level has been defended since 2016. i want to look up some stocks in
tokyo, given some of the moves. quite a bit of interest with volumes doubling, upgraded to buy at ubs with a price target raised to ¥9,600. gaining aathering -- percent. 7%king off with samsung, up as it boosts its output guidance. we have fletcher sinking as its ceo resigns and meyer falling 9%. mees falling 11% as it resumes trade. betty: bhp's incoming chairman planning a series of closed-door meetings with
shareholders around the world. already met has some changes. .hey have been under pressure what has been the response so far? >> can mackenzie, he is on a listening tour. a meeting in the u.s. and the u.k.. we are told that what he is can confusear investors. they went public in april. bhp.called for changes to they are not alone. we have seen other investors and their grievances.
the new chairman's idea is to listen. it sounds like he's flagging continued bordering. he is telling investors the companies strategic review is ongoing. those things are necessarily unexpected. >> what are investors expecting? is there any suggestion he will make quick changes? no one is expecting him to make dramatic changes on day one. real changes are going to take some time.
the track record does speak for itself. , ande point to his record then set out a series of changes. change management. change strategy. that is what people are expecting here. continue they can returns. >> he is going to take up the post in september. what is waiting for him as he takes up that post? , not least the future of the oil division. also, the future plans to expand into the crock nutrients. that has become a test of his chairmanship.
that is seen as a touchdown. in the last hour we have heard from elliott management, raising concerns about that project. it is something they are looking for more decisive leadership on. >> thank you. up next, u.s. china trade talks with unusually strong words from the american side. this is bloomberg. ♪
bloomberg has the details. >> there were smiles for our cameras, but also sharp rhetoric. for the americans, it is all about the china trade deficit. $400 billion last year, and growing. front man ons the trade. this were just a natural product of free market forces, we could understand it. it is not. rebalance our trade and investment relationship in a more fair, equitable and reciprocal manner. , each ofe a deal
administrations concerns about chinese steel dumping, the vice premier warned against mixing geopolitics and trade. >> compared with the previous it will focus on topics of long-term and strategic importance. interestific topics of to the business community. >> there were reports progress was made on the issue of steel dumping. how much progress was not clear. selecting -- reflecting the tension, both sides canceled news conferences. >> after those talks wrapped, steve mnuchin and wilbur ross issued a statement saying the
principles of balance, fairness and reciprocity on trade matters will guide the american position. so we can get american businesses a chance to compete on a level playing field. how much of a disappointment is this? that of a setback. there was hope, at least there would be some symbolic giveaway from the china side signaling they would sustain this progress . the fact you did not get anything is a disappointment. this is the start of a different kind of conversation. they want to be more forceful with china on trade issues. expectations that this initial conversation was going to lead to a breakthrough are overoptimistic. >> does china take this seriously?
>> from the trump administration? >> the 100 days. we are going to be harder on you? i'm not saying the chinese are but wasippant about it, there a disconnect with expectations? >> fundamentally, the trump administration did need to take a harder line position with china. we have arrived at that crossroads. it is clear where the two sides stand. does it mean the relationship of fall off a cliff but some of these difficult conversations are now going to be underway. >> does this mean the president is more inclined to put more stringent requirements on steel imports. >> the administration is looking for levers to pull. still has been at the forefront of the conversation. they reportedly made some progress in closed-door
discussions but that is unclear at this point. >> it doesn't seem like north korea -- north korea didn't make a statement before these meetings went on. what do you make of that? do you think the u.s. came out so strong this time of round, did they make -- today give up? >> these talks were really focused on addressing the u.s. and china economic and trade imbalances, pushing china to open their markets they've needed to open for some time, like financial services. my sense is despite talk about linking the north korea issue to trade, i don't think that was a feature. >> unless we get something hard like sanctions, something really serious and painful, don't you
think the trump administration risks looking like they are all talk, no action? they have painted themselves into this corner? >> it is too early to conclude that. statements, they want to set hard deadlines and continue negotiations around a certain number of issues. >> i thought they are ready sent -- that a hard deadline. >> it was meant to lead to a one-year conversation. i don't disagree with you but i think it is too early to say the u.s. is in a weaker position. >> how do you think this is going to play in china? sendingovernment has -- a positive message, if big part of the story, they have the 19 party congress this fall. that's a huge incentive to keep the relationship stable.
board --t risk a trade trade war. >> exactly. that does not mean the relationship is falling off of the rails. >> when it comes to deleveraging in china, leading up to that, we are entering the second round after that financial work conference in beijing. should we expect the next mood to be more drastic than the first? given the headlines, it is seen as a ramp-up efforts to crack down, or is it going to be about touch and go? >> is going to be status quo. knowing the political transition was coming ahead in october and november, there has been an idea that they would need to cool it, to make sure the economy stays stable enough to move to that. the economy is performing quite well.
it outperformed. beijing probably feels they have more space to sustain that and i don't think we will see much change in that. oncee big question is, hisident she consolidates power, we see more of his presence when it comes to financial regulation, is there a risk for that? >> absolutely. you have a significantly increased political focus on the financial sector, which is positive short-term of that raises questions about where these regulators themselves are headed. we want to see functional institutions in the regulatory space. that is a step in the wrong direction on the longer term. >> it is. it seems like it is an accelerator. do you think that, we have been talking about it, china risks a
financial shock if they don't handle this? >> most likely that is manageable for them. we should have some level of concern, some companies being targeted specifically are big players. so if they miscalculate, if that leads to insolvency -- theasically meaning availability of cash flow to keep one of those businesses in operation dries as banks are told not to do business with those companies. there is some underlying risk. my sense, the government is going to be able to handle it. >> how much of a chilling effect? the big ones have been acquiring and buying up real estate. how much of a risk is here to that crackdown? >> that is one of the questions we can look at. other than sing a few deals
potentially fall apart, i don't think this is a massive -- >> maybe the waldorf doesn't get renovated. >> this is not a macro risk here. >> thank you. want to bring our interactive tv function. you can watch us live and we can see the previous interviews. you can also be part of the conversation sending instant message during our show. make sure you check it out. this is bloomberg. ♪
>> this is daybreak asia. i'm betty liu. >> as we have been talking all morning, talks between the world's biggest economies make a rocky start, wilbur ross upgrading china over the trade imbalance. there is warning of a trade war. no one would win in that situation. >> it is important the u.s. stake out its position in terms of specific types of products or
services that are now closed to u.s. companies, and how they need to be opened up. the united states needs to press china for a timetable and commitment. a measurable commitment to opening up so many sectors of the chinese economy that are closed to u.s. participation. number oneerica's export destination. tradeexports, and two-way , support and create millions of jobs here in america and millions of jobs in china. the more we can sell our services to china the more jobs we create at home. -- needsso many needs and demands of the chinese consumer. these are the win-win propositions we need to keep pushing. >> what is the most successful way to push those solutions?
is it just through dialogue, is it through sanctions? do you use the carrot and the stick, or is one more successful than the other? >> the chinese are aware of the united states can impose tariffs and duties and sanctions on china. that will only lead to a trade war. if the president were to follow through on his promise of 55% tariffs, there's nothing to stop china from doing the same on u.s. products, going in to china. or meatit is airplanes and beans, automobiles, that would hurt the u.s. economy. it would raise the price of goods that american consumers purchase every day in the department stores, and the hardware stores. jobs.ld also eliminate so many jobs in america are
export related now. china is a huge market. that would have a major impact on the u.s. economy. in a trade war everyone loses. >> what about the idea of the u.s. cooperating with other nations in whose interest it would be to get china to stop these practices? do you have any optimism the u.s. can lead efforts on this? >> that are many mechanisms by which u.s. cooperation with our allies and other trading partners to make sure china opens its market. treat foreign companies fairly, gives them an opportunity to compete in china. we believe in competition. we believe the high-quality american products will do well in china if given a chance to be sold there. >> that was the former u.s. ambassador to china speaking to
julie hyman. >> a quick check of what's coming up on bloomberg markets. >> ecb, doj. >> it could happen any time. we could get the verdict. >> we know how the timing coincides. >> the longer they take, the more likely they are going to be doing something. we are going to be looking with our guest joining us in 15 minutes. looking at the options, the definition of insanity is if you keep doing the same thing over and over, hoping for a different result. we've got those two people leaving the board, which were critics of him. u.s. china trade.
>> what happened there? we thought it was going to be pretty come by and everything got canceled. >> everyone is talking about mar-a-lago. >> well. >> both sides canceling their press briefings. it is down to these trade balances. last but not least, drama as it plays out. >> looking forward to it. that is it from daybreak asia. markets continue. standby for bloomberg markets. this is bloomberg. ♪
♪ are there many who said, i want to be the leading cellist in the world? yo-yo: so in music there is no such thing as this is the greatest anything, because it is about learning forever. david: what about where you play? yo-yo: you don't have to be there. i don't have to be there. so if we are going to spend time together, let's make it count. >> 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. ♪