tv Bloomberg Daybreak Australia Bloomberg April 24, 2018 6:00pm-7:01pm EDT
♪ >> stocks tumble and 10 year treasury gets 3% for the first time in four years. betty: at a dousing its biggest decline and caterpillar dropping with the first order described as a high water mark. parents with a billion dollar route affect stocks. betty: and aluminum sees the biggest loss in three decades as washington eases up on rusal.
hello from sydney, i am paul allen and this is "daybreak australia" as we get on the open of asia's first edger markets. australia and new zealand, with markets closed in both countries for anzac day, which is what i'm worried the poppy. betty: running in the commemoration of new zealand and a strong soldiers. and today we look at how the u.s. trading day plays out into the asia-pacific. a quick reminder of how stocks ended today. taking a tumble as paul mentioned with the yield hitting 3% on the 10 year. we can see the dow dropping and and ther by over 1%, nasdaq taking the biggest hit in the sense that the tech shares shot down. for more on this is su keenan.
more on this roller coaster ride. su: that i have to do with earnings and bond yields. , giving strong reports being the top line and bottom line. and there is the but. let's get to the snapshot. yields were a key focus. briefly we saw yields should about 3% before retreating to make a lot of concern and stocks dropping. , gtvu go to the bloomberg is where you find the charts. we see the yield correlation returns. blue is the 10 year yield rising and correlating with the dollar, which is rebounding. that is something a lot of market watchers are focused on. if we go into the big movers, caterpillar is at the top. is fascinating is shares were rising on it's very strong
guidance. forecast, but2018 it was the conference call where they gave a it is as good as it gets message that they reached the high water mark for profits for the year. and it stock fell more than 6%. in google is another story where the earnings on monday were positively received, but investors focused on the increase in capital expenditures. the stock fell. and 3m is another story about concerns of the industrial and manufacturing center. wall street census warning signs and the weaker forecast undiminished outlook adding to the pressure as you can see the stock plunge. texas instruments gave a rosy forecast and that sent shares moving higher. they make chips that helps most
electronic devices, and forecast beat most estimates, diffusing concerns. that sets up for a tech positive going into the wednesday session. peoplend still plenty of in the metals market. aluminum with the biggest drop in decades. su: what is fascinating in terms that coming look at down, the biggest to date slump we have seen in 30 years for aluminum. the worst since 1988. -- the u.s. has softened its position, but take a look at how some of the aluminum companies have traded, particularly alcoa. -- can see those are down moving on the opposite direction
under this concerns. but many on wall street say the sharp drop as this forgiveness of -- adds to the speculative nature. and oil was heading to the $70 mark and many on wall street are saying 80 could be the target within the year after french president macron proposed negotiating a new deal with iran. us ahead of the big supply data that will be out wednesday, there's a view that the stockpile fell by 2.2 million. we shall see. paul: you can follow more on that story and all of today's trading on our markets live blog at mliv and get the market run down with one click with commentary and the knossos from bloomberg expert editors to find out what is affecting your investments right now. and we turn to first world news
with jessica summers. on aprilrose about 30% 13, up from 25% two weeks earlier. chose worsening sentiment about a company, however it can also be a signal to contrarian investors that the worst may be over for the stock. reportedition data has on a delayed basis by the nasdaq over two weeks. tesla has fallen more than 5% since april 13. best year's tax overhaul gave rise in a windfall to buy yahoo!. is worth $4 billion as of the below the 4.5 billion. bryson one a big tax break because all of its revenue comes the u.s. and expects the pain of active right as little as 4% this year, down from 35%. to make of the jet engine that
blew up on a southwest airline plane last week was about to recommend inspection. that would that included the turbine that failed. they urged carriers to check older fan blades, but a draft circulated among airlines expended a list to include. the engine on the fatal flight. initial inspection showed it had metal fatigue. france's proposing negotiations on a new deal with iran in a bid to keep the u.s. on board. as it macron set a new agreement should block terror on stick their activity through 2025 and its ballistic missile program. is a second should contain under influence in the middle east. present cap may abandon the current deal next month. is as it will certainly want to wait if that happens. upunited states is not lift to its side of the bargain and its commitments to lift certain sanctions, and not to impede
economic relations between iran and's economic partners. has done all of that and prevented and threatened companies from engaging with iran. global news, 24 hours a day, on the air, and at tictoc on twitter. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. betty: president trump says treasury secretary steven mnuchin is want to be departing for china within days to negotiate over trade. trumps as there is a good chance of a deal happening, but if it doesn't have the comparables on billions of dollars of chinese goods will take effect as planned. is go to washington with joe sobczyk. looks at he is leaving this and mnuchin's hands. what is he going to arrive to china with? the u.s. has clearly made
noises and sent a message it wants to negotiate its way out of the whole situation with tariffs, with some demands on the west side. how much there will accept remains to be seen. at this point it amounts to activity more than action. the part of the u.s. and china, there hasn't been many concrete proposals going back and forth. perhaps mnuchin and get some of that on the board when he gets over there, and he is dealing with the chinese officials directly, face-to-face. until now it has been a rhetorical volley back and forth between two countries with little serious negotiations going on. betty: and these will likely be the most serious and high-level. speaking of negotiations, the iran nuclear deal. and of the french president is trying to convince trump to stay in the deal. acceptis proposing that
this deal, but we can also add to it. joe: yes, the president's offered seems to be a quick fix to taper differences between the as well as to buy some time to stave off any u.s. withdrawal over the next month for trump to decide on iran and its compliance. macron, more than any european leader, has a strong relationship with trump. he has also been talking with german chancellor angela merkel, and you keep prime minister theresa may on some sort of coordinated approach to get a side deal and agreements on this to keep the entire agreement from falling apart, should the u.s. withdraw.
as flawed as it is, they seem to think this is the best we have got going so far, and it would the u.s. in it, so it stays in place. macronresident trump and out the joint's conference at the white house on tuesday. trump is changing his view on kim jong-un, saying he is very honorable and he is looking forward to the meeting. but is behind the sudden switch from little rock and to honorable? joe: kim has given trumps of the he really wants, which the potential for some sort of breakthrough agreement. at the same time, trump is now giving kim something he has long sought, which is a measure of legitimacy in giving this summit between the two leaders in the coming months. in a sense, trump is playing the role of both good cop and that
companies negotiations. the confrontational line which followed by consolatory messages. this is all part of trumps negotiating stance to give a little to be rather harsh at the beginning, and then soften as it gets closer. he did say today that he is willing to walk away if there is no true deal in the offing. there is a lot of both sites to maneuver on this. editorloomberg carvers dose object, ask for joining us and we'll talk more about president trump's foreign-policy later on the show. larger by the director of the program for international peace. stay tuned for that in 20 minutes. betty: and up next, opportunities and the selloff here, and some ideas and tips from wells fargo investments
paul: i am paul allen in sydney. betty: the 10 year treasury yield piercing the present level for the first time in four years. from our we are joined by scott from wells fargo equity strategist. what you make of the 3%? >> there is a lot going on out there, but i do not think 3% is a line in the sand. i think the percent for me is just a reflection that after we had tax reform, we are going to have some fiscal stimulus here. we are going to see better gdp growth. are economists but it at a half percent better if we haven't had
tax reform, and also our cpi number is 2.4, and that is higher than it has been in the realistically in my mind, the market is adjusting 50 basis points or so to the new reality, which is better economic growth and higher inflation. betty: i you saying this is a knee-jerk reaction? scott: i think there is some worries and this feeds into those worries. there is the fact, i think the biggest risk out there is that the market is worried about inflation going up. the prices going up, and the fed is going to move and overreact and should this thing down and bring a recession and closer. that is one thing. and also when you hear in major-league industrial companies talking about the earnings, you could very well make an argument in terms of growth. you may have seen organic peak
earnings in 2017, meeting this year we have a big tax effect. if you call me in 2019 the s&p 500 earnings may grow 7%, that sounds reasonable to me. you have those considerations going on. there is some issues that i think these news items feet into. -- feed into. betty: and reaction becomes reality and investor sentiments becomes a real concern for the markets, and eventually the economy. i want to pull up this gtv chart we have here that shows you -- what has been interesting as the dollar is weakening in the face of rising treasury yields. within the last few weeks, that inverse correlation has been reversing. the dollar is now changing course.
that is going to have some real economic facts, no? scott: the weaker dollar is a talent for the s&p 500. tailwind, and you have people leaning towards a weaker dollar. yet people positioned that way. said, the as you dollar has rallied lately and it meets at the very least it is less of a tailwind. that is probably playing into something's today. i would argue since february 2, since we heard the u.s. employment report that covered january -- traders are running this market. if you look at last week, above 2700 and just above that in the s&p 500. yet the trendline of the january highs, and yet the 50 day moving average and the 100 day moving average -- all of that was a good short-term resistance. the market try to make it through there, and couldn't.
all around come at the 200 day moving average which we are approaching -- traders are in charge and that will continue to be the case. paul: we had a guest on yesterday who echoed what you are saying. 3% on the tenure is a sign that healthy.e in rude . and have caterpillar today talking about the first quarter being the high watermark. does that give you a sense of foreboding at all? scott: caterpillar is a good gauge of global economic growth. we have overweighted industrials for a couple of years, and they have done well, in part of the reason we like industrials is the global growth story was improving. outink there is people there, if you look at the global pmi's, some of these global surprise indices -- these are starting to roll over and i think people are taking money
off the table there. been industrial stocks, just like technology and certain consumer discretionary stocks have been up a lot. when a little panic hits the market, people are going to sell the big liquid winners. we still believe in the global growth story. is it going to excellent a lot from here? i don't think it will, buy will probably move forward. paul: and to follow on your point on text, we have amazon and facebook earnings coming up as well, and you think the recent issues with amazon and twitter and the spec with president trump -- facebook and the cambridge analytica scandal -- is that going to weigh in your opinion? scott: i think the story comes down to the fed and if will have inflation that hurt margins. i think those are the overriding
affects that will determine where the stock market goes between now and year end. a lot of these other things i look at as noise. certainly low on the priority list. is are going to be more relation of social media? in the sector maybe and maybe there should be. am not the guy to just that, but maybe there will be. but overall technology -- if you look at the two years, the consumer discretionary sector as well pack contains though stocks, the two years prior to the generator 26 record high -- technology was up 60%. these stocks surged. have given back a little but haven't given up a lot. -- when these larger issues start to affect the market, people are taking money off the table and the most liquid stocks were they are up a lot of money, and. 's qualified. -- and those stocks qualify.
betty: i would a snippet of an interview with the charles schwab ceo, if the bond markets that this. do you think all this same that will see a stampede of fixed income and schwab accounts or elsewhere? >> it depends on the pace of which they go and how far they go up. if they eat got as they do now, i do think you will see it. if you see rates jumped two or 300 basis points in the course of 90 days, you are going to have a bit of panic among some investors. betty: that sounds extreme. is that a possibility? scott: i guess it is not impossible, but i would say that is a very small possibility here. with the market is what we nervous about is that, the bond market larger for the last year and a half has been telling me that it believes the fed will
hike rates two more times this year, and maybe three or four times next year. and that is a headwind for growth. ande looking for 2.9% gdp, untilte hikes six times 2019, and in that environment it going to be a headwind for the economy. i don't think we going to see the economic growth or surgeon inflation that is going to justify that kind of rate hike or rates trading to those levels. i think that is a very low probability. betty: i would agree, thank you so much, scott wren. and remember, bloomberg users can interact with the charts with gtv . andh up on key analysis charts for future references. this is bloomberg. ♪
♪ paul: we have some live pictures for you from washington thdc. walking across before, but i assure you they are arriving for a state dinner. president trump and french president emmanuel macron having a state dinner. a number of dignitaries arriving. at the of discussions on iran. betty: will be the american and french fusion cuisine highlighted at this dinner. a check of headlines at this facing aerpillar grammatic reversal on january 2015 after a warning that its first-quarter earnings may be as good as it gets this year. shares initially jumped after the company if the stargate and profit forecast by as much as
24%, but on the call that followed, cfo said first-quarter adjustment profits per share will be the high water mark for the year. says noport environmental standards in indonesia will make it impossible to continue its flagship coppermine. by shockingndsided and disappointed comes from the environment ministry. for 20 years as been bumping in the river of a high-altitude might and arrangement was agreed by the government in the 1990's. betty: cortical is pushing a range of new products, but most earnings come from old-fashioned drinks. tha diet coke may's number three carbonated subject in the u.s. and some volume last fall tumble more than 4%. which more ahead as president trump and first president bullet t.
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> it is a 30 a.m. here in sydney. a market, australia and new zealand the second day where we remember the soldiers who lost their lives in the war. the aussie dollar trading just a shade above $.76 and had a 75 handle briefly after the first quarter cbo went out on tuesday disappointed. i'm paul allen in sydney. betty: 6:30 p.m. in new york and you're watching daybreak us try up. let's get to first word news with jessica summers. jessica: treasury secretary steve mnuchin is heading to china to begin direct talks on trade. president trump says there is a good chance of making a deal but
that terrorists will take effect on a range of goods as planned if not. it will be the first trip for mnuchin as treasury secretary. president trump has a radically changed his tune on north korea. writing kimafter jong-un as little rocket man, he's not complementing him as very honorable. they meetat he hopes very soon. it is a dramatic u-turn for the u.s. which has long condemned the kim dynasty for brutality and human rights violations. despite his warmer tone, the president so had a strong message. president trump: get rid of their nukes. makeuld be easy for me to a simple beyond claim victory but i don't want to do that. i want them to get rid of their nukes. >> reported to have launched in the section of data scandal act of a steal.
they have subpoenaed documents from the company relating to years of quality reports. you have agreed to work with the tokyo metropolitan police department on a joint inquiry. targeting youtube with a new mobile version of the free music service. he hopes to persuade the users to upgrade. powered by more than 2700 journalists and analysts in more than 120 countries, i'm jessica summers. this is bloomberg. paul: here in asia, we have no trading in new zealand and australia.
currencies are still trading and we see the dollar they're just and weighed down by greenback strength. crude oil before pulling back, aluminum continuing to slide after the suggestion from a kremlin minister that the state may take control. >> a quick at how the broader markets are trading right now. thee have seen, strengthening dollar is correlated with the rising yield , particularly the 10 year treasury yields. the weaker pound recovering just a bit after yesterday's decline.
and with the yields climbing here in the u.s., the s&p, the dow, and the nasdaq all deeply in the red. at theake a deeper look 3% level, the 2% yield. we are joined by economics policy editor. it just seems to come out of nowhere. suddenly we are rising here. the 3% marquez become a big deal. -- mark has become a big deal. >> there is so much going on in the world. we've had the stock market rally, north korea news, a state between the french president and u.s. president. you have been watching it step by everyone was singing once you have reached certain key levels, getting above 3%, the highest in four years is a big deal. all, what is driving
it? let's take a look. the number one driver is the federal reserve. it the fed seems to be moving a little more towards three. very hard to keep bond yields low if you believe the fed is going to do it in 2018. all of donald trump's stimulus has to be financed somehow. a two-year note yield coming on the weak side today. and the signs that maybe that is weighing as well. the fed balance sheet is in the background and still shrinking. let's go to the bloomberg now. question, is this the end of the 30 year bull market? what you can see in this chart is a trend line that has clearly been broken. that line was in place and's around 1987. -- since around 1987.
the 10-year note for the benchmark is sitting right there at 3%. people are concerned, this will price more people out of the housing market and increase corporate borrowing cost. strength in the dollar, definitely stronger. good, one bright note here. jpmorgan sees this topping and morgan stanley says this could lead to a bond market rally. paul: what is the global impact of this rise? we have already seen emerging-market currencies like indonesia getting hit. indonesia has been in support of its currency. it is certainly going to be an
issue. the ecb, will it signal higher rates? weakening in france and spain, we got that news overnight. and you can keep the 10 year yield at zero what everyone else is concerned. the negative yield, the two-year note auction today according to wes goodman in hong kong. clearly, this resounds around the world. global economics editor kathleen hays, thank you for joining us. macron once ant new agreement with tehran that would curb the ballistic missiles and contain military operations as well as holding an with the carnegie endowment
for international peace. thanks for a much for joining us. what is iran going to have to say to all of this? >> it really entails is donald trump himself, he will eventually agree with this. the deadline for the decision the trump needs to make will expire on may 12. this is an attempt by emmanuel macron to get trump to stay with the current deal while addressing some of his concerns outside of that context. >> including russia and china going along with that. paul: iran used to be persia and viewed itself as original super
matter -- superpower. and this whole idea could end up backfiring. >> we heard iran saying that after the current deals would falter, they would return to the nuclear program. that is what emmanuel macron is trying to achieve. lying outside of the deal. betty: what you can see here in -- images we are >> there is a unique relationship and macron has gone to impressive.
japan also developed a very nice relationship with trump and feels into handed. if emmanuel macron can manage to get something, maybe on iran and maybe on syria. there more at stake here? outside a macron's relationship with trump in jeopardy and what about macron's standing in europe as this new leader? >> daktronics trying to capitalize on his victory. for something himself as a strong leader, it goes along with chancellor merkel of germany. macron to position himself as a strong leader.
talking to vladimir putin, there is an attempt by macron to strengthen his role after , a key leader if not the leader to europe at this time. moving away from that, there is a bit of a rhetoric shift on this. very honorable and north korea does have an impressive track record when it comes to saber rattling, extracting eight and going back to what it did before. is there a little bit too much optimism floating around? don't trump is trying to playoff the optimism ahead of the potential visit that may happen later this spring. it remains to be clear. i mean, it remains to be seen what an actual deal would look like. it was led by the new national security -- national security
adviser. very characteristically of trump, he is trying to create optimism and bolster his own chances of getting a deal. the two parties are far from agreeing on the details of what such a deal would look like. president trump is saying the steve mnuchin would be visiting china and days. are the fears finally being put to rest as well? >> we will see what comes out of that meeting and it seems clear to u.s. is looking to take a tougher approach on china, something that donald very much campaigned on and something that, during this first year of his presidency, he was hesitant to take a tougher approach on china on trade. had to do with his own relationship with resident -- president xi. to be more confident and he seems to be more actively pursuing this economic
naturalist agenda that we heard him talking about on the campaign trail. countries like japan and european union, targeting america's allies. it sounds like it's an interesting group going, though. mnuchin, light heiser, larry could low. that? >> oneake of of the most china skeptics. and gary cohn lets the administration's of the space. recover -- and china could
its service since 2015. betty: electric self driving autos, they will spend $18 million on investments in china over the next five years. the domestic battery powered car program. the beijing auto show, herbert die says changes happening ever faster. >> a relationship with the joint venture partners. not as a w in the north, so we don't plan. >> extending the ultraluxury buyback mark with a crossover to take on high-end rivals such as -- the concept at the beijing on
her show includes white leather, flat seats with massage and the therapy function. and a built-in porcelain service. archetype for new the rolls-royce and ferrari also had an suv to their lineup. hiring with big tech in silicon valley. is three directions. and so we worked not only as a supplier. a very important partner because the map is very strategic for that. it is our solution for navigation, for positioning.
we have bmw and some of the local ones. >> this category provides mobility services. i will foresee more and more companies going to this area. this partner is also very important. >> you try to buy a stake in a european-based company called here technologies week as they had operations in chicago. at the u.s. reviewed that and in the end, did not approve it. what lessons do you take from that experience? >> it's not the first time for us. several years ago, we try to acquire a canadian company. denied the local
government. i say the first one is people still have five years on the chinese company. every company position is based on the government. it becomes much better. steal, like people still focus too much on that side. and it think there is no choice. the globalization means every country has their own advantage. every country has their own advantage.
>> as you look around the world deciding where to expand, are you interested in looking at the united states? and is the current trade environment concern you? >> it is shorter to have a small office in silicon valley. and then technology aspect in the u.s.. big scale services from that operation. >> searching for that style of companies in the u.s.. invest to useso that technology back in the fora market as well as other countries. betty: that was ceo cheng peng speaking with wills in beijing.
we will be live at the beijing on a show in daybreak asia. we will hear from the volvo ceo sam wilson in just about an hour's time from now. stay tuned for that interview and don't forget you can watch us live not just on television but on our interactive tv function. you can also dive into any of the securities were bloomberg options we talk about here. to check it out at tv . this is bloomberg. ♪
tech, staying in investors in the semiconductor industry breathing a sigh of relief after texas instruments reported first-quarter earnings and second-quarter guidance. chips are found in pretty much every electronic device out there. amy has the deal -- details. androbably a lot of ti everything around here. it is a bellwether for demand.
according to them, is very good. pushing back on concerns from taiwan semiconductor. x sales.ging iphone a signal of the what is happening in terms of the actual data. it's not just the first-quarter numbers, it's about the guidance. take a look at the second-quarter guidance from both sales and for profit. $1.39 per share is what they are guiding towards. just one dollar $.22. revenue, you can see the range there $3.70 billion to 4.1 billion dollars. the estimate was $3.9 billion. a little more on the upside is well. i will show you my first bloomberg terminal chart. this is the revenue growth and we can see the share price following along that. and this comes in, analyst are expecting that it will come right around here. itdoesn't look like much but is better than analysts were actually anticipating.
just aooking at guidance then what istter o happening on the quarter as well. 64.5%.margins, dateis near the highest to and looking at the industry it thehe fourth highest across entire semiconductor sector, paul. paul: that is a relentlessly rosy picture that you painted. what is the reason? >> always to the lag in the phones, there is actually a bump in terms of the automotive's and the industrials. texas instruments actually gives a lot of semiconductors to the automotive industry. it's one of the biggest providers there. that's where we see the fall of
one and the rise of another, paul. paul: that's almost it for daybreak australia this morning. if on man betty liu up next with daybreak: asia. let's take a look at what is coming up over the next two hours. the u.s. tenure yield and what comes next? i had a fixed income trading simon fast tale will join us in the hong kong studio. at the 8:00 hour. he says that a lot of changes to the bond market recently, but don't panic yet. he says what we have seen so far is more of a healthy reaction. what weesentative of are seeing in the current situation, and not all bonds are treated equally during this rising rate environment. 3 we often hear economists and -- betty: we often hear economists and strategists cautiouslyut being optimistic. our next guest is uncomfortably optimistic about global growth. david manthey will be joining us to explain why he's choosing
♪ yvonne: 7:00 a.m. here in hong kong. i am yvonne man. welcome to "daybreak asia." pacific set to follow wall street, with industrials and tech under pressure. the 10 year yield hitting 3%. bellwether caterpillar fell in the first quarter, described as a high watermark. betty: from bloomberg's global headquarters i am betty liu, where it is just after 7:00 p.m. tuesday evening. evening -- aluminum seeing the biggest loss in three decades. talking trade, steve mnuchin preparing to head the china