tv Bloomberg Daybreak Asia Bloomberg February 28, 2018 6:00pm-8:00pm EST
in banking and insurance. yvonne: and spotify heads to wall street. note ipo or roadshow. ♪ we were talking a few seconds ago how we are done with fed. goodness.hank it has been a wild since we month -- andlendar what you are looking at his monthly returns. january and december, and is what we are talking .bout, 4.3% declines the custom was a declines was here, and the month before the u.s. elections was the worst month, going back to 2016 of
january. you have to wonder what is really driving all of this. we see treasury yields spiking higher but we come off of these highs. are we still in for more readjustment? that is the key question to ask in march. will see where that goes and where that narrative goes and whether or not we break 3%. yvonneet more on this, and i were talking about the fed thing overcome a that is a good sign, and it brought the worst decline in stocks. or result a period selloff in january. su keenan has the highlights of the final session. volatilitycutive genii is back in the bottle but will it stay in the bottle is
the question. the shorts and those who benefit from greater volatility are perhaps not as pleased as the bulls we have gotten. there is some coming of fact, even though there has been a selloff -- we did have stocks lower and have treasuries extending gains. what was important here is that march is going to kick off two of the strongest months for stocks. let's take a look at some of the big movers. based a bit of a brought selloff so it is interesting to note that gains you see here are strong. a online travel agent, investors are breathing a sigh of relief because the strong numbers is indicating the company is doing well even though it advanced into alternative lodging which cost concerns.
lowes sells sold off strongly because perhaps it is still weak in comparison to home depot and that is going to fuel these activists pressuring lowe's to get more from its bottom line. that specializes in specialty items is off the hook as far as projections in 2018. they had a 20% gain in earnings well above what investors -- and they loved it. let's go into the bloomberg and look at the months that was february, a month of turbulence. what i charted was a percentage change, one-day percents, and you see the change here was an the vix. soaring in late january. -- and the yellow is the bond, and a lot of moves come.
we had a late day selloff technically. yet been taking a look at the stocks in the spotlight for february, and i'm sure ge is happy to see february gone. the longest losing streak on record and the ceo can't catch a break. su: it looks like tough times are getting tougher. let's go into the chart because this february, as we close the chapter, is a 12 straight losing month for ge. the longest losing streak in the 126 year history of this multilayered company. there are so many elements of the downturn. in particular it appears that back in the day, we see cash flow issues. the new ceo took over in they017 and revealed that
were slowing earnings and the earnings were poor and he tried to cut the dividend and try to engage in a big turnaround. most recently revealed to us there is an inquiry into a now defunct subprime mortgage unit and that perhaps could result in a liability if there is any kind of wrongdoing involved. the year-to-year chart, a lot of investors are concerned here about the headwinds that could interrupt any advance we could see in this turnaround plan. ofnne: a down month february, sue, becky for joining us live from new york. what we are seeing in equities and what we see in new zealand -- it is down a third of 1%, and the dollar stronger here with the third day of gains with the greenback. and australia is opening
up right now and everything is down sector wise, led by mining stocks. give this time to get warmed up, the aussie dollar -- little bit lower their as 2.79 is your yield on the aussie 10-year. yvonne: it is going to be some risk there later on this morning. japan in terms of futures, we expect a pullback on the nikkei 225. spotollar-yen is the right as they tried to steepen the curve by cutting purchases of superlong bonds. 106.64. longest-serving aids is set to resign as what has been indications director. david: it comes one day after
thetestified -- back in meddling of the elections in 2016. joining us is bloomberg congress editor, joe, does this mean and operations of the white house with her gone? what is going to be happening is that she has been a longtime trump advisor and in the inner circle since a very young age and her title was medications director, but the president's that medications director at the white house. he is the one who sends the message and does his own thing, but she will -- he will be you losing a sounding board. he relied on her for bouncing to ideas and as a loyalist give him a good idea of what else is going on with the administration. in terms of the operations itself, probably not that big of an impact but it may have an impact on trump and how he
actually interacts with the rest of his administration. yvonne: as we were reporting, she has been there since the election campaign and the gatekeeper for his reservation. in the meantime we heard this news from the white house, the link and tell axis for more than 30 staff members. why this move from general kelly? scandaler the meanie involving a white house aide who was found to have a restraining order against him for domestic kelly went in and start reviewing security clearances and there's pressure from congress over jerod kirschner, the president's son-in-law and senior adviser operating on an interim security clearance. congress, including republicans wanted to know more about it situation as well as other people operating on interim clearances.
a situation for kelly to deal with because he said there would be no more of these top-level security clearances on an interim basis. probably a very busy man, it is a heavy newsday in washington on wednesday, and the president was also talking about these trade pretensions and he had strong language when it comes to dealing with china, what do we know? the white house announced its annual trade to congress, and they are warning that china is distorting world markets ment controlled economy and this comes as the administration is awake how much tariffs they want to impose on aluminum and steel which is primarily directed at china.
there was the language in the report that was tough, and it accused china of distorted the global markets and of dealing unfairly with trade. and with other countries as well. a top official of china's government is coming to washington to meet with some administration officials, including treasury secretary steven mnuchin and economic advisor gary cohn. it will serve tension in that meeting. from steveneard mnuchin, discussing the tpp lately, and it is going to be a little bit of a change of talk. is there a chance the u.s. may reenter the deal? there's heavy pressure from republicans in congress, particularly powerful farm state republicans. charles grassley of iowa.
they want him to reengage with the tpp. not only would it be good for the u.s. but also serve as a counter to china. flirtation with the possibility of going back may be part of the china strategy. u.s. was originally envisioned under president obama that this would serve as a counter to china by scooping up a lot of nations in the region to be part of a trade agreement. letting the u.s. set the terms of trade, and if china wanted in it would also have to take part of those trades. u.s. allies like japan are encouraging the u.s. to reengage in tpp, so it may be something that is percolating through the administration at this time. david: stop the train, you might get back on. joe, thank you. let's get you first world news now. thank you so much, david, you
charge a withholdings of u.s. securities rose to a record $18.4 trillion as of the end of june. for portfolio investments including stocks along with short and long-term debt shows and japan wash the largest investor with 2 trillion followed by the cayman islands and the u.k., and china. china's leaders have approved nominees for top government post as become his party promised changes to nations revelatory structure. the center committee finalized the names during a three-day meeting in beijing and it will be announced next week's national people's congress. the names are expected to include the head of the pboc. brussels is telling the u.k. it must pick up the pace if brexit is to succeed. -- setting upme
in detail how it sees britain's withdrawal. minister theresa may said she could never accept some of the passages, raising the suspect -- prospect that talks will fail. fasters expected to grow -- giving a left ahead of elections in 2019. , but slower than the 7% climb last year. given extension to budget for voter support following the abrupt cash ban and chaotic sales-tax. and spotify has filed for direct listing in the new york stock exchange in a unique move to be obligated traded and is forging a traditional ipo and skipping a roadshow. instead the opening public price of ordinary shares will be
lltermined by buy and se orders collected on the day it lists and will trade under the ticker, spot. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. david: thank you. up, high-frequency economic skews us a view of where the fed goes with rates and fourth-quarter growth. yvonne: and later on, north korea finds latest sanctions in washington. this is bloomberg. ♪
alive this morning. there is a little bit of softness in the gdp numbers. what do you think led to that drag? >> the number was revised a 10th of a percentage point to 2.5%, and it is still a very strong number. when you look at the underlying details you are even more impressed i it. three quarters of the u.s. economy is consumer spending, and consumption grew at 3.8% rate, which is a really strong rate and it is interesting in the context that the trump administration has been talking about having a goal of getting 3% growth or even larger than that. economists have scoffed at that, but the recent growth numbers have been very strong and suggest maybe 3% in the
near-term as possible. you have to quarters laster year and 2.5% this year. in the fourth quarter to atlanta fed growth tracker is putting the first quarter at two .5%, and some private economists are looking at 3%. that is the context for why jay isell, the new fed chairman, talking about how the economy is having tailwinds and not headwinds. the tailwinds think clearly a strong global economy tax reform, which is putting more money into people's pockets. it was very controversial but it is having an effect on confidence and spending. david: everything comes back to inflation, talk to us about core pce. core pce numbers today were identical and where going to get more numbers within 24 hours.
the feds principal measure of inflation is that pce measure is pce at 1.5%,core both of those are disappointed but the numbers have been moving up. the fed is expressing increased confidence that they're going to get to 2%. it will be interesting to watch what the numbers are within the next few hours. support thatmuch the fed is going to be on track to get to target, if not overshoot target. david: we will see what happens. steve, thanks for joining us live. let's cross over to new york with our first guest of the hour. let's cross over to newso, jim,r forecast your comment eight made
hikes on top of the five we already have in the bag. when you consider the intricacy g and when the economy feels it, and we find ourselves 2020,ituation in regretting eight rate hikes? jim: i certainly don't think so. in thebit of history, last cycle they moved a times a year for two straight years. so once a quarter is pretty gradual and keeps things going. it is stimulative and on top of that, arguably when you look at it broadly come up where not at the level of the funds rate, but financial conditions probably in terms of equity markets and credit spreads, what the dollar is doing, what the bank is doing, it is more accommodative
than when the fed started the tightening process. we're getting a round of fiscal stimulus. arguably there is too much stimulus in the system right now. models, asrding to you plug in rate hikes, the probability of a recession comes up. when does growth peak? historically, and i wrote about this in my weekly, most fed hike cycles culminated into a recession after a couple of years. it isn't everyone, the 1994's tightening cycle could eat looked at as a soft flattening. -- so the fed is hoping to slow things down to the downturn of the unemployment rate for the economy overheat significantly. a formal forecast for 2019, which is where my forecast goes, but certainly the more the fed has to tighten, the
risk to move tivoli overtime goes up and you will have a risk to movehe up.es yvonne: how much should or will jay powell overshoot when it comes to inflation? we don't know what that looks like, what can that do for the dollar and yields? percent,r goal is to and steve talked about the core , andumber running at 1.5% it was as low as 1.3% a couple of months ago. i think it will go up another take at 1.6 percent when that number comes out on thursday and will continue to drift up in the next. years i haven't at 2% by the and of 2018 -- so it is not a huge overshoot and certainly not enough to get the fed to want to throw the economy into a recession.
i would expect the numbers to go 2019, and where it goes in 2020, i think they can live at 2.5%, but the zipper pressure on the fed to keep tightening? this that mean for yields we can break 3%? we haven't done so in the last couple of days or weeks. jim: i expect that it will happen -- my forecast, if chances are that happens will break through. year. 3.20 this the fed action comes back to what the data is showing and with financial markets are doing. i assume if the unemployment rate is falling and markets holding ok, that is all to be determined. yvonne: jim, appreciate your time.
chip economist joining us live from new york and you can get a round of the stories you need to know to get your day going in today's edition of daybreak. just type tv on your terminal. you can also customize settings to get the news and information on the industries and assets and parts of the market actually care about. check it out. this is bloomberg. ♪
is 7:30 a.m. in hong kong and this is a clear view of what we are seeing in central today. it looks at a sandstorm, i don't know what is going on, but you see the sun peeking through that haze. read easy, and happy hump day, look at the markets, and it bads down on the s&p 500, a month of february as we look at futures right now, a little lower on dow futures but will see where this goes to the course of this trading session. david indusind hong kong. yvonne: and we go to courtney
collins in new york. deutsche bank and two local lenders have to provide ties to jerod kirschner and his relations with the family business. he and his wife the vodka have taken on more debt since they were appointed advisers to president trump and kershner step down when he joined the administration. netted prime minister justin trudeau is under fire after a visit to india that became a diplomatic debacle. his government is accused of being too close to separatist and his delegation is an .xponent o the admin facilitated by rock factions inside the indian government, something announced as baseless and unacceptable. facing a tycoon is loss of $7 billion from the
failed 12 your foray into the indian wireless market. the mobile carrier has filed insolvency proceedings confirming an earlier bloomberg report. the severn trent-year-old is the world's third richest man with an estimated third net worth of more than $6 billion. goods iss sporting ending all sales of assault rifles effective immediately. the retailers also pulling high-capacity magazines off the selles and will no longer firearms to anyone under 21. there moved songwriters from flagship stores in 2012, the latest move extended it's been to field and stream outlets. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. let's take a look at
markets right now, a half an hour from the open of cash markets in korea. closed for independence movement day, and so i am guessing not good for japan. going: you hear that fed -- looks like we could just the start of a good month goodbye. is perhaps the worst monthly drop in two years. the genie is out of the bottle as one strategist put it. we check in on futures in japan and we are sink pressure for the open their as stocks in sydney and wellington are on the decline. catalysts, we have trade data and japan's fourth spending expected to have moderated as companies allocate capital abroad. data, it istralia's a day after chinese pmi
delivered -- a private rating that is expected to reinforce that slowdown in growth momentum. the key indicator in that data is moderation in overseas demand. and a china slowdown may be imminent given those financial curves. and we are watching big u.s.-china meeting as you see it this thursday, that is a big want to watch. yvonne: we went to see if president trump serious about trade tariffs on aluminum and steel, but we are feeling the tremors when comes to steelmakers in japan. sophie: you have companies feeling the pressure and it is white be difficult to pass higher on ron material cost to consumers. aw material. japanese aluminum buyers are facing a hike in premiums of almost a third in the coming
is added to the track of japan's largest alumina maker. you can see that stock in yellow lagging. still stocks are certainly under the gun and face the possibility of a return to the doldrums of two years ago as well. for japan still industry, the chief's warning of a pandora's box retaliation from china. saying that on tuesday, trump should halt post-trade tariffs so he is willing to take it to the edge. david: sophie, thank you. have a lookvot and at china and president trump because he is warning that the u.s. will use all available tools to stop china's state driven economics. looke: tom mackenzie has a
at the warnings, tom, it is increasing pressure from d.c.. certainly it seems like they're not pulling punches, and this was a report delivered to congress on trumps trade policy and agenda for the year, and what they said was that china had not lived up to its commitment to economic reforms since joining the wto in 2000 and one. also said the status policies of china will lead into -- countries will end up being poor, and some might take issue as china contributed to global growth last year, but nonetheless this is punchy language from washington. fromng tariffs imposed solar panels to washing machines, and also most recently
aluminum foil, and trump has to weigh whether or not to slip tariffs more broadly on aluminum and steel. investigationn going on as well. sent an investor to flush a copper misys but also looking at potential tariffs on their own of u.s. soybeans. that be areowers gathered in beijing, where you are, and there are a lost of nominees and makes to fill a lot of top government roles and vacancies. what do we know so far? a big for weeks in beijing, or china more broadly. the central committee wrapped up meetings yesterday evening and we know that they have selected their list of nominees most likely for the pboc but also the regulators, the insurance regulators. we don't know which positions are being filled and who is been
decided on, that is likely to come out at the end when it kicks off on monday if it is not licked before. before. is not leaked -- he isoking at likely to be stepping down and it is possible that some analysts view a potential player who is the current banking regulator. there is a number of people potentially lined up for this pboc role. also may merge the banking and insurance regulators and also have an additional regulatory looking at financial risk and who is going to be the nominee for that as well. they have lined up their man, possibly women as well, most likely man, and it will get them signed off by the national people's congress. yvonne: tom, thank you. joining us live from beijing.
one of the year's most anticipated offerings is on the way. ittify is going public but is not going to be a traditional ipo but a direct listing on the new york stock exchange and skips a marketing roadshow. bring in our deals reporter alex barinka and joins francisco,of san alex, they are skipping a lot of what usually is a part of an ipo listing process. how does that tell us about business at spotify is performing? think they are good enough to draw investor demand without having to go out like a company normally what on this ipo process. they did file today, they had to file a big filing with the sec to give us a first look under the hood of spotify and he seemed to be doing better. active users, 71
million of those paid users. the business is continuing to improve as they say they are the biggest market share of 42% of the music streaming market. mentioned highlights from this 264 page document, and that is all investors have to look forward to. what numbers should they be paying attention to? alex: the top headline number is revenue growth. the company says they brought 4.9 billion u.s. dollars last year in 2017 and that is up 39% from 2016. the other thing investors will pay attention to is the bottom line. it is still in money-losing company and have not posted a profit in the four years that are listed in this filing document. from the financial perspective those are the two things investors are going to be paying attention to and spotlight has
it to convince the industry investors that streaming music can be a profitable business. so they will be watching whether or not those losses can get rained in after the company does list. david: i would imagine it makes the valuation process tricky. how will this company actually be valued than? en? alex: it is an art and science but this is a unique situation. there is no demand supply measurement going on in the ipo process because they are going straight to trading. what is going to happen is a regular open auction like it does on a normal trading day. on the first they want the company list the stock it will see what private shareholders want to sell the shares and what investors want to buy them and what price they want to change hands. the company has given some guidance of what the valuation might be, private share sales and happen since 2017 at a range
$236 billion valuation to billion valuation, but you can see it is a wide range there. frankly, it is unknown for a lot of people whether spotify and its potential investors and other tech companies might consider a direct listing -- that is going to be a big thing folks will be paying attention to on listing day. yvonne: it seems like anything goes. cdseems like the day of the are long gone. david: or the cassette. yvonne: we are taking ourselves now. sanctions north korea by changing a few names and will discuss that next. this is bloomberg. ♪
of starting sanctions by changing names of its ships. treasury secretary steven mnuchin says that could be new sanctions on russia as well. that should be 30 days from now. let's bring in global financial services section leader joining us live from new york. a simple question first, the sanctions work. are they going to be able to achieve international diplomacy. the sanctionsat in question, the sanctions of the highest level are used to force a change in behavior but generally with respect to sanctions, someone and the yielding something. the sanctions imposed on iran were successful in they brought iran to the negotiating table. at oneyan sanctions point were successful, but you
look at a situation like north what where it is unclear the endgame actually is and that does pose challenges for effective sanctions. yvonne: you mentioned behaviors, we haven't seen kim jong-un budge too much when it comes to changing behavior when comes to developing nuclear arsenal. starting around with economic sanctions, this is proof that the latest round is perhaps more symbolic? dan: i think what happened last week may be more than just symbolic. 's actions have to be more technical than they used to especially when some of the trading partners with north korea are trade partners and major forces of the gobble -- global economy. aresanctions imposed focusing on specifically on the shipping industry are just that. you look to choke off a country axis to the monetary system, but north korea also makes money under ability to ship around
goods, and if you force a change theections to intercept ships and stop them to be used, that will drop them out. reports thate north korea is looking to get into but going -- how they will follow the money. with everyone trying to follow the money there is someone trying to hide that travel so it is a constant effort for the treasury department and other agencies in the u.s. government and around to world have to balance understand the schemes that their adversaries are using to move money. are seeing with north korean vessels, that you write ian's used in 2009 and they have taken a page at a playbook out of another person were under sanctions by the u.s. government. ultimately the sanctions work, forcing negotiation and some
reasonable baton, and this is different. david: you have been in this field for a few years, has the emergence of cryptocurrencies major job more difficult? dan: there has been a lot of buzz about the use of crypto whether it is the venezuelan petro, or logic take the currency and the use of bitcoins to north koreans, russians with the crypto ruble, there is not a lot of evidence of how widespread this is being used to evade sanctions, but if you think about it, principal cash is used for nefarious activities for a number of years and is using the current medium of transmission of funds for that same purpose. on the concept of cash, a lot something comes down to banks. i would imagine some of these banks have stringent money-laundering rules in place, so that tells me either some banks are complicit or controls
are not stringent enough. what do you think the cases? it is a combination, if you look at the european banks over the last 10 years they have adopted extremely stringent policies even after business was permissible and iran. touchanks still wouldn't the business and bloomberg reported on friday that you are seeing a marked shift east across asia to financial institutions and south korea that seem to be similar in innovating sanctions although in thans egregious manner european banks and these banks have no idea what was happening through their institutions. the net effect is this additional force meant from the united states that will force change in compliance a can to what the europeans have been doing since 2005. to mind whatngs happens in the middle east, i am not going to name names of foreign banks operating in dubai
finding themselves in hot water, but based on the work you do, can you isolate any specific banks? can you give us names that might be involved. complicit or not? dan: i can't necessarily give names of who was complicit, but what we generally see of the institutions involved are smaller players, not global names people would know. there is a variety of different schemes underweight that would drive some of the sanctions of asian techniques. it is not necessarily an isolated event. in most instances the companies and entities tried to get funds laundered through the u.s. monetary system, the european monetary system are well aware of what they're doing and do so happens the banks might not be as sophisticated. dan, for a moment, we are getting breaking news of numbers in japan. capital spending excluding software, 4.7%.
that is double what we were expecting the rate to be. estimates were 2.7%, and also corporate office up .9%. and sales, the top line, 5.9% you're on year, certainly interesting numbers coming out as we move away from the first quarter -- earning season of japan. yvonne: silly after the disappointment this is some relief when it comes to cap certainly after the disappointment this is some relief. i received a are not happy with latest sanctions in north korea, but how do you think they will respond if trump lays and to phase two if these sanctions don't work? a methodical way to ratchet up pressure in the simplest explain nation to go after the trading partners known to be doing this business. china poses a unique issue around executing north korean
sanctions effectively. one, will be unsuccessful because of the challenges and rally support that needs to be in a multilateral sanctions. the chinese have taken steps to limit north korean business, and banking from their shores over the past two years. the challenge remains the know your customer standards particularly around beneficial ownership don't exist in china as they do in europe and the united states. while they make but laws and the books, they might not know who owns the company's we dare banking with. what can we expect from steven mnuchin on russia? dan: that is a guessing game. i have been working with russian companies over the last two years and we have to treasury/forbes list that was released a few minutes before the congressional mandated deadline.
there is talk in the speech that secretary mnuchin gave that within the next 30 days, additional sanctions will be rolled out. it is unclear who or what will be targeted by the sanctions but we know the fed of sanctions previously forced entities to restructure their businesses. one of the largest private banks in russia for example began to exit the defense sector in anticipation of sanctions to try to avoid any potential issue. yvonne: dan, appreciated. discussion,g joining us live from new york. tv forget our interactive function, tv , catches live and interviews, and bloomberg functions we talk about. you can see these charts. david: or comment on my tie. [laughter] wilson have guests coming up on the program, if you get questions for them, get them in. and comment as well.
yvonne: this is daybreak asia. david: that's what cap data out of japan, capital spending better than estimates. -- 4.7%, and the release of pmi numbers, the gauge of the. previous number was 54. it ae: the boj plastic hold and is a similar move in january cutting speculation among investors. boj commitment to easing
has critics and a stronger yen amounts to stealth papering. governor kuroda has said he will do whatever it takes to hit 2% inflation but the doubters remain. this chart tells us why. the boj embarq on the stimulus program is committed to buying ¥80 trillion per year, the actual pace is far below that. rateshere the bank cut below zero and bind yield curve control. the question is, this is, this less bind me less stimulus? the boj says no, but markets disagree. it is learned local investors overseeing local debt and back to the market, watch operations towards tolerance of higher yields given the bank has an outstanding limited it to cap at 0.11%, and that seems to be the ceiling for now. the boj made an announcement yesterday and will tell you about that in a few minutes. chinesecoming up,
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♪ david: very good morning to viewers just joining us. it is 8:00 a.m. and hong kong. i am david ingles. yvonne: i am yvonne man. welcome to "daybreak asia." asian pacific stocks enter march in decline, february 1 of the wildest months in years. david: wall street has a bad day at the office. worst day in equities since the elections in 2016. .avid: pboc and governors
tomart raises the buying age 21. president trump says congress is a scared of the nra. yvonne: we have been talking about trade tensions rallying. we have export and import data from south korea. foring expectations february, despite the lunar new year holiday. there are seasonal effects in play. we are seeing the drop from 20.22% from 4%. but better than what economists were expecting a 0.5%. david: have a look at our bloomberg chart, to track exports and the change year on year. 4% as yvonne was pointing out, that is the slowest pace of export growth, going back to november last year. that is 4% for you. here is the recovery, seasonal, hopefully.
the marketing korea is closed. we are getting movement across the currency. across the markets, japan is opening it up. let's get to sophie. >> aside from korean trade data we have an onslaught when it comes to data points today. out of japan, the latest capex data offering a glimmer of optimism, driving capital spending. that is not lending positivity to the mood in tokyo. the nikkei 225 and topix sliding a second straight day. healthia, energy and lower. the aussie sliding to a two-month low ahead of fourth-quarter capex data from australia. shares in wellington with a six day advance. trade rising to a record in the fourth quarter. join wallks set to
street in the doldrums. check the risk radar, treasuries and focus ahead of powell's meeting thursday. gold looking steady after capping the biggest loss since september. oil continuing to fall after the tumbling in u.s. supplies. david: sophie, thank you. just getting a lot of the details. capital spending out of japan rising more than expected, surging 4.3% compared to estimates of a 3% gain. yvonne: let's get to our japan managing editor, brian fowler. are this imply companies feeling this appetite in responding to the global environment? companies are definitely feeling pretty bullish about the situation. first of all, the global economic environment is very solid.
in japan you have the longest period of expansion in three decades. we had eight straight quarters thexpansion and we expect first quarter of 2018 to continue that trend. while it hascapex, been expansionary, has not kept up where you expected to be, given the state of corporate earnings. a lot of the capex has gone to replace old equipment. we have seen a toyota move a small amount of production from australia back to japan. investmentactory's in ai and the laborsaving devices, as companies cope with a very tight labor market here. david: i am guessing it does not mean because we are getting capex, does not mean that capacity of the economy is expanding. that being said, this bullish
sentiment across corporate japan, you think that will affect how the boj approaches policy from now on? brian: it is going to be interesting to watch what happens with of the boj. reappointedkuroda as governor. he has all the cards in his hand, he is in complete control. the economists these days are saying different things. see are saying we do not changes in policy until the sales hike. the most common sentiment i hear is that you can expect to the boj to start playing around a little bit with of that 10 year yield target, making the range after movement a little more flexible, allowing it to fluctuate in a slightly larger band while not touching that 0% target per se. yvonne: it would be interesting to hear anything of that sort.
does it look like the inflationary mindset in japan is finally easing? brian: yes, there are a couple things to say. prices, foodod inflation was a double-digit clip in january, which is quite big. that will hit households directly. sense thatin the will convince them we have escaped inflation. it is bad for them to cut back on discretionary spending. the other thing to look at his wages. we are in the middle of the annual wage hike negotiations. we have seen evidence in both directions. big banks said they would not raise a's wages. that is a bad -- big banks said they would not raise base wages. that is a bad sign. but we are looking for manufacturers to come up with a decent wage hike.
it is too early, but looking like somewhere between 2% and 3% wage increases, which is a good sign for japan. yvonne: at least heading in the right japan -- in the right direction. let's get you caught up with the first word news. up, new treasury data shows overseas holdings of u.s. securities rose to a record $18.4 trillion at the end of june. the annual survey including stocks along with short and long-term debt shows holdings rose about a percent. japan was the largest investor with 2 trillion, followed by the cayman islands and u.k. and china. china's leaders have approved nominees for top government posts, as the communist party promised changes to the regulatory structure. the central committee finalized the names during a three-day meeting in beijing and will be announced at next week's
national people's congress. the names are expected to include the head of the pboc. brussels is telling the u.k. it must pick up the pace is brexit is to succeed. the warning came as michelle barnier published about -- barnier published it. theresa may raising the prospect talks would fail and the u.k. could crash out of the block -- -- of the bloc with no deed no detail. to york once deutsche bank provide information on their ties with the jared kushner. he and his wife have taken on more debt in the past year since they were appointed advisers to president trump. kushner stepped down from the family business when he joined to the administration. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.
i am courtney collins. this is bloomberg. developments and the firearms debate. walmart is raising age restrictions to buying firearms to 21 years and will result -- will remove assault style rifles. this as exporting goods is stopping. yvonne: we saw the move from dick's sporting goods. was walmart obligated to follow suit? >> it is a big part of this. they saw what they did and are reacting to that, in part. i do think this has been on their conscience. we see not only this tragedy in full article -- in florida, but others. these executives are taking a long hard look at their business. sales,impact from the
should we see any meaningful change for these companies? , it was not a huge part of their market to begin with. walmart is such a mega-retailer, something like this is not necessarily going to hurt them on their own. there could be backlash among the pro-gun community. on a larger scale, walmart is not immune, that it is hard to make an impact with such a big company. yvonne: we have been in this debate before, unfortunately. after sandy hook, orlando, las vegas, is there a reason to think it is different among corporations? polly: that remains to be seen if it will be different. i want to point out we have the victims of the attack making speeches, organizing a protest, going on tv. i think that is different from what we have seen in the past. yvonne: it certainly is making an impact. thank you for joining us, she
covers the defense industry. emerging-market stocks falling early thursday after wall street rounded off its worst month in two years. discussing what comes next in march. david: also, tensions rising between washington and beijing. president trump says he will not allow global competitiveness to be undermined. this is bloomberg. ♪
names of the people who have been nominated and to which positions. beenenior leadership have meeting over three days, that wrapped up yesterday. they have drawn up a list of a appointees. the top economic visor to -- economic advisor to president xi maybe one of them. and an insurance regulator as well. and some of those could be merged. we will get these decisions signed off when it kicks off on monday. we will also likely get details on the gdp target, the deficit target, and military spending. a key focus for policymakers is tackling this risk. we may get more details about this new committee being set up to oversee regulators and
financial risk in the system. there is a lot to get to at the mpc, when it kicks off. and president xi's decision to change the constitution, we should not be surprised there are more surprises next week. david: possible complication, but maybe not. president trump ramping up pressure on china when it comes to trade. how far do you think we will go this time? it seems the trump administration is certainly going out of the gates pretty strongly on this. it is probably driven by robert lighthizer, a longtime critic of china's policies. this was a report given to congress and which the trump administration said china failed to live up to its commitments. leading policies were to a drag on resources they claim on countries around the world.
seen whether it is aluminum or solar panels, they are weighing up additional tariffs as well. it seems washington is raising the ante on this. they have washington trying to talk about trade and ease some of the pressures. china has removed some tariffs on u.s. chicken. but we also know they are eyeing and looking at the tariffs on u.s. soybeans. china is trying to ratchet down the pressure, but they are also lining up potential retaliatory measures, should trump continue to ramp up the pressure on trade tariffs. yvonne: we will see if cooler heads will prevail. thank you, tom mackenzie, joining us from beijing. let's bring in our next guest, john burns, from hong kong. a thank you for joining us.
we have trade tensions. what are looking ahead to the most when it comes to this rubberstamp parliament? is a more about growth targets, or people shaken up? john: it is a rubberstamp. for a looking continuation of the 19th party congress we saw last year. the most significant things for me are the attempt by the chinese communist party to formally integrated self with the state apparatus. you could say they have done this already for quite a while. but it is not formal. here we are going to see presidential term limits abolished. we will see a new move to integrate the party and the state in anticorruption. plus we will see looking at sustainable development in all these things. china dreams. yvonne: you mentioned sustainable.
we heard about repealing presidential limits. it is a stripping away from consensus-building institutions that led to predictability when it comes to governing in china. what does this leader for life policy mean? do you think china is on the wrong side of history? we are seeing the rise up and populism. -- in populism. john: how can the chinese communist party regain control of the military, which was one of the big issues in the central party congress, and formally, how can they institutionalize themselves as part of a state? that is what they are trying to do. is this risky, yes, i think so. seems to be doing is throwing out well-established, collective secession rules -- succession rules.
we do not want to find we have a 92-year-old leader, such as we , leading china. this could lead to coups, all kinds of conflicts, that would not be in the interest of china or the world. david: because the structure previously allowed stability, but it also allowed you to groom of the next generation of leaders. in a way you had a check and balance and jedi master apprenticeship relationship. 20 years, what happens when xi steps down? where do we get the next generation of leaders we would normally see after 2022. john: i think we are skipping a generation. we are skipping below the people we might normally considered. this is a significant. is the issue here is,
party, the society, firmly behind us? we already heard voices indicating this is contentious. remember the one who instituted these term limits. this could be a harbinger of risks to come. david: this takes us to a wider debate on what sort of government structure you need to govern a large population. you look at modi in india and the mess brazil is in. and china, you would probably win the argument they made this work, looking at the number of people they listed -- they lifted out of poverty. take,s the road of they no democracy, the strong man will reign supreme? john: definitely no democracy and the strong man will rule. when xi took over, he saw the
party not leading, especially the military. he saw widespread corruption. i think the party is saying we need a strong leader now to get us to continue to consolidate where we are going. this is very risky, though. because you have a strong man. what if the strong man makes a mistake? what if there are errors? who will these -- who will correct these? what about checks and balances? that is being thrown out as well. yvonne: you mentioned contention already, we have seen it in social media. it goes to show how different that era is different to the mao zedong area -- era. at a certain point they will be looking for accountability. they will want freedom of expression as well, maybe even a role in government. what will be the trigger for
that sort of unrest? john: it is hard to say from here. certainly they will want to participate. they will want to competitive the selections to be sure we get the best. maybe from a perspective of now xi appears to be the best and this arrangement appears to be working. but triggers could be rapid economic growth and a sudden decline, for example, or some other unrest. these are things we should be watching for. david: geopolitically, what do you think is the number one implication of a term for xi jinping? we have to watch very carefully how this is playing out. eyesst be very careful and open about the risks. i think the risks are very great. china is a model for the rest of the world, yes and no.
it is a strong man kind of system. will stayuming xi until he is in his mid-80's. that might not be the case. he might after say 20 years leave, because i think the dangers of the longer he stays, the dangers of no succession rules are very grave. we heard from eurasia group, given consolidated power from xi jinping, he might be willing to strike a trade deal with the u.s. do you agree? john: he has to strike a trade deal with the u.s. not because of that but because a trade war is a nobody's interest. ais is the issue, not superman thing. yvonne: john burns, professor emeritus at the university of hong kong. get a roundup of stories to get your day going in today's edition of daybreak.
closed 812 months decline, drop,ing -- the year-long the longest record. it goes down to 1971. a 12 month rally. $135 billion. yvonne: southeast asia's biggest gaming platform had losses in the last quarter. companies said losses in december tripled to $263 million, compared with analyst forecasts of $102 million. he intends to start a private equity firm. david: lower fourth-quarter profit, net profits fell. will besaid they cautious about sudden shocks to the environment.
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♪ 8:30 in singapore, half an hour away from trading in the lion city. looking less foggy than what we are seeing in hong kong this morning. david: you can actually see something. [laughter] david: that is a nice picture of the lion city. hot and humid i would imagine, down yourweat running four head in the elevator. i am david ingles. yvonne: i am yvonne man. let's get the first word news. >> india expects to grow faster than initially thought this year, offering a list two narendra modi ahead of elections.
gdp growing at 6.6%, but slower than the 7% climb last year. toer growth forced modi offer an expansionist budget to gain voter support, following a chaotic sales tax. for direct listing on the new york stock exchange in the unique move to become publicly traded. they are forgoing a traditional ipo in the process that goes with it. instead, the opening price will be determined by buy and sell orders collected on the day it lists. it will trade under the ticker "spot." justin trudeau under fire after a visit to india that became a diplomatic tobacco -- debacle. the delegation was an exponent of an individual punjab. they say it may have been
facilitated by factions inside the indian government, something denounced by new delhi as baseless and unacceptable. -- a malaysian tycoon facing a lawsuit of $7 billion from a failed 12 -- 12 your foray into the indian wireless market. aircel filed insolvency proceedings. the 79-year-old is malaysia's third richest man with a net worth of more than $6 billion. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ thank you. time to see how the asian markets are shaping up. let's get the latest with sophie kamaruddin. >> building up in hong kong, a haze descending on equity markets.
aussie stocks falling a second day. the two-month low extending the losses we saw in february, the worst drop for the currency since may 2016, getting knocked it down further to the capex data lower than expected. there was a 1% rise. --ee the korean won trek that being lost. the yen holding below 107. stockso, japanese dragged lower by resource players. we have some of the worst performers, kawasaki with the theest drag, following bullet train incident. he said earnings cannot be assessed. andave copper and metal gold miners. february was the worst month and five for copper.
they cut expectations to a low. in sydney, lithium miners under pressure. company bought lithium supplies. steel industry chief warning of the risk of a global trade war, should trump impose tariffs, warning of a pandora's box retaliation. the biggest drag so far today. david: thank you, the big story out of taiwan, has wider implications, is the shortage of toilet paper. it has gotten so bad, the country has urged the public to avoid hoarding the delicate stuff. yvonne: it is flying off the shelves in convenience stores. david: it is gone when you look at pictures at supermarkets in taiwan. it could be an indication of people's attitudes toward not
just toilet paper, but price levels. yvonne: let's bring in enda curran to talk more about this. toilet paper,bout or is inflation coming back with a vengeance? enda: in this case, just about toilet paper. it is making people a lot of nervous out there. the feeling that an incident like this is a reminder of how quickly inflation expectations can change. the global backdrop has changed since 2011. labor markets tightening the most in decades. companies spending money. people nervous inflation will come back. shortages indicate in economic terms, production is surpassing capacity. we talk about the gap in inflation. it is toilet paper in taiwan.
are we seeing similar instances across asia? enda: people do point to certain episodes. in taiwan, people blame china's efforts to clean up its own environment. yvonne: they are also talking about forest fires in canada that control prices, as well. enda: that is right. it shows you china's importance. while it is an example of inflation expectations [indiscernible] we do occasionally get spikes. yvonne: is it still a stretched but this as toilet paper, eggs, and link it to a policy shift? enda: for now, no one is calling a major policy shift.
its space to the idea people are nervous watching for episodes like this. they are certainly watching emerging markets. fooddes like this, be it or something else, it sets off inflation. david: it really is. if there is any single risk out there, it is inflation. that is the thing that is going to, pardon the pun, flush it. [laughter] yvonne: that was pretty good. david: the story is also on the website, fantastic, the delicate stuff and what it says about broader monetary policy. yvonne: [laughter] group,watching noble they will open in half an hour's time. the struggling commodities leader reported a loss of under -- $5 billion. relies on aurvival restructuring plan.
we seem to be near the crunch point for noble. >> absolutely. there is no doubt about that. this almost $5 billion loss is one of the highest people can remember in singapore. as you said, the chairman said yesterday restructuring deal that was agreed with ad hoc creditors in january was the only hope for survival. forays he has no magic pill investors facing hefty losses on the restructuring deal. no deal would likely be for the restructuring was completed. be ay it would court-driven insolvency process that would be damaging. he said there will be some pain and discomfort for some parties involved. one has to remember this was once asia's biggest commodity trading company with a market cap of over $10 billion in 2010.
and now the market caps are less than $200 million. david: whenever the concept is, will the company keep going, auditors have concerns. it tells you how serious the problem is. the auditors of the company have concerns over these numbers. tell us about that. james: i think that was crucial yesterday. saidesting the auditors the huge loss in 2017, the debt, and negative debt asset position in 2017 indicated uncertainty, which may cast significant doubt over the ability of the company to operate. that is using their words. that is one hurdle. they are facing opposition from bondholders and shareholders. just hours before the earnings came out the perpetual bondholders said they were
forming groups to fight the plans. there are a lot of headwinds out there. yvonne: that deal was very dependent -- noble was depending on that deal to survive. what should we be looking for next in terms of the next step? the chairman yesterday said the time is of the essence. deal, final,et a conclusive deal, with the ad hoc creditors group in the next few days or weeks. noble advisers have said it is one of the most complex restructuring deals ever undertaken in asia. is soason the deadline short, in march they have to bond,a coupon, the 2018 which is coming due. must besive deal
reached within the next few days, or two to three weeks. ourne: james, thank you, editor in singapore. you can find in-depth analysis and newsmakers on bloomberg radio. tune into bloomberg asia. you can also download the app or access it via bloombergradio.com. david: a pivot back to markets in the conversation. our guest on emerging-market stocks tells us she is not worried about four hikes. this is bloomberg. ♪
♪ yvonne: this is "daybreak asia." i am yvonne man. david: i am david ingles. markets not that great in march. we are down in thursday, down 0.7%. wall street rounded off its worst month in two years. let's look at whether or not the selloff is over and what it means for emerging-market equities. global head of equities joins us on set. you are usually based out of rotterdam, you are in town. the conversation this week centered around, do we get three or four rate hikes from the fed. you are saying it does not matter. >> it does not matter. if you look at how em performed
throughout other rate cycles, they have always looked at the growth outlook. between 2004 and 2007, the rate were 17 consecutive times, 425 basis points. and they have had the strongest bull market. in absolute terms, they were up. were up.00 it is really the key point, the outlook for growth. right now what we are seeing is growth cycles are up. we see earnings and all of emerging markets. pickingt see inflation up because if the fed were to increase rates, because inflation were on the run, that would be different. for now we see the fed being data-driven. david: what would you say would be the baseline in terms of growth you need to see for em's
to be sheltered from the storm? i want to bring up a chart. in the past four weeks we have seen a plateauing of the earnings upgrade cycle. is this temporary and do you expect it to improve? what is the rate of growth in earnings you want to see? fabiana: it is not an absolute number, it is a relative number. haspast 20 years, em outperformed emerging markets. this is what has been happening since 2016. coincidently, markets of and developedm markets since the beginning of 2016. we expect that to continue. it is supported by the fact that for emerging markets we have seen the division improving. for emerging markets, improvement has just started. revisions have just turned positive.
it is a very strong structural driver for em markets over developed markets. rising,we see yields risk premiums set to rise. the fact we are seeing signs of it, begs the question what multiple you are willing to pay for it to continue in equities. at toere sectors you look be more resilient to the volatility we have been seeing? fabiana: it is interesting on the pe side. they are still at the long-term average. ,hat is because the e in pe which has been depressed for some time, has started to rise. when you look at sectors, it is the building of that momentum. we are looking at financials, which obviously have positive impacts from interest rates. but also, the global up cycle. we're looking at consumption. if you look, consumer confidence
has improved, whether it is asia or latin america. we are also looking at i.t. although we are cautious on valuations. we prefer the hardware side of i.t. and the building blocks of this new generation of performance within emerging markets, everything that is i.t. services and not internet. wrapping up february, it is the worst we have seen it since 2009. what is now driving the selloff we have seen? before it was whether the 10 year could hit 3%, we have not hit that yet. could we still be driven by what treasuries do? fabiana: we are, to some extent. you will expect short-term volatility. there is never a dull moment in emerging markets. there is a silver lining.
this volatility, in our opinion, is short-term. we should see structural earnings growth continue to drive markets. you see that every time there has been a scare on the market. you saw it when trump was elected, the end of last year. when earnings are up, markets go up, too. the large trend of that may gain further traction this year, is a lot of these bond portfolios might add more duration. is there the money -- is there a correlation? fabiana: we have seen a little bit of that, but it is anecdotal. theylients have told us have seen money shifting from fixed income into equities. it is early to tell so we will see what will happen. when you look at the yield curve where it is now, we would expect equities would have a good time. david: within the em space, any
preferences? what gets you excited? fabiana: we like korea, where we see earnings improving. and it is closing the korea discount. we like china. we believe in the reforms that are happening in china. we see momentum building up. we also like russia, where we see earnings improving and a cut in rates, which is helping domestic demand. we do like selectively some latin american countries. yvonne: real quickly, we are looking at china next week. are there certain things we are looking out for in terms of anything that could surprise us and shift your portfolio and how you play china? fabiana: we do not expect any big surprises. we expect the deepening of reforms. we are looking at more
announcements from a protectionist standpoint, more soe reforms, more financial reforms. and we're looking at gdp growth rate of 6.5%. david: one concern that has come up since the selloff in china, is that a lot of the money that went into china was funneled through these wealth management projects. with china looking to clamp down on some of these wealth management products, arguably, that flow of money disappears. is that something you are concerned over? it has been largely a large cap driven rally. fabiana: as reforms continue, china is gaining more trust from a foreign investor viewpoint. we see a lot of our clients starting to put more money to work into china.
we are not particularly concerned about the impact from wealth management products. david: on that note, we will leave it there. manager,edeli, normally based out of rotterdam. yvonne: thank you. a tradingair asia, halt until 12:30 p.m. this thursday. we had their earnings come through. we spoke with tony fernandes yesterday. he clarified earnings and what to look out for. the outlook for the year very positive. we are looking for 's when it comes to the selling -- we leasing company. are looking for the selling of its leasing company. david: as we get more details, we will tell you about it. up to lunchtime, no trading in
air asia. don't forget our interactive tv function. watch us live, catch up on interviews. the fascinating conversations we have had the last two hours or so, as well as dive into charts or securities. become part of the commerce asian, send us instant messages. this is for bloomberg subscribers only. this is bloomberg. ♪
i am yvonne man. david: i am david ingles. a stock to watch, when the hong kong market opens, adjusted earnings that came in at 2.3% above the average estimate. , was three .7est billion hong kong dollars against the forecast of a flat 3 billion. galaxy reported earnings above expectations, above 14 billion kong dollars, among estimates of 13.8 billion. yvonne: mounting losses, they said the president of the company will leave the next year. to 263 million dollars. compared to analysts estimates of $210 million.
david: time to look at what is coming ahead. what you watching? it will be the pmi services and manufacturing. version.he unofficial the big miss we saw yesterday. yvonne: maybe more than distortions. >> exactly, blaming it on the lunar new year. we get reactions. possibleng at this informal ban on selling coming through as well. -- and executive portfolio professional, his thoughts on where we see this selloff that the moment, it has further to go. and a some key trading ideas and reactions to pmi. david: pmi, market story.
let's get early indication how the markets might open. singapore, taiwan, and futures looking down. not surprising, given the down session in wall street in the asia-pacific. yvonne: not a good start to march. markets in china, hong kong, half an hour away from the opening. hang seng futures following the trade. wti a little green a marginally. looking ahead today two of jay powell's testimony. that is it for us at "daybreak asia." coverage continues. david: this is bloomberg. ♪
the first day of the month. asia-pacific stocks entering with declines across the board. february proving to be one of the wildest months in years. the worst month for equities since the u.s. election in 2016. china's leaders agreeing their choice for top positions -- in hong kong, i'm rishaad salamat. haidi: here in sydney, i'm haidi lun. talking tough on trade. president trump says he will do whatever is needed to stop china from undermining global competition. this is "bloomberg markets: asia."