tv Bloomberg Daybreak Asia Bloomberg September 20, 2017 7:00pm-9:00pm EDT
♪ is 7:00 a.m. here in hong kong. i am yvonne man. welcome to "daybreak asia." the fed to begin reducing its balance sheet next month. janet yellen sees another rate hike this year and three in 2018. sent the dollar surging, racing earlier gains, but climbing above its g10 peers. globalfrom bloomberg's headquarters, i am betty liu in new york. it is after 7:00 p.m. wednesday. i'm meeting with opec and its allies on signs the cartel may change output curves.
president trump said he made his decision on iran but refuses to say what the decision is. speak thison due to hour, hopefully to clarify. ♪ betty: welcome back, yvonne. we missed you, a lot has happened in the last several weeks. today with the fed, that has been the big news. now we know this qt we have been talking about will begin next week -- next month. let's look at how the markets traded in reaction to this. in thiss quite a dip announcement and after with a news conference. we saw markets climb back. the s&p closing above the red that, butnasdaq below
the dow adding 42 points. i want to bring up a quick , which shows you how uncharted the territory is from markets. since 2009 we have seen the s&p track qe so tightly. yes, they spread apart in the last year. but it really has been qe that has driven prices. now where do we go? yvonne: we have seen the success of qe when it comes to equity markets, especially the s&p. the big question is, will qt have the opposite effect of qe? asia, one of the first markets to react. here is how we are trading in new zealand. pretty flat on the nzx 50. bang in line with estimates, not a huge reaction in the kiwi.
singapore back from its recent gains ahead of the weekend election. goinglian futures nowhere, up three points for the asx 200, after it finished flat yesterday. in0, still sing resilience the aussie dollar in the face of the strengthening dollar we saw overnight. the most in about a month or so. the bank of japan after the fed, how will the fed's balance sheet unwind shape the boj when it comes to yield curve control? the nikkei sitting well below 20,000, ahead of the meeting. dollar-yen hitting a fresh high at 112. should be a good day with the equity bulls. a big thursday for banks. and taiwan, philippines indonesia to wrap up the week for us, as well. it let's get to first word news with courtney collins. president trump says he has
made a decision on iran nuclear deal, but will not reveal what it is. he refused to say whether he would pull the u.s. out of the accord, which is called an embarrassment to america. his iranian counterpart told the assembly that iran would not be the first to -- the deal. president says his administration is ready to help order rico as it is battered by a second major storm in two weeks. maria has weakened to a category 2 system, but still casting strong winds and torrential rain. the whole island is without power and the capital san juan is flooded. storms are expected to leave a damage bill in the billions of dollars. the earthquake in mexico has claimed at least 225 lives, making it the country's deadliest tremor since 1985.
25 the students and teachers are thought to be buried. on softtal is built soil, that was once a lake bed. seismologists say it exaggerates earthquakes' effects. new zealand's dollar little changed as they show a grew .8%. it is lasting news ahead of the election. the key we saw a boost on wednesday, suggesting a late surge for the government. it gave prime minister bill 46% support,ty against labor, 37%. 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. ♪ look: let's take a closer at the key drivers of the u.s. market close. bonds tumbled come all the dollar surprisingly surging on
this news about the fed being hawkish. su keenan with more on the mood in the market. they put the dot on the plot. the s&p 500 did recently dipped below the 2500 mark, then surge above it, setting a fresh record. the market is closed -- close to unchanged. but now it is treading water. let's take a look at the index where you see the reaction. indicating there might be a rate hike by the end of the year. that means fresh profits for the bank. if we go into some of the market snapshot you see the 10 year yield is nearing 230. the at the 1300 -- gold at 1300 level. apple was in the spotlight.
analyst talking about weakness and iphone sales. we saw a lot of suppliers drop as much as 5% on the. fedex had a disappointing first quarter after the cyberattacks. you can see the market moving higher. bed, bath and beyond, a story of retailers under pressure, down 15%, a disappointing earnings report. oil closed above $50. we did have the supply data reports. if we going to the bloomberg you can see exports are back above pre-hurricane levels. g #btv 5114 is real important. the oil the recovery in patch. what is also important, we saw gasoline supplies fall to the lowest in two years, it showed you the slowdown in refineries. traders a they will have to jam and get back to running, that will increase demand. that pushed prices higher, as did the opec talk. traders say that will give oil a
lot of room to test the higher range. we talk about $50 being a psychological barrier. we closed above it on the latest session. it will be interesting to see if we can go higher. betty: how long we hold above that $50 level. the federal reserve official he on track for one more rate hike this year. it will start to reduce its balance sheet, a stance that seems hawkish when inflation remains far below the target. but they will do it next month. kathleen hays has more. the dots tell the story. ots are athleen: the d big deal. why is there doubt? because there are doubts above inflation. it is well below target. yell in a knowledge -- yellen
acknowledged it is a bit of a mystery. the fed sees it stronger this year. the revised gdp to 2.4%. let's look at the dots. if you go to your terminal you can see at the far left hand corner in the bottom, this is 2017 and there is a long line showing -- suggesting one more rate hike. three for 2017. there are still four not in favor of a rate hike in december. it is lined up solidly behind janet yellen. the fed also seeing three rate hikes. the rate hike on its for december have gone up to 63.8% after the fed meeting from 50% yesterday, from 25% september 8. they are climbing steadily even though traders are remaining skeptical the fed can hike as much in two years.
was asked about what the fed is doing and why, and the conviction they have. she opened the door ever so slightly to maybe some shift, if the data justifies it. let's see what you think. >> if there is nothing set in stone about the policy path is -- paths, there is a great deal of uncertainty around them. not only is their disagreement, there is uncertainty. c participants have been revising their views over time and will continue to do so. kathleen: some economists have soued this consensus being strong has something to do with not wanting to rock the boat. they say the dovish signal could make the markets wonder what is going on. to be smooth, they are going to be doing $10 billion a month in terms of
proceeds they are not reinvesting. it is interesting to think about what is going on. inflation is so far below target, some people were surprised. there was a little more doubt on that september rate hike. yvonne: stay with us, we will bring in vince reinhardt. he joins us live from boston. good to see you. as kathleen mentioned about the dots, they stay relatively on the hawkish side. but also all over the map. numbers lowering their projections with inflation. why are they still going ahead on this? vince: they are working on the theory. the theory is, when resources are so tight, when the unemployed and -- unemployment rate is this site, it puts pressure on costs and inflation and they want to get ahead of that. what you saw in the way janet yellen is leaning is, they have
a forecast where it is only a temporary, transitory dip in inflation. andation will be coming up, they are confident enough to display they will raise rates. they do not view this as a policy hike, but re-normalizing policy. kathleen: you are the head of the division of monetary affairs dothe fed, a fed economist, you agree with this procedure, this way of doing things? they are supposed to be data-dependent, but they are basing it on a forecast that everybody, including the fed, has a history of forecasting that are often wrong. the easiest way to see that is if you look at the very first dot chart in the long-term column, the lowest dot was higher than the highest dot
today. that is how much it has shifted in the last five years. underlying this is, guidance is hard. telling people what you don't know for sure is guaranteed to be wrong on occasion. the fed has been wrong about that. the dot chart was a good idea when they were providing negative guidance -- we're not going to raise rates soon. positive guidance is hard if you do not know that point. curious -- we know the fed will try to manage this smoothly. economists and analysts are saying, there will inevitably be volatility. do you think that will have a direct impact on the economy? remember, we are talking about small net changes at most. at most, the fed is talking
about raising rates one more time this year, three more times next year, from a very low level. would not expect that to be a large source of volatility. it will matter for financial markets because that is what we care about, the path of the federal funds rate. when you think about all the volatility being injected by what is going on in washington, by the congress and the white house, what the -- what is coming out of the federal reserve building does not seem all that important. let me take the other side. the equity markets have rallied, bond yields have been low, based on a very large balance sheet. the fed is kept rates low for a very long time. i think we all feel like everything is great. removinge fed stops stimulus -- starts removing stimulus, it could start making
more difference at a time when growth is still modest. the gdp might grow at 2.2%. inflation is not a problem. do you see a risk the fed could upset that nice economic applecart? vince: the fed can always make a mistake. it has made mistakes historically. but if they get it right, they will be normalizing monetary policy at the point where the u.s. economy can bear it. they are raising the funds rate because they want to keep economic activity in the neighborhood of 2% or so. by the way, that is faster than that rate of output. they want to land monetary policy gently on the deck of the aircraft carrier that is the u.s. economy. they will probably get it right. yvonne: vince, stay with us. we have a quick commercial break.
♪ ."onne: this is "daybreak asia i am yvonne man in hong kong. betty: i am betty liu in new york. fed-speak,for more central-bank-speak with kathleen hays and vince reinhardt. quickly wanted to say to our viewers, we were talking earlier about managing the markets and the different reactions we saw in different assets. i want to pull up on my bloomberg what we saw with the dollar index. this is the intraday chart.
the spike up, which was quite interesting, the surge you could call it in the dollar, given what we saw with of the more hawkish tone of the fed, were you surprised by that, given it seems to be so widely telegraphed we did see a sharp reaction in the dollar? what did you read into that? vince: i was a little surprised by that market, participants were surprise. we were thinking the fomc was going to tighten in december and the odds of tightening last week should have been flipped. that is what happened today. months, thet couple dollar had been depreciating because of the sense that other central banks were going to have to go a lot more than the federal reserve. at least the federal reserve has a to read normal lies monetary policy.
investors apparently came to the view the fed will do it quicker than they thought. that added upward pressure on the dollar. do not think that will last, because the fed has less room to tighten van ecb and the bank of japan, eventually. onhleen: i want you to put your fixed income strategist hat while you watch the federal reserve. they are closely linked. 30 year bond ended higher today. one of the reasons was, janet yellen may be opening room to doubt about inflation. but the yield curve is flattening. there was a lot of skepticism still about the fed being able to make as many rate hikes over the next two years as they think. short and that is steep close off, long end and it higher. how do you understand the fed, being right or wrong about the fed, and from an investment
standpoint, how do you play it? vince: there are two features to the dot chart. keep going down as they appreciate the equilibrium is lower. the second part is, markets were e they always, i track below the dots. the fed is pushing against disbelief. we believe the fed has a little more to go in terms of lowering the equilibrium funds rate. but they will get there on a path that janet yellen said out, i.e., lower for longer. what it feels like is a lot like 2005, where the fed was tightening monetary policy and flattening the yield curve. if you remember, that was the time of alan greenspan's conundrum, where financial conditions were easing, even if
the fed was tightening. sounds familiar. yvonne: it certainly does. a lot of time leading up to that, this next policy decision from the fed. in the midst of that we have drama in d.c. when it comes to the perceived or potential government shutdown, the debt ceiling debate. how does the federal reserve respond? vince: with great difficulty. we think of that fomc meeting on december 12 and 13. it will be around the time congress is fighting over the debt ceiling and the continuing resolution. there is a lot of time between now and then. lots of geopolitical events could intrude. you got to take janet yellen at her word. when she said all decisions are data-dependent, well, it is a slow-moving process. this is not a contract, this is
their forecast. things turn out differently than they forecast, then they will not deliver. betty: we are waiting for the boj as well later today. do you think this makes anything more cloudy for the boj? they are looking at it from the flipside. dollar appreciation means the yen depreciation. what governor kuroda has had a hard time doing is generating inflation. anything that can help him is probably welcome news. reinhardt, chief economist, joining us live from boston. i also want to thank kathleen hays. plenty more to come. this is bloomberg. ♪
am betty liu in new york. yvonne: and i am yvonne man in hong kong. the world bank is selling insurance operations. it makes it the biggest acquisition by the hong kong-based in sure. cba disclosed in august they were in discussion with third parties about the unit. they were also -- betty: bloomberg has been told google is close to buying assets of a taiwanese filmmaker. -- is said to be planning us planning a townhall meeting today. there will be a pending announcement. they have been exploring virtual-reality businesses. bloomberg reports that google had been in touch. yvonne: facebook is stepping up enforcement and ad targeting, with human reviewers. they will clarify their
advertising policy to disallow targeting using any criteria that directly attacks a group of people. saidheryl sandberg facebook never anticipated the system being used in such a way. betty: we are down to the opens in japan and south korea, counting down as well to the bank of japan and their decision and comments on the outlook. you can see nikkei futures nikkei 225 futures unchanged as well as the chicago nikkei. watch dollar-yen. despite the idea that even though the fed is now tightening, the boj continues firmly on its stimulus path. that still is going to create a cloudy outlook for the dollar-yen, for where the japanese yen heads. although you just heard from vince reinhardt, saying depreciating yen, always going to be good for the japanese economy. yvonne: always a good thing for
yvonne: 7:30 a.m. thursday in hong kong. i came back from europe, came back to summer. 30 minutes away from asia's first major market open. betty: looks gorgeous there. 7:30 p.m. wednesday in new york, holding onto the remnants of our summer. markets closed slightly higher. a mixed session. we saw the markets selloff after the fed announcement. i am betty lou in new york. yvonne: i am yvonne man in hong kong. you're watching "daybreak asia." let's get the first word news. >> the fed has announced the beginning of the end of an era,
saying it will start to shrink its a giant balance sheet next month. the fomc left rates unchanged, but said policy makers still expect another hike before the end of the year. janet yellen continues to see the economy strengthening with a healthy labor market and rising inflation, but admitted that cpi undershoot is a mystery. >> for quite some time, inflation has been below the committee's 2% longer run objective. inbelieve that the shortfall inflation reflects developments that are largely unrelated to broader economic conditions. >> legal experts say equifax could get away with a just paying one dollar for each of the 143 million people whose data was compromised by hackers. that is based on the money anthem paid in june for claims it did not protect customers from a hack. faces more than 100
consumer lawsuits, but they say neither side has a slamdunk case. a snap election in japan is expected to mean a substantial delay in new can see notes -- casinos. expected toas provide a bill, but the election would put that off until next summer. to 25 billion dollars in potential revenue from japanese casinos, making them one of the most lucrative opportunities in the industry in years. 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. ♪ on whatlet's get more we should be watching is trading gets underway in asia. sophie kamaruddin joining me on set. slightlyal reserve more hawkish than expected. we saw that in the dollar.
what will that mean for the fx world? sophie: the dollar breaking free, thanks to yellen. we are expecting a greater chance of a december rate hike. we have to keep in mind we have markets are meeting the most bearish on the dollar since early 2013. some traders are wary of what a potentially resurgent dollar could mean. 5.21 toto pull up g #btv show you what is going on. since januarys 2016. you can see the debt following the fed decision. we are seeing a continued run. some traders are switching up their strategy to reduce exposure to the greenback. they used the euro and swedish krona. paul mcnamara is shifting to the euro as well as the aussie and canadian loonie. he said well know em currency is
looking super cheap and attractive after the two-year rally, there is still the ringgit, rupee, and brazilian riel. are other central bank decisions today. the yen, i think has been cloudy on what will happen. especially now that we see the yen at 112. could be good for kuroda-san. sophie: continuing to fall after the fed's decision, trading at a two-month low. with a two in three chance of a december hike, it leaves a chance for more rises in treasury yields. one said that fresh impetus is needed. we will see the boj governor, corroded, can provide such incentive. 126, you can see the yen broke through the 200 day moving
average. the line in yellow on this chart. they could beat poised to test of the resistance. fedo have the hawkish against the dollar. we do have the yen remaining on the defensive. again, the cloudy outlook for that currency. so much, taking a look at how the markets are ahead of the fed and ahead of the opens. founded over a year ago, ellevest is an online investing platform that offers exchange rate funds to help women save for retirement, a different way for women to look at gathering funds before they retire. cofounder and ceo sallie krawcheck enjoys city rolls that city bank of america and just this week closed $834 million funding round for her company. great to see you again. sallie: i enjoyed those roles.
some were better than others. good days and bad days. betty: congratulations on your fundraising round. i know several big venture capital firms have an bounce -- invested. whichnk led the round, invests in many women-owned companies. given all we have heard in silicon valley, the gender gap, and what is going on with uber and other vc firms, what was the fundraising like? sallie: we were fortunate because the business is off to a great start. ago,a year ago, two years women do not want to invest, a digital platform for women -- are you kidding me? we really heard that. it is nice to have gotten off to a good start and to have the opportunity to work with really
terrific investors to get the business and get the mission. know, manys will people who get it. re-think impact. another has done a lot of work for women. and salesforce, they closed the gender pay gap. we have great investors they get it. betty: were there some you specifically wanted to avoid? sallie: yes. world, somee vc say, if the color is green, i am there. sallie: i understand. it is hard to say we want to get investors in line. not everyone has that opportunity. but when we read every week about venture capitalists who do not treat women right, that say, i admit, i am a creep. we want to help women invest and have more money, which is good
for the economy and society, to have venture capitalists who chase them around the desk -- it does not really a line, does it? you grewu'd said how up on wall street and saw the gender gap, discrimination against women. do you find the same in fintech? sallie: yes. i really thought it was over. i was wrong. i thought that was a 1980's, 1990's thing. but the stories we are reading about how -- first of all, women are not getting funded. women are getting a fraction, a single digit fraction of venture capitalist. you could say it is a meritocracy, you did not know how to run a business, but research shows they have women in senior roles, have a 63% better returns than those of men only. we love men come a but diversity drives stronger business results. betty: you have talked about the
personal experience on wall street. you are exceptional. sallie: are you asking if someone made a pass at me? betty: did anybody not invest in your company? mentioned, what we have gotten over time is, are women a serious market or a niche market? they one minute in which were telling me i did not know what i was talking about here and there. i said, you're probably right. and then the guy actually said to me, we are going to higher financial advisors, you do not know what you are doing. lynch -- iran merrill merrill lynch. i know more about this than almost everybody on the planet. and hisit was just him personality with gender or having a bad day, it was a moment where i said, really, dude? betty: a little wake-up call there. yvonne: thanks for joining us.
i wanted to get your take on automation. will six andthat solve the gender issues and finance once and for all, by eliminating human jobs? sallie: i do think automation is the wave of the future. in technology on the wealth management side will not be people or technology, it will be people and technology. and technology, technology, technology. it does not address the gender gap. we are the only ones that have an algorithm that builds in women's salary peaks. and women live longer. if you have the wrong information and say everyone is a man, you have the wrong step -- stuff coming out of the algorithms. havent from women do not -- need their own investing solution, to women live longer
than men, and they do need their own investing solution. betty: speaking about fintech and the itemization -- automati on of this country, they are talking about jobs that are being lost. there was this estimate about how jobs are be affected on wall street. >> i would not be surprised if that were a lot of jobs are going to be replaced by automation and robotics. we have done a lot of work with some companies and we think in the next five years, 30% of the jobs will disappear. betty: do you agree? sallie: jobs will disappear, and prices will go down. when i had responsibilities for merrill lynch, the platform we had in place, $1.5 billion to put in place. the platform at ellevest, which does not have all the bells and whistles, cost us millions of dollars to put in place.
basic thing.ame from billions to millions, it is a big deal. betty: it is ironic, you're building a company that could put your former wall street veterans out of work. is the other thing, the financial advisors of wall street [indiscernible] advisor,al financial 86% male, in his 50's and 60's. the industry is aging, it is not been replenishing. millennial's are saying, we want people, but a lot of technology, too. betty: great to see you. sallie krawcheck, ceo and cofounder of ellevest. in a moment, we will switch gears and talk president trump.
yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: and i am betty liu in new york. york.was speaking in new he said, iran will not be the first to violate the agreement but will respond decisively to its violation by any party. back with us from washington for more. tit-for-tat against trump and his comments in front of the general assembly.
joe: rouhani was emphasizing the fact that if the deal falls apart, it will not be because of iran. audiences.essing two one of the hardliners back in iran, to be defiant in the face of what trump has been presenting to them. he called trump's speech the day before insulting. robust political newcomers trying to blow up the deal. the other part of the audience are the other five parties to the u.s.ment, that of allies -- the u.k., germany, france, along with russia and china. they are also part of that deal. was emphasizing that the adherence to international agreements and the importance of international cooperation. he was trying to give some counter to trump. yvonne: that is right.
we heard from president trump earlier talking about leaving things up in the air about how he views this accord. we are waiting to hear from rex tillerson in a couple minutes. is he going to provide clarity on where the president is leaning? joe: it is unclear. trump said he has made a decision about what to do about iran, but would give no hints about what that means. he could completely withdraw the u.s. from the deal, he could announce the u.s. will no longer certify that iran is compliant with the terms of the deal, or he could demand or force a renegotiation of the pact. tillerson is meeting this evening with other parties to the agreement. the permanent members of the security council plus germany and iran, to talk about where they are at. will not clear tillerson
come out with some agreement or decision on a way forward. the meeting has gone over. at 7:40,pposed a brief and that has been pushed past 8:00. betty: we are getting comments from the e.u. policy chief saying all sides are implementing the iran agreement, that the iran nuclear agreement is working. also saying the iran nuclear deal is not a bilateral agreement. certainly sounds like whatever the u.s. decision is, if it is not to stay with this deal, they will have a hard time convincing allies to back them up. this is the important point for the trump administration and the hard part of doing anything with it, there are other parties to this deal. u.s. allies including theresa have expressed support for the deal and
completing it. macron has opened a way to u.s., saying, maybe we will add on negotiations about extending the prohibitions on uranium refinement, aiding iran's missile development, as well as their actions in the that part ofaking a new negotiation that would be an add-on to the deal. but it is not clear anyone else would go along with that. area and russia certainly not looking to back up trump on this. all the rest of the other allies -- the e.u., australia, has come out in favor of the deal. it puts us in a tough spot. come appreciate your insight. it joe sobczyk, bloomberg's senior editor. looking ahead to the speech from secretary tillerson in 20 minutes time. we will bring you the headlines when they come through.
turkey ready to send more troops to syria and in an attempt to end of the civil war raging more than six years. globalg at the bloomberg forum, erdogan praised russia's efforts to resolve the conflict. let me say this. before anything else, or political is this, increase your friends, increase your enemies. we are working on this. we had something negative with russia. but in a short time we got past this issue. right now with russia we have gotten to a significant place in the foreign exchange volume. it is a trade volume of $36 million with russia. now russia will pass germany to be number one in tourism.
a very significant wave of taurus have come from russia to turkey. have come from russia to turkey. as turkey, we are making calculations according to a win-win, and we will continue to do so. there is a 2.5 difference -- hour difference between us and moscow. there is only the black sea in between. we are there in 1, 1 .5 hours. on monday we will come together with president putin. we will have a telephone call. but on thursday we will have dinner together. we will talk about these developments, about what is happening in syria. right now, there are some problems in italy. we will talk about that.
despitethese offense, all this, children [indiscernible] has been resolved as a non-conflict area. there are towers of the russian federation, protective areas, police stations. and in turkey, police stations. all this, our soldiers are doing. this will continue until peace is established. as 100,000 syrians have returned to their lands, our syrian friends staying with us will return to their land. just to ask that question again about the troops in syria,
do think you will keep the number of troops or increase the? syria?kish troops in >> that will change according to conditions. it could increase or decrease. conditions will determine it. the quality of our soldiers will also change accordingly. sometimes it can be commandos, or he could be regulars. this also changes according to conditions over there. our highest ranking soldiers are represented in their waiting right now at the border. they are ready for a mission at any time to keep the peace. betty: that was turkish president erdogan talking to john mickelthwait at the bloomberg business forum. we will hear from china's ambassador to the u.s., he says beijing needs to make difficult but necessary changes. this is bloomberg. ♪
♪ betty: this is "daybreak asia." i am betty liu in new york. yvonne: i am yvonne man in hong kong. china's ambassador to the u.s. says cooperation, not war, is the path to economic success. cui tiankai welcome the u.s. and other country's participation in china's one belt, one road initiative. any war --t want trade war, currency war, whatever work, with anybody. certainly not with the united states. economic relations are an important pillar of the overall china-u.s. relationship. it is mutually beneficial by nature. ago, when5 years president nixon came to china for the first time, we had virtually no trade between us. of course, no trade disputes,
because there was no trade. trade isr bilateral reaching some $600 billion per year. that is such a tremendous growth of mutual trade and economic relation. it benefits people of both countries. this is a fact. there is growth in trading and investment. there are problems, sometimes disputes to be dealt with. but this has to be done in a constructive spirit, with the aim of mutual benefit. i am quite sure for president trump, the two sides will reach agreement on the issues we are prospectsth, and the for mutual trade, for investment, will be better. betty: that was china's
yvonne: 8:00 a.m. here in hong kong, live from bloomberg's asian headquarters. i'm yvonne man. welcome to "daybreak: asia. the fed is reducing its balance sheet next month. janet yellen sees another rate hike this year and three in 2018. the end weekend for a fifth day on the fed announcement. gold, another big loser with a more hawkish town. betty: from bloomberg's global headquarters, i am betty lou in new york, just after 8:00 p.m. president trump saying he has made a decision on iran, but refuses to say what. rex tillerson is due to speak in just a few moments. diving up a deal.
google may buy assets from htc to bolster its growing hardware business. you know, it has been a central-bank bonanza, right? going from the fed to the boj, the fed marketing that it will be reducing its balance sheet month. we saw a little more of a hawkish tent to the fed despite inflation still stubbornly below the target of 2%. some sizablew moves when it came to the dollar, strengthened the most in a month. the people we were talking to this morning were quite surprised by the strengthening of the greenback. could be favorable for the boj to decide in just a couple hours
as well. we are ahead to the speech from rex tillerson speaking about the iran deal. is the president going to quit, stand by it, or add new constraints? that is the key question coming up. in the meantime, let's get to the first word news with paul allen. paul: president trump says he has made a decision on the iran nuclear deal, but won't reveal what it is. he refused to say whether he intends to drop an court he has called an embarrassment to america. the iranian president rouhani says to will not be the first to violate the deal but would respond decisively to attempt to change it. rex tillerson is due to speak at any moment. a new bloomberg survey says the u.k. will have to agree its divorce bill with the eu before the block will allow negotiations on trade. we spoke to the other 27 members to assess their position. they said scan progress has been made so far, meaning little chance of trade talks winning the go-ahead next month. reports say london could offer the equivalent of $24 billion to quit the eu. some foot the bill as high as
$100 billion. president trump says his administration is ready to help puerto rico as it is an battered by a second major storm. maria has weakened to a category 2 system but still packing winds and rain. the island is without power and the capital is flooded. maria follows hurricane irma and the two storms are expected to leave a damage bill in the billions of dollars. the earthquake in mexico has claimed at least 225 lives, making it the country's deadliest since 1995 rescuers continue to search a collapsed school in mexico city, where 25 students and teacher on -- teachers are thought to be buried. the capital is built on soil that was once a lakebed. instead of cushioning the city from earthquakes, seismologist sayed exaggerates their effects. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg.
yvonne: let's take a look at how asian markets are shaping up. the market open pretty mixed when it comes to equities, but the stronger dollar is what we have to contend with after a hawkish tone from the federal reserve. >> december or bus potentially for the fed rate hike. we have the dollar continuing to rally up about .1%, sending bonds and goal lower. gold has slipped below $3000 for the first time this month. check out what is going on with the yen continuing to drop. trading near two-month lows. it is the worst g10 currencies today, followed by the kiwi. the kiwi dollar slipping with stocks in wellington, despite the better gdp growth we got for second quarter. signaling a recovery after two sluggish quarters, putting them on track for a ninth year of economic -- we do have the yuan falling the most us in september 19, trading 1132. the aussie is down .2%, but
keeping above the level. they have raised the forecast --m the aussie dollar to 83 $2.83 u.s. it is expected the rba will join the tightening bandwagon. keep an eye on resource players, particularly oil. we are seeing base metals continue to rise, aluminum gaining about 1%. we do have the offshore yuan extending losses for a fit session, seeing a weakening bias in the daily fixing. that is expected to continue. a quick correction of the hong kong dollar, little change now, but turning out to be more exciting than usual as trailers -- traders are piling on bets that stand to benefit from further volatility in the currencies options on the hong kong dollar. that has top $100 billion. the nikkei 225 is gaining .7%. telcos, energies leading the gains.
keep an eye on financial stocks following the industry group leading gains on wall street. banks to hawkish central bank talk, as well as rising yield. now i want to turn to the kospi, which is little changed, but apple suppliers are going to be in focus after apple shares slumped by the most in a month as we are seeing subdued demand for the iphone 8 orders. a last word on the philippians. we do have the government saying there will be no work in public offices, given that there are protests plans today, but banks are going to remain open and there will be trading on the stock exchange. most important become of central bank decision will be due out later this afternoon. other than the boj, we also have the philippines central bank on deck. yvonne: a lot more coming up. sophie kamaruddin on the market open. the federal reserve, our top story this morning, officially on track for one more rate hike this year and will start to reduce its balance sheet.
it stands to be hawkish when inflation remains far below target. kathleen hays is here with us now. the balance sheet announcement was of course 100% priced in. the dots not so much. the market seems to continue to doubt that. kathleen: it definitely had an impact on trading, a selloff of the short end of the u.s. treasury market shows it was a surprise. let's start with what everyone expected, janet yellen taking this historic step to reduce a $4.5 trillion balance sheet, the first central bank in the world to reduce this crisis-induced extraordinary set of steps. we will start in october, we already knew that. the fed will be -- proceeds won't be reinvested. put that to one side, very important, but did not move the markets. ,t is all about the doss inflation at 1.4%, far from the
2% target. janet yellen, even though she acknowledged is a bit of a mystery, still suggesting the fed is on track regardless. let's hear what she said at a press conference after the meeting. >> for quite some time, inflation has been running below the committees 2% longer run objective. however, we believe this year's shortfall in inflation primarily reflects developments that are largely unrelated to broader economic conditions. kathleen: bottom line, there are fomc who the 16 of the are seeing the hike in december because they say three, there has been two, so that is where we are heading. a stronger economy despite the hurricane. the fed for now is set in that direction. betty: kathleen joining us now for more on central banks. we have the managing director and forex head douglas borthwick. good to see you.
it was a somewhat muted reaction in the bond markets and stock markets, but in the dollar, you saw quite a spike up after the fed decision and the comment. what did you make of that? >> i think there is a lot of positioning going into this. there is an expectation the fed would back away a bit in terms of the december rate hike. instead, the fed wetmore all in. i think the market expected they would back away because the hurricanes and because we have not seen inflation as aggressive as the fed seems to see it. a lot of folks one into this, very short dollars, then took those. i don't think this has changed the direction of the dollar. it was a positioning move today. this 11870 trading at right now, where we were a couple days ago. 2150, i think we will continue that for a while at least until we get the ecb chitchatting on what they are going to do and how much they're
going to roll up their balance sheet. betty: you mentioned about the ecb. we are seeing a pullback from the 120 we saw this week for euro-dollar. do you think the ecb -- will they start to get more worried about the strengthening dollar, what is going to mean for inflation and when it starts to impact stocks? that does not seem like they have any urgency of the moment. >> the ecb has no urgency. when questioned said he was concerned about volatility in the euro but not necessarily the strength. a new survey came out in germany, talking about how the euro is largely irrelevant. angela merkel is campaigning to get reelected. she did not -- and she does not bring up the euro at all. the only people talking about euro strengthening our sources in the u.s., the person looking for dollar weakness is the president of the united states. betty: let's come back to the fed. we know basically what it looks like, the far left hand side,
you can see there is a nice cluster. this is signaling three rate hikes this year, three next year. markets are doubting that. you said you don't believe the direction of the dollar has changed. do you think the dollar is still in a bearish trend even with the fed threatening rate hikes? >> it is absolutely bearish, it has been bearish from the start of the year. the reality is the fed will raise rates by 25 basis points and the central bank abroad will say, we are thinking about taking our balance sheet up, too, maybe we will raise rates, too. you see the u.k. talking about it, canada and mexico raising rates aggressively. you have to look at the relative volume of the u.s. dollar versus other countries. so far the u.s. has a lot of talking and not a lot of action. today that the fed talked about doing something, but have not done it yet. yvonne: are you including the yen? will the yen strength and as well versus the dollar? >> i think the yen is a little
different. the japanese for sure, when we dip down below 106, they have not said anything. usually they say we are closely watching the currency, and they stepped away from discussing the currency altogether. i think there is a general agreement globally that the u.s. dollar will weaken. president trump is looking forward to increasing the competitiveness of the united states. to manufacture in, you have to have a weaker dollar. a u.s. employee is more expensive here then mexico, china, and he is looking at every country that has a surplus and saying, maybe you should not have that surplus, we would like to weaken our currency versus you. said, treasury secretary it is not the dollar is that the dollar currencies are two weak. betty: i don't know if everybody believes that. i think there are some that said the bigger losers are going to be the yen and gold, and the dollar is going to strengthen. >> i think a lot of folks have
called for dollar strengthening since the start of the year. one of the most interesting things is it has not. that is a call we have had since the start of the year, and something we continue to believe. the reason the euro went from 120 down to 104 was on the back of greece. when was the last time you looked at greece cbs on the television? no one talks about greece anymore. >> there are so many other things to worry about right now. >> you expect to bounce back in the euro because of that. the reason from going down to one of five is greece. greece is not talked about. i think what you are seeing is a punch back in the relative volume of the dollar against other countries. the u.s. had a strong dollar policy. that pushed folks away from manufacturing goods here. instead, the u.s. was exporting treasury bills. now we have decided, you can export treasury bills to create jobs for middle america. if we can create manufacturing again in united states, that will create jobs.
job holders pay taxes, could be better for the u.s. in the long run. yvonne: stay with us, we will talk more about em and asia in our next segment. also looking ahead to the speech from secretary rex tillerson coming up in this hour. in the meantime, iran hits back at the u.s. effort to review the nuclear deal. betty: plus, softbank speaks at bloomberg's global business forum. he offers his thoughts on innovation. this is bloomberg. ♪
we were talking in the earlier segment about the dollar strength we have seen. you are saying it probably won't be too sustainable in the near future, what we see in the strength so far. what does this mean for em? we see a 20 month rally in em currency. cannot be sustained? >> it is sustained by the strength of the dollar. stronger and goes has this change in direction we were discussing earlier -- which i don't think is going to happen -- but if it does, these emerging markets have dollar-denominated debt and will have trouble hanging back. the easiest way for these folks to do well is for the dollar to weakened. another outlook for why the dollar should we can -- should weaken. andt does, all bugs go up down together and you will see strength in korea, malaysia, indonesia, china. i think as long as the weak dollar philosophy that i am talking about and discussing happens, you will see emerging markets continue to do well. yvonne: you mentioned china, i have a hard time calling that an emerging-market. yuan, and theng
uc government policies continue to move in the direction of supporting more openness? more true flows and flexibility? >> the chinese are looking to remove as many obstacles as possible moving towards a freer currency. there is one person who pops up in the news but no one really follows him. he talks about flexibility. the last time he did that, you saw significant strengthen the yuan versus the dollar and you saw the euro pop up from 130 to 160. the chinese have been doing something lately the last couple of months, buying u.s. treasury's. wide? and they are actually trying to stop yuan from strengthening as opposed to weakening. they come into the market, buy dollars, take those and put them into u.s. treasuries. you are finding there is a general move for the dollar to weaken.
that means china has to strengthen based on how it has constructed its assets. if the dollar weakens against the yen and against the euro, the chinese currency strengthens. what you will probably find tonight when you have fixing for the yuan, dollar-yuan will fix higher because dollar-yen is higher but the euro is a lot lower. yvonne: i kind of get your point. i will throw up this chart. you see the yen is actually depreciating even as the dollar flat lines. it is interesting to see the optics we are getting from the pboc, where we see four days in a row, as you mentioned the yuan fixing has been lower than expected. we are heading around 660 right now. do you see the renminbi can continue to weaken as quickly as it came up? >> i think you are seeing the 660 level, but i think it will turn around, especially if we see dollar-yen stabilize and start to move lower, which is our expectation. if that happens, you will see
650, 640, and continue to move. it is not about a move that central banks are concerned about. they are concerned about the pace of moves. i think the chinese and americans are concerned about the pace, also trying to free up their currency. i think you won't see dollar-yen start to move lower. it does not take much for dollar-yen to move down a figure and a half, all it takes is an icbm let off from north korea and you will see dollar-yen back to where it was earlier today. we are not concerned about a change in direction. we don't believe it is going to be moving higher, we think it will continue to move lower at a slower pace. the last few days and the fixings you have seen has been based on the ability for folks to buy chinese currency. that certify of has folks thinking, maybe they want a weaker yuan. i don't think that is the case at all. betty: what about the china bears that have come out in the last several years and accelerated their calls that the yuan is in for a pretty sharp drop?
particularly after the congress next month, given all sorts of issues, but primarily the debt issue in china. the debt to gdp, which is a norm us and china. what about those forecasts? >> there is plenty of yuan bears sitting in the gutter as well. betty: they have been wrong so far. >> they used to be the japanese yen was a widow maker. i think the yuan is now the widow maker as well. there are folks who look for weakness and don't find it. i think that is something that will continue. certainly china has an economy with tremendous debt, but also not a free market economy like the united states. the chinese government is able to smooth things over in a more controlled fashion than the united states. the u.s.'s in the situation we are right now because the central bank bought tremendous amounts of debt to keep us stabilize that a certain level. the chinese can do these things as well. there is plenty of machinations
they can do to make this continue for longer. what are the hot trades right now and what are the traits nobody is watching? i'm also thinking about the pound because we had the meeting, bank of england. the bank of england would love that because it would be another way to stamp out inflation. what are you looking at? >> there are two big volatility plays. obviously brexit. can sterling continue up to 160 or collapse and go down to 120? what is going on with their foreign minister right now? is there a breakup that is going to happen? if that is the case, you could see tremendous volatility. it is less about the direction for sterling, more about playing the volatility. in china, there are more folks going the other way. in the euro as well, folks have listened to the fed. --re was much in today's fed there wasn't anything in today's that i did not know yesterday, but there has been a change with the dollar strengthening. this drop in the euro is a gift story. the move in dollar-yen, let's
sell that as well. i think the dollar will continue to weaken. i think most folks who are looking for the weakness to be hitting land area, i think that is not the case, think we will punch through and see more dollar weakness. yvonne: before we let you go, decisions not just with the boj, but also taiwan, philippines, indonesia later this week. do you think any of those currencies are more vulnerable to a more hawkish fed? >> no, i don't think so. the only thing we heard from today about the fed being more hawkish is there were more folks voting for a raise in december as opposed to before. otherwise, the story out of the fed was on par. looking at the philippines, certainly they have a rate decision tonight, bringing everyone back even the most folks are out of work today -- the reality is, there probably won't be any decision whatsoever. i think you find the same thing with the boj overnight as well. a lot of these countries in asia
are watching last their own economies and more watching what is happening to china and trading partners. >> all those who have suffered, continue to suffer -- yvonne: we are going to leave it there and go straight to the speech from the secretary of state, rex tillerson. let's listen in. >> obviously the succession of massive hurricanes may caribbean are really testing, i think the will and spirit of the people that live in that area. it is also testing our response and capabilities. what i would tell you is our response capabilities have been extraordinary. we are really grateful for the cooperation with other nations. as you know, there are many nations involved in the string of islands that have been affected, and the cooperation has been tremendous in terms of our ability to address the needs of our own citizens, the american people better in those
areas, but also to work cooperatively with other nations and help them as well. i also want to extend our thoughts to the people of mexico , let them know that we stand with you in the aftermath of two very bad and massive earthquakes. i know many of you are following the most recent quake in mexico city, very heartbreaking situation to watch unfold. the president did speak to earliert pena nieto today, expressed his own deep concerns about the situation, also indicated his immediate deployment of assistance to mexico city of search and rescue expertise, a very large team of people who are trained for these specific type of circumstances. immediately, he deployed goes towards mexico city with heavy equipment. obviouslypena nieto
thanked the president for that, said he welcomed and accepted that assistance. the president assured him if there are other ways we can help , notwithstanding the fact that we are continuing to deal with significant aftermaths of hurricane harvey and hurricane irma, now to the extent we will be dealing with hurricane maria -- this i think is a real testament to the relationship between the united states and mexico. our thoughts and prayers are with the mexican people as they are dealing with this terrible tragedy. again, ready to help them anyway we can. i know you want to get to your questions quickly, so i'm not going to make a long number of comments, just a couple of remarks. from a meeting of the parties responsible for the jcp away, the arabian nuclear deal -- the iranian nuclear deal, a meeting the eu
commissioner convened so we could have land the exchange of views of all the parties to the agreement as to how implementation is performing. it was not a technical discussion. it was a political discussion with political aspects, so we had a very open and candid exchange of all the parties to that agreement. i hope it was useful to others. i found it useful to have their perspectives. i hope they found it useful as well. we clearly have significant issues with the agreement. the president has been quite clear and articulate as to his concerns about the agreement itself, the enforcement of the agreement. , as he has said and i have said many times as well, that when one looks at -- he uses the word spirit of the agreement, i use the word expectation of the agreement --
even contained in the preamble of the agreement, there are clear expectations of the parties negotiating this nuclear deal that a conclusion of the nuclear agreement with set aside a serious threat to the region and to the relationship, and if allowng so, this would the parties to seek a more stable, peaceful region. that was the expectation of the parties, and regrettably, since the agreement was confirmed, we have seen anything but a more peaceful, stable region. this is the real issue. that is why we talked about iran defaulting on these expectations , because those expectations clearly have not been met. since that time, iran has continued to prop up the assad regime and its horrible way in which it has brought violence to its own people. they have continued to engage in
malicious cyber activity. they have aggressively developed in tested ballistic missiles defiance of un security council threatening the security of the united states and the stability of the region. they have provided weapons and training forces to deploy to create instability throughout the region in yemen, syria, and iraq. i think we even see them carrying out provocative operations in the gulf itself against our naval coalition vessels as they tried to peacefully transit the gulf, threatening the very freedom of navigation through this very important right away -- important waterway. it is difficult to say that the expectations of the parties negotiated this agreement have been met. perhaps the technical aspects have, but in the broader context , the aspiration has not. so recently, the u.s. has taken action to counter those
activities. as you know, additional sanctions were recently put in place to deal with the ballistic missile testing, cyber activity, other destabilizing activities. we are going to continue to monitor iran's activities, and we will take additional steps, other destabilizing none of which put us in anyway contrary to our obligations under the jcpoa. we are fully compliant. the activities we are sanctioning, iran for carrying out are not covered under the technical agreement of the jcpoa itself. i think in particular, the agreement has this very concerning shortcoming the president has mentioned as well. that is the sunset clause, where one can almost sense the countdown clock to when iran can resume its nuclear weapons program, its nuclear activities. that is something the president simply finds unacceptable. all of you are keenly aware of
the circumstances we're dealing with with north korea. when we look at the history of north korea's weapons development program, in many senses, we have seen this before , agreement that simply pushed it to another government, another administration to deal with. the president has made clear he does not intend to do that. he takes his responsibility in this particular matter quite seriously, and that is the reason he is very carefully considering the decision of whether we find the jcpoa two continue to serve the security interests of the american people are not. we expect iran to fulfill its commitments. until that time, we will fulfill our commitments. the president has the matter under consideration. with that, let me stop. that is the most recent event i came from. there have been a number of u.n.-related events, and i'm happy to do the best i can to
address questions you may have around the many activities that are going on. i am going to allow heather to referee for me. >> we will start with the associated press -- yvonne: that was secretary of state rex tillerson speaking, coming from a meeting with parties responsible for the iranian nuclear deal. he said it was an open xchange on that agreement as a political discussion. we did not hear a whole lot of clarity when it came to where the president is leaning towards when it comes to this nuclear deal, whether he is going to quit it, do more tweaks, add restraints, or what not. he did mention a little bit about the expectations of the agreement. he says iran has not met those expectations so far. betty: we heard rouhani earlier say they will not be the first country to have violated the agreement. it certainly would be holding others to that as well.
what was interesting about tillerson talking about the sunset clause, a very contentious part that allows iran to continue to enrich or restart enriching uranium after this deal, in about a decade's time. that is one serious issue that the u.s., as he had mention, trump finds very troubling. you can expect the u.s. is going to try to do something that won't to be in violation of this agreement. you can continue to monitor the q&a session happening right now with the secretary of state. yvonne: let's get some immediate reaction, jodi schneider, our asian editor joining me on set. he brought along the analogy of north korea, about that nuclear program, basically a lot of officials have kicked the can down the road. did we get more detail here from the secretary of state? jodi: it is sounding more like they have a deadline. october 15, that is the next time.
every 90 days the u.s. has to certify that iran is in compliance with the agreement, from the u.s.'s standpoint. we have a few weeks. these comments, given what president trump told the u.n. the other day that the deal was an embarrassment, it is hard to see how they say we are still in. they have not pulled the plug or have not said they are going to, but it is hard to see that. their biggest concern is what happens in 2025 and 2030, when the most stringent restrictions would be off the table. this is what the secretary of state and the president have said about kicking the can down the road, which is what they claim happened with north korea. rest: does this put to what we believe is trumps decision -- trump's decision? we have heard tillerson say one thing, then trump contradicts, and back and forth. do you believe this is the decision the u.s. is going to
stay in this agreement, but going to try to find other ways to handle iran? the secretary of state did not come right out and say that, so it is not as neat as that. deadline, october 15, they have to either say we are still in or we are not and kick it back to congress at that point. that is what it would be, to redo this deal. many in congress don't want to do that. they have already past sanctions against iran. it is sounding more like the u.s. is going to either significantly pullout of this war going to ask to renegotiate. the other members of the coalition -- the members -- don't want to see that. we heard that very strongly from macron, the french president, the other day, who showed great
divergence from president trump on this, who said that they think the deal is working and they see international atomic energy agency continues to certify that iran is in compliance. yvonne: we are getting more detail here from the secretary of state from reporter questions. rex tillerson saying that trump has not revealed externally what he has decided with regards to the iran deal, so it seems like even the secretary of state himself does not know where the president is leaning on this forefront. , we it comes to macron heard comments from him saying, i have not given up to convincing trump on iran and the climate deal. is there a halfway point where the u.s. and allies can meet when it comes to iran? jodi: there could be trying to renegotiate the deal, certainly. again, that would send it back to the u.s. congress, which has not shown a great appetite. this is a hard-fought deal to years ago. i was in washington, we covered
it. it was really hard-fought. those republicans don't seem to be in the mood to go along with a deal. they seem to be more wanting to impose sanctions. it would be really hard. it opens up the whole deal -- what would iran do? iran has said, we are not going the first to violate, however, we will take action if anybody pulls out. once the u.s. tries to do something to get out of it, it becomes very complicated, what could happen next. betty: to do think we will get further reaction from iran? jodi: i assume we will be hearing from iran. we heard from president rouhani, who made comments to the u.n. he called out president trump and said he was a rogue newcomer. but i assume after we finish hearing from secretary tillerson, we will hear from iran. betty: how do you think this is
going to affect the relationship with key allies as this decision is pending? how do you think this is going to affect -- we mentioned macron had made comments. how is this going to affect our relationship with allies? jodi: it certainly kabul kids it. it -- itnly, locates omplicates it. having these contentious issues as trump is calling for other nations to help with tougher sanctions on north korea, a cobbler gets the relationship, presumably with china and russia as well, who are signatories. yvonne: we were just learning -- if he does scrap out of this iran deal, how does that impact the whole discussion with north korea? where are china and russia going to play in all of this? jodi: it is certainly a cop locating factor. you are saying to china and russia, help us with north korea
, but we are not going to do the same with iran. it raises all kinds of questions. that may be why we are not hearing a definitive -- we are going to pull out of this, not going to certify on october 15, because in a week where the u.s. is trying to get some support from others, it would not necessarily be maybe the most expedient or the most diplomatic thing to do. yvonne: jodi schneider, joining us with the latest on iran. betty: been so much, jodi. let's get to the first word news now with paul allen. paul: the fed has announced the beginning of the end of an era, saying it will start to shrink its gigantic balance sheet next month. the fomc left rates unchanged as expected. fed policymakers still expect another hike before the end of the year. janet yellen continues to see the economy strengthening with a healthy labor market and rising inflation, but admitted the cpi
undershoot is a mystery. >> for quite some time, inflation has been running below the committee's 2% longer run objective. however, we believe this year's shortfall in inflation primarily reflects developments that are largely unrelated to broader economic conditions. paul: legal experts say the facts could get away -- say equifax could get away with just paying one dollar each for the millions of people whose data was compromised. that is based on the millions of dollars that anthem agreed to pay to resolve claims they did not protect customers from a hacked in 2015. faces facts e --quifax lawsuits, but analysts say there is room for a deal. new zealand prime minister bill english has cast his ballot in
the general election after the latest poll gave his party a widening lead. many new zealanders are able to vote early. gdp data out today showed second quarter vote right on estimates of .8%. nationalists campaigning hard on economic management as they seek a rare fourth term. japan iselection and expected to mean a substantial delay in new casinos. shinzo abe had been planning to introduce a bill by the end of the year. an official told us an early election would put that off until next summer. toing analysts forecast up $25 billion in potential annual revenue from japanese casinos, making them one of the most lucrative opportunities for the industry in years. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. yvonne: let's take it back to the markets and see how asia is shaping up after the feds slightly hawkish tone from fomc meeting. keeping those dots quite
scattered when it comes to 2018. what does that mean for asia? courtney: they are keeping -- sophie: they are keeping their eye on december. equities are looking mixed. check out the yuan and korean stocks, sliding, although we do have the bank of korea governor saying he anticipates a limited market impact from the fed decision. we are keeping a close watch on the dollar-yen, trading .33% lower. earlier in touch 155, but for now keeping steady even as rex tillerson spoke of the u.s. approached iran. the yen weakness has been a boon for japanese equities, trading at two-year highs. equity bulls reinforcing the uptrend we are seeing in the nikkei, gained a 6% since the start of last week, outpacing other global benchmarks ahead of the boj decision. ,eep an eye on the jgb market 10 year yields rising, set for a third weekly advance.
tokyo securities expects the jgb market to start on a soft town, but they do see support coming through. jumpedee year yield has to the highest since december 2014. we do have the rba governor set to speak. we are going to look for clues on what that might mean for the potential for risk of a rate hike. check out sydney, discretionary stocks sliding along with utilities. energy is the one bright spot, as they are in seoul and tokyo with new york crude holding above 50. financials, a mixed bag, but check out cba, the biggest gainer on the asx 200 in terms of points, rising after aia agreed to buy his life insurance business, making aaa the biggest life insurer in the antiquities -- biggest life insurer. betty: of next, we are going to find out why google may buy assets from troubled taiwanese
yvonne: "daybreak: asia this is -- ." s is "daybreak: asia betty: toshiba has agreed to sell its memory chip business writing billion dollars. peter l stremme joins us now from tokyo. tell us more about this deal. peter: the deal has finally come together, about eight months in the making. bain capital assembled a large group of companies to participate in the bid. apple played a critical role in swinging this bid toward bai n. apple is one of the largest consumers of the memory ships -- chips. it was important to them to keep
the business healthy so it has a steady supply and is not dependent on samsung electronics , its competitor in smartphones and the largest maker of memory chips. it contributed capital and helped toshiba decide to go with the bain group because of his participation within that group. secondly, bain has given toshiba assurances it is going to proceed with the bid, despite some legal pursuits with western digital, it's partner in the chips business. bain has said it wants to close the deal even if legal disputes are outstanding. that is very important for toshiba and shareholders, because they need the cash to come in before march to avoid getting delisted from the tokyo stock exchange. betty: bain leading this group, what is bain betting on in the chip market? peter: these memory chips are complicated to make. they are also very popular in mobile devices, from phones to tablets.
and they are increasingly used in computers and other devices as well. it is also a very capital-intensive business, so there are only a handful of companies that can make the investments to build, get the latest technology. bain sees this as a good profit opportunity. samsung is the leader in this business. toshiba is among the next tier of players and is playing a very significant role. they are betting that with capital, toshiba is going to be able continue momentum and is seeing a growing market with rising prices going forward. yvonne: have we heard any response from western digital from this deal? this is going to worsen the relationship between toshiba and western digital. peter: yeah. it has been a very contentious relationship. western digital is a partner in three joint ventures. they have already file lawsuits. they filed for arbitration overnight after this deal was announced. they said they are going to -- or they did file for a new round of arbitration, because they
want to invest in these businesses. they are in a difficult position. they bought in through their acquisition of sandisk. they are dependent on these memory disks and they need a continued supply. they are fighting aggressively to make sure they have access to that. there are tensions between the two companies at this point, and they need to work those out. you saw that reflected in western digital share price today, which went down pretty sharply. yvonne: 4% drop in the u.s. peter ahlstrom live from tokyo, our asian technology managing editor. staying in the tech space, google's parent may be pairing to buy parts of htc. sources say alphabet will require some of htc's assets and looks to bolster its hardware business. let's get more now from tim colson, our columnist in taipei. your ultimate reaction to this partnership and any benefits it could have for both sides? tim: for htc, they have got a
lot of overhead, they really don't need anymore. they are producing phones at a much lower rate than they were at the peak in 2011. the problem is essentially sales have dropped to about 12% of where they were at the peak in q3 2011. unfortunately, they have not been able to slice back operating costs, around 24% of where they were back then. you can see that overhead is a real issue. ,f they can offload some assets manufacturing assets, to somebody else, that will go a long way to get rid of that overhead. they don't need it anymore. so many phones are outsourced. the chinese manufacturers, they are all outsourcing. there are a few left that do their own, huawei and samsung, and even they do outsource some manufacturing. apple does outsource all of its manufacturing. for htc, there is a good reason to get rid of these assets to
get some cash and reduce their operating expenses, and maybe they can recoup and move forward. for google, it is a bit of a surprise. people think, what happened, they bought motorola years ago and sold it off again? what has changed? they are really taking hardware much more seriously than they did before. the best example is the pixel phone, which is manufactured by htc. this is a product they built suit to knots from the ground and decided they wanted to be in troll from every part of the process. they were not doing that for the nexus series. it really changed the way they look at doing hardware, they want to be in more control. betty: this is likely not going to repeat some of the mistakes google made with hardware before beforenotably with , most notably with motorola. what are some of the other differences that might actually make this integration of htc a success for google?
things -- wehe will find out, there's going to be a press conference in taipei today at the taiwan stock exchange if people want to keep an eye out -- we will find out what happens in terms of the details. it looks like htc will not sell the brand. that is an important point. google did get the motorola brand. they don't need a brand, google are ready has a brand and are doing very well on the google brand and a sub brand of the pixel model. that is the key issue. all they are getting is the manufacturing, the rest of it they don't need, so it does not look like they will buy. yvonne: tim colson, joining us live from taipei. coming up next, softbank's masayoshi son shares his thoughts on innovation with bloomberg's global business forum. this is bloomberg. ♪
yvonne: this is "daybreak: asia ." betty: i'm betty liu in new york. yvonne: i'm yvonne man in hong kong. speaking at the bloomberg global forum, masayoshi son talked about tech innovation and his thoughts about alibaba. take a listen. , the innovation of the microprocessors, using microprocessors as a base to create internet, that has
changed the lives of almost everybody on the earth. but going forward, i think it is accelerating even more. >> earlier in your career, you were a technology innovator. at one point, i think in 2000, you lost $70 billion of net worth. what did it feel like to lose $70 billion in one year? >> it was a crash. everybody crashed. [laughter] somehow, at the bottom of the my spirits ofed the fighting, you know. actually, it was good. [laughter] maybe -- don't know. for three days, i became richer than bill in that day. [laughter]
but then 12 months later, i became almost broke. price, 99% our share in one year. >> let me ask you one other question about your career. at one point, you make an investment of $20 million him up on a little company not heard of by many called, think it was alibaba. it became worse about $90 billion, now worth about $130 billion. how did you decide that was a good investment and you have more you can recommend? [laughter] >> not because of the business , not because of the technology, it is because of the charisma in leadership. china had enormous opportunity on the upside. i said, this is the guy that can be the leader for this innovation. betty: certainly has a fighting spirit. that was softbank chairman and
ceo masayoshi son speaking of the global business forum at the panel moderated by david rubenstein. masayoshi son has been in the news all over the place, everything from the sprint-t-mobile merger. is it on, is it off? to vision fund, which continues to invest in some of the hottest startups in the u.s. and some not so hot, but pretty mature startups. yvonne: a rare glimpse to hear from masayoshi son himself, great to hear he has a sense of humor as well. he can bounce back from losing $70 billion in the year. more to them hear from "bloomberg markets: asia". this is bloomberg. ♪ what did we do before phones?
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