tv Bloomberg Markets Asia Bloomberg May 29, 2017 9:00pm-12:01am EDT
haidi: xd9 and in hong kong, 11 it 9 a.m. in-- hong kong, 11 a.m. in sydney. 9 p.m. in new york. if it -- this is "bloomberg markets: asia." i'm haidi lun. for the asia-pacific with china, hong kong, and taiwan markets all closed. telling bloomberg the target is close. japan remains stuck in neutral and employment is low.
wages are creeping up, but households still unwilling to spend. yet more signs that the missing puzzle piece when it comes to the japanese recovery. remainingics story elusive with this threshold out this morning. laboroyment, the tight market staying at the lowest in around two decades. also looking at things like retail sales and consumption lacking. take a look at this chart. consumers. is this the case that so many years of deflationary mindset is shake?ry difficult to the stubbornness of a reluctance to spend there is. low unemployment -- employment. you can see when it comes to spending, living expenditure, it is not going up at all. we are going to delve a little bit more.
there is no change to the picture that japan's economic recovery lacks that strong driver despite expending for a fifth consecutive quarter. the longest run of gdp expansion in about a decade. let's take a look at other markets. it is a funny start to the trading week. large parts of global markets closed.the u.k. and u.s. are no real contenders. china and hong kong are closed. singapore and malaysia are coming online. let's take a look at the limited session. aporter: we are looking at mixed picture in asian equity markets so far. today, stocks in singapore and malaysia joining the fray, down for a third straight day. we have a third day of losses for the asx 200 and the nikkei 225. gainingve the kospi
marginally, the best month since january 2012. we are getting warning signs the -- continue. taking a look at the currency space, the yuan snapping a four-day trade. aussie dollar continuing to fight the -- iron ore picture. taking a look at the commodities space, new york crude fighting below $50 a barrel. still higher about a third of a percent this tuesday. rising for a second day. now let's get a quick check on uob in singapore. penalizeary authority the spend or with credit suisse. for a fourthlling day, down about a third of a
percent. taking a closer look at aussie shares, given that they are leading the drop in asia, we have dominoes falling almost 3% after the rating was cut on the outlook. when you take a look at a nurse in sydney, take a look at what's going on with insurance. australia about 1.8% gain after failed to suisse outperform as premiums rising. fortescue gaining about 1.2%. iron ore prices are snapping a four-day drop, rising almost 4%. mark mobius, metals decline, highlighting the difference between demand and price movement. haidi: thank you.
let's get caught up with first word news with rosalind chin in hong kong. fedlind: the newest president says the last taper tantrum must not policy. james bullard says the economy is close to the fed's target and the current interest rate level is close to appropriate. he said it's time to consider andnding the balance sheet agrees with john williams it will be done in an orderly manner. we communicate effectively, and i agree with john's comment that this is just baby steps, that their runoff in the ballot she will go very smoothly. it's going to be managed. it's going to be slow. it will take a while. rosalind: a boost in the value tolerant -- currency demyelinating assets gave japan a four-year profit in 2016, making up for the near 2 billion dollar losses suffered in the first six months of the year. the bank had net income of $4.6
billion in the 12 months through march. helped byl in the yen reducing foreign losses from currency holdings. the u.k. prime minister theresa may and opposition leader jeremy corbyn have taken part in a live tv question and answer with the general election tending the way. earlier, the two of them disagreed. the prime minister said it was not a question of paying for a good deal, and the labor leader said he would handle that would legally be required. says japan's turnaround fund is considering joining western digital in a bid unit.shiba's chip western digital and toshiba are partners in the flash memory business, but they are in a dispute over sales. western digital is reportedly planning and $18 billion bid for control, which would be lower than other offers. global news 24 hours a day, powered by more than 2600
journalists and analysts in more than 120 countries. haidi: thank you. with japan showing few signs of draft, wages are generally starting to creep up. household spending is the missing factor, falling last month by more than expected. let's go to our north asia economy editor joining us from tokyo. we talk a lot about this, whether it's a sense of bad deflationary mindset being hard to shake and households not willing to loosen purse strings. reporter: right. household spending numbers are worse than expected today. they have been bad for quite a number of months. that the to note is retail sales have showed an increase, bigger than expected
increase in shopping. not all of that will be chinese. is a disconnect between what household spending data and what retail sales are showing. it's possible household spending is under county what people are actually spending. we have to be careful when we say this is overall a bad sign. data,g at retail sales released by a different ministry, it gives a better picture of what happens in the economy. it's not great. it's not incredibly strong growth, but they serve two different signals coming out of this. conflicting signals from this data. haidi: do we expect that to feed into extending the decade best street of growth we had when it comes to gdp? our is that a sense where that is the peak we are seeing?
reporter: depending on the way you look at it, economists are saying this is indicating there will be a good period of consumption in the second quarter.other people see it falling off . equal, if being there's not a huge shock to the economy, you will probably see growth extending to a sixth quarter. whether that is as strong as it was in the first quarter are not, it remains to be seen. we have to watch what happens in may and june. haidi: and a 2% inflation target, the boj has all that said whatever it takes, but what else can be done? for inflation to pick more a matter is of what happens elsewhere than what happens in japan. the third arrow of structural reform, there's no way that --
it hasn't had the effects on inflation it was supposed to. it will not have an immediate effect in the next year, which is when the boj says they will get to 2%. looking at what happens with inflation, the biggest question is what happens with iron ore price and the currency, and what happens with wages over the next year or so. the big factors in japanese inflation are going to be outside the control of the government and the boj, what happens with oil price, shale and opec, and the currency, which the boj can have some effect on, but not a direct policy choice for them. haidi: thank you, james. north asia economy editor from tokyo. japan,head, staying with we will talk more about efforts to help entrepreneurs breakthrough.our guest is ceo.ormer sony
haidi: this is "bloomberg markets: asia." i'm haidi lun in sydney. a quick check of the latest business flash headlines. chinese developers extending asia's against rally this year with china ever grand surging to a record in hong kong. it is the world's most indebted developer, but closed 23% higher this year. this despite j.p. morgan saying there business is not sustainable. the china and i is at the highest level since july 2015. competition and $7 billion of debt are catching up with reliance communications.the stock fell to a
netrd low on the back of a loss on the signs it is failing to meet obligations. it is in talks to sell business. mitsubishi is cranking up drives to boost foreign currency deposits as it looks to mitigate rising costs of lending overseas expansion. biggest bank is expanding the overseas lending to earn higher margins with negative rates zapping profitability of domestic loans. thesesaw from some of macro indicators that came out this morning, japan remains very much mired in a slump, despite years of monetary and fiscal stimulus. big companies have yet to see a breakthrough.i want to talk
about that was the former ceo of sony, nobuyuki idei, who now heads up quantum leap. this company tries to help entrepreneurs. great to have you on the program. in terms of big picture, what needs to change in the corporate mindset, particularly when it comes to the space you are operating in, to get entrepreneurial startup type businesses after money in japan? mr. idei: it is very difficult corporatethe japanese culture itself. i think it is slightly different from that is -- of american capitalism. the entrepreneur has so much conservative philosophy. they don't have any mindset to rather thane. stable management of the company. haidi: do you see signs that
things are starting to change? mr. idei: i think so, because of the change of technologies such japanese companies will be forced to change in the next few years. haidi: you talk about this conservatism when it comes to the corporate culture. we have seen signs of more activism within corporate japan as well. do you think this is a good thing to force some of these japan companies to think more about shareholder returns, more about whether governance reforms needs to move a little bit faster? mr. idei: i think so. i can describe very shortly, the japanese economy has three. is aging society, bureaucratic led society or
closedontrol, and c is society. cap and -- japan was successful after world war ii. this is before the internet. has to take a chance to create new value after the internet society. haidi: in terms of this creation of new value, what are you hearing from younger japanese entrepreneurs, people that are wanting to work with startups. what are their concerns about doing that any corporate culture that is so traditional like japan? mr. idei: as i said, this company has so many regulations. for example, uber. there is uber japan, but they
have strict regulations. also, airbnb with the same thing. japan remains the before internet society. but around leader there are dynamic entrepreneurs who try to but compared to europe and america, the number is much smaller. haidi: what do you think is the most important way to improve governance? we know there has been well documented scandals within japan over the past few years. toshiba, all of this among them. what the japanese companies need to do beyond that? mr. idei: i think corporate people's itself is on minds. we have to improve corporate governance. for example, esd has become very popular. s for social, g
for governance. after three years of the government, i think many companies are starting to think about board structure and inviting outside board members. -- onewhat do you think of the criticisms from activist investors when they are targeting japanese companies is looking at profitability, and return on investment. what do you think is the major problem and what should be done about it, and what reforms or incentives or penalties should come through from the policy side to push these companies into a more modern corporate way of thinking? mentioned that scandal for the two companies. it is related to the acquisition of foreign companies.
case of united states companies are british companies. i think governance itself is very much domestic governments -- governance as ok. challenges, how we can change the business model itself other than increase profitability, i think most japanese companies have a huge challenge of how to adapt changes for technology for a mixed paradigm. haidi: that's the other thing we are seeing, a lot of these -- the profitability when it comes companies aree lower compared to western counterparts, but even the companies doing really well are sitting on huge cash piles and they are not investing into the economy. that is thatnting a legacy? confidence thing, the conservative thing you were talking about?
mr. idei: japanese companies survived by consolidation of industries. industry,e, the steel the two big groups and financed banks. there's consolidation of several banks into three groups. is how we made the effort to survive during the past 20 -- i think wee are facing another challenge for .he new technology ai and launching for new technology. this is a challenge for how to
reform the structure of the business itself. haidi: huge challenges ahead, as you say. i know you have a huge amount of experience within japan as well. fromof luck, nobuyuki idei quantum leap, former head of sony in japan. credit suisse caught up in the 1mdb probe in singapore. they have been fined.all the ugly details, next. this is bloomberg. ♪
the investigations have been going on for two years. the latest to banks that are -- theind our credit latest two banks that are being fined are credit sillies anti-e.u. kobe. -- credit suisse and 1mdb. haidi: they say this is the price to keep their financial center clean. is there a sense this contagion from the 1mdb scandal has dented singapore's reputation for being a financial hub that values transparency and comes down hard on corruption? yes, definitely. what the central bank has also said is that they are one of the few central banks around the that havethe world taken action. they have closed banks, imposed
millions in financial penalties. they make a great effort to make sure they are doing something. haidi: singapore has really taken the lead on this, but this is just part of a world wide ongoing at the moment. reporter: yes. we have had investigations in 10 countries are more. in malaysia, we are racking up as well. there are documents from the police investigating one mdb as well. the u.s. department of justice has come to a settlement with the producers of the wolf of in assets related to the film. haidi: this is quite an extraordinary story, clearly still ongoing. thank you for keeping us up-to-date on that.
haidi: it's a 11:29 a.m. here in sydney. the local markets are trading to the downside for a third straight day. that's a view of the sydney house. a beautiful winter's day here. we are seeing downward pressure when it comes to aussie stocks having to decouple from the asian rally we had been. every sector accept materials and financials staying today.ove water the latest declines being driven by the poor outlook for commodities outtake in china. iron ore trading below $60 a ton for the first time since october.that is weighing
on the broader commodities picture. i'm haidi lun here in sydney. marketabsence of capitals coming through from global markets, we have seen low volumes and not a lot of physicians being taken given that the u.k. and u.s. and large parts of asia remain closed. hong kong and china are closed for holiday as well. the focus shifting back to central banks. comments from the ecb overnight, mario draghi streaking a dovish striking a dovish tone. talking about balance sheets, four $.5 trillion is the amount that the fed eventually has to do. the bank of japan are head and shoulders above the rest. the european central bank in yellow. processing some of these remarks, we go to jim barlett -- bullard from the st. louis fed, earlier this morning saying it
should be about calm when it comes to the unwinding. we heard it will are from john williams in san francisco, saying that what we are going to get is a boring unwinding of the balance sheet. communication will be key, so we are watching for that. this is before u.s. jobs numbers come out on friday. breaking news. -- 4.4% rise. gain of 3% was expected. expecting a super decline of 18.1%. that does add to them except whether we are going to have greater construction activity. soft dataen a little out of australia recently. some more positive numbers when
it comes to housing could add to sentiment. shanghai and hong kong markets are closed. it is a quiet session, but sophie is taking a look at where we can find action in asia. sophie: not much to be had in markets. the nikkei 225 along with asx 200 leading the drop in asia today. i want to draw your attention to the kospi, to losses down about a third of a percent, looking at it second day of declines. new zealand stocks are the only bright spot so far in the region. take a look at what's going on. the currency space, we do have leading the drop in asia. we had john williams from the fed indicating three rate hikes this year does make sense. let's look at the currencies race -- space. the korean won retreating for a third day.
the singapore dollar, declined back to back for three weeks. the you want snapping a four-day rise. traders are seeing bigger price jumps ahead for the currency halloween moody's downgrade of china and the shift in the pboc fixing mechanism. we have the yen on the advance, trading around 110.92 a dollar. that is the only g10 gainer against the green here. the euro is sliding about a third of a percent.this is after the ecb chief comments that monetary support remains necessary for the euro area.while we do have the yen strengthening, we had the nikkei declining. volatility on the nikkei 22 the lowest level in three years. take a look at the movers. ic stocks along with electronics makers dragging in tokyo. haidi: thank you.
let's get the first word news with rosalind chin in hong kong. shows few signs of ending years of drink. although unemployment is at its lowest in two decades and wages are rising, the household spent -- spending fell off. retail sales beat expectations in april, showing a 1.4% rise against the forecast decline. >> the household needs to have a higher expected wage growth. that also hasn't happened since 2013. we really need to see this nominal risk continued to grow and at some point, nominal wage growth will be higher than the inflation. that hasn't happened in more than four years. u.n.ind: the offshore extended gains for a fourth day signal that policymakers are becoming less tolerant of a weak
currency. the exchange rate surged almost 1% in the past four days. the biggest three-day jump since august 2015 evaluation. china is revising rules on major investors selling stakes. china securities regulation commission says investors earning more than 5% of a company must act in a legal, rational, and orderly manner. penalties will be imposed on anyone breaking rules. latestorea says its missile test with a new weapon and position guided system -- precision guided system. kim jong-un oversaw the missile. -- theng says it was it has a plan to
target of seven meters wide. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i rosalind chin. this is bloomberg. ♪ you.: thank the st. louis fed president told bloomberg there is little justification for a series of rate hikes this year with inflation starting to slow. however, he says the turmoil in the white house could affect the u.s. economy. our policy editor kathleen hays has the story. fair to say that jim bullard was a little bit down pete -- downbeat, little conservative. reporter: i would say he's definitely putting the spotlight on something other fed officials, for the most part, are not. the most officials say inflation has been softer, but it is temporary. it will keep heading back toward its target. in fact, he joins charles evans from the chicago fed, also speaking in asia on friday,
thing.the same also, jim bullard says he thinks the fed has done all the rate hiking it needs to do. he says maybe another rate hike year. he's never been on board with two or three more. he says the idea the fed needs full 200 basis points, two percentage point over the next few years, totally wrong. he's looking at the fact that the fed has missed the inflation goal for five years. and has not really held onto the 2% goal in that long. he doesn't see rising wages boosting inflation, even with inflation as low as it is. let's jump into the bloomberg and illustrate what jim bullard is saying. chart.a simple the yellow line is the 2% inflation target. the turquoise line is the headline number. frequently above 2%, now it is heading back down.
looking at food and energy, it can pretend the headline. it has never been above 2%. also interesting, when we asked him about what's going on in washington, there's all kinds of turmoil around donald trump from the fbi investigation into a budget that was dead on arrival when released.could it affect confidence ? could it affect the way the fed look at the economy?here's what jim bullard said. >> the business confidence numbers shot up after the election. the president was perceived as more pro-business than the previous administration. washington does have to the liver at some point. -- have to deliver at some point. that is a concern going forward whether the honeymoon. they would end at some point, and maybe the reality of american politics with settling. we will see if that happens or not. i think the jury is still out on all of that. reporter: put this in context.
a lot of fed officials, including janet yellen, have said they never really added that much on to potential gdp for 2017 because they're not sure what donald trump would accomplish maybe for 2018. it looks like a lot of people, including jim bullard, saying the contribution for fiscal policy makes the economy seem up in the air right now. haidi: a lot of uncertainty. bullard also agree with john williams from san francisco that the fed ballads she'd reductions were not really a federal market. why are they so confident it can happen? reporter: they are hoping for a. they say things like the fact that the fed will communicate, that communication will make sure it doesn't roil the markets. jim boyd -- jim bullard says the amount of the runoff, the amount of the bonds we will not repurchase again, is small relative to bonds out there. listen to what he said. >> on the rate itself, acting we
are not very far from an appropriate rate for the u.s. economy that will keep inflation not too far from target and the labor market performing well. what i disagree with is the idea that we have to go to hundred basis points higher to get some sort of neutral rate. i don't think that's the environment we are in. i think we can stay about where we are, possibly a little higher than where we are today. reporter: again, jim bullard saying he doesn't see a lot more rate hiking needed, but he's also acknowledging that if you are going to be reducing the balance sheet, and that is a form of tightening, then it will be another reason why you don't need to do quite that much rate hiking. bottom line, he said he doesn't expect anything like a taper tantrum because the fed is going to go slowly and let the markets know what they are doing. he's confident on the balance sheet. a lot less confident on what the
fed is doing and the path it is on to get inflation to target, talking about interest rate increases. that is where he seems to break with the majority. that's the clear majority view. the employment report has to be an absolute disaster for the fed not to deliver a rate hike in a couple weeks on june 14. thank you so much for that. of course, more facts speak coming up. -- fed speak coming up. we will be hearing from robert kaplan tuesday and wednesday. the u.s. jobs report is out friday. the vietnamese prime minister is set to meet donald trump this week. --l there be a trade out trade-off after the fall this week? this is bloomberg. ♪
haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. a recheck of the latest business flash headlines. bmw is set to halt production in china and south africa for at least a day as it grapples with a shortage of steering production. the facility in munich has been affected. the problem stems from an unidentified italian supplier, which has been unable to make deliveries required by bmw. warren buffett has buddy a 3% stake in german chemicals -- has bought a 3% stake in a german chemicals company. he became one of the company's top shareholders. china's pharmacy is reported to
be interested in buying the body shop, which has been up for auction by lori l a price tag of more than $1 billion. l'oreal but the body shop from british of the turn -- a british entrepreneur in 2006. minister,mese prime the first set the first southeast asia leader to meet president trump when they sit down in washington wednesday. he spoke to bloomberg about leaving for the u.s. about i o trade, the tpp, and being called -- cheat.eek to promote thes comprehensive partnership between vietnam and the united states for wider scope and added substance at all three channels, including bilateral, regional, and international. reporter: will you be pushing for a bilateral free trade agreement, given that the u.s.
has pulled out of tpp? >> after the u.s. withdrew from the tpp, vietnam and the u.s. has restarted a trade network agreement. we respect president trump's decision with regards to trade, and we want to make sure we can convince him that this is a mutually beneficial relationship for both sides, and american consumers benefit and prefer products from vietnam. haslinda: you saying you are confident of concluding a bilateral free trade agreement with the u.s.? noting, of course, that president trump called yen on a trade cheat. >> there is no cheating in any kind of product we export to the united states whether it be,
catfish or shrimp, and we had proof. i would like to stress that besides exporting to the u.s., vietnam also imports and buys products from the u.s. including airplanes and engine turbines, down to the aggro producers. can tell you that the importance of vietnam from the u.s. will increase significantly since this year as we will sign a billion dollars worth of deals with american firms and import lots of meaningful, high-value products around the u.s. to help create american jobs. our next guest has been .anaging money in vietnam joining us from ho chi minh city is kevin snowball, ceo and cio of pxp vietnam asset management.
you're looking at potentially in pakistan, given that pakistan will be added, the exodus of frontier investors going into vietnam may actually help boost the upside when it comes to the enemies stocks. is that one of the factors you are looking at? >> not so much really on the msci, because it's not a great deal of money that follows that. it is emerging around $1.7 trillion. going to the msci hemorrhaging watchlist and into the msci merging index it would make a significant difference, but the amount of money diverted from pakistan is turning over a couple hundred million dollars a day, not terribly significant. haidi: when you look at the index, we are already beyond what most analysts thought was the upside for 2017. how much further upside the you
see? the you think valuations are still on track, given the right environment out of the u.s. and the risk of what happens with the dollar and chinese currency? that has enabled the vietnamese currency to maintain a pretty stable path over the last six years or so -- five years or so. raisesu.s. weighed -- rates and we don't, there will be pressure on the currency. if china devalues them, we would follow suit. for 2%ent follows policy annual devaluation annexed, back to maintain -- expect to maintain competitiveness. we are any weighted average basis, it looks somewhere in the 15 or 16 times 2017 earnings,
but we do see much greater growth next year than this year. if you look among individual stocks, there are extremely cheap chips as well as fairly fully priced ones. selective shopping, if you like. haidi: how do you rate the pace of financial system and market reform that is going on? given that he do expect vietnam to be added to the watchlist this time around, how long do you think it will be added to the index? >> it's a minimum of two years. if we are told in june 2018 that it will go into the emerging markets index, which we are not convinced will happen quickly, but the earliest possible times
will be in june 2019. obviously, pakistan was told over year ago it is being promoted or redesignated. that becomes effective next month. there is a years lean time for people to rush and invest in an orderly fashion. the market has, grown tremendously in the last six to nine months in nominal terms, although a lot of company merging, we are not saying this is a guaranteed msci can put vietnam on the decision to put it on the emerging watchlist if it wants to, because it has checked the boxes and reforms are going in the right direction. it would provide encouragement
for vietnam to continue those forms in order to get into the index. we are hopeful but not 100%. haidi: we have to leave it there. great insights. so much euphoria when it comes to the emerging markets. pxi vietnamll from asset. coming up, the advance of bitcoin in japan. the details on how the virtual currency is planning to take over the high street. that is next. this is bloomberg. ♪
looking at ways to take over the high streets of japan. it is planning to give hundreds of thousands of retailers the ability to accept payments. using -- is usage writing -- rising in japan? reporter: a few things are going on. nation's biggest electronics retailers recently started accepting bitcoin in two of their stores in tokyo. that is part of a larger trend of growing interest in the crypto currency, and especially its use in a retail environment rather than a speculative tool or one that only geeks want to use. one restaurant booking site has started to use it. now the plan by bitcoin which behind an aviation company,
they started accepting bitcoin. they are trying to get into stores nationwide. they will work with a patient terminal provider. they will get into convenience stores, which are ubiquitous in japan. if that happens, it looks like there will be even more of a foundation for bitcoin use to really accelerate here in japan. haidi: right. the other thing we are seeing is this meteoric rise in the price of bitcoin. what has been driving that? what does bitcoin think about it? is reallyit interesting. there are a lot of factors behind the rise. part of it is speculative trading, a little bit of probably.oing on also, some recent changes that have made it difficult to essentially moved out of bitcoin. all of that has contributed to it reaching record levels. that is also contributing to the heightened interest in crypto
haidi: it's almost midday here in sydney. 10 p.m. in new york. this is "bloomberg markets: asia." a thin they for the asia-pacific with a string of markets closed. st. louis fed jim boehlert saying the economy is close to the target and it is time to consider unwinding the balance sheet. india and china begin trade talks in europe suggesting asia is more important for the eu
economy. it's a funny start to the trading week. major markets closed across the world. china and hong kong closed for the dragon boat festival. australian markets underway. quite a bit -- bit of pressure. take a look at this chart. the aussie stockmarket rally. this bull run we are seeing failed to reach 6000 last month is starting to diverge from the rally across the rest of asia. it is in the turquoise, going higher. you can see the decoupling. there's concern the decline in the iron ore price, trading below $60 a ton for the first time since october. that is starting to weigh on sentiment when it comes to currency as well. the national australia bank saying they see the aussie inching toward 70 this year,
depending on what comes out of china. tomorrow, another key gauge, china pmi coming up. that will be pretty crucial when it comes to where markets go from here. following for a third straight day. it is a holiday session in asia, but indonesia is getting underway. let's get jakarta open with sophie. fray,: jci joining the about 2/10 of a percent. asian stocks are sliding for a third day. while we are seeing volumes depressed across the region, turnover on the kospi is running hot, about 40% above the 30 day average, but not looking like a sign of bullishness. a stronger yen is dragging tokyo,nics makers in
while telco and consumer stocks are dragging on sydni shares along with property movers. in the currency space, the ringgit leading the drop in asia. john williams says three rate hikes makes sense this year. the offshore yuan is snapping a four-day rally. moving on to bonds now. we are looking at the aussie 10 year yield showing up on the chart. the u.s. tenure rate show -- falling. and --rd on oil, crude holding onto gains following the prices last week, given opec's decision to extend the deal for another nine months.
the commodities story is certainly a big factor when it comes said the decline we are seeing in the aussie equities space. haidi: thank you. first word news with paul allen in sydney. thank you. singapore's central bank has find credit suisse and the you will be following a two-year investigation into malaysia's troubled 1mdb fund.credit suisse must pay $500,000, and you will be has been hit with $650,000. lenders are being penalized for breaches of money laundering regulations and lapses of control. both banks say they accept the punishment and have put new measures in place. st. louis fed president says the latest temper -- taper tantrum is a failure of communication, not policy. james bullard says the economy is closed to the feds target, and the current interest rate level is close to appropriate. he also said it's time to consider unwinding the balance sheet and agreed with san
francisco's john williams that it will be done in an orderly manner. >> if we communicate effectively, and i agree with john's comments that this is that the runoff in the balance sheet will go smoothly. it's going to be managed. it's going to be slow. it will take quite a while. the value of in foreign currency denominated assets gave the bank of japan a four-year profit in 2016 making, up for the near $2 billion loss it suffered in the first six months of the year. the9% fall in the yen over second half helped the boj by foreign losses from currency -- holdings. the nikkei and says the turnaround fund inc. j is considering joining worth western digital in a bid for toshiba's chip unit.
sales.e in dispute over western digital is reportedly planning and $18 billion bid for which wouldthe unit be lower than other offers. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. haidi: which would be lower than other offers. thank you for that. the days when oil could move as much as 10% in a day seem in the past. dropping to the lowest since november 2014. we have been looking at all this. where's the fun? what's going on? reporter: it's extraordinary. not much happening. if you look at the chart on the goldilocks economy, it's not the same across all commodities. energy has been extremely -- had a wild ride. volatility still pretty high.
the thing really driving it down is precious metals. itatility is about as low as has been this century. agriculture as well. it is dragging the index down. haidi: is that completely bizarre? if you look at saint haven demand, you would think we had more political risks than other times throughout history. reporter: there's a degree of truth to that, but the thing driving volatility is more to do .ith the market fundamentals in the past when there has been volatility, it's often because of a jump between supply and demand. in 2008, demand from china rose as producers had been cutting back supply. in 2015, demand from china drop as supply was running strong. we have reached this goldilocks economy moment. ,he market is close to balanced
if anything, little glutted. commodity markets are better understood the states. the 1950's, the founder of glencore made a fortune from understanding the markets of mercury. now we understand these things. any day trader can look at their mobile phone and look up the weather in brazil, and invest in a soybean. the latest convergence of the availability of information and technology. reporter: exactly. that's what markets are meant to do. -- aid price discovery. think there are winners and losers from this. clear winners in terms of anyone who depends on commodities, anyone who buys commodities. you don't want the prices of raw materials to be going up and down. -- the problem
is if you are a traitor. the difference between high and low prices is where you get the margin. over the past week, we have seen glencore, the u.s. greens trader, that's a classic example of acting this way. we've seen the big privately held oil traders moving into more up and down stream assets. they can't make money from the court trading business used to. haidi: it has changed the landscape. also, is it sustainable? abouter: the great point volatility is exemplified by the classic market volatility gauges . 2012, the cboe introduced a new index measuring volatility on the the vix. volatility on the volatility index. [laughter] volatility itself is volatile. things may be calm at the
moment, but there may be more ahead. haidi: we are getting into inception territory. thank you. one thing we would like to bring you to attention is our would like to bring you to attention is our interactive tv function. find it at tv on the bloomberg. you can watch us live and catch up on previous interviews, and dive into any of the securities or functions we talk about. can become part of the conversation. send us instant messages during the show. this is for bloomberg subscribers only. check it out. india's prime minister modi begins his european tour in germany.what is on top of his agenda? we will talk about that next. first, the asian outlook. this is bloomberg. ♪
i'm haidi lun in sydney. a quick check of business flash headlines. rising wage costs. net income for three months to $420 million, from $680 million a year ago. rose 18% in that period. growing competition from other energy sources preventing the company from raising prices. june and now competition at $7 billion worth of debt catching up with reliance communications. the stocks fell to a record low on the back of the net loss and signed it is failing to meet obligations. the wireless operator is in business, andits an equal merger with allow it to parry debt by $4 billion. mitsubishi usg is cranking up drive to boost foreign currency deposit as it looks to mitigate rising costs of funding expansion overseas.
they have appointed 50 relationship managers at the offices outside japan to attack mark corporate deposits. -- more corporate deposits. asia-pacific markets are facing -- are pretty thin today. capitalism coming through from global markets with the u.s. and u.k. closed. investors are looking at comments out of the fed going into the june rate decision. mario draghi striking a dovish tone overnight suggesting both economies remain on track. let's bring in our asian market strategist from singapore. it is a bit of a truncated trading week, given all the closed markets. looking? athis china the big story in terms of market movers. reporter: certainly.
i think in terms of a short outlook, for asia the main driver will be pmi data coming through tomorrow. i think what we have seen previously is that it has disappointed the markets. i think this number is going to be highly watched. puts it intoberg extension territory. haidi: we heard interesting remarks from jim bullard a little earlier from the st. louis fed. he's talking about washington has to deliver at some point in order for equities rallies to continue. do you think the markets have taken their eye off the ball in terms of expecting president trump to deliver on the fiscal and reflationary trade fronts? reporter: i think in terms of what's going on with the markets
right now, a lot of what has said when we first saw the leak from fbi director james comey, fundamentals supporting market sentiment, i think as richard mentioned earlier, expects progrowth policies, that is something the market is still waiting. political noise can interrupt the market. in the long-term, i think fundamental indicators themselves will drive markets. haidi: what drives the next leg in terms of emerging markets rally? do you expect that has further to run? reporter: i think what we see with the emerging markets right now, especially in asia, many markets are pushing recent
highs. it depends on the situation. added be looking toward advanced economies. it is being led by what's going on in advanced economies. what we see with europe is it has taken the lead, despite the fact that the u.s. is taken -- slowing down.that will transpire in asia , and the overall global growth will channel more money into asia, which is relatively more risky. markets in a oil tantrum in the wake of not getting more from opec. do you expect this many rebound in crude prices can be sustained? how does that inform your outlook when it comes to energy stocks and energy heavy markets around the region?
reporter: i think in terms of outlookprices, the would be supported. he cd first reaction, you would think they had made the decision to extend .he current cut i think it will be supported for oil prices moving forward. i see more fluctuations. using an exit strategy. we are seeing u.s. production increase. it will be can -- continue to be a main driver for fluctuation in these are the kind of comments that will help push prices up. haidi: we were talking earlier today bit about this theory
called when it comes to classes of commodity. -- a little more volatility in oils, but metals has been quiet. what is driving that, given the geopolitical risk on the horizon? reporter: i think looking at despite example, i see the fact that we have the dollar itself moving gold prices, it is supported. i think the concern with regards to many of the geopolitical concerns and political concerns --the u.s. is keeping investors a little cautious in keeping money in that arena. in that sense, i see the medium for prices for gold. haidi: how much attention are you paying? it feels like almost a daily or
weekly event where we get action out of north korea.how much attention are you paying to that , and how do you expect that to move markets? we have seen markets when it comes to south korea, incredibly sanguine. reporter: i think the market with multiple missile fires by north korea is a little more desensitized. i think they do see this happening on a frequent basis, and the fact that there hasn't really been any reaction of any market don't see the being influenced for trade. if something serious were to happen, i think it would be quite devastating for the markets. the markets regionally have strong domestic fundamentals.
quickly take us through which ones you are liking at the moment. reporter: definitely. i think the ones in asia-pacific , the domestic ones including india and indonesia, these are the ones that will continue to see strong growth due to fundamentals. they had phenomenal growth rates. given the benign outlook in terms of the global outlook, it will help these economies in particular, especially for the equity markets. haidi: thank you so much. a strategist from ig markets. japanese unemployment to decade low wages. consumers are unwilling to spend. we break down the latest numbers from tokyo, next. this is bloomberg ♪. ♪
markets: asia." i'm haidi lun in sydney. japan showing few signs of ending years of draft. the unemployment rate is still at the lowest in more than two decades. wages are starting to creep up, but household spending fell last month by more than expectation. consumption in a long slump. what is the take away from numbers? it seems there's a little bit of a decoupling when it comes to the retail sales number and household spending. reporter: that's right. , exportsast year carried the japanese economy. private demand was really weak. year,rst quarter of this private demand was a bigger contributor to gdp. today's numbers, particularly the retail sales rather than
household spending, indicate the second quarter was off to a fairly strong start in terms of private demand. haidi: in terms of these jobs , it's a very tight labor market for sure. when will this feed through to productivity? shouldn't that lead to stronger wage growth numbers? reporter: it's a bit of a mixed that in terms of -- bag in terms of wages. some indicators point to the hourly pay edging up. figure hase wages not been so strong on the other hand, but economists say the labor market will continue to tighten at least a little bit more, and continue to support
consumption and wage gain. will -- remains to be seen. expect, given we have had the best run for gdp growth in about 10 years, do we expect that to continue into the next quarter going by the numbers we have gotten so far? reporter: yes, we do. and economist was saying the growth will continue barring any unexpected risks, particularly with external demand. wasate demand within japan solidifying, and global demand remains strong. at least for the next quarter or two, expectations are for continued modest expanse. haidi: thank you. let's take a look at how the markets are digesting this.
we are seeing a slide when it comes to dollar-yen weighing on sentiment in tokyo. we don't have strong leads from the u.s. the nikkei two two half a percent at this point. starting to get pressure coming through from the stronger currencies. we see that feeding into the s&p 500 index. this could be setting up fine ugly open in the u.s. as the markets come back from holiday. in sydney, the asx, almost every sector in the red. seeing declines for a third day. the aussie dollar has been coming under pressure. a lot of these commodities related stocks are under pressure. the benchmark chinese price falling before $60 a ton in iron ore. the declines of about 30% year to date when it comes to iron ore price, a lot of concerns going tore chinese is go from there and what it means for the aussie dollar.
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private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. >> i am paul allen with the first word headlines. of endings few signs drift, the unemployment rate at its lowest more than two decades, wages rising, but household spending fell by more than expected with consumption mired in a slump. retail sales beat expectations in april, showing a 1.4% rise against a forecast decline. >> the households had higher than expected wage growth, and that has not happened since 2013, so we need to see this grow,l wage continue to
and at some point that growth will be higher than the inflation. since qenot happened was implemented. extendedfshore yuan gains amid signals that policymakers are becoming less tolerant of the weak currency. amid expected intervention from the pboc. in the derivatives market, the one-month implied volatility is headed for the biggest three-day jump since the august 2015 devaluation. china is revising the rules on major investors selling their stakes. the chinese securities rig atari commission says investors owning more than 5% who then decide dispose of their holding must act in a legal, rational manner. the regulator says disclosure is required before, during, and after a sale, and penalties will be imposed on anyone breaking the rules.
latestorea says its missile tests involve a new weapon with a precision guidance system and improved electronics. says kim jong-un oversold the firing. pyongyang says the firing process was more automated than previously come added that it remarkably reduces the launching time. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am paul allen. the latest on the markets with sophie. how is it looking? sophie: a down day in asia. tokyo, the nikkei 225 falling .5%. leading that tech line of over 1%.
this as crude prices hold onto gains. and electronics makers dragging in tokyo and consumer stocks on the back foot following the morning data doubt. household spending is continuing to slump and retail sales put in a decisive beat for april, 1.4% monthly rise. toshiba shares, pulling up the board, this after the company concluded the agreement to split off three units. the split remains july 1, toshiba shares falling for a second day in three. aussie banking stocks after scott morrison introduced a bank levy bill to parliament did not much reaction here off the four big lenders. anz consistently on the back foot here.
2% today.p financials one of the sectors keeping their head above water in the session. fresh off president trump's protectionist tone in europe, it is now down to india and china to discuss potential new world order with leaders. for more on these visits by prime minister modi and premier masayoshi son, what is at stake in the eu-india relationship? stake isis at specially after donald trump left europe with head scratching on the continent about where the global trade perspective is headed. is it a new world order? variousre heading to countries to discuss that because we had the indian prime minister in germany, a six-day to other countries including spain, the first time in indian prime minister has been to spain in 30 years, also
russia meeting with vladimir putin, then click on the heels, li keqiang heading to germany to meet with angela merkel. basically, berlin sees new delhi as an ally and defending global free trade and they can also reach consensus on climate change initiatives and antiterrorism measures. india looking for more trade and investment. prime minister modi is bringing the energy minister, the minister of external affairs, a number of deals will be signed in the next day as they too begins when europe wakes up. at the same time, we have prime minister modi saying we want to chart out a future roadmap with focus on investment. 8934.t to bring up # the european and indian
negotiations have been stalled. complicated as well by the .rexit development in one way, it could be of benefit for india and do a separate fda with the u.k. and the european union, but some in the european cap have complained that india has in a bit protectionist and slow. what you are seeing here is the trade deficit with india. despite thatid and surplus india has without bound trade to the european union, #8931. chart, we have seen indy in an upsurge of foreign direct investment. modi's policies have been attracting foreign direct investment into india. india would like to boost that as well on the six-day trip to europe. haidi: yeah, for sure, but what about china?
's meeting with angela merkel p we talked about the special relationship. betweenrading partners the two. angela merkel heading the g-20 this year. china would like to see their voice larger in the g-20. the g-20 taking a larger voice globally. we talked a lot about the belt and road. i'm sure that li keqiang is coming with his pamphlets for investment in the belt and road. also, india has been cautious on the belt and wrote, so surely li keqiang wants to get some common ground and interest in investment there, so li keqiang meets with angela merkel starting tomorrow. then to germany, brussels and belgium on a two-day trip to the continent. what a difference in meetings we are expecting from president trump. thank you so much.
the vietnamese prime minister nguyen xuan phuc will become the first southeast asian leader to meet president trump. he spoke exclusively with bloomberg before leaving for the u.s. and aims to convince his host that two-way trade could be mutually beneficial. promote at aims to comprehensive partnership between vietnam and the united states for wider scope and added substance in all three channels, including bilateral, regional, and international. you be pushing for a bilateral free trade agreement given that the u.s. is pulled out of tpp? ju from the u.s. with the tpp, vietnam and the u.s. have restarted the framework to maintain dialogue on issues of common interest related to economic and trade matters. we respect president trump's
decision with regard to trade, and we want to make sure that we can convince him to this is a mutually beneficial relationship and americans consumers benefit and preferred the products we export to the u.s. market. >> are you saying you are confident of concluding a free trade agreement, a bilateral free trade agreement, with the u.s.? noting of course that president trump has called vietnam a trade chief the cousin of the $31 billion trade surplus with the u.s.? cheating in any kind of products we export to the united states, catfish or shrimp, and we have the books to prove it. i would like to stress that besides exporting to the united vietnam imports and buys a lot of products from the u.s., including airplanes, turbines, down to the aggro producers.
importsll you that the of vietnam from the united states will increase significantly since this year as we will sign billions of dollars worth of deals with american firms and import lots of high-value products from the united states that will help create american jobs. how concerned are you about rising protectionism? is there a need to diversify your trading partners? the noun is a big supporter of free trade, and we want to make sure that all people and countries benefit from free trade. we have established at the same time a wide network of partners currently signed and under negotiation. in vietnam, business would not invest that they don't see interest and profits. same for vietnam and the united states. haslinda: you talked about a
closer economic relationship with the u.s.. what role would you like to see the u.s. play in areas like the south china sea, for instance? if you like to see more u.s. presence? via non-and also the united states and other countries in want to have a south china sea in which the freedom of navigation and aviation is seared and the law of the is observed. haslinda: will that require more u.s. presence or not? >> think that we were need to discuss together and with the stakeholders to make sure that all parties will benefit from whatever action we decide to take to ensure peace in this area. haidi: that was the vietnamese prime minister nguyen xuan phuc
speaking exclusively to bloomberg's chief international correspondent for southeast asia peter elstrom in hanoi ahead of history to washington. we will speak with phil falconi, making a come back with his investment in the vietnam. that interview is at 1:00 a.m. in hong kong. presidentancisco fed says he sees a far smaller balance sheet, but the reduction will be done line may be steps. we hear more from john williams next. this is bloomberg. ♪
caused shortages in germany, china, and south africa, caused by a bottleneck by a company that supplies casings for an electronic steering system. it is the latest blow for a parts maker already under fire role in emissions cheating scandals. warren buffett has bought a 3% stake in the german chemical company, the stock rising 7%, and berkshire hathaway became one of the company's top six nxess.olders for la a chinese farm in a interested in buying the body shop put up for auction by l'oreal with a price tag of more than $4 billion. andbritish cosmetic firm bidders are invited for a second round. shop inbought the body
2006. the san francisco fed president john wayne says three interest-rate hikes this year makes sense as the central bank takes gradual steps to tighten monetary policy. i think the data have been very good. jobs aadding 108,000 month in the u.s., twice what we needed to be at the same level. unemployment below 4.5%. i see it lower for the rest of the year. ,he economy still has momentum a ways to go on our inflation goal, but i am optimistic. we need to continue the process was started of getting interest backs -- rates haslinda: back to a normal level. why aren't you concerned about the weaker inflation data? fluence byn is different factors, sometimes a tory -- transitory things, but
when i look broadly, inflation measures are moving towards 2%. with a strong economy growing at good pace and employment towards -- unappointed towards 4%, i think that will give us a draft and move us to 2% within a year or so. to seea: if you continue inflation below 2%, would you have to re-thank the june rate hike? >> i'm not saying what we will are won't do in june. our strategy is gradual movement of interest rates back to normal. even today, interest rates are very low, over $4 trillion are stilleet, so we giving the economy a good push where we have monetary policy moving back to normal over the next few years. i am comfortable with where we are and where we are going. want to let the expansion run too hot, so we are getting it just right, not
slowing the economy, but not letting the economy get to an unsustainable point. haslinda: if you see another round of week inflation data, will you achieve the 2% target by next year? data will look at the carefully and see what is causing inflation to move up or down. we have had some movements and the dollar and oil prices influence that. i will be frank, it the inflation data did disappoint regularly, that will go into my thinking on what is right for policy. inflation data has been soft, but gdp growth, employment growth, those indicators are looking better than expected, so weaker data on one side, stronger data on the other. because of the two offsetting effects, i have not change my view on policy. haslinda: if inflation remains to be weaker, meaning to say you
would be more tolerant if it continues to be below 2%, fair to say that? >> that is a good point. i am making sure to see the inflation trends moving back to 2%. i'm committed to reaching the 2% goal and be there on a sustained basis. we have been below our inflation goal for the last 7-8 years, and i do worry that we don't want that to get embedded inflation expectations lower. i do want to see inflation back to 2% on a sustained basis. that was the san francisco fed president john --liams speaking to ramy: haslinda amin. this is bloomberg. ♪
111, that risk off tone starting to take hold. japanese macro numbers this morning, unemployment at a two decade low, but household spending, retail sentiment still softest,mired in that the reluctance to open the purse strings. the aussie dollar under pressure , national australia bank sees it heading towards 70 by the end of this year, with potential further downside risks correlated with the downside and it comes to iron ore, he would be demand out of china. china pmi tomorrow. aussie at 74.28 at the moment. , not a great day for korean assets, equities falling for the first time in a number of days, hitting record high after record high, the current won looking like this at the moment.
the dollar trading flat overnight, very little in the way of volumes. with alow to the, low number of global markets away on holiday. let's get it over for a look at what angie is watching for us. angie: it's all about the fed, fed in focus after james bullard here in this part of the world bloombergpeaking with television today, basically saying the honeymoon phase of trump going to washington will be ending soon, and investors and the markets, and of course the fed, will be taking a look at action when it comes to the trump effect on equities driving the watchers on the fed. more about policy inflation and the balance sheet when we hear more from james bullard and john
williams as well, the st. louis fed president come and the san francisco fed president, both on our air today. we dissect the fed with the head of economics and strategy for mizuho bank. what kind of alliance and battle lateral -- bilateral trade agreements can we see? finally, we look at troubled india, reliance munication's extending its tumble, investors pretty spooked after a report that reliance was behind on its loan payments, so mounting debt piles that reliance communications. that, looking ahead to but just before we go, we've been talking about aging populations creating a demographic time bomb for countries like japan and
germany, but the robot could help and it comes to the workforce. a report from moody's says increased automation and use of robotic technology will push lagging job growth for big manufacturing countries. how does this work? how do robot solve this demographic crisis in countries like japan and germany? >> hi. we all know that germany and japan are sitting on a demographic time bomb where an aging population is a real problem and will be a drag on economic growth. says, hangs report on, we will have robotics technology helping with this demographic aging population. offset the that help
demographic time bomb and what will happen is a lot of the labor intensive work being done by humans will now be done by robotic technology, replaced by that, so that should help offset some of the impact we will see from the aging population that both germany and japan are sitting on, and that should help , butof their economies will have an impact on their sovereign ratings or not, moody's is not yet clear about that. that robotic dog we are looking at at the moment. is it a fair assumption it will as outsourced labor if automation will replace that? >> yes, that's right. ist moody's is saying is that a lot of the outsourcing
that took place from germany, the united states, to the emerging countries like czech republic, slovak republic, and indonesia and india, the are likely to have an impact, these emerging economies will be challenge because what is going to happen is that a lot of the jobs that were outsourced are likely to come back to these developed countries, and that tould help these economies get along very nicely. tech: just one of the ways knowledge he will be the game changer. plenty more to come with angie and shery. this is bloomberg. ♪
unemployment low, wages rising, but households are unwilling to spend. vietnam's leader will be the first from southeast asia to meet president trump. we hear exclusively from the prime minister abe ahead of his trip. ♪ daye: of course, i down across the region, thin trading having a big impact. shery: of course we do have china, hong kong, taiwan away on holidays, so that is limiting market moves, but that also puts into context the fact that when they do get back, they will have so much to deal with. data, china pmi, nonfarm payrolls out of the u.s. , not to mention some fed speak
overnight. we have the st. louis and san francisco fed president talking about the unwinding, so markets will brace themselves as they come back. the markets open hard down, south korea down point 6% leading declines, but this is a market that has rallied so much in the past couple of weeks and that we are still seeing them in rsibought territory in a above 70. we had the japan nikkei leading declines there, a stronger yen because of the risk off sentiment, also the malaysian ringgit is losing ground. emerging-market currencies in general. ground,tinues to lose brent at $52. gold up, i risk off sentiment again, and although we are
seeing global equity markets continuing to rally, a different story is being told by the bond markets. bond traders are a little cautious, gaining ground, the bond yields falling in the asian session as well. angie: how about the fxp's? -- fx space? >> especially against the euro. isdi: the malaysian ringgit leading the declines and is now falling for a second consecutive session, and analysts are warning of oversold conditions with that currency. when it comes to the year old againstsession the yen, and thie important point that our colleagues pointed out, there was some euro strength after the french elections, but now against the yen, we are seeing a bearish signal. a big move today, almost close
to 1% and the declines. we are seeing this there's top may have been formed for the euro-yen, which could signal further declines. the ecb president mario draghi talking about more expensive monetary stimulus, and the june 8 ecb meeting euro coming up, so although dollar-seems stable, it is the euro-yen that is taking a hit. we will have more throughout the program them up at first news -- headline news with rosalind chin. rosalind: the unemployment rate is at its lowest in two decades and wages are generally rising, but household spending fell by 1.4% with consumption mired in a slump. still retail sales showed a 1.4% rise against a forecast decline. higherhousehold needs a
expected wage growth, and that has not happened since 2013, so we need to see this nominal wage continue to grow and at some point nominal wage growth will be hard and the inflation, so that has not happened in over four years since qe was implemented. is revising the rules for major investors selling their stakes. 5% ofors owning more than a company who then decide to dispose of their holding must act in a legal, rational and orderly manner. disclosure is required before, during, and after a sale, and penalties will be imposed on anyone breaking the rule. malaysia slumping after the cut by cimb, mainly due to weakness in the u.k.. it had been forecasted in coming quarters based on the $2.4 billion upgrade. hasite the decline, genting
risen was 30% this year. north korea says the latest missile test involved a precision guided system and improved electronics. the state media said kim jong-un oversold the firing of what appears to be a very of a scud missile. it was reported that it was more automated dent previously. the missile hit a target seven meters wide. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am rosalind chin. the st. louis fed president has told bloomberg there is little justification for a series of rate hikes this year with inflation starting to .low he also said the turmoil in the white house is something that could affect the u.s. economy. inflation, if it was
flowing, that would be a different story. kathleen hays has this story. fair to say here that jim bullard was a little downbeat? a smile on his face the entire interview, but he is being more realistic, putting his focus on where he thinks the fed focus needs to be, which is inflation falling short. in fact, he is saying even though i think he rely says his colleagues will go ahead and push for more rate hikes including june 14 that they key rate is close to where it needs to be and they don't have to do a lot more. listen to this. on the rate in itself, i think we are not far from an appropriate rate for the u.s. economy that will keep inflation not too far from target and the labor market performing well, so what i disagree with is the idea that we have to go 200 basis
points higher in order to get some sort of neutral rate. i don't think that is the environment we are in. i think we can stay where we are, possibly a little higher, than where we are today. points, number one, the fed has missed its inflation goal for five years or it -- years. for the previous 17 years, it was keeping on track with the rate of inflation that would keep it heading close to target. bee also said unemployment may very, very low, but there is not enough momentum in the economy to boost wages. let's look at a chart to see the is on his mind, #2185, 2% target, the turquoise line is the headline pce deflator, recently about 2%, the yellow line, it has peaked and come back down. some are saying a temporary blip, don't worry about it.
look at the white line taking out food and energy. many economists say that is a good indicator of where that headline number will head next. it has plateaued and is heading lower. another interesting aspect of the conversation with jim bullard had to do with what is going on in washington. business confidence soared after the election come expectations riding on a stronger economy based on tax cuts, a budget that would boost spending. we know there is an fbi investigation going on. will that affect confidence and the fed outlook? >> the business confidence numbers shot up after the election. the president was perceived as more pro-business than the previous administration. washington does have to deliver at some point, and i think that is a concern going forward, whether the honeymoon period
when end up with some point and may be the reality of american politics would settle in. orwill see if that happens not. i think the jury is still out on all that. about how markets have responded and how financial conditions look, stocks rallying. jim bullard noted stocks were up a lot but he believes investors have been anticipating corporate tax cuts come at may be a cut in the personal income tax, and said this would revalue the sector 10% to 15%. i think he was just observing what happened and saying it is what you would expect based on what investors have inspected -- expected from donald trump. bullard agreed that the balance sheet reduction won't really unsettle markets. we saw the taper tantrum, but he does not think the markets will react that detrimentally, why?
>> this is one place where fed officials are singing from the same book. it is a chorus. bullard saying balance sheet reduction will be slow and orderly, saying that will be effective communication and it market'sfle the feathers. let's look at a chart now and see what kind of -- #7665 in your bloomberg, the balance sheet, the far left hand side of your screen. look how little the balance sheet was before the great recession and financial crisis started, about $.5 billion. look how notes and bonds have gotten up to $2.3 trillion. look what sits on top of that, mortgage backed securities. sayomists and strategists they will be sensitive to the fed trying to reduce that balance sheet because it changes the way those mortgages and
bonds potentially trade. it could be a tricky part of the balance sheet reduction. we know the fed in minutes last week said they are looking at for the amount of bonds that can rolloff because they have been reinvesting all the proceeds and start take small amounts and not reinvesting those, and that is what will gradually reduce the balance sheet. seebullard said we won't anything like the taper tantrum of 2013 because we will go slowly, communicate effectively. it will just not be a problem. i would not say everyone in the bond market disagrees. it will potentially be a technical thing that everyone gets used to, but when you remove a date purchaser of u.s. treasuries from the pool of global investors only you will have other investors needing to step up and buy those treasury bonds the treasury will continue to sell. i think that is what people are ultimately wondering will do to yields. haidi: we will see. the fed does insist it will be
for an electronic steering system. it is the latest blow for the parts maker already under fire for its role in volkswagen submissions cheating scandal. angie: warren buffett buys a , whose sharesss soared in frankfurt, surging by 7% as berkshire hathaway became one of the top six shareholders. lanxess is transforming itself into one of the world's leading makers of lubricants and flame retardants. l'oreal auctioning the body shop with a price tag of more than $1 billion. a brazilian cosmetics firm is among those said to have been invited for a second round. l'oreal bought the body shop in 2006. india's prime minister
touricked off his six-day of europe. angela merkel said europe and the u.s. are drifting apart, so opportunities for india? questiont's ask that to mizuho bank. thank you for joining us. let's talk about prime minister modi's strategy of make in india . there were expectations the last time the prime minister was in brussels about significant for trade between the two regions. the fta would be focused on bilateral trade. the eu is already a key partner, and india's total trade is 15% of that share.
i do see germany pushing for a bit more progress on something in the pipeline sense 2007, but prime minister modi has a much larger agenda. in particular, to other aspects, one getting investment to kick off what you rightly point out is make in india project, and the other the strategic partnerships around counterterrorism and things like that. #8944, let's dive deeper into our bloomberg. india currently has a trade surplus with the eu, but of course it is looking to grow that as you say. what with the detrimental effects be if they do not grow this relationship with the eu? it does retired the d for india's plans
to make a strong proposition about india. it is not just about the mystic markets, but india positioning itself as a manufacturing hub. that also fits in to its potential growth being achieved come manufacturing as 25% of gdp rather than 16% right now. talk to us about what's happening in the u.s.. we have been talking about james bullard's comments on the balance sheet. now we also have commentary from the fed resident williams of san francisco talking about making the downsizing very boring. we have some sound to play on that, guys, take a listen to -- listen. is not where we reduce the balance sheet significantly, but will it have $2 trillion or $2.5 trillion or something like that. i am not trying to communicate a
decision, but that is the thinking, the right way to think about the endpoint of this. tell us what the u.s. is doing in terms of its balance sheets and rate hikes in terms of emerging markets including india and the rest of the emerging markets in asia. be ofuably it will significant importance. the u.s.n which chooses to reduce its balance sheet in terms of the speed, the vintage of the balance sheet in how it deals with the duration of the securities attached will have a large impact on not only yields per se, but the shape of the yield curve. if we assume that the yield , risingts steeper yields would see some capitulation of funds from emerging markets, especially as there is three pricing on, and
investors look at things in terms of yield differentials, so that is one particular channel for impact on emerging markets, and also as yields rise, it will the behavior of much longer-term investors, in particular if we were to reestablish the premium, that is yields getting higher at the long end, a lot of the pension ,unds, longer-term investors who had gone into riskier assets may now shift back because they can get safe, but fairly high returns. this would take away from emerging markets which have risen to prominence, so arguably this would have a large impact. difficulty is in quantifying hit because even the fed is making it up as it goes along, and for that reason emerging markets are grappling with how this will play out. the fact is none of us have seen this movie yet. about theve heard
trump trade effect in markets when it comes to the equity space. about foreign policy? trump removing himself from this globalization talk, how does that help india? >> that is one of the big wildcards. there are two cap's we are dealing with. one is what trump has put forward in terms of this america first foreign policy, so that is the big overarching statement. there is a gap the between that and how he deals with nations on a bilateral basis, so it is not altogether protectionist, so that is one aspect that markets are beginning to slowly get a sense of, and the other thing is that as angela merkel has shown, if trump turns protectionist, then others will step up, so there is a strategy here for the u.s. to think about as well. we remain watchful.
angie: this is "bloomberg markets: asia." the vietnamese prime minister nguyen xuan phuc is in washington on wednesday to become the first southeast asian leader to meet with president trump. haidi: the prime minister spoke to bloomberg. to convince his host that two-way trade would be mutually beneficial. >> my visit aims to promote the
conference a partnership between vietnam and the united states ddedwider scope and a substance. you be pushing for a bilateral free trade agreement given that the u.s. has pulled out of tpp? true fromhe u.s. with the tpp, vietnam and the u.s. have restarted the make and this him to maintain dialogue on issues of common interest related to economic and trade matters. we respect president trump's decision with regard to trade, and we want to make sure that we can convince him that this is a mutually beneficial relationship for both sides, and american consumers benefit and prefer the products that vietnam exports to the u.s. market. haslinda: are you saying you are confident of concluding a free trade agreement, a bilateral free trade agreement with the
u.s.? president course that trump has called vietnam a trade cheat because of the $31 billion trade surplus with the u.s. >>? >>there is no -- no cheating in any kind of products we export to the united states, whether catfish or shrimp, and we have the books to prove it. besides exporting to the united andes, vietnam also imports buys a lot of products from the u.s. including airplanes, engines, turbines, down to the aggro producers. tell you that the imports of vietnam from the united states will increase asnificantly since this year we will sign billions of dollars worth of deals with american firms and import lots of meaningful high-value products from the united states that will help create american jobs. that was the the admin
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delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. rosalind: this is the latest first word news. mario draghi has warned the u.s. it might he headed down the wrong path on trade. the ecb president said the eurozone economy is strengthening. he added that the biggest threats are now external come at merkel's comments that the eu and the u.s. are drifting apart. the u.k. prime minister theresa may and jeremy corbyn have taken part in a live tv question and answer session with the general election 10 days away. over paymentseed
due to europe under brexit. the prime minister said it was not paying to ensure a good deal. the labor leader said he would hand over what is legally required. a boost in the value of foreign currency denominated assets gave the bank of japan a full-year profit for 2016, making up the $2 billion loss it suffered in the first six months of the year. the bank had net income of $4.6 billion through march. the fall in the yen helped to the boj by reducing losses from foreign currency holdings. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am rosalind chin. sophie: a lackluster trading day in asia with little in the way china, hong are to kong, and taiwanese markets off-line, so asian stocks set for a third day of losses with japanese shares the biggest drag
, along with korean stocks down .5%. japanese shares maintaining the declines with the yen trading around 110.90 against the dollar. g10 leaderthe only against the dollar as the greenback is finding support on the statement that three rate hikes this year makes sense why john williams, so dragging on asian currencies, the ring at leading that drop. -- them bring it in the commodities space, oil holding onto gains and traders don't seem too impressed with the opec deal. turning our attention to the kospi, samsung electronics the biggest drag is the benchmark is set for the second day of declines with trading volumes 40% above the 30 day moving average. we did get data out of korea
showing department store sales onwing, but some traction plans to stimulate consumer spending by president moon. shery: right, markets opening in just a few minutes, this after closing at record highs for the last couple of sessions. allave the sensex, nifty, at all time highs. if you look at the bloomberg as indian stocks rallied come of the cost of protecting against is declining, falling steadily on a down trend as the nifty continues to gain ground. this of course as we see prime minister modi celebrating his third anniversary on the job.
gdp data also coming out tomorrow, wednesday. have grownpected to a solid 7.1% on year in the first quarter, but we did have tons of data coming out of japan as well. angie: we did. it is india and japan that is part of this greater global equities story, global growth on the heels of just more consumption around the world, except it is that product consumption story in japan that is slightly worrisome. japan is showing a few signs of ending years of drift but that unemployment rate is at its lowest and wages are generally rising, but let's dive into the #6407.rg, low unemployment, wage is growing, so why aren't people spending? it is that stickiness when we see household spending dropping for 14 straight months that is the concern here because just
like the united states this is an economy predominantly dependent on private consumption, accounting for 60% of japan's economy, so we need to see that traction in consumer spending before japan's recovery shows signs of sustainability. our editorore with joining us from tokyo. it is that concerning household spending number, isn't it? >> that's right. the household spending number today was worse than expected. there were some bright signs in the retail sales figures. a fourth straight month of gains , the highest in two years, so while exports have been carrying japan's economy for much of the past five quarters, there are signs that private demand is picking up. in the first quarter, private
demand was a bigger contributor, and it looks like consumers might be feeling a little bit better. shery: private consumption always depends on what happens to wages. are people getting hate enough to go out and spend? are we seeing a significant increase on the wage front given that these companies have record amounts of money right now as their stock markets rally? >> so far, no significant increases. the wage data has been uneven, a lot of it disappointing. the hourly data is better than the headline data, but economists are saying they expect the labor market to , andnue tightening ahead to continue supporting , so wages are ticking up a little bit. whether or not they hit a tipping point where we see significant wage gains, that
remains to be seen. angie: explain why though despite that unemployment figure being very beneficiary for wages that we are not seeing the kind of wage growth we need to see to get to 2% inflation. unions don't quite have the bargaining power they once had. that is a big part of it. economists are also point to the need for labor market reform to switching which would raise upward pressure on wages. openingsthe job market we are seeing are for part-time jobs for lower paying jobs, and while those jobs come to pay for those jobs is rising more, it is not lifting the overall wage picture very much. this will affect what the boj does in the future.
so far, we have seen this tapering of law and buying by the doj. now that we see yields in the short end of the curve stabilize and start to rise, are we going to see some changes and what the boj does in the coming months? that is not likely. the boj is expect it to hold the course for at least the coming months. economists are pretty much unanimous on that point. angie: thank you so much for that. shery: right, bit point is the company behind peach aviation's move to allow travelers to use bitcoin for tickets. take looking at ways to over the high streets of japan, giving hundreds of thousands of retailers to accept bitcoin payments. angie: reed stevenson is in
tokyo for us. pushing intoint retail, and what are the opportunities here? >> it is really interesting theree just back in april was a new set of regulations that came into place that made it easier for people to buy and sell bitcoins and spend and them in the retail market. nation's largest electronics retailers started accepting bitcoin in a couple of stores, and there may be some of the effect you mentioned earlier from the pickup and consumer sentiment. so all of these have led to an environment where more people are jumping on the bitcoin , theagon, so bit point company that enable transactions for peach aviation, a low-cost carrier in japan, they are now planning as you mentioned to get to aretail, talking payments provider and want get into japan's ubiquitous network
of convenience stores muscle all of that is feeding to at least some momentum we are seeing in terms of using bitcoin in the retail space here in japan. what are the risks related to this water use in japan? >> one of the risks is that it against aill priced fiat currency, the dollar, the , and we yuan, the euro have seen a lot of volatile swings in that value in the past week. bitcoin has risen to a record and there are a lot of factors at play their, but is situate if you don't know how much your bitcoin is worth, then you may be more reluctant to spend it and you would rather hold onto it and let it appreciate. 8860,: i want to bring up # when we talk about valuation of
bitcoin come all you have to do is having compared to gold, and you can see through this chart if you take a look right now #8860 on your terminal, it is really hard to say. gold in terms of a stable pricing and then take a look at bitcoin, now double what gold is worth, so how is it point able point able to stay on top of that? >> it is up to the market itself. moneyint will try to make off of the transactional fees, but it needs falla and a larger net work. in terms of the comparison between bitcoin and gold, but coin does in some ways resemble butmmodity, which gold is, the analogy breaks down in that gold typically gains in value when the dollar is weak or --
so a safe haven currency so to speak. bitcoin is a different creature, ise speculative, and it essentially a currency in its own right. it just does not behave like it anduse of the noise unrelated factors that go into bitcoin buying and selling. shery: if you get news or headlines out of china sometimes , sort oflunges unstable want to say, but anyways. thank you for joining us out of tokyo with the latest on bitcoin and its wider use in japan. angie: as you said, very volatile. coming up, toshiba giving some friendly advice -- given some friendly advice making up with western digital because the disk drive partner is not going anywhere. this is bloomberg.
angie: welcome back. this is "bloomberg markets: asia." i am angie lau. inry: a 38% fall fourth-quarter profit on rising wage costs, declining to $420 .illion for coal india that is the fourth quarter in a row of falling profits. whileee cost rose 18%, growing competition from solar and wind prevented the company from raising prices. angie: tough competition and $7 billion of debt are catching up with reliance communication. the stock fell to a record low on the back of a first full-year net loss. the wireless operator is and
talk with lenders for the sale of its tower business and a merger with a rival that would alert to cut debt by $4 billion. shery: mitsubishi ufj is cranking up its drive to boost foreign currency deposits as it looks to mitigate the rising costs of funding overseas expansion. has appointed 50 relationship managers at offices outside japan to attract more corporate deposits. japan's biggest bank is expanding overseas lending to aren't higher margins with negative rates, snapping the profitability of domestic loans. the singapore monetary authority has find credit suisse changesand demand did as part of its in the vista geisha and into 1mdb. -- its investigation into 1mdb. shery: how significant are these penalties? >> today, the central bank
announced fines totaling one point 6 million singapore 1.2 millionut dollars, and credit suisse was fined 700,000 singapore dollars, they also impose lifetime prohibition orders against ex-bankers who were implicated in some of these 1mdb related fund flows. these penalties come at the end of a two-year review of financial institutions and zynga or that have been involved in 1mdb fund flows. they cap two years of investigations by the authorities in singapore, and singapore has over the past two actuallyits review
find a total of 29 million angapore dollars -- fines total of 29 million singapore dollars and eight banks. pledgedingapore has stronger action in the wake of the scandal, so what changes have been implemented here? words in these the statement today, this is how they summarized it. the review of their financial institutions involved in 1mdb has been the most extensive regulators have ever taken. the chief today said that the anti-moneyanced its laundering and taken unprecedented enforcement actions against the errant institutions and individuals, financialhat the institutions in singapore have increased risk awareness and strengthen their anti-money-laundering controls.
i think the central bank has summed it up by basically saying the financial center grows in size and connectedness, they are in a state of vigilance and that is what they have to do going forward. thank you so much for joining us. that was the latest on malaysia's 1mdb fund. let's turn to japan. toshiba's relationship with western digital is becoming increasingly fragile after the japanese moved to block them further joint venture. angie: but a future without western digital could be a bleak future for toshiba. what is the problem between these two? >> western digital has a joint venture with toshiba. it wants to make sure that joint stakee -- so it wants a to make money to plug those losses.
western digital is offering the lowest price of anyone out there. shery: there are other rivals to western digital right? >> one of them is a big rival called broadcom. it is offering more money, but western digital does not want them to acquire, so it is doing everything it can to block the sale. it's like there was a marriage and somebody needs more money in the family household. there is a very clear agenda with western digital, but what with the detriment before let's gof it decides to arbitration and try to fight it out for the top dollar? >> it takes a long time to happen, needs billions of dollars to plug those losses made because of the nuclear write-down. it means that if it has negative equity for another year then it stands to be delisted, which it is not too big to fail if it gets delisted.
shery: while we are talking about foxconn, what happened to them? reported,at has been they have bedded the highest, but the problem is foxconn bought sharp and made lots of cost cuts. this is something japanese officials want to avoid if they bought toshiba. perception ina japan that if foxconn buys it then the technology will be transferred to china. if western digital once to put its foot down and say to your detriment toshiba, let's move forward. it also hurts itself, doesn't it? >> it hurts itself because it wants to be there and is a big player in the flash memory business. to someonesells else, its rankings are going to go down, so it wants to be up there and wants to win the deal, but it's not want to pay.
angie: welcome back. this is "bloomberg markets: asia." i am angie lau. , open in india right now and down day for the broader markets. index seeing the sensex unchanged, but the nifty also trending down after reaching record highs in the last couple of sessions. it is a down day for most markets across asia, so you can't really blame them.
the indian rupee weakening slightly as are most emerging-market currencies against the dollar, the dollar index rising .2%. angie: reliance communications down as well, but also on its own accord. , now downk shares more than 5% after the company reported its first full year net loss amidst signs it is struggling to repay its debt. shery: the stock sank to a record low on monday, down 5.4%. tell us, what is the issue here with this company? investors are concerned that reliance communications may not be able to pay off its debt, about $7 billion of debt, and so far the indications are the company may struggle to service that debt. angie: what did the management say about it? >> the management had an
investor call where they said they were seeking lender approval for two asset sale projects where they have plans to sell their tower business to brookfield, and their wireless business will be combined with a smaller carrier, so they are seeking lender approval for these transactions as it will help them to pay their debt, and that is why they want to get these transactions off the ground quickly. shery: this is not only about reliance. ll market in india is quite competitive, so give us a state of the market currently in india. >> the indian cell phone market was brutally competitive before launchedcommunications its geo-service, and that has
roiled the markets and forced the carriers in the market, the number two and three carrier, now in the process of merging. you also have pressure on all these carriers to cut rates, so aery carrier is reporting troubled time and everyone is expecting things to stabilize as geo-services against charging. shery: if everybody is cutting rates, this must have a huge impact on how much they can earn when they are all competing for the same piece of the pipe. >> sure. the indian market, the competitive market has taken a toll on company financials, but many carries reported quarterly losses come as a toll on the
market, so now the question is when will carriers raise rates to move back towards normal. angie: thank you so much for that. bloomberg markets: middle east coming up at the top of the hour. i will be joined by yousef gamal el-din into by. -- andubai. >> we have an amazing show prepared. we will be looking at the federal reserve and the ecb and terms of the rate hiking cycle going forward and possibly tightening balance sheets. ultimately what does it mean for the road forward. the latest comments from mario draghi can be interpreted in different ways, but ultimately we did see a move in the euro and we understand the deeper implications of that, something we pick up with westpac banking's senior currency strategist there.