tv Bloomberg Markets Asia Bloomberg March 26, 2019 10:00pm-11:00pm EDT
just when we thought global yields were stabilizing, equity markets are bouncing back, things at 180, risk off moves in bonds again in the seeing a bit of a by especially after the -- rishaad: two steps forward, two steps back. they have strayed to the bond market, these rallies we have had petering out with negativity on spreads in the u.s.. what does that mean resort this is something we are looking at. -- out ofe comments the u.s. on those trade talks at least. let's have a look at new zealand. the interest rate decision of a short while ago, no change but the signal is the next move could be to the downside. this is when we have a top 50 on -- elsewhere the nikkei flipping negative also china positive and
cents.land dollar 68.1 it fell against its american counterpart. at flakka -- let's look this. it is showing you where we are at the moment. this is the fed model. it favors equity bulls because earnings are now 3% higher than treasuries pre-that is the yield spread. this is a signal going back to 1962 that when we get these sort of spreads, we get told months of gains. it is an effective barometer of where stocks are going in certain circumstances. , guaranteesan 3% positive returns for the next 12 database fromthly 1962. we could be -- data going back
to 1962. buy signal for equities. now let's look at new york with the first word news. here is su keenan. su: we start with the latest with boeing. the jet maker will submit a final software fix for the 737 max jet. it will do that by the end of the week. they also say it has been flight tested. china's aviation regulator has suspended its own airworthiness certificate. beijing says it needs to make its overview of the proposed software fixes before allowing it to fly again after the recent fatal crashes. and for apple, the iphone maker is facing a potential band on on u.s.orts -- ban imports after the u.s. trade commissions that it infringed on a qualcomm patents. but in some courts, the verdict
went apple's way, highlighting the complexity of this battle. qualcomm jumped as much as 2.6% on the first ruling while apple shares pared gains and closed down 1%. successfuln says the -- it has tested the first salvo tworcept system using missiles to destroy an incoming rocket. they were fired from southern california and hit the target over the pacific. this defense system has been operating for more than a decade but this was the first time the pentagon tried to use multiple rockets to destroy a single target. tanks to theved border with gaza after threatening its powerful response to rocket attacks. this follows a night of violence as the israeli air force bombed targets across the gaza strip. militants continued their missile strikes. this comes to weeks before the
israeli general elections, although hamas has vowed not to escalate. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. keenan. this is bloomberg. rishaad: let's have a look at what is going on. is looking at the -- [indiscernible] presidentrmer pboc there at the moment talking about trade, where do we go next? rishaad: they went through the last yvonne: went through these trade negotiations. they need to think of a services trade when it comes to wti -- wto reform moves and china's current account balance is shrinking. you talked about the u.s. and goods trade in balance, not in
service. focusing on the services side. you can actually -- rishaad: you can see the trade imbalance almost goes to balance by some measures. that is currently what we have at the moment coming out of that [indiscernible] yvonne: there is the u.s. secretary of commerce speaking. what it china doing can, should do in trade disputes, the headline. yvonne: more from tom mackenzie no at the forum -- now at the forum. we talked about profits out of china, broke that, didn't look good when it comes to seeing signs of recovery when it comes to industrials. it looked pretty miserable. down,y and february were down 14%. looking back at the terminal,
that is the weakest we have had for a good number of years. down 1.9% in december. furnace -- versus 14% for january and february, versus the previous year. pretty bad. it does point to continuing concerns about deflation and weakening inflation at the factory gate prices and the fact the growth picture, demand, domestically and externally continues to soften. that is impacting the profits of the manufacturing sector. we are seeing sales drop for auto sales in china, double digits. that is highlighted the auto sector from these numbers. we have had tax cuts and now they will start taking in from the first of april, a few days away from $400 billion worth of tax cuts. primarily they are benefiting the manufacturing sector.
so towards the second half of the year, things will start to ease, or conditions will improve for some of these manufacturers and we were talking to primavera capital earlier. he is focused on consumption. he thinks the consumer will hold out. that will feed into the domestic demand picture. profits numbers looking week for january and february. rishaad: it adds up to the narrative of a slowing economy. to highlight the root of it, it is not the actual trade war, it is the consequences of preparing for it. we do have mr. gutierrez talking, saying china has shown .etreat -- restraint and they are close hopefully to a china-u.s. agreement. i guess that is the buzz. you are right. the view from the executive we
have been speaking to has, we are in the last stages, that was the line from the chamber of commerce. we are in the last stages of this, and the expectation is we are going to get one because both sides have very good reasons sitting down, putting pendant table and finalizing. but as it was pointed out, there are crucial westerns around enforcement and tariffs. -- questions around enforcement and tariffs. impact,ffs has been an $250 billion of chinese goods. that has dullled sentiment for china's manufacturers, but it has pushed concern from the hawks in the u.s. to decouple the economies of the has put a dampener on sentiment. the chinese priority is to get the terrorists lifted and hope -- the tariffs lifted. there are others who hope that these issues would be difficult,
but at least conversations are continuing between mnuchin and lighthizer in beijing, and we are expecting the vice premier of china to go to washington. the former pboc governor on the panel was saying outside pressure can help with china's reform because it is something being debated. reformers in china will tell you off-camera they are pleased with some of this pressure because it helps their agenda pushing open some of the sectors and opening the capital markets. canne: also that you humiliate nation into a trade agreement. tom mackenzie joining us from the forum. we have headlines focusing on the policy response. everyone was expecting china's economy to rebound. we have two new surveys seeing the pboc easing less aggressively for the rest of the year while maintaining study injections of liquidity.
the earliest cut is expected next quarter with two more in the second half and three 50 base point moves. rishaad: is it just the rate or other various levers they haven't there disposal -- they have at their disposal. thank you for coming in. great to see you. been a long time. what do you expect out of beijing? how are they responding, and how better things in china that they need to respond to? take the easy part of the question, how is china's economy doing, the export, the index and bench point is south korean exports collapsing, global trade. we see germany and europe, negatively impacted from the excess growth. china's stance is less
aggressive on the monitor side and more on the fiscal side. we saw that huge stimulus of the tax cuts rate and lowering -- which is a new way of doing things, believing you are not impacting the economy through the monitor side. but in the second part of this year, the pboc will become more aggressive. we will see three or four cuts in the rrr. all of the government, not only pboc, are underestimating where we are in the cycle. rishaad: you look at measures in asia, it is equally worrying with europe. on top of that we have in china mobile film -- mobile phone sales are down. .uto sales down even if you take the seasonal factors of the lunar new year out, it is a deep worry. phone sales haven't fallen this much since 2013. >> the ecb is behind, the pboc,
the bank of england. and as we saw from new zealand, which has been, the people who introduce a 2% inflation target, so in the leading sort of academic world, it is a lower rate. i think we are in for a massive adjustment of growth. i think what is underestimated is how bad of shape is germany. i would argue they are to factor in a recession. if you look at the benchmark german news, the banks trading, [indiscernible] and it has been the single biggest driver of german exports. they are treating in multiples of three -- trading in multiples of three to four pre-we haven't seen political and economic impact in europe of germany's slow down, which is spilling into the u.k. we can talk about brexit up and
down and have nothing more, but the contraction of the credit in the u.k. is equivalent to 2% of gdp. everywhere i look and go on the ground, i am getting -- i am usually the most negative person in the room. right now i am positive because there is a pro cyclical move in china and all of the central banks, we made 2019 the theme of global policy panic. they are one inch away from all panicking was on the first from new zealand today. all of them will follow suite. japanese 10-year negative interest rate. yvonne: it brings a question of the credit in china. we have aggregate financing backup. openingdering, is this up the taps again, or is it the final ending of the credit cycle? we need to make the premise
there is only a credit cycle. saying a slowdown of the dreaded facilitation will be met by more credit or in the case of china trying to induce more personal consumption. number two, the credit cycle -- the central banks still believe moving the second derivative of monetary policy, the price of money, will be enough. what is needed is the quantity of money. that globally in terms of credit impulse changes. you can point to shorter financing in china but in momentum terms, it is not enough in an economy in china to have too much of a base effect. there is too much credit already in the system. you can't clean the system types to facilitate the impulse. what you are seeing is the transformation of credit will not be held by lower price money
but increasing quantity. there will be more fiscal spending, more tax cuts and toer remedies that will try change the level of growth in the credit, but try to put more in the hands of consumers not just in china but globally. yvonne: there is a new term of modern monetary theory. >> which is not modern. yvonne: what is your take on that? >> it is not a theory, it is a concept. that is what china is doing. look at the policy spots area it is not to expand the monetary cycle. but increasingly to go to the fiscal. ism into the is about -- mnt about employment, and then containing inflation through taking the tax rate on the down. famous is themnt
concept of spending -- printing money infinitely. the cannot be done -- that cannot be done because of the base effect. supplye importantly the of resources and workforces in the world is too short to take too much of a boost to the fiscal side. if we see public spending, there isn't enough supply of labor or resources to facilitate this. rishaad: stick around with us. we will discuss the latest moves in a certain saga taking place in an island off europe. theresa may's unpopular deal, winning some support. yvonne: and hong kong beginning its crown as the top container. this is bloomberg. ♪ ♪
may is winninga some support for her deal, just as lawmakers begin to design a rival plan. a staunch critic has shifted position, saying while you doesn't like the deal, it is better than not leaving the e.u. at all. parliament will vote later today after taking control of the process. mp's will propose different models and the chosen ones will be put to a vote using paper ballots. yvonne: underpricing the credit contraction from brexit. let's return with this central-bank cio. the development overnight, even brexit hardliners seem to be on her side when it comes to this deal. when it comes to her resigning, do you think others will actually follow? >> in terms of resigning? yvonne: in terms of backing her
deal. >> i doubt it. even if she [indiscernible] overall you have a country split down the middle. even if she gets a vote on her are only negotiations starting. we are talking about a delay of six or 12 months. in that cycle britain continues to be closed for business. the ability to have clarity in terms of political decision -- when i go to amsterdam, a number of companies are moving out of london into amsterdam. this will continue because it is a mockery and disgrace to democracy. the standard of politician they have been unable in more than two years to do anything to get this closer. i was going to say, will sanity prevailed, but i will not define that. it is a relative term with what
is going on and what they call the mother of all parliaments. steen: sanity will prevailsteen: for business. even voters can deal with anything but the markets cannot deal with the parliamentary session we have had. i think corbyn [indiscernible] --hink prime minister is the may is the prime minister with the largest number of votes in any real democracy, she should have stepped down a long time ago. rishaad: who wants her job? steen: a lot of people do but no one will step forward now. ultimately it will leave the u.k. in a stronger position but in terms of the markets, sterling is way overpriced relative to the credit cycle and what is needed. every time we have had a crisis, sterling has had to drop 5% to 10% to gain competitiveness. in the u.k. in 1992, this is
what is ongoing. the market is trying to price out no deal, but ultimately they have to deal with the reality which is underlying economic growth, and in u.k. -- yvonne: how much could sterling drop? steen: 120 in the worst. yvonne: thank you. chief economist, joining us here in hong kong. plenty more ahead. this is bloomberg. ♪ is bloomberg. ♪
market share in more than 50% in hong kong. is a unit ofress hna group, which is trying to trim its corporate debt profile. loss inines racked up a last year. exceedid this would not $75 million. but they revised because of impairment, fewer subsidies and lower returns on investment. it is backed by chinese glamour hna which is carrying one of the largest debt piles. the hong kong debt unit of one of china's biggest brokerages must $39 million last year. sufferedategy funds significant losses due to foreign fluctuations and lack of liquidity in the relative market. it in standard citigroup--ensnared citigroup
which was going to face $181 million of losses on a loan to a hedge fund. rishaad: this is what the japanese lunch break looked like. down.pics is sony will be merging its phone, television and audio units into a new entity at electronics products and business solution. are down. headlines they have given a letter of authorization to keep on flying its aircraft in the u.s., heading up for certification. subaru is down 1.7%. the company said its growth trend has actually been threatened by tariffs. it is good news, getting to bed with another company called yl
president trump's order emergency survives as democrats failed to override his veto. their win was just short of the two thirds majority needed to overturn the president's decision. most republicans back to present despite widespread unpopularity with his emergency declaration. they plan to use the emergency status to redirect money for military funding over -- already approved by congress. 's paying for a open federal reserve seat says that they should cover it immediately by about half a percentage point. even more, they told the new york times that the fed was wrong to raise rates in september and december. he insists that if he is he would to fed board, not be a sycophant for the president.
reports from tokyo senate nissan pay the tuition fees for all four children of carlos ghosn when they were at stanford in 2004 and 2016. we are told that was part of his employment contract after he became nissan ceo back in 1999. it is not, among top executives for japan. it has been valued at more than $600,000 according to this fee schedule published at the time. ,lobal news, 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan, this is bloomberg. rishaad: let's go to hong kong -- it lost its crown as the top port. it is behind singapore and shenzhen. they hope to revive the port's status.
they are raising antitrust concerns. a modern terminal group is what we're talking about. >> p or is with us. great to talk with you. will it work? will this revive hong kong? major terminal operators are working separately but that was not going to resolve the issue. being able to have the terminals were together to create one port and one single operation ran by a single control tower was the way to maximize efficiency and allow hong kong to compete with other things in the region. >> it doesn't seem with the trend anymore. the macro story is that everyone is going directly to china or to large reports through china as well. does joined together actually buck that trend? peter: the value that hong kong adds is that it is an
international court, considered an international port. this does not allow for international shipments. hong kong's value is that it can provide international shipments right in the backyard of china. that is the value of the hong kong court. -- port. that is why transshipment is so important that. alliance will allows to compete for those ports. rishaad: that business has existed. port? a loss as the top su: it was lost quite some time ago. -- it was lost quite some time ago. the alliance will allow us to operate and to rationalize the port into a single point operation.
port operation. the savings will be passed on to the customers. ofnne: like any kind partnership that is key, what sort of obstacles do you see in the integration process? peter: we have been working for a year on the operational aspect of the alliance. so far, it has been very smooth. we all know what we have to do. really we are just trying to run 23 points as a single operation. as opposed to four different ones running for different areas of control. the work together -- to put it together to operate as one is easier. rishaad: what is the objection from the regulator? it is antitrust but you are not really ultimately competing with
each other as much as you are competing with singapore and shenzhen and shanghai. peter: that was the objective of the alliance. so that hong kong can compete against other ports rather than each other. i think the commission is to review it and they should review it to make sure they are in compliance with the competition. we are fully confident that we are within the requirements of the competition ordinance. we are convinced after the commission reviews it, they will come to the same conclusion. we have been working with them since last april. we are trying to be as transparent as we possibly can on this arrangement. conclusionome to the that we think it will come to. best for hongs kong. yvonne: their concern is that this could create cartel are those concerns
ballot? peter: it is an interesting question. the only way we can bring value back to hong kong is if we make deals that bring value back to hong kong. you don't use that by raising -- you don't do that by raising rates. you need to put incentives in place to bring global carriers back. the concern about raising rates is a natural question to ask. i'm sure the carriers have asked that. our customers now see that the only way we will bring them back is to offer them incentives to make itself attractive that they have to. rishaad: what happens with them? peter: they were not in the original ones -- original negotiations. as we implement the alliance, we will be talking to ports about what will they play and what when they want to play.
they could end up inside the joint operation. rishaad: the regulator will want to know how much you will reduce prices by. correct? peter: that is correct. it is not about lowering prices necessarily but providing a better proposition for carriers. you can do that without lowering rates. stayay the point is set up , the way the carrier alliances are arranged, we are putting ships all over the place unnecessarily, creating a lot of additional cost unnecessarily. ships staythat the in port longer. customers don't like that. there is a lot of additional cost. they will see the benefits of that rationalization. the alliance can show that it creates efficiencies, a faraway benefits -- it will
faraway benefit having them compete. yvonne: you used to have the had of being the top of the u.s. chamber of congress here in hong kong. we were speaking to carrie lam and she was talking about how vulnerable hong kong is in this trade war between the u.s. and china. peter: hong kong citrus between china and the united states. anytime the two big economies are having difficulties, one is attacking the other. separate in terms of how they are treated by the united states in terms of trade. we think that will continue. in terms of business, we saw quite a bit of volume increase in the fourth quarter of 2018. this frontloading of orders to the united states. now we are seeing a drop off. i am hoping that the lack of the news that is coming out of the
trade negotiations right now means that something is taking place. particularly around as three or four issues. tech transfer and open markets. resolved, china needs to knows that the issues exist and that they will fix them. the u.s. needs to knowledge that there are structural issues and they will take time to fix. hopefully they will come up with a roadmap of how to fix that that meets everybody's timelines. rishaad: thank you. for companies get together. there is a game changer coming , bun markets, den the way.
slew of policies that stimulate its slow economy, including opening up its capital markets. yvonne: helen one says the reforms have a lot of global investors to find value in chinese markets. she says the economy is continuing to grow. that china is doing a lot to stimulate this economy. are expecting the economy will continue to grow about 6%. there has been a lot happening. the next thing is the opening of the capital markets in china. we thought that was exciting. >> what could be done there? capitalmaking these markets more transparent is the wider trade tensions between the u.s. and china. what is on the to do list? the further progress would you like to see? >> looking at the capital markets. for years, global investors have
been interested in this market. it is challenging. then again, this is not fortunate but for tomorrow. the chinese capital markets. tomorrow has come in deed. obviously, a lot of global investors are investing into the markets through some of the connection that china has felt over the last few years. we are talking about the bond connects. there has been a lot of this going into a. last year, if you look at foreign investments into the china markets, it exceeds 18 million. this is the largest recipient of foreign investment into the bond markets among emerging markets. of policy inclusion bank bonds into the bloomberg index will be a game changer.
we have been talking about this for some time. obviously, it will come on board in april. this is exciting. from what we have been talking to investors around the world about -- they're talking about this opportunity to invest further into the china fund markets. >> can i ask about the greater bay area in china? what are your intentions in that particular part of china? give me some specifics. thanks for that. we have been investing in this for some years now. we had the largest foreign bank in that part of china. in hong kong, we have a rather prominent position in market share. there will be a lot more
connection, we hope to expand our business and do it into a scale market. speaking exclusively to our very own and edwards. that was helen. helen.edwards, that was yvonne: coming in at just under $900,000, estimates were missed. they are still bullish on long-term growth and they say the new bmw fastbreak is the key to boosting sales. x3 is the key to boosting sales. they are hoping that it will offset a slide in demand for their own cars. sales gains would be threatened if there -- president trump puts tariffs on cars. subaru is the only carmaker to boost u.s. sales every year for the past three years.
that is to the end of february. they delivered a report about whether this threatens national security. >> ultimately, the price of the car has to work. depending on who you listen to, it could be from anywhere between 5000 and $7,000, raising the payment assembly would have to pay, $50 a month. it could be to 600 summary five, maybe $700. hasare earth minor linus rejected this bid from west farmers. they said the decision is that -- is based on interest. share on the% premium cause. rishaad: let's talk about this before the trading day gets
underway. divina standing by. yesterday, when we spoke about it, we analyzed a trader that happened in the previous afternoon whether close was not the lowest part of the day. that indicated that there was some amount of conviction to bring money back on the table. that is what happened in yesterday's session. the key drivers were obviously the financial stuff. devina: the top 10 gainers were on the financial names. the bank moved up a good 600 points, just another 100 or 120 points away from that 30,000 mark. not a single stock on the ranking index ended the day in the red. you had some engaging at 1.3% on the way up to three, 3.5 or 4%. it is not overbought.
they show a reading of 74. they are expecting to move up further. >> auto stocks are heading in the other direction. is there more pain ahead? devina: the auto stocks have been under a lot of pressure. it has been ever since the week december. we have been talking about a time and again. the prices are at a 52-week low. .0 straight days of losses a 52-week low that has lost about 23% since the mid-december hike. the weakness continues. they lost about 18%. that stuff is under a lot of pressure. this is one pocket where there is consensus. things change in
♪ rishaad: a bit of breaking news coming through. there is other companies that we have at the moment, this energy company will be investing 80 billion rupees. that is just over one billion u.s. dollars. this is currently coming through towe get the investment retread that infrastructure pie. this position is is coming through. they have various volitions. >> look at that reaction there. in the meantime, it is time for our segment. we have today. sitting for us. also, our oil editor. they will have the best tries against each other. rishaad: let's kick things off.
adam: this is interesting chart. what this does is it looks at the earning yield of u.s. stocks relative to what you're getting from bonds. i'm looking specifically at 10 year bonds. all this concern with the inversion of one part of this is causing a lot of panic and a lot of people to run for the hills. i think this chart shows you pretty well that when the gap between the earnings yield on stocks and the yield you are getting from bonds gets to the kind of level of where we are now, rent 3%, it does actually all go fairly well for equity return. if you think about earnings growth on the s&p 500, expected to be something in the order of the double digits this year and next. it may still not be a bad time to be incrementally adding to
equity portfolios at this point in time. brushes feel little cautious on some of these headlines that are saying the bond market is telling you that global growth is really concerning. betweene relative value equity and bonds that is particularly important this time. it may not be at that time to be in stocks. rishaad likes that chart. you may already have his boat there. andrew, you have to beat that. andrew: the two lines for my check, at the top, we have data from banker you showing the oil from here dropped. this is the longest run of the clients since 2016. there are a few signs that the shale boom be running into a few problems.
the bottom line is the oil price. that is at $.30 this year. factors,ne of several that includes the supply and instructions. i guess the main takeaway here is that if u.s. rigs do keep falling along with those other sectors, we can expect oil prices to keep rising at least for the next few months. could opec change that? rishaad: the other thing is this is an element. andrew:, the rig count is one element. also, on the demand side, it is very uncertain with people waiting to see what happens with the u.s. china trade war.
all right, i want to go with andrew today. it is unanimous. sorry adam. rishaad: i like that one, that is why i used it. there we go. no expeditions. and adam. have go out to what we with bloomberg users, if they want to interact with those charts, you did you tv function. >> we were looking at markets here. it is looking a little mixed and muddy when it comes to equities. we are taking a look at some of the key markets in particular. heading in the other direction after bouncing back yesterday. china also thousand back today after going stealth. a bit of a 180. we are seeing these of more than 1%.
china is having a good day. it is up to 50 companies that are reporting earnings in the next 24 hours. rishaad: the beginning of the week was not feeling well. there was a steep slide of equities. those traders might have thought to themselves that this is the right time to be getting in and the tumble was overdone. today, it is pretty mixed. >> we are on for the best quarter of asian stocks in a while. we are seeing yields fall was again. >> we had that you'll spread. that could go well for the rest of the year. ♪