tv Bloomberg Daybreak Asia Bloomberg May 25, 2017 7:00pm-9:01pm EDT
big automaker to be accused of cheating emissions. a soft launch in response. this is daybreak asia, live from bloomberg's u.s. and asian headquarters. i am ramy inocencio in new york where it is just after 7:00 p.m.. >> let's go to the development in the nl. -- in vienna. g7.ty to come on the look at what is happening with the u.s. markets and how it could affect the asia-pacific. markets were up across the board. in the s&p 500 and nasdaq hitting fresh records, in part of what happened in the retail sector. we will talk more about oil because that was on the downside and by far the biggest loser, down 5%. our opechat is delivery, but not quite there.
crude struggling this morning. even though we saw fresh records on wall street. let's see how things play out in the asia-pacific region could be seeing hesitation. mobile equities on track for a sixth straight weekly gain. we might end the week on a cautious note. seems the case for australia. 7019. close to a 5% drop for the dollar. the $49 a barrel mark for nymex crude. .7453 for the aussie dollar. japan at the bottom of the hour, looking for a pickup in core and headline cpi of the 0.4%. we are inching closer to 112 territory for the dollar-yen.
pretty soft when it comes to the futures on the nikkei. we did see a slight recovery yesterday. a bit mixed up right now. on wall street, seems like the long weekend came early. ramy: investors here are probably breathing a sigh of relief. especially after the turmoil of the past few weeks. we are heading into the memorial day three day weekends. s&p 500 closing at 2415. consumer confidence is also at a 2001.the highest since let's go to su keenan to break down the markets. a strong friday, likely to see reduced volume. when you have the nasdaq 100 index that is tech heavy, close to a high -- let's go into those
big movers. ramy mentioned retail getting a good shot in the arm from test by it 21% gains. the stock is soaring, unexpected newnd, and nintendo consoles. they predicted a decline in same source -- same-store sales, that was up. phillipsk about konica cophillips. they all raised fares. let's jump into the bloomberg. check out the big boost. trumps political troubles should provide tailwinds. we are seeing open interest. late april.since that is after the budget pan by
members of his party and fueling concerns of stability to push things through congress, maybe harder than originally thought. any uncertainty, a positive. yvonne: retailers offsetting what we saw among the energy names. energy -- oil still the big mover. traders wanted more. su: the extension was expected. check out the chart. what we saw was a better than 5% drop in traded oil futures. they had sunk from a five-week high. oil plunging on the opec deal. veteran traders on the street, expects the saudis to get more than they got, and it was a disappointment when they did not. we are also trying to catch up
with the russian oil energy minister. check out what he had to say. disagreement, they have expanded mandates to read it takes a close look at the market. -- expanded mandates. it takes a close look at the market. they will are needed, adjust behavior, actions. su: that is all well and good. let's go into the bloomberg. one concerns new york traders have, the u.s. oil output, the yellow line at the top, is mitigating against the opec cuts. u.s. oil production is increasing, even as opec is trying to put a dent in the global glut. that is of concern, particularly going forward. thank you so much, we will continue this conversation on opec. let's get first word
news with paul allen. lecturedent trump has allies in public, saying they must pay more for security. he told fellow leaders that 23 of the 28 alliance members are not paying what they should and that is unfair to the u.s. the president's comments threaten to white indifference differences among members. a setback to his proposed travel ban is a federal court slammed the order. to lift the ban from seven mostly muslim countries. it is likely to run afoul of the constitution's ban on religious discrimination. cheatsued for software to emissions testing in the same
way volkswagen did. it claims gm install the devices in trucks from 2011 to 2016. they said the environmental damage could be worse than that caused by volkswagen cars. owners of luxury homes in manhattan are beginning to accept reality. contracts in excess of $4 million says the median price has been the lowest in at least five years. top and market is overflowing with properties and sellers are founding the discounting is the only sure way to get a deal. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. paul, thank you. oil traders were underwhelmed by decision to extend output curbs. it was partly unexpected. wti fell below $49.
it will raise pressures in the open later on. let's get more with our editor, aaron clark. fast. this rally fading at the market was looking for surprises and we did not quite get them. >> that is exactly what happened. opec and its allies announced yesterday they would extend these historic production cuts another nine months. it will go from july through march of next year. it like you said, this is telegraphed, the expectation was built into the market they would make this decision. what people were hoping for, was longer or deeper cuts or both. they did not get that. that is why you saw oil fall almost 5% yesterday. wti trading around $49 a barrel right now. clearly there was disappointment. there is a lot of uncertainty. what is opec going to do after march?
what is the endgame strategy? aret of questions unanswered, which is why you sell the market reacted the way it did. quite some time before the next meeting in november. opec and its allies said they are aiming to reduce global inventories below that five-year average. how come it is taking longer than expected to do this? that was a strategy last november when they first announced the cuts that are underway right now the started in january and go through june. they want to reduce this global glut of oil and get inventories below or at the five-year average. it is taking longer than expected because of the u.s. shale producers. they are not a part of the deal and they are price responsive. as prices rise when opec cuts production, u.s. oil producers boost supply.
in the u.s. you can look at inventories. they fall in the last seven weeks. you can say opec is making progress. they are still 100 barrels above the five-year average. there is still a long way to go. ramy: i want to show this bloomberg terminal chart really quickly. hop into this. what you were talking about with the u.s. shale is interesting. ago where that red and blue line intersect, that was 12% of opec's production. now we are at 30%. it is interesting to see as they take this opportunity to get more market share. what does this mean for the output cut extensions? does it really matter when we head out to march 2018? aaron: it raises a lot of questions about what happens after march next year. u.s. shale reducers will
continue ramping up production if prices stay around this high. there is a risk opec loses market share and we will have to see where we are in terms of supply-demand balance globally in march. there are a lot of questions about what the endgame is for opec and what will happen after the first quarter next year. ramy: a lot of uncertainty despite what is happening today. aaron clark in tokyo, thank you very much. we are counting down to the latest inflation figures out of japan. is the economy better than we think? president trump shaming nato leaders as he supports -- g 7, what to expect. this is bloomberg. ♪
in hong kong. ramy: i am remy inocencio in new york. president trump is headed to italy to meet with the group of seven nations. what is on the g7 agenda? and what is on president trump's agenda of his own? kathleen hays is here with the preview, so let's start with the g7 agenda. kathleen: people will be shaking meetings attending g7 for the first times as leaders of their country. you have president trump, emmanuel macron, theresa may, her first global g7. have the host. and all the things that happened at the last meeting, u.k. leaving the european union, donald trump elected. italy has put security of the top of the agenda. pledged to get the strongest commitment on
fighting terror that they can from this meeting. donald has been talking about fighting tear since he was president. on this week long trip he has been emphasizing that. g7 onout of step with the climate. he has put the u.s. on review about climate policies and greenhouse gases. he may opt out of the paris agreement. and then of course, trade. back. trump has pushed he is not answering protectionism. he would not put it that way. he would say, i am for free and fair trade that benefits companies, another key area -- it has already stymied the finance ministers, the resistance to fighting protectionism. these are things that will be talking about. given what happened in manchester just days ago, it is easy to see security is something where they can all
come together. we will see if they make actual progress. ramy: that is the actual question. if it will go beyond words or if it is just talking and handshaking. thank you. let's get more on donald trump and the g7 with our emerging markets sovereign analyst, and former u.s. department of treasury senior coordinator for china affairs. good to have you, sir. i want to set the scene. the theme for the summit is, building the foundation of renewed trust. this is a very appropriate theme, especially with what is newening now, with four leaders taking the stage at g7. let's start with the economic side of things. anything to expect in terms of deals or pronouncements? >> first, thank you for having me, it is a pleasure being here. , have to say for investors expectations are low going into the g7 meeting. people will be looking at what
they're going to say on terrorism, given the tragic events in manchester. --t will come out on climate the biggest issue for investors going forward is, who will provide a leadership to the global economy and global financial system? u.s. leadership was indispensable in the global financial crisis during the asian financial crisis, and now where europeriod again is very inward looking on its own architecture. the u.s. is coming to the g7, proposing to slash foreign aid, and threatening to pull out of more trade agreements. i tell you, you cannot help but compare all this to what happened in beijing a couple weeks ago, when president xi is hosting 28 leaders and talking about financing infrastructure across the globe. and: free trade is lauded
praised and celebrated at the g7. i have to say with the caveats, butitionally, anything tradition at this summit, especially with donald trump -- do you think there will be any movement in terms of free trade in that talk? do you think president trump , or willge the g6ers those six change donald trump? david: you raise an interesting question. the problem is, we do not yet know what the u.s. trade policy has been. there has been a lot of flip-flops on chinese currency and other issues. one thing that is hampering the u.s. is, it is hard to score goals when you are not fielding a full team. there are key players at the treasury department, at the state department, and other agencies, key undersecretaries that normally play a critical role in these it g7 discussions,
they are just not there. yvonne: haven't we come a long way when it comes to the white house, on this talk of currency manipulation and protectionism and trade tariffs? we see the trade deal with china as well as the u.s., the first -- when it comes to restrictions. absolutely. a lot of the fears that investors had earlier in the year about getting into trade wars, those fears have not been realized. when you take a look at the recent u.s.-china trade deal, i know the administration said it ean effort, but when you look at the details, the nnly thing that was herculea was the hyperbole. but i would take that any day over a trade war. we heard china with
eight 720 page report about the situation. they were willing to talk about how they were open to u.s. infrastructure, aircraft, hollow -- hollywood movies, even. is that enough to strengthen the deficit? thinkwo -- i think two things. they cannot become too complacent on trade. we will reach a point where a lot of the trade agreements and in -- initiatives are disappointing. administration's domestic agenda runs into trouble, they will need quick wins. the one thing you can get bipartisan support on in washington is to beat up foreigners on trade. tcwne: sovereign analyst at and quarter nader for china
yvonne: you are watching "daybreak asia," i am yvonne man in hong kong. ramy: i am remy inocencio in new york. general motors slumped a most 2% after being sued for defeat devices to foil emissions tests. they have second company to be accused of this, since volkswagen. let's bring in bloomberg legal reporter to get us up to trade -- up to speed. is this a cookie-cutter version of the volkswagen story? >> it is, it is funny you say that.
it is the same attorney who filed the expedia suit if you remember, for five months ago. of the committee that filed and litigated the volkswagen suit. these are the same attorneys who are looking for diesel manufacturers in the united states to pull them up, if there is any hand of wrongdoing. indeed, they have found -- alleged to have found claims that gm has also crated these defeat devices, software that allows the car to detect when it is being tested for pollution standards. apparently, while being tested, feigncars are able to certain emissions. when they get back to the road, they go back to polluting. the question is whether gm did the same thing volkswagen is
copped to volkswagen back in 2015. ramy: it is interesting, it goes back to the company bosch. can you explain the relationship? sch great the platform for calibrating the engines and emissions software. what they were able to do, allegedly, is create a formula that would allow the cheating to a core -- to occur. bosch provided the same technology to dime a and the daimleren and fiat -- and volkswagen and fiat. whether gmstion is, did in fact do the same thing.
yvonne: what does this mean for diesel technology? questions about the credibility of the technology itself. is there not enough regulatory scrutiny? kartikay: the regulations are there. question is -- it is not even a question. this technology allowed carmakers, at least allegedly, testst the regulators's and sell these cars. the question now is about consumer confidence. do drivers care about the emissions standards? or do they simply like the fuel efficiency? if they do, it is a problem for the diesel truck market. even though vw seems to be bouncing back, maybe this hurts the entire industry broadly, we will have to see. r implications after five carmakers are part of this story.
asia's first major market open. japan futures heading higher after the weakness we saw in the yen overnight after opec failed to meet expectations. we were hoping for deeper cuts. but we are looking at inflation numbers, just breaking the bloomberg right now. when it comes to the core cpi, a slight miss here. rising 0.3%. still higher than we saw in march. the headlines, bang in line with estimates, up 0.4%. we were expecting a pickup, but not as much as expected.
the rise in oil prices a year raise thoseng to cpi figures. the big question is, how long can this momentum keep going, now that we see this favorable base from last year start to fade? ramy: especially over the last few months we have been seeing energy prop up these numbers here. even right now, oil in u.s. trading fall 5.5%. the future of the oil price in doubt, we have to watch and see how this plays out over the next few months or so. spot on for cpi, year over year. excluding fresh food, it is a miss by 0.1%. asia get over to our editor, with a look behind these numbers. chris, the data shows, yet 2%in, it is way off the
target. the you are saying there is -- there are signs of an economic revival. chris: clearly, the inflation 0.3%rs are not great at for the core measure. are probably going to be significantly far from 2% for a long time to come. most economists are saying inflation will pick up toward 1% by later this year. if you look underneath the headline numbers, one thing we have been looking at here in the tokyo bureau is, a number of underlying -- there are a number of underlying signs that japan's economy has turned a corner. it is not the inflation numbers. if you look at a number of gauges, including nominal gdp, the job market, lending figures,
it is clear that japan is at a different place than it was five years or so ago. say we buy this idea that things are not as bad as they at least were. what has driven the change? a number of is things. first of all, keep in mind that while japan is certainly has had a lot of structural problems for the past couple of decades, it has also had a bunch of body blows to the economy. if you think that to the asset bubbles bursting in the 1990's, the asian financial crisis, banking crises in the early years, the past five japan has not had of those body blows. you look at how the bank of japan as fundamentally shifted from being a break on the economy before governor kuroda
came in, to being a stimulus for the economy. skeptic of a japan turnaround story for a long time, myself. we have heard japanese politicians say time and again at that japan's economy is on the gradual path to recovery and we just never saw in the numbers. if you look at some of the numbers we have been highlighting in a piece we had out yesterday on the bloomberg, and you look at some of these tickers that you can look on the bloomberg back decades, it is quite clear there has been a significant and positive shift in japan's trajectory. yvonne: wager -- labor market is climbing, wages are height -- climbing. what does it mean for investors? label of aad the value trap. could this be a surprise growth market? chris: that is what some are saying.
foreign investors have turned off the story for the past year. at the was really sexy get go, disappointment with the sales tax, then they got excited in japan's market. they have turned forward with the japan market. we have seen a number of the mistake investors tell us that this is significantly a different market than it used to be. responsiveness of japanese companies to shareholders, record buybacks of up, someividends going people, including peter tasker, hedge fund manager in tokyo who has been here since the 1970's, says to man is among the markets that are investable. it is a -- it is worth taking a look at.
yvonne: thank you so much. those inflation numbers. at first word news now with paul allen. paul: oil slumped after opec expanded outlook prescriptions for the next nine months, after having failed to lift the oil glut. it fell almost 5% as the cartel and producers agreed to prolong the quotas through march. non-opec members will join. there is no reason to further the plan. >> the agreement has expanded the mandate. it takes a very close look at the market and what is happening there. if necessary, if adjustment they wille needed, adjust behavior, actions.
we believe it is necessary for all countries. market, and the oil to do everything necessary for stabilizing the market. for the benefit of producers and consumers. paul: the u.k. election campaign resumes friday, after having been suspended after the manchester bomb attack. theresa may asked for tighter security after the blast. opposition leader jeremy corbyn says it is not working. polls position -- opinion show leaders slipping with 5%. as wide as 24 points earlier. former bond traders accused of lying to clients have not said whether they will testify. jurors heard audio recordings from one of them as they prepared to live.
the case is nearing an end. defendants are not required to just -- not required to testify and normally do not make a decision until it is complete. machine has beaten man again, artificial intelligence taking a lead in that ancient chinese game of go. 19-year-oldrodigy in another show of strength. he has played professionally since the age of 10 and posted that a computer can never beat him. a god out -- ago god of the game. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. get more on what we should be watching as trading gets underway in asia. adam haigh joining us live from sydney. adam, we see these fresh highs over nine treasuries. fact pretty much to where we
started on the week, sideways. and there is the slump in oil. how is it heading up? move inat pronounced oil has its affect on asian energy producers. we will see some weakness, no doubt, in that sector. the big move for equities is people trying to assess throughout these record levels. and, for many of those u.s. bench markets. korea also has some records. it had a good run for the past four or 5, 6 weeks or so. expectations already fairly rosy for the economy and growth. worries around inflation have been suppressing bond yields and that is upholding through the end of the week. we might see a bit of that follow-through and the australian debt markets as well. today, we have the
second release of the u.s. gdp number. are already ratcheting down expectations of how good the second quarter can be. it will be interesting to see the revision to the first quarter as well. ramy: i want to switch to the bond market. it has not behaved as many expected through the first five months of this year. treasury yields remain stubbornly low. since january, it was at 2.4%. what is a telling us again, where rates need to go from here? the 10 year yield is holding around that 2.25 percent mark at the moment. let's bring up this chart on the bloomberg terminal. change ins how the the breakeven rates and expectations for inflation have been changing. has that trump trade has faded off in the last couple months,
you see how that has come down from the high in february, march. it is about reassessing the inflation numbers. we had a miss with u.s. inflation numbers in both march and april. people are more worried around how inflation can grow from here. it is been on the lips of fed policy makers the past few weeks. many have indicated how this is a worry for them. with a june hike looking pretty much like a done deal, there is still plenty of disagreement as to the pace of rate hikes as we go over the next six to 12 months. many dialing back expectations for how the central bank can start that inevitable move to further normalization of policy. jpmorgan, justnd two of the banks in the past few
days that have had to bring down their treasury forecasts for the 10 year. stuff, adam haigh in sydney, thank you. he is on vanguard. the world second largest asset manager expanding its footprint in china, adding to a list of four money managers. our china correspondent tom mackenzie joins us from shanghai. spoke to the ceo, and we ran that interview in the past hour. where does the see -- where does he see opportunities in china? tom: he wants to focus on institutional and -- investments they already have in a china. they have a representative office in beijing. longer-term, potentially trying to provide products for some of china's retail investors.
in terms of a time frame, he said maybe 10 years or 15 years away. they try to build up experience and knowledge. they spoke glowingly of alibaba's money market fund from three years ago, now the largest money market in the world. vanguard saying they need partnerships to expand and build on this business. it comes down to the regulators here in china. bill mcnabb telling us he is hearing the right sounds from them in the meetings he had with china's regulators. take a listen. >> regulators tell us what they want to see are more open flow,s, more open capital and development of a more sophisticated retail investor base. retail investors tend to buy and trade individual securities pretty aggressively. the idea of having funds for them to invest in has not taken hold yet. tom: vanguard are expanding
their footprint in china at a time when the bond markets, equity markets, are feeling the squeeze from this deleveraging campaign. and we have the moody's sovereign rating downgrade focusing people's minds on the debt pile. mcnabb to said it is a concern. it may pose challenges to vanguard's services in china. but he is optimistic about prospects in china. yvonne: and a little more cautious when it came to the u.s. market. -- markets. what did he say about opportunities in the global equity market? right, he wasy very wary about u.s. equities. this coming with the s&p hitting fresh records on wednesday. he said investors have priced in assumptions around trump policies and the trump agenda that may not come to pass. take a listen. >> i think the u.s. market is fully valued now.
the thing we worry about, the market has made assumptions that tax reform occurs, and regulation is tamped down a bit. the possibilities of any or all of those things happening over the next six months are pretty low. that would tend to disappoint investors. we are very cautious about the u.s. right now. mcnabb also talking about european equities. i asked him about the rotation, the great interest in european equities if it improves. he said the interest is likely to continue. he also talked about emerging markets, saying they looked relatively cheap in terms of valuations. but he says what investors are looking at is what plays out in china for the next 18 to 24 months before they make a move into the emerging markets. he is a about consolidation in the asset management industry. blackrock and vanguard
we have the principle of global investors in japan. it is up to wait status. we areu look at 0.3%, coming in at very low expectations. what do you make of this kind of inflation story out of japan? are we too inflation-obsessed? >> yes. thank you for having me. the story in japan i think is that inflation is under several forces that are pushing it down. aging demographics, declining population, implementation of technology, which is in itself deflationary. add to that the fact japan has an expansionary monetary policy but a restrictive fiscal policy. it is unable to move away from restrictive system -- fiscal policies. as long as they keep the fiscal
policy tight, you will see slow growth and very slow inflation. they are basically acting in a pointless way to talk about 2% inflation. it will not happen because of the economic structure. yvonne: far away right now. it is interesting, along with this economic story come a look at the market right now. it is quite bullish. incsee japan think -- japan on the way to recovery. corporate profits that records, lending also backing -- dancing back. we also see wage inflation happening in japan. it is not soaring, but we have risen more than 1% the past four years. how will this affect the corporate story for japan? are we going to be compressed? jim: no, i do not think so. it chip -- japanese businesses are well managed.
the trend globally toward more gdp going to corporate profits comes with the change of the capital structure. and again, the adoption of technology. i do not think that will reverse itself area -- itself. the rise of corporate profits puts the market in a fairly positive way. it is still investable, but not unique to the most attractive market in the world. that remains the united states. the japanese market is ok. think we will have to take that. i want to give you and our viewers a road map of where we have been in terms of inflation. hop into my bloomberg. i am curious what you think about in terms of how this current cpi reading will impact boj policy.japan's a quick recap, the yellow line is japan's cpi nationwide, year on year.
the purple line is fresh food and energy. jim: the problem is, they will continue. because it is so low, they will this -- continue with it monetary policy and that is a failing policy. monetary policy, fiscal policy, and structural reform. they are only firing one of them, years into it. what that leaves you with is what yvonne just described. moderate we rising wages, but no consumer price inflation. for the consumer it is a good out turn, even if the market would rather see a bit of inflation. the consumer will remain fairly positive, modestly positive. japan looks on fairly steady growth. the danger is, if they try too hard to inflate, they get boom and bust.
pretty steady, i think. it will be difficult to see how they access this easing accommodative policy. the last few here, months of cpi readings were better in part because of higher oil. little slide -- a big slide, 5% today in u.s. trading. how will this play in terms of future cpi readings? jim: we have to stop being so upset with the cpi. if i look at technological change in the oil market, the price should be closer to $40 than $50. that is the price at which it can be extracted in the united states. the oil price is being talked up. but the fundamentals, in terms of higher rig count in the united states will bring in equipment at $40 a barrel. that is where the oil price is headed. the cpi is a less reliable indicator than perhaps some people think. ramy: so forget about it for a little bit.
it there. leave ceo of principal global investors, thank you for impacting japan's cpi and what the future holds for all of us. get a roundup of the stories you need to know to get your day going in today's edition of daybreak. subscribers can go to dayb on their terminals. it is available on mobile and of the anywhere app. customize settings to get news on the industries and assets you care about. this is bloomberg. ♪
from today's 6600. they are focusing on bigger, and on big economies with lots of young people. yvonne: i saw it in seoul a couple weeks ago. than 2000sacked more miners in indonesia. the voluntary resignation notices were issued to workers who have been absent more than five days. many have walked out. most of the 30,000 staff are working. ramy: the incoming philippine central bank governors says there is no race to raise banks, despite economists predicting he will be the first in southeast asia to act. he said they are constantly reviewing the situation and said he does not think the bank is behind the curve. law -- he takes the
they must contribute more to defense spending. yvonne: and awkward dinner at the table. coming to you live, i am your yvonne man. past 8:00.st good to see you. ands get you a quick recap show you how the day starts off. the nasdaq, hitting a fresh record. this is all retail -- off retail, but we have been talking about oil. we will see how that all plays out. yvonne: it was interesting to see the irony, the records. it was the retail that really helped. going to be a big focus. ness in asia.us let's get to the open with shery ahn. we getwe will see if
that tailwind coming out of wall street, but so far, it looks like a modest open for asia equity markets. we are seeing the japan nikkei fall. stocks climbed to a two-year high yesterday so we could see some fallback, especially with oil slumping. 200, down. we could also see some pressure on the aussie dollar. the japanese yen continued to strengthen a little bit. that is putting weight on the equity markets. the cost fee, it is great. consecutive sessions with games which closed at an all-time high. the bloomberg dollar index gained in the last session.
we may see where it goes from there. when it comes to commodities, it is all about oil. we are not really seen that much movement at the moment. take a look at the japanese yen it traded in the top range. right now, it is sort of midrange. dollar-yen resistance at around 111.98. what will be important is inflation. yields,- u.s. treasury an important factor. we did see the cpi numbers. core cpi in line. the reported 1% growth. it could still signal upward momentum for prices in japan. talk i don't think we can
enough about oil today. i am looking at that s&p energy sector. out of the 30 or securities, only three are positive. everything else is in the negative. what is on radar? shery: did you see that plunge after the opec decision? and thenve-week highs, a plunge of more than 4% for both brent and wti. a lot of those gains, the decision was priced in. somethingpecting more, a surprise, perhaps even cuts, but that did not happen. wti below $49 a barrel. brent also feeling the pressure. what is important when it comes to oil prices, it is not just the prices itself. it is what it means for inflation.
played a big part when it came to price expectations. in the u.s., we saw breakevens plunged together with the price of oil wti. we are seeing the five year breakeven being very near a bear market, plunging about 16% since the march high. key whenlation that is it comes to oil prices. thanks very much for unpacking that. continuous coverage on what is happening. first, we have to get the first word news with paul allen. president trump has lectured nato allies in public, saying they must pay more for security. he said 23 of 28 members are not paying what they should. the comments threatened to widen differences among members.
he attacked the organization is obsolete during the campaign. president trump has suffered to most significant setback his travel ban as a federal court slammed the order as quote steep in ms. steeped in animus. and general motors slumped after being accused of using so-called defeat devices. it is being sued for equipping diesel trucks with software to cheat emissions testing. they claim they installed the to 2016.rom 2011 gm says the claims are baseless. owners and luxury homes in manhattan are beginning to accept reality. if they want to sell, drop the
price. in excesse contracts of $4 million and says the price has been the lowest in five years. sellers are finding discounting is the only sure way of clinching a deal. global news, 24 hours a day. i am paul allen. this is bloomberg. weree: oil traders underwhelmed by opec's decision to extend output curves. wti fell below $49 and brent is also weaker. 51.50.brent at let's bring in our energy markets editor. we were looking for some surprises but we didn't quite hit it. where do we go from here? >> opec cannot win, can they?
they flagged an extension that was longer than expected but the market wanted more. you saw the price reaction when ministers were meeting in vienna. as soon as they came to headquarters, a comment by the saudi oil minister that cuts would not be deeper. that was the moment when prices started to plunge and they kept going from there. from here, we have nine months of cuts. whenis more than a year, you include the first quarter of this year. i guess you have to wait and see. the saudi minister said they are stockpilesat global should be down to the five-year average by the first quarter of next year. it is happening incrementally. it is whether investors have the time to stick with them. yvonne: you mention they are going to stick with being flexible for next year. the reason we are not seeing stockpiles fall is because of what is happening in the u.s.. we have the shale revival.
we continue to keep pumping. crude still see that inventories have fallen, but we are 100 million barrels above the five-year average. >> u.s. shale is the wildcard here. saidonthly report, they they could not predict how u.s. shale would go. the saudi minister said, rising output from the u.s. would not be a problem and they would do the best -- their best. u.s. production is over 9.3 million barrels a day. in the to see it lower we might see prices higher. what i am curious about this means for the oil price. you brought up u.s. shale. i want to look at it one other way. hop into my bloomberg terminal.
you see the confluence of the red as well as the blue lines. 10 years ago, 12% was what the u.s. was making in terms of opec production. as you go to the right-hand side, it is coming up on 30% or so. this is an opportunity for u.s. shale to gain market share. how is that going to impact the oil price? >> that is the problem for opec members and something the smaller members are probably asking. the loss of market share to those u.s. suppliers. one thing to watch over the next nine months is perhaps compliance. if prices remain low, will the rest of those members remain compliant given the u.s. will be taking market share from them? is probably be one thing to watch over the next nine months. if prices remain low, that could be an issue. ramy: thanks again.
it is not negative, it is positive. could say japan actually has the wrong inflation target. pace japan has sustained for any period of time. if you look at the underlying signs, it looks like inflation may pick up to maybe a little over 1% later this year, but still well short of 2%. at the same time, we published a story this week contending if you set aside the inflation figures and look at some of the more important economic data, on the size of the economy, on wages in japan, on bank lending, real economic activity, our economicn is japan's
trajectory has changed significantly over the past few years in ways many investors have overlooked. the idea thatbuy things are not as bad as they were for japan, but what is driving this change? bouncing back out of that now? chirs: a number of longtime japan watchers, ones that have not necessarily been bulls on then are starting to say era of the lost decades is no longer applicable to japan's economy. if you think about the last couple of decades, japan went through a couple of tough per iods. asset bubbles bursting in the early 1990's. the asian financial crisis.
another local banking crisis, the global financial crisis. years,the past five japan has not had those kinds of body blows. policymakerst what are doing, it is a different framework under abe. bank of japan continues to pump liquidity into the economy. a lot of the brakes on the japanese economy, that it suffered from for a long time, are no longer there. yvonne: great to have your perspective. joining us live from tokyo. from get more perspective a portfolio manager. great to have you. is the inflation story out of japan, it is not just isolated to japan, but what we are seeing is reagan's are rolling over now. what will be driving prices higher? inflation is very
interesting. if you look at japan, inflation has been a good progress in terms of inflation. in terms of the early days of a bit disappointing. ening, on the decline of low oil prices. that is around zero .5% of the core inflation, contribute a decline of 5%. the numbers haven't really changed the whole picture of the labor market in japan. with youru have been exposure when it comes to some of these bonds, it is
interesting when you take a look at some of the other indicators in japan, you take a look at my bloomberg here, the japan yield curve. we see that spread between the two-year and tenure continuing to narrow. the curve continues to flatten. inflation is not picking up. what makes you so convinced prices can go higher in japan and this can continue to be a good trade? in the we are seeing, bigger picture, we have a tightening of labor markets in japan. eventually, we think that will's for upward pressure on wage growth. on the back of that, we have the boj which is very committed in terms of keeping rates lower. the market is tilted more towards underpricing inflation in japan.
it is currently hovering around 50 basis points which means the market is pricing in japanese inflation, sticking at 0.5% for the next 10 years. we think that is where the market is going. ramy: that is really interesting. e have been talking about jgbi's link to the cti. the cpi line, it is linked bonds. the other line is lower, much more negative. what is your growth outlook? >> japan, you have seen the growth trajectory has been fairly positive. we remain positive in terms of that. think theoned, we
tightening labor markets and the central make, which is committed to keeping rates low for a longer time, is generally positive for inflation. ramy: bloomberg news is reporting recession does remain, ks still dois remain in japan. i do want to get euro and take on that and the likelihood that that will happen. japan,ink policy wise, the recession risk is always there. but japan has turned into a more -- a more fiscal expansion policy. we have seen signs of this since last year. i think mr. abe is leaning more toward government spending as necessary. seeing then government trying to push that
the target in terms of achieving balance by 2020. these are things we are looking at. dovish will remain for the foreseeable future. yvonne: great to have you. we have breaking news right now. aviation announcing they will be purchasing six aircraft from airbus. in terms of the breakdown here, several aircraft. boc aviation saying that aggregate list price coming in at $1.05 billion. aircraftto take that delivery from 2018-2020. break for markets
you are watching "daybreak asia." firstpresident trump's visit to nato headquarters may not have won him many friends. he asked member countries to called what he -- to pay what he called their fair share for nato defense. >> president trump is calling on nato allies to pay their fair share to be part of the alliance. saiding, president trump 23 of the 28 nato nations that are not paying sufficient funds need to increase their allocation to better counterterrorism. nato membersmp:
must finally contribute their fair share and meet their financial obligations. nationsf the 28 member are still not paying what they should be paying. meanwhile, the fallout from the manchester terror attack continues to shadow over president trump's first international trip. the president has called for an investigation into who is leaking intelligence information after manchester police decided to stop sharing intelligence with the u.s., given that they believe the u.s. intelligence community leak information to the american press. the president is headed to sicily for the final stop of his visit. brussels,from bloomberg news. yvonne: let's do a quick check of the latest is this flash
headlines. alibaba said to be leading investment of $1 billion in a top player of china's food delivery business. they will help it compete with a rival backed by 10 sent. -- 10cent. second-largest effort so far in 2017. that overbeck unit accuses a former engineer of colluding with its rival to steal driverless technology, and says evidence can be found and a report uber commissioned. waymo suit uber in february -- sued uber in february. yvonne: amazon has entered two grocery pick up kiosks in seattle.
shoppers to buy online and pick up groceries within 15 minutes rather than waiting for deliveries. they want to collect with click and collect shopping offers by rivals such as walmart. almost a $1000 stock. i do like that idea. ramy: don't know if i can afford a $1000 stock. let's check the markets. the nikkei, down 0.2%. ospi getting a k bump the other way. of a bump fromh what happened in the u.s. when we saw the u.s. markets hit fresh records in terms of the s&p and nasdaq. we can definitely go and unpack that in the next half hour. yvonne: usually the energy next,s are going to be --
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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. is eight: 30 in singapore. half an hour until the open of trading here. markets, a little bit of caution as we enter the weekend. i am yvonne man. ramy: you are watching "daybreak asia." let's get the first word news with paul allen. opec oil slumped after announced they will extend their output restrictions for another nine months. brent fell almost 5% as the cartel and independent producers agreed to prolong the quotas through march. no new non-opec nations will
join, and there's no plan to continue this any further. >> we have extended mandates. it also takes a close look at the markets, and what is happening there. there can be an extraordinary to addressed -- adjust behavior and actions. to do everything necessary for stabilizing the market. paul: the u.k. election campaign resumes later on friday, after
being suspended after the manchester attack. theresa may announced further security, but the opposition leader said it is not working. the government lead is slipping down to 5% with two weeks ago. the gap had been as white as 24 points earlier. three nomura bonds traders accused of lying to clients have not said whether they would testify. the case against ross u schapiro and others is reaching and and. --a an end. man again, beaten taking a lead in the ancient game of go. he has played professionally since the age of 10 and
announced a computer could never beat him. hagover, he declared alsp a god after it defeated him. time to see how the asian markets are shaping up this morning. energy players not having a good day. shery: stabilization for the oil prices, not so much. those into says heavily dependent on energy stocks. it was not such a surprise we saw the reaction. a huge run-up ahead of the opec decision. we got nine months of extended cuts. the reaction was pretty broad, following from the hig five-week high. stabilizing a bit but not enough for the energy stocks. 200 falling after two
days of gays. -- gains., we will see what happens to the rest of the markets as they open. aussie dollar stable but only after plunging overnight. we had commodity currencies getting hit hard. it comes to asia currency markets, we are seeing the offshore renminbi holding steady. this after significant strength in the previous session. people speculating whether or not we will see intervention from authorities. seeing the south korean 0.5%, the biggest drag on asian currencies. we did have the dollar index
strengthening the previous session. we have more positive data out of the u.s.. also, given the huge rally for the south korean won in the last you days -- few days. is on thee the kospi move again. break it out for us. awesome charthis from yesterday. i didn't even have to change it. again, we keep saying this. kospi seeing inflows of foreign investors. totalas about 29% of purchases. more optimismhave over the south korean economy. we have a new president and more fiscal spending. that has given a boost to consumer sentiment, which has
risen. surprising the bok did not move in yesterday's session, leaving the rate unchanged. spin it comes to the kops index, information technology leading the gains. a decliner. electronics samsung trial does resumed today, the vice-chairman, in a couple of hours. ramy: have a great weekend. and president, trump has arrived in sicily for a meeting of the g7, fresh from nato where he called on member states to cough up more money for defense.
our editor joins us for more. what is the bottom line? kathleen: the bottom line is he certainly did remind nato members there is a broad agreement to contribute about 2% of your gdp to defense. he pointed out a lot of them have not. it came at a time when they were starting off their talks, and some people felt it was a bit too much. he put it on the table. that was expected. nato,s from meeting with 28 members, on to sicily where you can see him getting off the plane with his wife, the first lady. there are going to be a lot of people -- not that they are meeting for the first time, but they are meeting as heads of state for the first time. donald trump new. the french president is new. a year ago, theresa may was not the prime minister of the u.k.
a year ago, the u.k. had not brexited. we had not seeing all the status quo on traded turned over. that is kind of the backdrop. also, of course, the manchester attacks. even before the attacks, the italians put security at the top of the agenda. the meeting is in sicily. lots of migrants come from libya to europe. an important issue for them. here, we think donald trump is clearly in step. they are in lockstep together. here is what he said when he addressed the nato members earlier. president trump: all people that cherish life must unite in finding and removing these killers and extremists. and yes, losers. they are losers. yvonne: climate change has
become an increasingly important issue at these issues, but donald trump is pushing back on u.s. climate change rules. trade, tough to get an agreement on. he thinks trade needs to be balanced and fair. benefiting workers in the u.s. and their companies. he has been criticizing trade surpluses including germany. he can't agree to the previous worrying. none of the -- wording. none of the previous meetings have been able to say we are going to fight protectionism in all its forms because donald trump is not on board. terrorism, security, something paramount right now. if there is progress, that is something they can point to. yvonne: what kind of economy is trump taking to the g7? is the global growth story
intact? een: forecasts were upgraded to 3.5% for the world to read some news unexpected, a gap, up to $67ds billion and change. retail and wholesale inventories, we got word, those are weaker. you can see the trade deficit, all of a sudden, it gets wider. that takes away from gdp. inventories, added to gdp. thel was the first month of second quarter. the fed is counting on a strong second quarter. peopleis have shaving back forecasts? we are getting the first quarter gdp revision tomorrow, up to 0.9% from 2.7%. still not very strong.
one thing bloomberg news pointed out, the u.s. is winning the g7 unemployment improvement race. unemployment down to 4.4%. the biggest drop in any g7 country over the past five years. that is something donald trump can take with him. the fed is confident enough in the economy to keep raising rates. the global economy, the governor gave a speech in washington. the fed governor. she said it is the brightest outlook in years. if this was 10 years ago or five years ago, a bigger issue for the g7. becomingterror attacks all the more of an issue. the leaders, the heads of state, are going to discuss that go beyond the economy and the markets. i think everybody will be watching to see if any
substantive agreements are made. yvonne: kathleen hays, thank you. second largest asset manager, vanguard, has opened a new unit in china. foreigno the list of money managers hoping to tap the market. tom mackenzie spoke to the vanguard ceo and shanghai. >> we think scale is important. if you look at vanguard u.s. and you look at the decline in our expense ratio, that is a window into the economies of scale. other people are looking at it, saying the only way to compete is to be significantly large. it is the only way you can both invest in the service side and keep your prices competitive. we have seen something of a rotation into european stocks. some of the political risk possibly being taken out.
do you expect a near-term pullback? >> this is a question a lot of our analysts are looking at. i would expect you would continue to see some interest in europe. the only broad sector of the market that seems cheap is the emerging markets side. everybody is trying to figure 12, 18, 24 next months. kind of theup being favorite place. tom: only u.s.. you have the fed tussling this dilemma between the improved job market, and the trump agenda being derailed or slowed. i think the u.s. market is really fully valued. the thing we worry about, it has made assumptions tax reform
occurs, infrastructure spending goes up, and regulation is down.d down -- tamped the possibility of any of those things happening in the next six months is low. that would tend to disappoint investors. we are cautious about the u.s. right now. interesting interview. the vanguard ceo sees the opportunities here. what did he say in terms of that? is not the best timing for them in terms of what is happening in the bond markets and equity markets that are being hit as part of this deleveraging campaign. you have the moody's downgraded as well. long-term, he sees opportunities. short-term, there may be challenges. he is concerned about that debt pile. long-term, he is positive.
be focused on to providing more products for institutional investors. they have a wholly owned foreign enterprise. they may look to set up a private fund. there is also a quarter of that allows offshore funds to raise money. that has been suspended for about two years, but there is speculation it a be lifted. they may be looking at retail investors, although he says that is probably about a decade off. the success of alibaba. they have set up the largest money market in the world over a three-year time. they are going to be looking for partnerships, but he sees opportunities. he also says that a shares should be included in the msci index. we are going to get a decision on that at some point in june. ramy: thank you for that
ramy: welcome back. you are watching "daybreak asia." checking brent crude and wti, continuing to fall this morning. alliespec and its extended output restrictions for another nine months. that is through march, but what happens after that? no guarantees about compliance either. we spoke to the russian energy minister. is either rising or falling. it happens all the time,
fluctuations. what is important is we took a long-term fundamental decision which would lead to faster rebalancing of the markets, the return of investment appeal in the sector. i believe this fundamental decision will be important for the markets very soon. have seen aould much worse reaction of the markets if no decision was taken. >> compliance has been a word used very often today, and in the meeting. meet your compliance every month for the next nine months? yes, of course. companies russian take this obligation very seriously, very responsibly. we value our corporation --
cooperation with opec and other countries. we expect to have full conformity over the next nine months. trust with partners is very important. we know it takes a long time to build this trust but it can be lost in a day. that is why it this point, it is very important for us and all countries -- that all countries to to commitments and honor commitments. all the other countries and participants to also meet these targets. manus: can i ask you, as russia is the biggest non-opec member taking the weight, have you had to put more pressure on non-opec members to come on board today? >> as far as the extension is concerned, i can say the talks
were fairly fast and successful because country saw the efficiency of the deal, they understood the benefits and their responsibility. what was much more difficult, ien the talks last year, would say opposition countries are very consolidated. language used in the news conference was the ability to do more. he talked about reviewing the situation. would russia support possible extensions if that is what the market needs? if that is what the data says? >> we have created a very good and very efficient platform for monitoring the market and assessing the situation. we have the joints technical
committee which assesses the market. the joint ministerial monitoring committee. and the conference which can be held at any time if needed. askedgreement, they have end of their mandate. it takes a close look at the market and what is happening there. if further adjustment actions are needed, there can be an extraordinary meeting. to adjustbehavior, actions. these adjustment actions can both be aimed at increasing the amount or reducing the amount of costs. it all depends on the market situation and what is needed at that point. ramy: that was the russian energy minister speaking to manus cranny. you can also get a roundup of the stories you need to get your day going. go --erg subscribers can
latest business flash headlines. taco bell is looking overseas with hundreds of new restaurants over the next five years. india, and canada are on the list. taco bell says it is focusing on the four countries as their big economies with large numbers of young people. home market is increasingly saturated with fast food. yvonne: i wonder if china likes union leaders say the country issued so-called voluntary resignation notices to workers who have been absent for more than five days. freeport says about 4000 workers opted out. philippine bank
governor saying there is no race to raise rates. he says the bank is constantly reviewing the situation and actually does not they are behind the curve re. espenilla takes office in challenging circumstances. martial law is in mindanao. yvonne: a look at what is coming up in the next few hours. heidi, i know you are watching the g7 . haidi: is it going to be awkward in sicily? one would have to assume so. brexit and trade, in particular the push for domestic trade.
another massive hurdle for president trump as he wraps up this trip. i have to talk about oil. wti crude is at a session low can read opec had the deal to extend supply cuts. will the surging u.s. shale get in the way? haidi: that very much the problem. we will be speaking to the executive director for weighing inand fx, on where the oil price goes from here. what it means for the rest of commodities as well as petrol etro-currencies. ♪