tv Bloomberg Daybreak Australia Bloomberg June 4, 2019 6:00pm-7:00pm EDT
>> welcome to daybreak australia. i'm paul allen live from the australia summit in sydney. bloombergry ahn from headquarters in new york. we are counting down to the market open. paul: here are the top stories we are covering in the next hour. signals of being open to rate cuts and watching the fallout from the trade war. the stocks jumped the most since january. carmakers and chip stocks rally on the hopes of avoiding tariffs.
president trump says that he will go ahead next week. china turns up the heat even further. citizens warn against traveling to america in the trade war. shery ahn: but get a quick check on tuesday'ss session. rally in more than 2%. the s&p 500 pushed above the level. from chairman powell signal being open to rate cuts. we such it makers and carmakers rallying as there was more optimism coming out of the possibility of avoiding u.s. going up next week. we are seeing the nasdaq gaining 2.7%. u.s. futures also getting .3%. treasury yields any ground for the first time in a week. let's see how we are setting up for the session and asia. -- in asia. paul: it won't surprise anyone
that it looks like a risk bond today in this part of the world. nikkei futures are pointing higher. defying be -- kospi gravity, futures higher. we are watching today in australia for first-quarter gdp numbers. it is expected to be a little soft as the rba cuts the cash rate here as expected. new zealand right now looking higher as well. check in on first word news now with jessica. jessica: outgoing u.k. prime minister theresa may has spoken of the substantial risk between the u.k. and the u.s. since president trump took office. she says london and washington are at odds over several issues including china, iran, and climate change.
the president faced a backlash from u.k. lawmakers when he proposed assets for u.s. firms to the u.k. national health service should be in future trade talks. but he later backtracked on that suggestion. says he hopesent to reach a deal with the u.s. nextwould avert tariffs week. the trumpet ministration and a duties on all imports from mexico unless the government tackles illegal migration to america. the president hopes the two sides will make a deal. president trump says the initial 5% tariffs will go ahead. one man has been arrested after a mass shooting in the northern australian city of darwin. police say he was on parole. motiveve not revealed a but have ruled out terrorism. four people were killed and one wounded in an hour-long standoff. it is the third mass shooting
since the tough gun laws following the killing of 35 people in 1996. struggle tos may coax people back on the 737 max 8. passengers say that they will the firstairplane for six months according to an atmosphere research group. 40% said they will take pricier or less convenient options. southwest and united state a less people switch to flights on will see no fees. 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. i'm jessica summers. this is bloomberg. shery ahn: let's get back to the u.s. stock market close. we saw a big rally of more than 2% for major indices. the main market winners, let's check them out. we have a shot in the arm.
su keenan has more with the banks surging. su: a big part of the message from powell and tech really taking off, less go into the market snapshot. the bond rally reversed. and you have the bond bulls and retreat. you look at the market snapshot if we can. there you see the green. , the futures in the green. let's go to some of the big movers because banks certainly are in the forefront. the noted wells fargo analyst mike mayo said he believed that banks will party like 1995. is to another parallel when banks were the out performers. the similarity was the end of a raid tightening cycle and the yield curve had previously flattened. when you go to the bloomberg, tech stocks -- there you have,
by the way, short covering. that of theticed most heavily shorted stocks, they were all up 3% or more. vary.f these very -- notice the size of the gains were much larger than the market as a whole. paul: how much of the story was the short-sellers covering themselves? some of them were forced to take fairly drastic action. su: they say they would not take away from the fangs and the attack was an underlying action. you look at the bloomberg. stocks go on a wild ride. the title of this chart. the s&p 500 recovering to the best day since january. if you go through some of the different groups, the faang stocks were badly beaten in the prior session. it is noticeable that the gangs
gains in i -- that the faang stocks were not as big as other panels. stocks the semiconductor . this is a group on a wild ride. shery mentioned at the top of the hour, there was hope that mexico could placate the u.s. and placate or subvert on some of these tariffs. take a look at what is going on after hours. one of the companies getting hit very hard on dismal sales. this is a retailer of video games. they had their ups and downs. this particular quarter not received well. shery ahn: turnout to commodities. -- turned now to commodities -- turn now to commodities. su: -- su: the gold moving
higher. a look at gold, normally a story about interest rates. impacty the moves would gold but it has been on a run. perhaps the momentum carrying it. fall off. both wti and oil, brent crude have been near a four-month low. it was a bit of a bounce back. if you take a look at the big picture, it is a huge dent. oil was up 40 plus percent year to date. we have the supply issues and the trade concerns still weighing on commodities. that will limit the run for oil. thanks very much for that. still to come on daybreak australia, investments give us his take on the market moves on
paul: we are counting down to the sydney open and we have futures pointing higher right now on a chilly day in sydney. a bigger rally in the u.s. markets. allen at the morgan stanley australia summit. shery ahn: and i'm shery ahn in new york. focus has been on disruptive forces shaping the future of software maker. the ceo and founder spoke to
heidi in the first interview since the nasdaq ipo in december of 2015. >> i still feel the same way about australia. and the positive role that new energy technologies can have an .our economy -- in our economy we don't realize how much energy we could be exporting. i think it will be up to corporations and individuals to do that. i think it will continue to power along. reporter: when it comes to the theme of the morgan stanley summit this year, they are talking about disruption and the next driver for australian growth. the trade reliant models. you have been pretty critical of the government not providing a policy platform to encourage innovation. is that still the status quo?
>> on the innovation side of things. there are certain things the government could be doing to help. look at the last three or four years on r&d. it is critical to the start of industry. dustry.tup in industry booming tech and that goes regardless of what the government does, which is great. they could help a lot more than they are. i think we have a pretty rosy future. the are concerns over data, privacy, and national security. how the u.s. ban on huawei is having an effect on other countries. tech is really the new battleground for trade, right? i am curious to get your views. when it comes to tech and the western world, how do you make sense of that?
>> it will be interesting. a boring world. from that point of view, we ride the global macro trend up and down like anyone else is going to. we are a little countercyclical in the way that we have many more customers. we don't participate in trade wars or anything else that will really affect our software that we sell, and selling it globally. general, there are privacy issues from a consumer point of view. and that is something that we will have to get used to. cann that was mike on-brookes. we will have more from that summit coming up.
paul: fed chairman jay powell's comments affect the markets. mike mckee joins us from chicago chief was the fed speaking. how are the comments received at the conference? ofe: there was a little bit a surprise because this was supposed to be a conference of how the fed's monetary policy rather than policy itself. i generally knowledge much that
he was right to make note of the fact that the markets have been selling off and there is an issue that the fed has to keep an eye on. how will didn't really do anything more than say that we jobs.ing to do our but that seemed to satisfy the markets. you saw the result as the day went on. know how or when these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook. we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. mike: jay powell not promising to cut rates. they at least took it that way. what about the broader theme of the fed conference? mike: this is really a conference about whether the fed is able to a calm push what it wants to in terms of the
mandate. reticular leak, inflation. -- particularly inflation. the latter part has been a problem. somethingommunicate to the markets reassuring without locking the fed in. it got general kudos from the people here. mike, we have a new bloomberg survey out. can you tell us about the findings of that? mike: there has certainly been a change in the way the markets and economists who report to bloomberg has seen the economy. being therade wars base case going forward, there has been a rush to change the view of the economy to lower growth estimates, suggesting the fed will be cutting rates. people that were buying into the , the patient's
argument, they say the fed will be cutting rates. it is a question of when. jay powell did not promise a rate cut. but if necessary, they will go forward. the question is, do we have a trade war with mexico? the mexican president said they thought they would reach a deal. president trump said he didn't think so. we did that leave jay powell? as longl watch and wait as they can before they have to pull the trigger on anything. fedy ahn: if we do see a rate cut, with that be enough to reverse the damage that has already been done on business sentiment, confidence, and economic growth going forward? there is a general feeling that it won't. that it would put a floor under things. the confidence has been damaged significantly because they don't know what will happen next. supposedly mexico and canada ratified the new nafta agreement
but then the president decides to put tariffs on. there may be some long-term hesitation on the time of companies to really ramp up investing. it will probably reassure the that it won't fall off too much. shery ahn: we have seen a sign of weakness. , the pmirldwide contracting as well. what is the feeling about global co will thewth in a external -- economic growth? will the external headwinds affect policy? mike: there is the feeling that external headwinds will affect policy. and with the decline in the global pmi, there is a feeling that this may be reminiscent of 2015 when we saw global
slumps without being recorded as one. you saw a lot of capex and hiring go away. keep an eye out for that. we don't think that we are there yet. response in china and in other areas that may need it, maybe the u.s. at some point would keep us from going down that road again. shery ahn: bloombergs mike mckee joining us in chicago. let's get a quick check of the latest business flash headlines. the board will beat again on wednesday after failing to make a decision on the proposed .erger with fiat chrysler they discussed the plan amid resistance from longtime partner nissan. if he was a 50-50 combination under a -- fiat chrysler wants a 50-50 combination.
ceo should be prosecuted along with carlos ghosn for financial misconduct according to a report filing in tokyo. this falls under japanese laws that allow citizens to consider charges against an individual or organization. covers someceo alleged crimes. he denies wrongdoing. byomberg is being examined u.s. tax authorities and says the potential tax charges in a number of key markets could change the focus of the inquiries. this concerns the transaction of goods and services. ofs result in fines accused shifting and come to lower tax jurisdictions. taxhifting income to lower jurisdictions. for more on jay powell's
comments, let's get the view from investment in your portfolio manager who helps oversee $50 billion in assets. we have seen investors looking back at 2016. we don't have a guest at the moment. a connection seems to have broken. but let's continue the discussion on what happened in the market. we have seen this huge rally rally andsuries yields rose for the first time in a week. take a look at the markets closing in the u.s. major indices gaining more than 2%. you are looking at asian futures at the moment. that we areprising seeing a lot of green on the screen. we have seen that rally here in the u.s. with stocks posting their biggest gain in five months. the kospi up .7%.
has been interesting and resilient the last week. there was some speculation that given theee rate cuts lagging economy in south korea. the resilient samsung electronics, it's competitor huwawei facing troubles against the trump administration. stocks trading at .7% higher. we are expecting some data out of asia with potential gdp numbers showing that the economy in the firste quarter. it seems that we have our guest russell investment, senior portfolio manager. great to have you with us. i was starting to ask you if we
could see a repeat of 2016. we have seen investors looking back at the time then when we saw stocks rallying. we could see the same scenario unfold? >> we are at a different stage in the cycle. that said, i don't think there is any environment where the equity market is going to be spooked, if you will, by a decline or rate cut by the fomc. i think if that is the case, we will go there. fomcl say that even if the speaks about being in it -- , thatbeing a backstop would also be received well by the equity market. there is a chart on
the bloomberg showing that markets are pricing in two fed about 25 basis points each. i asked this to bloomberg reporter mike mckee at the conference in chicago, is this enough to reverse the damage already done to economic growth thatusiness confidence >>e to release earnings soon the biggest damage could come with an erosion of confidence. the consumer or the ceo that has capexe a expenditure -- a expenditure, that is the channel. i think where the fixed income the fomcarket, it is may be going a little too far. it is over a 10% chance of two rate hikes at the end of july.
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paul: 8:30 a.m. in sydney with the market open 19 minutes away. the big rally in the u.s. equity markets. this is on encouraging remarks from to achieve jay powell. i'm paul allen at the australia summit in sydney. shery: i'm shery ahn in new york. you are watching "daybreak australia." jessica: fed chairman jay powell is signaling a willingness to -- keeping, cleaving an eye on the fallout of the trade war. powell's comments gave stocks a boost.
the fed is also under pressure from the white house with president trump calling for lower borrowing costs. do not know how or when these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook. and, as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near the 2% objective. jessica: bank of america boss brian moynihan is raising the alarm for a potential trouble spot of the u.s. economy. he says things are solid but leveraged loans could be a major issue if the economy slows. investors are steadily weakening and the loan market looks like the mortgage industry ahead of the subprime crisis. bank is cutting its forecast for the global economy, citing trade war and rising financial strain and the unexpectedly sharp slowdown.
slowest calendar growth in 2016. global trade is expected to grow 2.6% this year. this is bolstering the military attempt to stay in power. seatsmy coalition on 254 with the house of parliament. that makes former army general the favorite to return as prime minister. day onnews 24 hours a air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. let's take a look at how
the asian stock markets are looking heading into the open. we have the nikkei futures pointing higher right now. well -- yeah. nikkei futures pointing higher. kospi futures as well. getting a boost in the tech sector in the u.s., higher by .2%. by .56%. .66%.her by at 1:30 p.m.hose local time. let's get a little more on what we should be watching as trading gets underway. we will see a bond yield getting a nice kick. where does that leave yields? important to is
remember that despite we have a decent kicker overnight, think about where we've come from. remember at the start of may, the 10 year treasury yield was at 2.5%. 2.1%ve gone back below the in the last week or so. we have is very fast-moving bond market that let a lot of people say that bonds were essentially in an overbroad position. this is prior to powell's comments overnight. and what you see in this chart terminal, it shows the rocky ride that we've had in the past week. that green circle there showing the lowest yield we have had since 2007. we had a little bit of a move higher. and that yellow circle is where commentshe most recent leaning towards where the markets are positioning.
the expectation that a cut is coming whether it is one or two in the next six months, there is still a debate around it. it could save the way for a little bit more stability in treasuries trading over the next few weeks, especially if it is thated by some sense things are settling down somewhat, given how much things have escalated in the last couple of weeks. of the equitya market that has been suffering from the commentary short-sellers is that they had been enjoying a good run. but it is coming to an end. right.ou are they have had a good run. a very good position to be in, you want to that u.s.bly sure equities will be like what you had in may. that was expressed in the view of people making outright short bets on u.s. equities or shortly
-- certainly want to hedge their positions more. you see from this chart here that this is a basket of stocks in the s&p 500 relative to the s&p 500 itself. it came down to that redline last week. and what you had on monday and tuesday is evidence of a huge shortedin some of these names. basket jumped on tuesday and it shows you how quickly sentiment turned. we have the powell comments which kind of triggered the risk on appetite. sense that you get a continued move, you could get more selling from those that want to reposition in their portfolios. maybe it got a little too far skewed to the downside. a chart will be a good one to keep an eye on the rest of the week to see where sentiment is
moving for u.s. equities. paul: bloomberg global markets editor adam haigh in sydney. think you for joining us. don't forget to check out dtv charts on -- gtv for dtv go -- gtv go. threatening the tourism sector and luxury goods, china's tom mackenzie has the story. hy is china doing this? tom: the travel advisory was issued by the chinese tourism industry. for theon they gave was frequent number of shootings, robberies, and thefts in the u.s. later, the state broadcaster said in a report quoting the foreign ministry that they also had a tick up in the harassment
of chinese visitors to the u.s. by the way, it suggests it is the first time they have put out an advisory like this for the u.s. in at least a decade. in terms of numbers, you saw 3 million tourists visiting. they are big spenders. if this travel advisory leads to a restriction or reduction in the number of chinese tourists heading to the u.s., it will have a broad impact on luxury, retailers, consumers, consumption stocks. sector. casino this is a tried and tested tactic. back in 2017 to a
rollout. it can have an impact and this is another step in the tensions between the two sides when it comes to this trade war. shery: and china has more details on how and might it would restrict exports to the u.s. what do we know? >> this is what they've been advised to do, monitoring and exporting rare earth to the u.s. it will put them in place as soon as possible. and of course, this would have a significant impact to the u.s. which depends on 80% of the rare earth. it gets that much rare earth from chinese markets. from are minerals used dishwashers to military
equipment. so yes, another step up in terms of the pressure campaign. china is trying to make it very clear that china can pressure and make a significant impact between the two presidents. that seems to be the play from the chinese. shery: thank you so much, our china correspondent. tariffs onnt insists mexico will go ahead next week despite some pushback from hope inepublicans and mexico city that the duties won't happen. we heard from mexico's foreign minister. it is an 80% chance that the u.s. tariffs may not happen next week. that is just too optimistic -- is that too optimistic? >> today, the president of mexico said in his daily conference that there is a good
chance of an agreement. the mexican side is showing this confidence into the meeting that they will have tomorrow with mike pence and mike pompeo. we need to think about what could be a solution for this in the eyes of donald trump. what can mexico do to keep the president satisfied? we will have to wait until tomorrow. mexicans have gone over the details of this strategy. over the last you months, -- few months, we can probably think about making that argument. it is certainly optimistic if we see that donald trump's answer is that the tariff will go on.
so far, the tune from mexico seems to be quite conciliatory when it comes to reacting to president trump's threats. we can expect that to continue. it is a very popular resident. shows that 72% of mexicans approve of his work. president does not have a domestic internal problem that may lead to a more hectic and response. if that 5% is put in place, it may lead to an increment in iniffs toward the 25% level october. that is one of the other things that president trump has said. position in that
october, we will probably see and much more aggressive stance from the mexican government. so far, they are trying to work and see if the 5% tariff is not approved. shery: how are companies in mexico reacting so far? >> we see mexican companies have been very supportive of the president. the president has published in his twitter account showing the two mostf the number reached mexican in the country. behind the rallying president, rallying behind the idea that this is an unfair tariff. his will hurt the u.s.
let's get more from australia strategy and economics. thank you for joining us. the worst kept secret. they are good to go again, are today? -- aren't they? >> most central banks around the world were expecting to be raising rates. most central banks are expected to be cutting rates. market slowdown in economic activity, the gdp was very soft and that start the conversation about the negative cuts. and that will turn into real action yesterday. where we probably differ is that we are forecasting another cut. and we get the 1% rate, that is where we see the stimulus affecting what is really important. that is the earnings cycle. paul: the fed rate is interesting because the rbs says
that want to get the sort of 1% low, you have reached the limit. so what then? qe needs to be pushed down the horizon. any fiscal stimulus, it is unprecedented when the rba's last statement said that they would be connected in the past. to go beyond 1% i think is a big issue. and whether that would be cord nation -- coordination, i think that would be done the road. -- down the road. paul: we are not expected great things in the first quarter, are we? >> we're not. we're thinking about .6. it could be lower. they could be .2 on the margin. we are looking for retail sales
numbers. the first quarter volume numbers were negative. so that will put you on track for 2% growth, which is kind of the forecast on an annual basis. anything lower than that on the one handle -- >> where does the growth come from in australia? is it mining or housing? the groundnt hole in surrounded by overpriced real estate? we talke back of that, about australia being in transition. this is a boom that has been linked to china and you have the consumer leverage group. the adjacent industries have generated that. we want to transition to a more service orientated economy. we need to do more of that. that transition will have challenges.
that disruption needs to occur. paul: we just had an election. the coalition government is back . and also the central bank has been saying in the poly way that central banks do that it is time for fiscal stimulus -- in the polite way that central banks do that it is time for fiscal stimulus. >> we have avoided some fairly significant policy issues. there are issues for the economy in terms of just adjusting to change. we don't have a debt problem from a government perspective. we have a strong focus on surplus. that has been the political meredith. we look at the debt -- political narrative. but we look at infrastructure and nation building. --h of those things paul: and we are getting into
that territory. they are blowing all their political capital. so will we see another three years before a rally? >> if we continue to muddle through, we could see the realization that growth is lower. and we look a bit troubled. response from the fiscal perspective and we can change the political narrative. i am not in the mindset just yet. bank said that we need your help. paul: tax cuts are coming. will that help? >> it will be a relief but the meaningful tax cuts will be in phase two and three. 2022 and 2025. if you can bring that forward, that would be significant. the initial tax cuts will help, but it will probably be taken as a buffer as opposed to a stimulus.
paul: morgan stanley head of australian strategy and economics, think you for joining us today at the morgan stanley australia summit. we have more coming up. an exquisite interview with catherine would. -- catheirne -- catherine wood. you can dive into any of the securities and functions that we talk about. this is for bloomberg subscribers only. check it out, tv . this is bloomberg. ♪
trillion --ered 70 73 million which means he could retain upside if the stock rises. china is considering raising the barrier to entry to prevent the booming industry from hitting a wall. hundreds of chinese startups have rushed to the electric car business in the last decade, raising almost $20 billion since 2011. the main target will be companies planning to farm out manufacturing to other automakers. chinese tourism to the u.s. slumped by more than 25% the last quarter after the trade war. trend has worsened over the last three quarters. first order sales missed estimates. tiffany says they see improvement ahead even as tourism continues to drop. since his early days,
allen was forced to ground all the airlines planes, cut jobs, .nd cut costs we look at how the actions were instrumental in the revival of contests -- of qantas. became one of the most vilified chief executives in australia. you had people calling for your resignation. .here were television polls nobody was supporting you except for the board. how did you keep the board on your side? >> i was on a tv program, sunrise. that they just did a poll before i came on and i was announcing the turnaround planned. high 90's98% or the of people want you to resign. was, it's not a
popularity contest. work for the board and for the shareholders and they fully support me. qantas ceo on the turnaround tonight at 6 p.m. hong kong time. and the more ahead on daybreak asia. paul is joined for an excessive interview at the morgan stanley australian summit in sydney. you don't want to miss that. and let's get a quick check of the markets. it we are seeing new zealand underway. it is a positive day for equity markets across the board. more than a 2% rally in u.s. stocks. see the qe gaining .7%. futures up .8%. we are expecting the gdp numbers out of australia likely to show that economic growth grows an