tv Bloomberg Daybreak Asia Bloomberg July 30, 2017 7:00pm-9:00pm EDT
♪ >> the pressure mounts on the white house, russia orders hundreds of diplomatic staff to leave the country. >> what to do about north korea? wholeng-un claims the continental u.s. is within missile range. $50 onbriefly topped signs output curbs are having an effect. producers meet next week. >> the rally for crude to give markets a boost, waiting on new data from china. >> that will be key.
this is "daybreak asia" live from bloomberg's u.s. and asia headquarters. it is just after 7:00 p.m. >> it is just after 7:00 a.m. in hong kong. happy monday. d.c., dysfunction on the health care bill, what will come next? a lot of earnings to talk about. data of the the day. this hour, we get output numbers from japan. absolutely right, seems like every other day we are getting strange new headlines from washington. sort't think anyone can out what the cumulative impact is of all this infighting going on. who knows what we will wake up to tomorrow in the u.s.
you are waking up in asia, so how does it look so far? positive, looking at new zealand, some profit taking in terms of asian stocks off 10 year highs, but more of a picky market as we look at her earnings downgrades in some markets like india and indonesia. .20%, the kiwi still a two-year highs and no signs of stopping as the dollar heads back into those lows as gdp rebounded, but not as much as expected. australia, the rba meeting later this week. pointing to again with the asx 200 after capitulation on friday. getting really close to touching $.80 against the dollar for the aussie once again. if we get reaction
after the central bank decision. dollar-yen six-week lows after north korea fired another icbm into japan's exclusive economics own. we are seeing equities futures limited, just gains of six points or so. a lot of earnings on tap. that could be the driver this week. just tobly, indeed, and recap where we were in the u.s. markets on friday, 30 much a mixed close. -- dow closed near the high pretty much a mix close. the dow closed near the high. little bit softer gdp than what economists had estimated, so did not provide the juice investors expected for the markets. a lot can change this week. it will be a busy week for
washington, domestic policy and international relations. bloomberg now is our washington editor. let's start with health care. we had that dramatic vote, john mccain tipping it to know passage of this skinny repeal, so what will happen now? >> well, we have seen president trump on twitter's several times this weekend urging republicans to get act in their and try to repeal and replace again. of budget direct or management saying the same thing, senate republicans should not do anything else before they try to repeal and replace again. there is a plan being hatched by three republican senators, including senator lindsey graham. they say they have spoken to trump, but no timetable to , so wer that possibility
are waiting to see. i don't think there is anything imminent, but it would not surprise me to see more actions from republicans at some point. already in was not disarray, the republican party in more disarray, so what does this mean for other legislation, tax reform. tax cuts may be all we can get. >> republicans wanted to have the big obama care repeal and cut associated with that two free of money to do a major generational tax reform bill. now it looks like that money so thet eat available, time table and possibility of doing very much and getting some kind of signature legislation for the republicans and for trump is not looking that great. the house is on recess for the
whole of august, and the senate will be gone within a few days as well. september,ng back in and both chambers of congress will have a tremendous amount of work to do to keep the government running. over to russia, we have seen some retaliation on the thetions will come of russian government ordering the u.s. to/staff at its diplomatic missions, 755 people, nearly two thirds. what is the likely implication of this? are we likely to see more action from the kremlin? >> on the one hand, yes, the white house signaled that trump will find this bill -- it is interesting because it ties his hands in terms of unilaterally lifting sanctions against russia to miss other has been pushed back from the administration.
if trump house knows were to veto this bill that his veto would be overridden, so he does not have much of a choice. itterms of more tit-for-tat, is unclear what the u.s. administration will do. there was an interview with vladimir putin tonight in moscow, and he has indicated he does not want to do anything else at this point, but one of his deputies was on u.s. television suggesting possibly u.s. consumer goods could be targeted at some point. i don't think that is imminent. jawboning have been of a threat, but apple iphones to ford cars, to hundreds of mcdonald's restaurants across russia, it could be big news, but i don't think there will be a next round of action just yet. >> not just yet. thesee been following
headlines with north korea firing another icbm close to japan waters. we talked about what rex tillerson has been saying, cigna signaling china and russia as helping pyongyang. >> there is an interesting theement from nikki haley, u.s. ambassador to the united nations, and she said the time for talk is over. smarter people than me said there are really no good options on north korea. the administration is leaning hard on china to do more , both trump and tillerson have said that, and so did nikki haley. perhaps they will get on the horn with china and try to persuade xi jinping to do something. >> do something. >> do something, anything. one thing that nikki haley says
is that there is no point calling an emergency session of becauseecurity council north korea does not pay any attention to what goes on there any way, so it does not sound good from a diplomatic standpoint. >> it certainly doesn't. great to get your perspective from d.c. ahead, as we mentioned, another round of earnings including apple and berkshire hathaway, as well as auto sales and labor market data. we're bringing in su keenan from new york with more. >> some of these big earnings like apple and tesla will set up the tech momentum story. do the bulls have more room to run? again, it was a mixed close. gdp came in and had something to
do with snapping that advance. at one btv 7754, we look major fund manager is saying. it is the u.s. market cap versus gdp ratio. on the far right-hand side, a high. how would marx brought up this could be a signal for a pullback -- howard's marks brought up this could -- how would marks brought up this could be a signal for a pullback. fe,ave berkshire, santa siemens, ing, toyota, pfizer, and apple, a very robust week ahead. more about apple, apple, berkshire hathaway, apple on august first, so what is the expectation? >> when the most viable company reports it is of the wherefore the economy and tech. fangve seen with the stocks that if they don't crush it as netflix and facebook did
come a can flounder as amazon has, so will they hit the numbers? hear what they have to say about the iphone 8 and expanding into australia to do green projects, solar, wind. china has a company that is posing arrival to iphone sales. is that causing a dent? again, expectations for eps, anything under and you can see the stock punished because investors have priced in strong earnings. hathaway,f berkshire what is interesting is what they have to say about the railroad and manufacturing units. it is also a bellwether for the economy. company and how his outlook is for the economy and how it is impacting his company as a clue as to how to proceed. >> we will also get the latest
labor statistics. will it is positive, it shore up the optimistic economic outlook we heard from the fed. the expectation is for the addition of 180,000 jobs and we could see the jobless rate all to a 16 year low, and again, big positive for the economy. >> thank you so much with a look ahead on wall street. now let's get to first word news with remy innocence you. >> house republican leaders say scrapping plans for a border tax will make it likely to overhaul the wider u.s. tax code. also rejected raising taxes on wealthy americans, saying he supports a top rate of 35%. house's chief strategist steve bannon is supporting raising the top rate to 44% to pay for middle-class tax cuts. police anda, demonstrators clash of the country holds a vote on remaking its constitution.
at least six people were reported killed as violence flared across the country. president maduro's opponents are boycotting the poll, saying he was to curtail decades of democracy. president maduro has faced condemnation and the u.s. is considering sanctions. major airports across australia ramp up security after a counterterror operation claim to foil a plot to bring down an airplane. four men were arrested after a 30 said they had uncovered that plot. prime minister malcolm turnbull said passengers should expect some delays at screening points. austria's threat level has not changed. share buybacks are catching on in hong kong again. the company reports and as to make a 3.2 billion dollars into repurchasing their own stock through july 25. that is the highest ever since 28. all of this activity has been boosting -- since 2008. ,ll this is boosting activity
even after rallying every single month in 2016 to a two-year high. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you. still ahead, a delusion of data out of the u.s. we go through all the numbers with oppenheimer funds. latest factory data, a preview with commerzbank next. this is bloomberg. ♪
what can we expect? the forecast is 51.5 in terms of the manufacturing pmi. that compares to 51.7, a strong number we got in june. we have not then above 51.7 since mid-2012. there have been positive early indicators, including a sales managers index at the strongest level in two years, 52.8. metal prices showing strength, indicating positive momentum as well. we will also get nonmanufacturing pmi, no forecast, but june was 54.9, construction and i.t. feeding into that. tomorrow, we will get the private caixin number. or above for the
official pmi, that will underlying that growing consensus we will see healthy growth in the second half in china. the slowdown may be having been delayed somewhat, at least for now. >> that's right. i want to look at a chart, btv 7008. three months ago, four months ago, to a,'s were saying ppi prices, pmi, those have peaked and it is as good as it gets, but june was an uptick surprise at 51.7, 51.4 for the caixin numbers as well. this speaks to the resilience and the chinese economy. let's bring in the commerzbank senior emerging-market economist to talk more about this. you are looking for 51.8 for this reading, so further upside, why? seen theeral, we have
economic indicators and china have shown stabilizing momentum in the past few quarters. you look at the high frequency data and china, especially this prices, commodities prices am also on the rise, so the industrial production is definitely still relevant at this moment. the third, you can see global momentum still holding up. you can see the manufacturing data from europe and japan in recent months is still quite good, so that's why i am looking at a slight upside for china pmi. >> what about the inventory side of things? has run itse it course. also showing restraint when it comes to restocking. will that be a headwind? the stockingink
and restocking process will have a big impact in the chinese economy at this moment. after the introduction of the so-called supply-side reforms, china's corporate's have been cautious and holding inventories. on the other hand because of uncertainty of the economic areook at the moment, they also cautious in restocking as well, so the inventory cycle will not have a big impact on china's economy at this moment. maybe some impact next year or so. >> speaking of impact, perhaps more next year. what about the slow down in the property sector? we have seen that slowdown already in tier one cities now spilling over. will this be a multi-quarter impact, or is the slowdown in the property sector going to be longer than anticipated? the think it is clear that
property prices in tier one begun to spill over to tier three and tier four cities at the end of this year. the slowdown will be one of the victories for china in the next few quarters. i believe starting from early next year that the overall growth will be under pressure again. we also have to the political agenda after this year's party congress at the end of this year. the economic activities, we will slow down again because infrastructure investment has been kind of boosted because of the political event, so next year, there will be moderation as well. is so much talk about the people's party congress coming this fall, which is only a few months away. are these numbers expected?
i'm not saying they are doctoring these numbers or anything of that nature, but are they asked acted to be non--headline-driven news as we get closer to this political event? the numbers have been doctored in some instances from the provinces, and the central government would say they are cracking down. in terms of the data, there are always questions over the data, particularly from local levels and china come up and in terms of what we are expecting with so party congress being central to this year, we are not expecting any big surprise numbers. really we are expecting some shifts and change after the party congress, which is potentially september, october, as late as november, so maybe
next year you do see changes, whether that is a crackdown on credit, liquidity, and more tightening. spending has been pretty strong in the lead up to this, but it's always about president xi jinping will want to ensure the economic actor is stable as he heads into that party congress and as they come out of that crucial political meeting. i want to follow up on the infrastructure question, in terms of the ratio of infrastructure spending versus overall investment is now higher than during the financial crisis. how much of a risk is that building up further down the road for china? >> from a long-term point of view, china needs a lot of infrastructure spending. the problem is that if the guided or led is by local governments, that will
be a risk because we know the money is borrowed from the banks, and when banks than the money to the government, they are not concerned about the credit risk is embedded in terms of the infrastructure spending. few years the first of this kind of infrastructure , theeen put into space cash flow should not be that great come of that will be .nother risk they will still be highly indebted because of the infrastructure spending over the years. >> kicking the can down the road. thank you. commerzbank emerging market and was, and tom mackenzie from beijing. let's talk more about china pmi numbers. one feature on the bloomberg is our interactive tv function. you can watch us live and see previous interviews and dive into any securities or bloomberg
>> a quick check of the latest business flash headlines. selling the fixed assets of his telecom business for $1.9 billion. bidders whichl have been preparing financing for an offer. china's biggest coal miner expects first-half profits to double thanks to higher prices and sales point. risencome is estimated to one hundred 43% from year earlier to three 9 billion dollars, exceeding the whole of 2016's total, which was its first profit in four years.
♪ 7:30 monday morning. it feels like a sauna, looks like a sauna. the first major market open is close. it is much nicer where you are. beautiful sunny, not very humid summer day in new york. p.m. sunday. the markets closed on friday a bit mixed, jitters coming out. i am betty lou in new york. yvonne: i am yvonne man in hong kong. you are watching daybreak asia. let's go to first word news.
ramy: the u.s. military has staged a show of force in korea, sending nuclear capable b-1 bombers across the country. they flew from long. -- guam. launch of the second icbm means the whole of the continental u.s. is in range. , russia, anderned is ready to back measures against pyongyang. russia told the u.s. to reduce consular staff across the country by 755 people by september 1. this is following new sentence agreed to by congress. 455,ll lower the total to the same number russia has in the u.s. president putin said he will refrain from further measures, but it administration said they will act if necessary. >> this retaliation is long overdue. if the u.s. side decides to move
further towards further deterioration, we will answer. we will respond in kind. we will mirror this. we will retaliate. opec ok and independent -- and independent producers meet in on two. -- abu dhabi. they will talk about why some countries are falling behind curbing production. 78% in production delta june. -- fell to 78% in june. signs thatbest week the market is rebalancing. apple has complied with chinese government orders to remove virtual private network apps from its stores. they said the company has been required to move apps that do not meet new regulation. they are cracking down on the vpns popular in china because they allow users to sign state
-- sidestep the great firewall. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. inocencio, this is bloomberg. yvonne: we are counting down to the major market open here in the asia-pacific. we have china pmi, a lot of folks focusing on commodities. david: we had to move from friday, looking at oil and copper in a moment. have a look at the assets here. new zealand is up 0.3%. when you look at equities, futures, what we were looking through this week, the close we had in the u.s., the nikkei 225 .1%. i had the commodities space, i -- 0.05%. nothing when you look at the forex market, trading sideways.
at the levels, 117.50 for the euro, it is a two-year high. we are trading at a strong level. the kiwi dollar 560. --2 for the aussie dollar 79.82 for the aussie dollar. i will not change. -- that will not change. moderate gains for japan opening, 0.1%. you have to keep in mind when we are looking at south korea, we are looking at the biggest drop since the u.s. election. we were up on friday. 2400 was the starting point. we were looking at a small gap higher in australia, south korea and australia. looking at moderate declines, a half of 1%. the futures coming up a little bit. maybe closing that gap. the commodity we are following this morning's copper. it has been up and down the last
few weeks. a big producer recently upped their forecast for the price of copper. 280. contract, this is in pounds, both in u.s. dollars. chilly coming out and saying we are looking at 268 on average for 2018. city is saying china driven. it plays into the pmi story we will get. momentum is still there when you look at china because we came into 2017 with a slight deficit. the demand curve has heightened much until midyear. citi said we could be looking at a deficit in the range of 180,000 metric tons. copper price seeing the upside a little, $.65 per pound. last day of the month, we are
very much on track for a seventh straight multi-gain in the asia-pacific. betty: thank you so much, david ingles with the market. the u.s. and south korea developing stricter measures against north korea. kim jong-un saying he has missiles capable of reaching the entire continental united states. that changes the game. we are joined by isabel randall. north korea lost a second icbm to japanese waters -- launched a second icbm to japanese waters. what has been the response from prime minister abe? reporter: what we have to remember is north korea is thought to have been capable of reaching them for quite a long time. further can ith go, and japan has responded to each launch.
it will call the u.s., south korea, they will work together. more interesting this time than before the launch, we saw japan stepping up sanctions and including chinese organizations. that is putting some muscle behind the criticism the u.s. and japan have from china, but it is not coming forward to put enough pressure on north korea. we will have to see what the response is from china to that. it could damage relations between china and japan and china and the u.s. prime minister abe spoke to president trump on the phone this morning. something could come out of that on china. betty: we will monitor trump's tweets for any update. on the domestic front, abe is expected to reshuffle his cabinet. what is behind this? isabel: what has happened, it is a rather catastrophic fall in
his approval. scandal thatthe have been building the last few months suddenly seem to take effect on public opinion. he is lower in the opinion polls that he has been since 2012. he needs to do something different in response to that. having said that, it is limited. many say he will not come up with any huge resizes -- surprises. he could be bringing back familiar faces, so it will not be a surprising lineup. yvonne: we have been following the fallout, but what is happening in tokyo is just as xciting as d.c. the opposition party leader has stepped down. what is causing this disarray? isabel: it is an extraordinary situation. i have never seen both major parties in such a mess at the
.ame time, but it is a mystery why the opposition stepped down at this time, she took office a year ago. she has been rather popular, but she failed to turn that into support for her own party. she has less than 10% support in the polls. but this may say as far as the election, some analysts will say despite abe seeing lower, this is that he could go for the early general election to take advantage of the disarray in the opposition. yvonne: what does this mean for yuriko koeke? thank you for joining us with the latest and the political front in japan. we have a snapshot of the japanese economy in 10 minutes' time. jim production numbers, 7:50 a.m. hong kong time -- june production numbers. betty: we will talk u.s. data
♪ yvonne: plenty of big stories this week. we are talking about them all on daybreak asia of course, lots to look forward to. polling from the reserve bank of india, and the governor and his team sent to start the two day meeting on tuesday. they will announce a cut after a string of subdued inflation readings. let's bring up the chart, 59 -- 5839. sliding below 2% with industrial growth as they raise the r.b.i. if you want to find an indication for how low it is
across the globe, look no further than india. the headline cpi heading down to this record number here, below the midpoint of the long-term target and the march 2017 target just north of 5% for the r.b.i. some are saying it is a given that the r.b.i. will be kept. -- cut. they are cutting that repurchase rate. there could be some new juice with the equity rallies we have seen in india at records. betty: that is right, a lot of central bankers are saying where the inflation is. in the u.s. we are watching auto sales for july, the industry coming off six straight months of year-over-year decline. analysts are looking for signs of growing demand of suv's. i can be sustained even if the strength is not enough to -- that can be sustained even if
the strength is not enough to whet the appetite for sedans. as an look at car sales indicator for the market and the economy. they are seeing auto sales in the white, s&p index in the blue. it has looked like this for a while. auto sales go up, you see the market follow along. people have been saying u.s. auto sales have been a nice leading indicator for the markets. but just take a look what has happened in the last year or so, less than a year, 2017. there has been this divergence. the s&p continues to rise on a variety of factors, but auto sales have fallen. it has got people wondering if it is pretty bad news for equity goals. someone that can talk to us about this is oppenheimer ceo
joining us on this sunday evening for the outlook. what did you make of this? what do you make of this divergence? sixuto sales peaked almost months ago, and they probably don't drive the consumption that much anymore. income growth is pretty good. service consumption looks pretty good. auto sales have not been helpful, i don't think they take the equity market down anytime soon. betty: what does? krishna: overall on a global u.s., to -- basis, in the we see deceleration in growth. there is no evidence. betty: but what about washington? krishna: when we came into the year, all of us were hopeful washington will be able to deliver all sorts of policy
initiatives that will be helpful to the economy, have inflation of, and they have all been dashed over the last six months. betty: the market has not fallen in reaction. krishna: they have not come up the bond market at the beginning of the year, we were talking rates at 3%. 3% -- the likelihood of that anytime soon on the policy initiatives is zero at the moment. anything from washington, that would be a total surprise. i don't think it is likely, but the market have priced it in. betty: does it take the market down? krishna: i think it would be helpful. if you have inflation back up, nominal growth would be higher. you have policy stimulus, all of that would be helpful. none of it is for coming -- forthcoming. we have slow growth and no uptick in inflation. yvonne: thank you for joining
us. i think everything just kind of seems like a pawn for washington. it looks at jackson hole. , thee bring in this chart security holdings the three major banks in the world, the fed, ecb, and the boj. we put that against the 10-year yield average which has been inverted in white. the blue is the balance sheet of these three central banks. any signs of tapering from the three does have a bit of an impact when it comes to where yields go. it is some type of tightening. but my question, are we going to see a moment at jackson hole where we see the chorus of central banks talking about stimulus? krishna: the markets have been expecting for the era of central banks is kind of increasing their balance sheets.
reallykets are not expecting that, so it will not be a surprise. they could be surprised if the fed or the ecb kind of show a more hawkish tendency. i don't think that will be the case. one are the drivers for the markets are very similar -- simple. synchronized growth and citing india, no signs of inflation on a global basis. as long as that is the case, central banks may want to raise rates, but they don't have the ability because inflation is not picking up. as long as that is the case, the market is quite good. goldilocks, though one should not use that term so often. yvonne: we cannot help it given the situation. you mentioned volatility is a killer given how low the environment is now. we see the across equities, some
type of volatility in the fx market these days. do you think investors have complacency? krishna: we talk about that quite a bit. the expectation in the market is because volatility is low, the market must be complacent. but the market participants, one has to ask if global growth is stable. low inflation, policymakers are not changing things dynamically, expecting the markets to be extraordinarily volatile in that environment is not the right thing. whether the vix should be at eight or nine we should argue, but whether it should be high double-digit, there is a chance for it not to be the case. but what we should be looking at is, are there some parts in the global economy? we don't see that now. betty: i bring you back to the u.s. we have a lot of data, auto
sales, job numbers, culminating on friday. will the jobs report -- how much will that change the outlook? krishna: i think it is very important. it has the potential strength for the fed to remain committed to the path. betty: significant strength. krishna: it is 200,000 here that is significant strength. if we see 100,000, the bond market will rally because we see the fed commitment is questioned to tightening. i think that is how the markets will react. yvonne: we have got a break some data coming through from japan. take a look at the month of june , numbers are quite a bounce .ack from a, production up 4.9% just north of what the economist
were expecting. year on year figures, slightly ending the month on month after that slump in may of 3.6% down in industrial production. it is down to 1.6% for june but slightly higher on the month on month numbers from what the economists were expecting. they were talking about company production plants. those will bounce back. and thinking of europe, the stronger euro may have provided good for exports in japan. -- how know how you much much you look at japan markets, but it is -- how do you view this? krishna: growth outlook in japan, growth outlook in europe and the emerging markets, including and excluding china looks good. the one country not participating in that accelerating growth, there is
some sign of weakness, is probably the u.s. it is not weakening per se, but things are not as early -- strong is earlier in the year. the japanese market, they are in good shape here in the japanese economy is in good shape. the outlook is for all markets to do reasonably well. betty: it seems different from january. krishna: absolutely. betty: thank you for joining us. cio.oppenheimer funds, the we have much more ahead on daybreak asia. you can get a roundup of the stories to get your day going in today's edition of daybreak. bloomberg subscribers can go to dayb . also available on mobile. you can customize your settings to only get the news on industries and assets you care about. this is bloomberg. ♪
♪ betty: this is daybreak asia, i am betty lou in new york. yvonne: let's get a quick check of the business flash headlines read wells fargo is getting rid of 70 executive positions following the scandal. an internal memo said the number of presidents will go to 91, with some remaining on staff for 60 days until further steps are decided. they were find $185 million after people opened accounts without customers' positions. boostedhe stock really commissions and offset income trading. $30net income climbed million. it was in the middle range of analysts' estimates. the nikkei 20,000 on 225.
nomura is up 56%. the appetite for investment is shirley on the rise. not only -- surely on the rise. economy turning more positive, i investment sentiment to improve even further. hsbc will announce a $2 billion share buyback with results on monday. they said that buyback is the first phase of a three-year program to run down the stockpiles of cash. comment, declined to saying estimates are for the profits of $5.5 billion. betty: and i want to recap quickly the japan output numbers we got a few moments ago. we saw industrial production for month on month for the month of june up 1.6%.
a rebound from the prior month, slightly beating what economists estimated at 1.5%. this is a bit of a slowdown from the slave month a year ago. -- same month a year ago. you have this pattern. we get some good numbers on japan offset by not great ones which end up with a mixed, might outlook on the -- muddy on the japanese economy. yvonne: it is interesting. we saw the output forecast they ofe out with here, a percent month on month in july -- 8%, and august further positive signs for the outlook when it comes to private capital expenditures. the story is quite firm for the second quarter.
♪ >> the pressure is mounting on the white house, russia orders hundreds of diplomatic staff to leave the country. >> meanwhile, how do you solve a problem like north korea? whole ofun claims the the u.s. is in range. numbers.ic production >> and tesla takes the lead, especially report on the launch of the model three. >> this is the second hour of "daybreak asia" coming to you
live from bloomberg's u.s. and asia headquarters. it is just after 8:00 p.m. sunday evening in new york. we have not gotten our week started yet, but what a weekend in the u.s., particularly in washington, including four washington.ou it seems like better news on japan. it is why we see more investment going into the stock market. we will talk about it later with our guest on japanese banks. opent's look at the market and reaction to industrial production numbers with david ingles. >> we have the breakdown already. the topline numbers came out 10 minutes back. here is your breakdown. generalooking at
purpose business machinery manufacturing the standout. i.t. as well. that is the breakdown. there is your function for clients. that breaks down the numbers, plus commentary. 225.p open, nikkei on friday.twee below 20,000 to the downside here. there we go. stronger against the u.s. dollar, there we go, about .1%. little weakness in the u.s. dollar in the last 15 minutes into the open. that's why we are seeing downside. a lot of earnings out of japan, 100 listed companies reporting today.
asx 200, the other theme is this of the weak because dollar and partly because of this growth story from china and how it is filtering across emerging markets. 200, new home asx prices also coming out today. something to watch for ahead of pmi numbers. this is friday's session, the kospi continuing to fall. are coming off the biggest drop since u.s. elections, so still some downside on the kospi . there we go. , down oned slowdown the kospi index. down 1.3% come as a
roughly two thirds of the overall index dropped, nine points. we heard from the bank of korea, the latest following this missile test on the weekend from north korea. nothing new really. they are monitoring the markets after this missile launch. >> that's right. it has almost become an almost common occurrence, a pattern here. will be diving deeper into that story, but let's get to first word news. wells fargo has a new problem following fraudulent bank accounts, bogus cards, and compromised data coming out unwanted auto insurance. moreank may have charge than 500,000 people for insurance they did not need. the bank told investors about the changes, but not the
insurance issue they had known about since july last year. saye republican leaders scrapping plans for a border tax will make it likely they can overhaul the wider u.s. tax code by year end. paul ryan rejected raising taxes on wealthier americans, saying he supports a top rate of 35%. the white house chief strategist steve shannon said to support raising the rate to 44% to pay for middle-class tax cuts. police and demonstrators class in venezuela, six killed in violence across the country. of president maduro's opponents are boycotting the polls, saying he wants to curtail decades of democracy. president under a has faced international condemnation and the u.s. is considering sanctions. saudi arabia and allies have reinstated 13 demands against qatar, saying they must all be
met before the diplomatic isolation can in. the alliance said that it can be no compromise until doha stop supporting extremist groups, claim it has denied. the 13 demands have been cut to six abroad principles, but include the closure of the al jazeera tv network. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> the white house has its hands full with foreign and domestic issues has the week begins. expelling hundreds of diplomats, while china is getting flack from donald trump after north korea testfired that second icbm. remy inocencio has the latest. tell us more about this. they expelled 700 plus? >> 755 diplomats they are trying
to get out of the country. the deadline is september 1. from russia's point of view, the negatives in the united states have been building against them since december. you remember early december when the barack obama administration throughout 35 diplomats. donald trump said he would write the ship and away. especially with the sanctions bill out of congress, 90-2, that was the proverbial straw that broke the russian camel back as it were. let's go into what's happening in terms of the specifics. 755 staff here at there are so many -- 755 staff will be cut from across russia. the embassy and three consulates . that would lead 455 staff inside russia. also, they were going to seize
two properties in russia, seesar to how d.c. the two properties -- seized two properties. also off of this, the deputy foreign minister is doubling will saying they retaliate. >> this retaliation is long overdue. to move.s. decides towards further deterioration, we will respond in kind. we will mirror this. we will retaliate. deputy is the russian foreign minister, but mr. putin adding his words, saying right now he does not want to add fuel to the fire, but says look at the trade balance between russia as well as the united states. $25 billion going
back and forth in the past year. that has fallen from $42 billion two years ago. pushys he does not want to that right yet, but if he wants to, he can push those buttons and has that at the ready. after russia, we saw on fired another icbm. more geopolitical tensions now. a fresh round of tweets aimed at china from president trump. tohe wants to pressure china do something, anything. these are the latest tweets trying to put pressure on beijing to do something on the economic front, potentially more, but china pushing back, at least in words. this is what mr. trump has been saying. he said he is disappointed over china. u.s. leaders bullish because of the hundreds of billions of dollars they have allowed china to have with north happenedt nothing has and says china could easily
solve this problem. there is only a $6 billion trade and between north korea china, but it is unclear whether they have the wherewithal to do that. to rotateoes have according to what happened late last week come of that is what happened with the latest north korean missile test. let's throw up that graphic on the screen with the missile distance that can be reached from north korea, all the way to the united states. there,ay, the third bar it can hit, fly less than 7000 miles, but that can now possibly as 10 thousand miles, putting it within spitting distance of new york. this latest missile only traveled 1000 kilometers the for falling into japan's exclusive economic zone. the reaction out
of china, xi jinping has not ormented off of north korea donald trump's tweets, but what he has said in state run media is that beijing has modernized its own military. we are looking ahead to the fall party congress. he wants stability and show stability and confidence moving into that so he can tray a smooth transition to the next five years. >> thank you. coming out, a busy week for japanese lenders, several big banks reporting earnings, some insight and if surprises are in store. we talk bonds with ubs asset management next. this is bloomberg. ♪
bond traders are bracing for what is usually a pedestrian event. the u.s. treasuries quarterly refunding announcement on wednesday. why are they anticipating this? of u.s. bonds is getting ready to pay less. guess who? kathleen hays is here to connect the dots from treasury refunding to the fed in their balance sheet. >> it is a quarterly refunding announcement here at it always comes in the middle of the quarter. not beause the fed will buying back all the bonds that mature in its portfolio, people are saying what does this mean for refunding? refunding occurs once per quarter. there are so many bonds maturing. these are the threes, tens, and 30's, so the treasury is replacing the debt by buying new
threes, tens, and 30's. the fed has decided it will not invest all the proceeds. once it makes this announcement, it will let 6 billion and treasuries roll off. this will just affect the treasuries. quarter, the treasury calls the primary dealers together, about half of them, and ask them questions. how is the street positioned? what is investor appetite for bonds? so they can adjust the size of the auction, how many threes, tens, 30's will they sell. dealers howked the do you think we should make this adjustment. these are some the things traders are talking about. they could be in the discussion and come out of this refunding announcement. will they change the re-issuance size?
maybe the treasury will say it is time to buy more tens because that is something they are letting rolloff. stephen mnuchin talked about extending the maturity. locale low long-term yields are. why not sell or 10 year notes are up year bonds while rates are so low? lock in a low interest rate and help make financing debt cheap. traders are saying beware because this could hit the market and cause a lot of volatility. we know after the fed minutes last week when they said this announcement could come soon that at the meeting in september, announced what they would do starting in october, which is one reason there is no change expected from the announcement on wednesday. it will still be 62 billion dollars in quarterly refunding after this announcement. a lot of people are saying nothing will happen or change until november, that refunding announcement. , as oppenheimer funds
driveying, echo dat eco-data wl it. traders are bracing. what the fed is doing could be more interesting. >> all right. stay with us. let's bring in the head of asia-pacific fixed income at ubs asset management in hong kong on set. how much should we put into this right now? maybe it is a november event or so? >> i think you're right. we have the debt ceiling coming up, this announcement. we throw that into the next, what does it mean? the credit impulse has gone into reverse, so now note new net apply coming through. we are going into reverse. we have not had this for 10 years. this will be of the question for markets right now. >> what does it mean? everyone is looking towards whether the debt ceiling debate will happen.
we saw what happened with this health care bill exploding. is there any confidence you can get breakthrough from washington? >> you have a big salad bowl mixed up there. there are so many things going on. we have had risk appreciation. i think you want to start taking risk off the table. that is what we are thinking about. we have been sliding down our risk scale. as we come into the second half of the year as credit impulses are starting to unwind, it is china as well switching into negative territory. we are expecting some markets to unwind a bit here. >> i would like to ask you regarding the debt ceiling and how that will affect issuance, tie hands to a certain extent. we know it will be resolved, but it could cause disruption.
will this be a disruption at the short end in terms of treasury bills? where would you see the most disturbance happening for the bond markets if the debt sitting does not get resolved quickly? >> you are seeing it in the t-notes. the bond market right now is not paying a lot of attention. the prices have not been moving around, but in the short and, it will remain there. the u.s. has a great history of rolling over these issues. every time we agonize coming into this debt ceiling, something gets pulled out of the bag at the last minute, so the market is expecting the same reaction this time. >> job report on friday, what is the focus? is it wages? rising, thatot means inflation is not rising. will we be watching personal income and spending before the jobs report on friday? we get that pce deflator, the number the fed is watching so closely.
>> absolutely. everybody is looking at the headlines and wondering why it has not gone up because wages have not gone up. everybody is focused on wages. employment numbers have come down. we have not seen that reaction. inflation isrld, very benign. it is coming down. a lot has to do with energy, food, and you can't see wages picking up anywhere at the moment. the bond market across on the debt and credit side. >> it is interesting. off of that, earlier we were talking with the oppenheimer cio . we are watching this jobs report closely, but if you're going to see reaction, it's going to be in the bond markets than equities markets. it seems like the bond market that is more reactive. would you agree with that? >> something has changed in the last six month spirit we are
getting pushed around by equities markets. this happens when you go into one of these carrier phases and bond markets. bond and credit have been performing well. everybody is thinking about carry right now. no matter where you look around the world come up money is coming out of the market at a faster pace than going into it. surprise, the future, surprise, everyone will get a shock that the credit is no longer there to buy this carry trade. >> what about keeping an i on the dollar? what about the gdp numbers on friday? give me a sense of where you think the dollar is headed. ofwe are back at the bottom the range where we were 2015-2016, so we are thinking some oftting back into those latin american currencies in particular, so turkey, brazil seem interesting to us. we think the u.s. dollar bottoms
up for some time, then cross into asia. some currencies look interesting and we are adding that into portfolios. >> one thing we did not talk thesemuch last week, sales from asian issuers, india, china, as well as indonesia. they were not happy with the demand. you don't see that happen all in one day or one week, but the reaction was pretty stoic. why do you think that is? >> what is happening is asia is credits rents blowing outcome in particular for chinese issuers. they have been widening out, particular the high-yield or property sector, so people are saying i haveot some spare cash, but i will be more selective and demand a higher yield, whereas it has been an issue is market up to this point in time. >> you don't expect a man to pick up, the second half, risk appetite. is a lot of rotation,
so people are probably getting out of safer assets with the widening out to riskier assets. in looking for a person handles instead of 5% handles, so getting better for investors rather than issuers. on to salesmarket at their fastest pace ever. you just mentioned brazil. will discontinue or is this a play that will play out? what would you tell investors? >> our emerging-market team thinks brazil is getting better. there is a lot of cleanup underway there. all those things are positive for the longer term. we like the carry trade as well, so still a low yield environment and likely to remain there, so carry trades are hugely important, and appreciation as well and a looking more interesting. >> the r.b.i. expected to cut this week. will it affect the market at all? >> not really.
they have been on the downside. that has been positive. in the official statistics when , itlook at de-monetization is not showing up. i think it is slower and they will continue cutting. >> always good to have you. one feature on the bloomberg we like to bring to your attention is the interactive tv function. in see watch us live previous interviews and dive into securities our bloomberg functions we talk about. you can join the conversation and send us a message throughout the show. check it out. this is for bloomberg subscribers only at tv. this is bloomberg. ♪
komatsu's profit double, net income rose 130 4% to $328 tolion for the number maker of mining equipment. sales rose 44%. it supports the prospect of a turnaround for the construction sector. >> li ka-shing selling fixed assets of his telecoms business to a new york-based business for $1.9 billion. it beat rival bidders, including a consortium of them became partners preparing financing for an offer. hutchinson global communications is selling the assets to focus on new industry sectors, including data centers. >> warner bros. world war ii epic dunkirk held onto the top collecting $28 million to bring total receipts to $100 million. i watch this weekend and was on the edge of my seat the whole time.
♪ eight: 30 in singapore, a lovely monday morning in the lion city. half an hour away from the open of trading. >> you are watching "daybreak asia" this is "daybreak asia." let's get to first word news. >> japan's factory output rebounded in june as global demand continue to support economic recovery. increased production 1.6% from may when it fell 3.6%. year on year production was up almost 5%. global demand and a weak yen have helped exporters deliver five consecutive quarters of expansion, the longest run in a
decade. the u.s. military has staged a show of force and korea, sending the one bombers across the country. they flew in from qualm in response to the latest missile launch by north korea. kim jong-un said this second icbm means the whole continental u.s. is within reach. russia says it is concerned about the launch and is ready to back new measures against pyongyang. russia has told the u.s. to reduce the number of embassy and consular staff by 755 people by september 1 following the new sanctions agreed by congress. that would be more than half of the personnel and would lower the total to 450 five, the same number russia has in the u.s.. president putin said he would refrain from further measures come but his administration warned it would act if necessary. >> this retaliation is long overdue.
if the u.s. side decides to move deterioration, we will answer and respond in kind. we won't mirror this. we will retaliate. >> some unity and westminster oh-fer brexit didn't last long with the prime minister on holiday. chancellor philip hammond said consensus was forming around a three-year transition phase during which literally change in the uk's relations with the eu. that vision was shattered when liam fox told the sunday times he had been involved and no such discussions. opec and independent producers to meet and hobbled dobby -- i'll dobby to discuss compliance. they will look at why some countries are falling kind and cutting production. overall compliance fell to 70% in june after members including saudi arabia boosted output. we'll had its best week last week and assigned the market is rebalancing. global news 24 hours a day
powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> we are half an hour into the asian session. here is david ingles with more on how the asian markets are shaping up. a quiet start, but a little momentum coming through. i would talk about the yen in a moment. we are getting a lot of dollars selling. overall, here is your picture. south korea a 10th of 1% on top of the drop on friday. have a look at the currency markets. a lot of dollar strength, except against the japanese yen. we are trading at 110.44 at the moment. traders are telling us you are getting leveraged funds betting that we might hit these option
barriers knew the 110 level. yen is stronger by .2% against the dollar. the bloomberg dollar index at that level, i will map that out for you later on. have a look at yields. 30 down 1.5. , s&p futures down .1%. i'm watching copper. that is the contract in shanghai following the run in the past several weeks. as we get started this trading week, where are we on the u.s. dollar? here is your dollar index. support level, which takes you back to 2016. anything below that takes us back to 2015. we are getting some buying into the u.s. dollar. the japanese yen is the other side of the trade. leveraged funds are positioned like this going into this week. the data is a one-week lag.
as you can see, very extreme bearish dollar positions, 130,000 net shorts on the u.s. dollar. it is interesting. pmi today. we will talk more about that. home sales out of australia, and jobs data out of the u.s. on friday. >> that is the big one. one stock we are watching is hsbc set to report earnings today. hoping for some new buyback program? >> if they don't announce a buyback, i expect the stock to fall. the sunday times came out with a saying another round of buybacks could let me quote them here. "$2 billion worth of shares, second-quarter earnings." when you look at analysts, they are saying because the fed approved its capital distribution plan in
june that they are likely to announce a buyback. the chart shows you 2832 for our clients, this run-up in shares from below 50 hong kong dollars 76where we are right now at hong kong dollars. the target price from the street has flagged the actual price. do we get an upgrade up, court does the price fall further? here is your gap. the number we are looking for is $5.5 billion, pretax profit for the second quarter. thanshould be out in less four hours. >> thank you. anda revealed the winners losers in the country's regional growth competition. 12 provinces reported to pick up, eight provinces showed signs of deceleration. we are joined now by malcolm scott. let's talk about the pmi
numbers. we are expecting a drawdown for manufacturing pmi. will that mean much? fromey are expecting 51.5 51.7 a month earlier, still firmly expansion. still giving us overall picture of stability, so like the gdp, you have to get under the hood to see what is going on. we will look for key things, what is happening to the industrial reflation picture, a strong theme of the first half, seem to be fading in june. some of those numbers on input and output prices below 50. we were also confirmed jobs, some strength there. the that be continued? and the forward looking components of that, u.s. orders, new orders, strength there. if that continues was so does the economic robustness we have seen in the first half. >> you mentioned the report that shows the divergence in the regions in china. has that improved? >> this overall picture of
stability, we are seeing more provinces that have reported so in reporting an acceleration the first half from the first quarter. we have to strip that out. things are looking fairly good. there are some notable laggards. when of the more prosperous areas of china is having notable deceleration. a couple of things that work there, probably a push to curb some environmental excesses, and also a push to curb housing excesses, so a pullback in property seems to be putting the brakes on there. , growth has come off, and analysts say that could be related to to push to curb some of the concerns around corruption. onthere is a lot of focus gdp growth in china, so how is president xi jinping trying to shifts that focus away from just looking at gdp?
>> he has tried to reprioritize some of that focus. advance as aay to provincial official was to post alert growth, back to back coming year after year, 10%, 12%, forget about the environment and debt. there has been a change this month. president xi jinping said officials who racked up their debts, that will be on their ledger for life. there is a change from the top there. , we have granularly seen a push against some fake statistics that has bedeviled china, a crack down there. that is that the local level. so there is no longer incentives to game the system like there once was. so much.you counting down to those pmi numbers, china pmi, and other economic numbers on our markets live log.
you can keep track of these numbers and the reaction on the bloomberg at mliv . you can get a market run down in one click, and there is market analysis from expert editors to find out what is affecting your investments right now. >> coming up on "daybreak asia," second-quarter results for japan's banks. what to expect, just ahead. this is bloomberg. ♪
♪ betweenstinguish running expenses and investing. we want to keep up the investment because we need to move on with the modernization program. it is a mixed picture, but we have been focusing on costs. now we need to focus on revenues. >> increasing wealth, wealth creation and markets in the world economy is there to stay. currency, we are
not happy with where we are. we were down in the second quarter. we made some recent important hires. get that correct it, the investment bank had a good order. >> we are confident we can achieve our target. coste talking about a net savings target, so we are absorbing a huge number of costs from unexpected regulatory ,hanges, technology investment needed to keep up our competitive position. talking aboutnks strategy and challenges has earnings season gets underway. all these banks around the world. we will follow those results on bloomberg tv. monday, hsbc releases earnings, followed by socgen and standard
chartered, and rbs wraps up results on friday. week for earnings in japan, financials as well. a look with our asian banking reporter live from tokyo this morning. profit rose thanks to a rebound in the retail business after a three-year slump. how important is this trend? >> absolutely, it is a positive nomuraber of -- four after three quarters of sliding income. at the same time, they have a challenging target. 190 $5e looking for billion by march 2020 in pre-profit. this quarter, they are halfway there, so work to be done on retail in a sector that is heavily impacted by the market forces, investor sentiment from investors in japan. >> certainly that has been a
challenging experience for nomura and other banks. looking to boost revenue from investment banking, so what are the prospects there? come oftment banking this quarter up year on year, although down slightly on the fourth quarter from last year. this time around, they were quick to stress their successes. they had a list of some of their acm and dcm successes, including the global ipo of companies. dcm has been weaker, not raising equity so much, although the low interest rate environment means raising a lot of debt, and nomura is benefiting from that. it does not look like rates will rise in the short-term, but for the next couple of quarters they can expect a positive result out of their debt businesses. >> how do you extract what happens at numeral two -- nomura
to other financials? looking out for in some of these are the results? >> that's right. we have the first of japan's megabanks reporting after the close of markets, then mitsui reporting tomorrow afternoon. analysts in the lead up to this are saying more or line with the banks targets, net is this profit level between 23 and 26 come a progress towards annual targets. net income level supposed to be lower, but we are looking to see since the boj introduced negative interest rates how much the banks are being squeezed by those very low margins, which have reached levels where there is not match left they can still keep going down, so are they still going down and by how much and have they failed to come
back a bit? credit cost for japanese banks are at historical lows. ifwill be looking to see they have had to put aside more .oney toshiba is in big trouble here in japan. the cross channel holdings issue, have the banks made any progress and sharing those holdings to boost profit this year. out for.to watch thank you for joining us on japanese banks. let's get more with one analyst who covers the banks. david marshall is the senior asia-pacific banks analyst. a host of things to watch out for in these bank earnings. net interest margin is one in particular you are keeping your eye on. what do you expect there, and what we you be looking for in the rest of these results? >> you are right. that is a crucial point. we are in the fifth year of
abenomics, which was supposed to benefit japanese ranks, but because of the low and falling interest rates in japan, we have seen a squeeze, domestic interest margins coming down, domestic net interest revenue has been falling for years, so this is a negative trend for the japanese banks. we are seeing that process come to an end because rates have become so low there is not much lower they can go, but we have seen some signs of sequential improvement, the lending rates are no longer falling as fast as they were. that is what we will be looking to see. i think it is stabilization rather than improving. i don't think we will see lending rates rise, but at least it's not getting worse in the way it had been up until now. on theow we are focused megabanks, but there is talk about how those conditions are affecting some of the local and regional banks in japan and whether you will see a lot more activity because
of that. i'm curious what you think of that if conditions stabilize and how that might affect the big banks eventually. >> that is an interesting point. when we look at big banks earnings, true for the big banks and regionals, japan is unusual. when we analyze other banking systems, we are looking at , butively stable earnings in japan, the proportion of earnings from these other sources come in particular investment gains from their large on in stock portfolios, is huge, and this tends to be volatile which makes it difficult to predict the bottom line. the equity market in japan is doing well, so they are well-placed to unload those holdings and book gains. has fallen inen recent years, and now turning towards a rising rate
environment, so that will be difficult for all the banks, including the megabanks, so we need to watch that as well come the earnings coming from that. the regional banks have been under more pressure in terms of profitability, so they have certainly done some risky things , over investing overseas and loans, bonds, the yield curve, the megabanks taking on more interest rate risks. about thisworried and regulators are focusing on this issue and tightening the rules to limit the risk of the bank can take on. in a sharply rising interest rate environment, the megabanks would be hit, the regional banks much tougher, and some will not survive i think. >> sure, so still some headwinds for the regional banks. about thisking revival of the retail sector from the brokerages. do you think this was a one-off? some results were more gloomy omura.ut of numbe
can the retail revival continue to offset the slump we have seen globally? >> it is unlikely. a japanese investors tend to be cautious. i can't see them shift rapidly into stocks. one of the things the megabanks are doing is trying to beef up investment banking operations overseas, particularly in the u.s.. their securities arms are trying ,o do more business in the u.s. bearing that with the commercial banking operations to provide services to global companies and u.s. firms. thatare all trying to do and can have success in volumes and share because they can do some business with relatively low margins, but whether they can make that into a successful banking operation in terms of profitability, i would be more skeptical. i think we have to wait and see. i'm not sure that will offset weakness in japan short-term. >> i want to play for you one comment from the cfo of nomura
where the earnings call he talked about investment appetite and how it is coming back. the appetite for investment is surely on the rise. not only for stocks, but demand for foreign bonds is increasing. with the macro economy turning more positive, i expect investment sentiment to improve even further. >> do you agree with that? is that accurate? >> i think in the near term, that looks right. japan's economy is doing ok. the japanese stock market is doing relatively well, so the near term does the writer for those earnings -- brighter for those earnings. are interested in investing overseas, bond fines, indian equities for example, nomura highlighted that, so there is interest in the near
term, but the confidence of japanese investors can easily be set back by any pullbacks in the markets which inflict losses on them and confidence come a near term looks relatively optimistic. >> especially with the nikkei 225 about 20,000. you have to be careful. david marshall, thank you. those banks and financial results coming through in japan. noon,osts results at midnight in new york. sayingday times has been the bank will announce a two billion dollars share buyback, the first phase of a three-year program to run down its pile of cash. we will have all the developments here on bloomberg. >> coming up, yes come you know, as he makes it happen. it has become a reality. cells and whistles
electric cars. much fanfare that night. he has promising 500,000 vehicles. it will be a massive strain on manufacturing capacity, and that for analystsrry and investors on tesla, can they meet that demand? i want to play for you one comment from gene munster, the tech analyst we follow here, what he thinks the future is up tesla now. is buy they should do tesla. elon musk will probably not let it happen, but that could transform apple. got that hint at the end, he's talking about apple buying tesla. the next that could be stage, but i have a hard time seeing elon musk work for anybody, much less tim cook. >> the prospect of the applecart coming through, that seems to have been pushed back alongside
a lot of things for apple. i'm not sure that marriage could work. one of theseve in excitement and hype for everybody, but these are lofty ambitions when it productionese targets, 500,000 cars in production. we will see if he can reach those targets. >> absolutely, but do they have the materials to make these cars ? that includes the lithium for these batteries. we will be watching tesla shares on monday. that is it from "daybreak asia." ♪
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♪ >> i am rishaad salamat. japan's factories rebounding, waiting for data out of china. kim jong-un saying america is within range. all agree more must be done about north korea. >> i am haidi lun in sydney. asian equities saying a strong this rally in five years. more resilient than wall street, we ask why. this is "bloomberg markets: asia." ♪