tv Bloomberg Daybreak Asia Bloomberg June 21, 2018 7:00pm-9:00pm EDT
yvonne: we are live from bloomberg's asian headquarters. welcome to "daybreak: asia." asian stocks set to extend their worst week in almost three months, as trade trauma returns. behind-the-scenes, some white house and chinese officials are restart talks. amy: just a 7:00 p.m. on thursday in new york. opec decided to boost output by 700 thousand barrels per day. inappropriater in
work-release -- workplace relationship. and a happy friday to you yvonne and our asia-pacific viewers across the region. looking at the markets, we are still not out of the woods, not out of the fog, whatever metaphor you want for this trade will. -- this trade war. markets were very noncommittal, despite one reported fact that white house officials were trying to reengage with beijing to try to head off any worsening of the trade spat. 0.6%.0 down the dow down eight days in a
row. the bloomberg dollar spot wall just a fraction higher now. it was down, seeing its biggest fall since may, down 1/3 of 1%. italy appointing two eurosceptics to parliament. the eu saga continues, but this time in the opposite direction. the central bank raised key rates. the brazilian real pulled away from the 4 mark because they country side a -- because the country sold fx swaps. yvonne: in asia, we have certainly felt the brunt of it. correction territories other benchmarks as well. this is still asia's best
performer this year. still hitting record highs. 1%.re edging off 1/10th of look at new zealand and australia as well. sydney overall still hovering around some 10 year highs. some teflon stocks here in sydney. looking at nikkei futures, we are pretty much flat at the moment. korea kospi futures down 1%. looking at futures, a slight down facing and yen. just breaking below the 110 handle. unchanged for the ozzie. the pound -- the bank of england held rates yesterday, but sterling and guild yields after four hikes, so perhaps that hikes could be sooner than later this year.
is going to be a big question on how much further weakness the pboc is willing to tolerate amid these trade tensions. which leads to our top story, bloomberg has been told some white house officials have been trying to restart talks with china before tariff take effect. commerce secretary wilbur ross things washington has -- thinks washington has a distinct advantage over beijing. far,riffs, if it went that they have nothing more they could do. we could theoretically go all the way up to the 500. that is not an easy game for them to play, and it is similar ratios with other countries. that is what president trump means when he says if it gets to be a big war, we have many more bullets than these other countries. yvonne: joining us is washington
reporter greg sullivan. seems like ross is really doubling down on this right now. is there a delight in the white divide inhere is a the white house about how to proceed? greg: what we are hearing from ross himself is a very tough rhetoric on china trade policies. some in the white house see this as a moment to follow through with tariffs and seek structural changes within china's trade policies. others do not feel that way. we have seen silence from steven mnuchin amid the tariff spat. some seek to engage with the chinese to avoid a tit-for-tat tariff escalation. definitely a divide in the white house. greg: there's -- ramy: there
seems to be a glimmer of hope, according to these reports. greg: we have heard reports that some in the white house are seeking to engage the chinese, particularly high-level talks with the vice president of china, but the timeline is short. effect are set to take july 6, two weeks. there is a divide in the white house. those wanting to work with china have their hardliner opponents. potentially the longer term timeline a trade war can be avoided. ramy: switching to immigration, house republicans rejected a broad proposal favored by conservatives wednesday. but there is another one out on wednesday.ote what is the chance of passing? greg: it looks worse now than it
did before. they delayed the vote so lawmakers could discuss what was in there. that the votenow scheduled for tomorrow has been scheduled until next week as they potentially garner support. very unclear if they had the republican votes, if they can get the democratic votes, and even if they were to pass it, it would face extremely steep odds in the senate to become law. ramy: and the president himself. as we mentioned, trade concerns weren't reignited in part by daimler's profit warning. a host of stocks played a role in pushing the dow lower for its eighth straight session. bloomberg's sue keenan has more on this negativity in the
markets. su: daimler came right out and said this trade war chief between u.s. and china -- war between the u.s. and china is affecting their bottom line. but a lot of, different stocks. daimler down almost 5%. all of their automakers were down. amidnalyst was skeptical, underlying problems, this is one way to mask them. there were other stocks definitely down on the day, analysts citing concerns. boeing, general dynamics, they are in the aerospace business, very exposed to concerns. apparel makers down across the board again on these specific concerns. yvonne: and su, the big sigh of
relief for investors is the largest u.s. banks. they all cleared the first round of fed stress tests. su: we are seeing a lot of them them. you could see a relief rally tomorrow. let's go right to the after-hours chart. again, all of the 30 plus banks passed. it is the third straight year. the fed said all of these banks could survive an economic downturn. goldman trailed its peers on leverage. they are going to send the fed some kind of a hey, take a closer look at this or that. seeingstanley also grades -- that the fed's does not reflect their numbers.
ratio, youto book are looking at u.s. stocks. these are s&p 500 banks. broadly positive for regional and mega banks is the easiest way to look at this. that is a positive indicator moving forward. many analysts expect to see a pop in the banks. yvonne: we have talked about opec as well. that leaving hours away as ministers gather in vienna. we are sensing a bearish scenario is emerging. su: look at the big picture for ride,n up and down particularly as we get close to this meeting on friday. iran walked out of the meeting. looks like ministers are talking about boosting output. iran was opposed to it.
the talk of a compromise and much smaller output increase, looking like that i really theres. traders are worrying -- are wondering if there will be any agreement at all. yvonne: let's get to the first word news. >> greece is said to see some relief on loans from its second bailout, creditors extending the repayment period by 10 years. they also agreed to disperse $10 million to ease athens' exit from the eurozone program. the bank of england held policy in its latest meetings, but not all members of the monetary policy committee agreed. three out of nine dissented, voting for an immediate hike. the split leaves the door open for tightening at the august meeting. policy makers voted to change continents on when they will
consider reducing quantitative easing. first lady melania trump made an unannounced visit to child immigration detention centers in texas, this a day after president trump signed in order to end family separations at the mexican border. she planned the trip on her own. the president has called for federal agencies to reunite families previously divided under his policy. a permanentll seek solution to separation, but as greg sullivan reported, that has been delayed until next week. president trump: we have to house these miners, and we have to house them safely. we should be taking good care of them, and we should return them back home. that is what we have to do. >> turning to the world cup, argentina is hanging on by a thread in russia after a shocking 3-0 loss to croatia.
quite a disappointing as appointed -- disappointing performance for the finalistss from 2014. australia's hopes are hanging on a knife edge after a frustrating 1-1 draw with denmark. and need a win over peru for france to beat the danes. global news 24 hours a day on air and on tictoc on twitter, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. ramy: still ahead, from fuel prices to the u.s. china trade dispute, we ask the ceo of singapore airlines about the burning issues of the day. our interview with him later in the show. yvonne: up next, a look inside the markets as trade tensions forced investors away from riskier assets. this is bloomberg. ♪
asian's first major market open. japan futures looking like this -- down nearly 1%. this after red across the board in the u.s. market, the s&p at its lowest in two weeks. yvonne: on wall street, stocks continuing their slide. trade tensions between the u.s. and china refused to go away. joining us now is ryan caldwell, chief investor at chiron investment. welcome ryan. the selloff globally seems to be hitting the u.s. now. the dow on an eighth straight day of losses, tech seems to be down too. has anything changed to you? ryan: the u.s. market is understanding if this is more than brinksmanship, the outcome for u.s. stocks is not good
either. asia has been digesting the outcome of what a potential trade war would look like for the last four to eight weeks, the u.s. has ignored it to a large part. was filtering through in s&p 500 companies, if we end up in a trade war, s&p 500 companies have been a beneficiary of globalization. so anything that will ding profit margins will be judgmental in the cycle. -- be detrimental in the cycle. yvonne: we have been talking about daimler cutting its forecast. can we expect to see other ceos with the same tune? ryan: this is really the rubber hitting the road. markets in this cycle has been apt to ignore these things up until the last minute, particularly in the u.s.
thatink that is right, the market is finally starting to price in this is more than brinksmanship. yvonne: are you just as optimistic about earnings later on this year? ryan: developed market earnings are fantastic, but we have known that. most of the rally in 2017 was around what was going to happen in 2018. by and large, companies continue to deliver. we think that will be the rest of the case through the rest of this and next year. what the market is trying to get its arms around is what happens at the end of 2019 and 2020. there are a lot of indicators saying that even in the u.s. we will see a relative earnings slowdown. looking at europe, there has been almost a panic as of late that these markets may be slowing down too fast, we maybe
borderline crisis. we are skeptical of that. at least in syncing up global markets, u.s. outcomes are more worried about a growth slowdown. em, europe might accelerate into the back half of the year into the first part of 2019. ramy: perhaps my bloomberg terminal speaks to this. hop into this. it is in your gtv library. this is the s&p 500 falling below the bull market in yellow. if we continue at this pace, what concerns do you think investors need to know as we had it this 2018 low? -- 2017 low? ryan: that is a good chart, because there has been a conversation as to how much volatility there has been. a huge part of that is technology relative to
performance. if people start to get nervous it will be a great anti-correlated instrument to have in your portfolio. in the u.s., it looks very cheap. if you look at euro-vol, that has been on the rise in the past few weeks. i think your chart is a salient one. a lot of that has to do with technology, as leadership being a big contributor to why volatility is falling. ramy: i see your big sectors are financials. health we are looking at online retailers, specifically with amazon and taxes. ryan: the question is going to
be, who are the retailers that can power through it? amazon will have a much easier time powering through this. they have been planning this for a while. some of the younger retailers, in their brick and mortar strategy, it might turn out to be more of a big deal. the market will look for idiosyncrasies in these units -- who are the players that have scale that can grow, like amazon and walmart? they will have an advantage. the market will be nervous about the recent come to market of investors just coming online. yvonne: we have seen these evaluations come down quite a bit after this seller. -- this selloff. look at the philippines heading
to a bear market. are youd of themes seeing? ryan: we are thinking, is it cheap enough yet? when we look at em, investors broadly have been skeptical of the rally, because it has been discretionary led. if you want bargains, emerging markets is where you are going to have to go. is it time yet to step in? our argument would be, in certain markets, the answer is yes. we would say china-hong kong is sufficiently cheap enough that you have to start vetting it. there is no clear catalyst. policymakers maybe slowing things down more than they intended to. when we look at these cheap stocks in asia, they are
significantly cheap compared to where we think the global cycle is. you will have to do hard things. in some regards in emerging markets, he will have to pick some of these things to step into. you don't get cheap stocks for value without controversy, and now we have controversy. yvonne: china has been bogged down with these trade tensions. ryan: we think it is twofold -- the deep cyclicals look attractive to us, things like energy, banks, industrials. those have gotten back to almost 2016, late 2015 multiples. that is when one would consider we had good currency for around in the market. we think the government has a good handle on the capital account today. on the margin, we think policymakers will start loosening. as we think about where the
aircraft close to $1 billion based on list prices. the deal follows one in may for at least 15 jets. ramy: singapore airlines says while oil price for ultimately will impact costs, it is looking for price based on supply and demand. he gave us his view on the current trade tensions between the u.s. and china. >> a couple times. firstly, i want to say i am not qualified to talk about the impact of trades between the u.s. and china. however, from a business perspective, we would like to see countries around the world work to grow the economy rather than computing to a slowdown. ramy: you can see more of my interview with singapore airlines's ceo on "daybreak: asia" in about 10 minutes's
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yvonne: it is a: 30 a.m. in tokyo, 30 minutes away from the market open. breaking numbers coming through from japan. this is the inflation numbers for may. they align with estimates when foodmes to core inflation, coming in at 0.7%. edginge core inflation lower, rising 0.3%, matching what economists were expecting, slightly lower than the 0.4% print. we are far away from that 2% target ramy, but at least we are holding steady for now.
we are not even close to the halfway mark. looking ahead, things could pick up slightly more in the third quarter. the main driver are these import prices due to the weaker yen we have seen. we will see with trade tensions where those currencies will go. ramy: it looks like investors are pretty much nonplussed with that. under the 110 mark, as we had been earlier this week. it looks like there was little to no reaction when it comes to the japanese yen. as we digest those numbers even further, let's do the first word news. >> some white house officials are trying to revive talks with china to avoid a full-blown trade war. that is according to bloomberg sources, who say the national economic council has been
engaging the chances of high-level talks in the next two weeks. still it is not looking likely, with opponents in the demonstration still in favor of penalizing beijing with sanctions. u.s. tariffs take effect july 6. ministers overseeing the opec agreement have backed rising oil fromction, despite protest iran. it has recommended a 6000 barrel a day increase in output to prevent the market from becoming unbalanced. >> and overwhelming were geordie -- overwhelming --ority recommends [inaudible] ,his is a nominal figure meaning what is actually delivered to the market is going to the a smaller number. >> u.s. banks cleared the first hurdle of stress tests.
the fed found all 30 u.s. l enders could survive a economic downturn. goldman sachs and morgan stanley came closest to the edge. the industry is getting more comfortable with reviews that once triggered headaches. malaysia's government says it will complete a financial district project in kuala lumpur, despite the misappropriation of about $750 million linked to a scandal. will repay borrowings, even achieving a small surplus return. thinkcan convinced -- i you will be able to get more confidence. first, you want to reinsurer foreign investors. happy, but we cannot
-- we finished that project. >> google news -- global news 24 hours a day on air and on tictoc on twitter, powered by 2700 journalists and analysts in 120 countries. bloomberg. yvonne: let's get more on what we should be watching as trading gets underway in asia. adam, we have a pretty negative set up friday trading. negative four equity traders overall. what is the key concern now, and how much further could this move lower go? adam: what is happening is a re-examination of earnings growth across a number of different markets. a lot of markets are getting swept up in this. we have seen people from
investment banks talking about a slightly slower rate of growth in many equity markets. aldman sachs have trimmed very long-term bullish stance on equities. ubs suggesting there is a 1 in 5 chance of pricing, of a trade war causing a recession in the asian region, so "daybreak: asia -- so that is not insignificant. you are seeing a lack of enthusiasm to buy back into equity markets. as this chart shows, we are retesting those 2018 lows. technically, there are many equity markets now looking very shaky. there was morgan stanley this cut their index on
the hang seng about 10%. many are saying there are tricky times ahead, and prices have been some sense readjusted to this. you have seen forward price earning valuations. for now and for the last day of the trading week, it looks like a pretty deteriorating environment. ramy: emerging market assets for another place that have taken a hit lately. why is goldman sachs buying into local currency bonds in em? adam: you are right, emerging market assets have hit with severely in a number of places across the world. it was not too long ago we were talking about a phenomenal bull run in equities, but also many bond markets. now that things have shifted a bit, what is behind this latest
change in sentiment is what is going on in the u.s. and the fed tightening cycle, this slightly more hawkish stance we have heard in terms of the projections for u.s. interest rate hikes for the next months and years. where is before emerging-market assets were able to escape the idea of tightening fed policy, it seems investors are taking it more seriously. part of that is because this increasing trade tensions between the u.s. and china. what goldman see here is fundamentally there are many locals to be earning denomination debt. they are not keen on turkey get. -- turkey yet. but places like peru, seoul,
and south africa. this is all premised on a negative story on the u.s. dollar. they say if global growth remains intact, you want to be earning outside emerging markets and debt that could benefit from the weaker dollar. ramy: bloomberg global markets editor adam haigh. don't forget to check our gtv library for some of the charts you just saw in your bloomberg terminal. intel is facing a leadership crisis after removing its ceo after a consensual relationship with an employee, but a violation of the company's policies. let's get to the heart of this. is this the reason he was ousted, or was it a pretext for something else? >> that is a good question. according to our reporting, he
transgressed these rules, someone brought it to the attention of the board, the board was unable to ignore this because they have fired others for a similar transgression rule put in place in 2011. he was confronted and he had to go. is the big question -- succession. where do they go from here? ian: the changes he has made the top of intel has left them in trouble. for all 50 years it has been around, it is hard to this rigid system of developing talent, grooming executives up to the top. the wall street employee base has always known who is next. one thing he did was bring people from the outside and remove people who would be the successorsnd-ins or
to him. yvonne: what challenges will krzanich's successor face? ian: this is far from a poison chalice. this company has record earnings. the same time, many have said he has left the job half done. intel needs to adapt itself to new realities in the market, artificial intelligence -- things intel is only starting to move towards. those will have to be capitalized on. they will need a strategy quickly. that will have to be done by someone coming in, either from intel or the outside. yvonne: ian king joining us from san francisco. we hear from the singapore
yvonne: this is "daybreak: asia ." ramy: the price of oil hangs in the balance ahead of opec's meeting in vienna starting friday. for the airline industry, feel is one of its biggest's cost. i asked singapore airlines's ceo about the airline's fuel hedging strategy. goh choon: boyle is a huge component of any airline's space. when oil prices goes up, it can be a significant drag on performance obviously. we, at least from sae's perspective -- we had people
talking about oil reaching 200, but look at what happened. we have a steady consistent hedging strategy, basically not to speculate, but managed volatility of oil price. we hedge five years at. ranges of to 40%. from a hedging perspective, we are in a reasonably good position. it doesn't mean oil price has no impact on us, because it will always have a cost. ramy: to what degree is this an impact on the cargo load for singapore airlines? the most recent number is that it fell 2% in may. goh choon: i want to say i am not qualified to talk about the impact of trades between
whatever happened in the u.s. and china. from a business perspective, we countries workee together to grow the economy rather than slow it down. talking about cargo, it is fair to say if world trade is affected, cargo will be affected. based on the demand from last year, which was a great year for cargo, one of the contributing factors is demand was not quite anticipated, a spike in demand, and thus the supply of cargo capacity was not there to satisfy demand. there was a huge spike of demand, but capacity not you don'tp, and then have a very good year. ramy: looking at u.s. growth, talking about the long haul
coming from new york, gdp is expected to fall from 2.8% next year out., 2.1% that what are the concerns when you are putting so much stress on the u.s. customer? goh choon: we don't see it as stress. we see it as fulfilling a demand that has always been there, but we could not do it because there was not a viable aircraft. -- this is anraft aircraft we pushed to manufacture. with that particular aircraft, we see the possibility of being directlyonnect singapore and agent with the u.s.. he u.s.asia with te
ramy: what kind of pressure, what kind of strategy is singapore airlines doing to andess pressure on yields price competition? goh choon: singapore, we don't have a domestic market. competition is nothing new to us. policypast, you had a institute by the -- edited by the gulf carriers. now we have a whole portfolio of carriers. this gives us an additional vehicle to compete on routes -- a food service model is probably not appropriate. to have services to berlin, honolulu and all those places, where traditionally we would not have been able to do so. we have more vehicles, more ways of serving the market.
ramy: that was singapore ngrlines ceo goh choon po speaking with me earlier today. bloomberg intelligence transport analyst joins us. with profits at multi-year highs, what you think singapore airlines is doing right? we heard from mr. goh a very rosy picture despite the trade tensions we have been talking about ad nauseam the past few weeks. the growthsee recovery happening. that is certainly driving demand. the front of the cabin, the yields stabilizing, all of that is possible on the demand side. if you look at the comparative
landscape, we are seeing in easing of conditions on houston carriers -- eastern carriers. leslie, the transformation plans with singapore airlines last all, we see early signs -- those factors are keeping singapore airlines in a good state over the last few quarters. ramy: i was not exactly convinced. i was not happy about his answer with passenger yield. hop into the bloomberg very quickly. we have this chart, looking at how yields will be pressured and remain pressured. this is the blue line at the bottom of the screen. what do you think is going to be -- what do you think yields are going to be like moving ahead?
easternw the middle carriers, the chinese carriers, all of them add a modest capacity. we think 2017 was certainly a bottom. it is hard to say how much recovery we have seen in the yields. i think the demand is very strong .if you look at the monthly numbers from the chinese carrier on the demand side, we saw singapore airlines monthly numbers holding up well. we don't expect yields to fall. stabilization is what i would say. yvonne: hold on a second, some breaking lines coming in from anz, the bank saying they will double their buyback program to 3 billion aussie dollars. they say they will buyback to raise their ratio by 56 basis
points. we will see how that fares when sidney starts shares in about 20 minutes time. consolidating branch after the merger of its low cost units. how is that going to help their profitability? we have seen encouraging results. they have managed to increase traffic, the same time hold on to the cost. that creates some synergies, keeps costs low. you are at a full-service carrier and low-cost carrier. that is much more positive than
what you had with three or four brands updating in the past. yvonne: we have to talk about how a trade war could impact headlines. analystsly see improving their rating more so to singapore. how do you think they will fare the next these trade tensions? >> it fosters business sentiment -- whether trade tensions escalate and corporate event takes a hit, that is a direct impact. 2017 was a very good contributor in terms of asian airlines.
it helped cushion their ailing passenger is nice. -- passenger business. ramy: one thing we have to talk about is the price of fuel, price of oil. $85 by the end of this year. what do you think about that? are airlines prepared? >> it certainly affects their margins. i'm sure all of the airline ceos are watching this meeting this week. the trend is up, and that should keep margins under pressure for the rest of the year. ramy: don't forget our
what should be the biggest ipo in history is pushed to next year after already being flagged for 2018. yvonne: coming down to the market open in japan, south korea, and australia. we are dealing with this trade angst, commerce secretary wilbur ross doubling down on rhetoric, despite that we are hearing from under nations like india in retaliation with their tariffs as well. u.s. stocks catching the cold as well. nikkei down close to 1%. kospi futures down more than 1%. sydni down more than 4/10 of 1%. talking more about what is to come, he says perhaps we could see some further panic selling. we have an exclusive interview with the thai prime minister.
>> 8 a.m. in hong kong, we are live at the asian headquarters. i'm yvonne man. asian stocks are facing a grin and to the worst week. trade hunts investors while the benchmark heads toward the fourth largest decline. this turns into a war of worlds. the call trance -- trumps perform -- >> i'm ramy inocencio in new york where is just past 8 p.m. on thursday. oh back -- opec and partners are boosting output by 600 about -- 6000 barrel.
thailand prime minister commits to long-delayed elections. our interviews coming up. >> the trade tensions are going up again and it seems at the u.s. is now catching on to some of this angst from what we saw during the wall street session. not as bad as we have seen most of this week already in asia. again, we wrap up at a pretty volatile week already. we are set for more selling today. >> u.s. markets did close off of the session lows and there is a glimmer of hope about the white house ring gauging but taking a look at where the markets more than twolow
weeks and the dow is down for eight days in a row. a lot of investors are trying to get to the weekend. you are already almost at the weekend there. one more day for us. yvonne: losses potentially for us as we wrap up the trading week. look at this function and you are seeing state losses at the start for the nikkei 225. we're down 1% on the benchmark and it is also leading losses down 6/10 of 1%. the south korean markets have been bearing the brunt of it given we have seen this em selloff. catching korean won is juan is catching. we are seeing a down side hovering holding onto the tenure highs at the moment. looking at currencies, the dollar yen is one to watch. we are still edging closer to
109 more than 110 this morning. the offshore is touching 650 overnight which is a key level. announced some triple arc, and they did not deliver yesterday. remy is also one to watch, -- ramy. perhaps we can see a joint agreement, but still, a lot of tension around the iranian weister and we will see if can see any types of consensus from vienna. ramy: as we figure out where the markets are headed. let's go to the first word news. to see some said relief on loans from its second bailout. creditors are sending the repayment. by 10 years. sources tell bloomberg they agreed to disperse $50 million to ease the exit from the bailout program.
finance ministers gathered in luxembourg to try to finish the rescue deal from greece. it is due to expire on august 20. big u.s. banks cleared the first hurdle of today's stress test and they found they could withstand a severe economic downturn. goldman sachs and morgan stanley came the closest to the edge. every bank exceeded the fed's minimal capital demands and it was the sign of the comfort that once triggered headaches. a committee of ministers overseeing the opec agreement has backed raising oil production despite objections from iran. -- minister met in is recommended at 600,000 barrels a day to prevent market from becoming unbalanced. majorityerwhelming [indiscernible]
the cuts that are in place today which is 2.8. that's a nominal figure meaning once it is too submitted what we are going to deliver to the market is a smaller number. yvonne: serving to the world cup in russia, argentina is hanging on by a thread after the shocking 3-0 loss to croatia. superstar is unable to inspire a response. their hopes are on a knife edge after a frustrating confrontation with denmark. they need a strong win over peru in the final game and france beat the dames. global news, global -- global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna degen heart. this is bloomberg. ramy: we got news that anz is doubling to 3 billion aussie dollars. that is about 2 billion u.s.. here's our bureau chief, james.
one of the details? -- what are the details? >> they are sitting on $1 billion in research pricing after they sold life insurance units earlier in the year. they're looking to put the cash to work and handing it back to shareholders. you would expect this to offer some support to the shareholders which is welcomed by most people. a lot of people in australia hold the share as part of the attenuation. it has been battered along with all of the banks among the world commission which looked into malpractice in the financial sector. this is going to help the share price and it makes sense for them to do this. it will also boost your capital buffers which is another good thing. in the background, we have these issues bubbling away and anz also faces criminal proceedings
for alleged cartel behavior over a capital raising a did a couple of years ago. frome: i think we heard the cheap a of months ago or weeks ago, and he was realistic saying the good old days of australian banking are coming to an end right now. given anz positioned these changes compared to the rest of the australian banks? they aren't worse than any of the others. this move today shows the balance sheet is reasonable. there is a lot of uncertainty over what the commission will come up with over the end of the day. more regulation on the banks in certain so they will all be facing not. i don't think anz is in any worse position than any others. the only thing different is this cartel's that anz has in the others haven't.
is that the say markets rolling nicely and there could be getting a sense of investors saying a lot of the bad news is priced into these share prices. we might see some recovery. there are more sharks to come which is a big question mark. it resumes next week. with the shares up more than 1%, james, our deputy bureau chief. the trade dispute between china and the u.s. is increasingly turning into a war of words. the chinese president has had back at critics and the trump administration who have called china's opening up a joke. stephen engle is in beijing for us and joins us now with the latest. steve, who is saying what and why? >> those comments you mentioned about criticizing china and the
pledges of openness were a joke, that was coming from america's top diplomat and he was not very diplomatic in his assessment earlier this week. mike pompeo, i'm talking about, the u.s. secretary of state did call those pledges a joke and he has called the economic policies of the chinese government quite predatory. he was quite sharp in his criticism of the chinese. xi jinping, the president in china give a speech yesterday in to manyin the audience foreign business leaders including american business leaders of their chinese operations here. this is what xi jinping had to say. ofwas not quite as critical those barbs from the united states. a little more diplomatic but he said basically all nations should abandon cold war mentality and zero some gains. pretty much alluding to the united states. he says lessons have yet to be learned from the international
financial crisis. we are not fully recovered, we should not be fighting each other, we should work together to make a bigger cake. the ministry of commerce here with the far more critical comments with the spokesperson saying the u.s. is abusing tariffs and triggering a trade war. the spokesperson said china is fully prepared to respond to any new list of u.s. tariffs. the u.s. commerce secretary, wilbur ross, he went right back on the attack on china saying the u.s. has more arrows in its quiver in this tit-for-tat fight. >> was they put carrots, if it -- tarrifs if it went that far, they have nothing more they can do. we can go theoretically all the way up to the 500. that is not a very easy game for them to play. and similar ratios with other
countries. that is what president trump means when he says that if it really does get to be a big war, we have many more bullets than any of these other countries. ross upped the ante even further saying china has been spoiled for years. and the game is over he says. ramy: we know china is retaliating with threats of butffs on our products, where else could china hit american businesses at this point? stephen: that is a good question. we heard from wilbur ross saying there's not that many more products he can attack, but they could go for the big-ticket items like aircrafts. let's bring up owing as an example. --ey have a slightly 00 boeing as an example. they have a slightly. guess who's coming -- slightly.
guess who's coming to beijing to seal a deal for 180 airplanes and that is the french prime minister. becca be a sharp warning shot to the united states saying we do have areas that we really could hurt you and i could hurt boeing's market share. ramy: if you want trade with the u.s., we will trade with other countries. stephen, thank you very much. let's bring in the chief strategist and had of bochum international joining us from shanghai. good to see you again. we got you here to talk about xiaomi. question with regards to the valuation, whether it is too high or too low or what kind of company it actually is. >> i think the valuation given the market sentiment and liquidity right now is too high.
time, theint in market evaluation to does business which basically is a hardware manufacturing business plus internet retail business, is actually low. if you compare it to the international companies like ants -- apple, samsung, they are low to high teens. at a time like this, you're coming up with an ipo that is 50 times plus and that is a little too high for the market right now. ramy: in terms of market volatility affecting how investors are willing to pay for it, talk to me about that. what are your concerns? hao: i think the market is trying to put in all the complexities we are facing and it is finding it hard. for example, the trade war
situation becomes rather complex with the u.s. piling on new threats on chinese exports. also, domestically, because we are facing a macro liquidity environment, and in this environment we have a rather substantial bubble overhead that limits the leeway of the policy that the central bank can apply. at this point in time, the chinese market is switching -- is between a rock and a hard place. hao, these companies are buying back their own shares and it reminds us of what we are seeing back in 2015 when you called the boom and bust of this equity market. with -- ave of wiff of what we had?
hao: i think this is exceeding many people expectations -- many people's expectations. backanies are by shares but it is small compared to the market size that the chinese market is in right now. it is at 50 trillion. with a couple of billions here .y back -- buy back it won't change the situation. yvonne: stick around, we will talk more about chinese markets. they give her joining us from shanghai. ramy, mentioned the upcoming ipo in the decision to put off china and have the stock in view. ramy: and later, our exclusive one primewith minister about thailand's economy in his political future. this is bloomberg. ♪
ramy: welcome back, this is "bloomberg daybreak: asia." let's bring back the chief strategist from oh come international. he is still in shanghai for us. , where been talking about the volatility down 8% in two weeks now. beare a whisper away from market territory. it seems like the cat is already out of the bag and we could potentially see a triple arc cut as what the officials are seeing . now that we are below key levels, does this spark further interest? againstould caution using the monetary policy to support the stock market. we have seen the move before and that did not work out well for the market back then in 2015. in april, there was quite a
surprise to many people and the market was substantially lower. happeningrouble arc in the problem is the market is expecting this. many market participants have been looking for at least one trouble arc cut. with -- triple arc cut. we would not be surprised to see more than one. at the same time, when you're cutting triple arc, the point number one is that it may not necessarily immediately become bank lending. the banks can choose not to lend out excess reserve. secondly, when you're cutting triple arc, it means the central bank balance sheet is reducing in size. what that means is the central risk stopped taking over from commercial banks.
those are the things we need to watch out for. isn the central bank reducing its balance sheet, it tends not to be good news for stock markets and for the chinese currency. yvonne: if the triple arc cut is too little too late, what is going to lead to a sustainable reversal in stocks that? we heard from the pboc that they are taking a "whatever it takes. approach -- takes" approach. hao: when the market was pboc leader said he believed to pay less attention because it is more sentiment related to the public. i agree wholeheartedly. i would say that even though the situation is not looking promising for the market, theuse of the trade war, monetary policy should be directed more towards how the
economic fundamental is performing. in the first quarter of this year and also in april, economic numbers are looking better than expected. it gives less excuse for the central banks to ease monetary policy aggressively unless things turn substantially worse. ramy: you mentioned trade war there and it is an issue we cannot skirt away from. to what degree do think china can hold out before the pain becomes concrete. wilbur ross said we have more bullets in the gun and china has. yeah, obviously china is an exporter. tariffs put on chinese exports will be detrimental to chinese economy. having said that, there are many other weapons or strategies the chinese can apply to in the trade war situation.
for example, we have seen the chinese currency is depreciating rapidly. to a certain extent, that should help chinese exports through other nations. yvonne: hao, you have been watching closely and we hit 650 briefly overnight. how much further does the pboc tolerate year when it comes to weakness? hao: i think we are back to where we started earlier this year. 6.5 is a key level to watch out for. i would not be surprised to see depreciation here. depreciation is a boost to the domestic market and the chinese government still has relative the flow and what to control the flow, you can do a lot with your currency. i would say, given monetary policy having very little
leeway, i would not be surprised to see chinese currency depreciate much further. our: one more question, for investors this friday morning in asia, in terms of positioning and strategy, what you recommend moving through with the headwinds we were talking about? hao: i would say people want to be defensive and don't be so hasty to go into catching falling knives. there's so much complexity we have to look at. even if you catch a temporary bottom and there's a rebound, it is not enough to produce a sustainable rally given limited leeway monetary policy can have and also the trade war situation. yvonne: record we, we learned that xiaomi pope -- postponed the listening. is it about the profit itself or is this an excuse for the company to not list at a time
when trade tensions are so high? hao: that is right. obviously, at times like this, the valuation you can get for your ipo is probably substantially less than what the company's vision is looking for. we are hearing from the streets 50% the valuation is 40% or of the original valuation. that is substantial. at times like this, they want to list it in hong kong market first which has better liquidity, better international reception. in the asianhe cdr market can proceed if the market conditions improve. yvonne: hong kong went out for now. from oh comenk you bocomational -- international. bloomberg subscribers can customize your settings when you look at the news on the industry's they care about.
yvonne: a quick check of the business flash headlines. a manhattan judge was failed to persuade to remove a merger with xerox. the company claimed damages as a $6 billion deal was thwarted by investors. wall street is waiting for comcast underbid in the battle of disney for 21st century fox's entertainment assets. estimations are around $41 or $42 a share. those settle the debt and threaten the credit rating. asnne: intel shares dipped the ceo was removed over consensual relationship with an employee that violated company policy. roberts one was made interim ceo while the board searches for
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.
yvonne: a: 30 in singapore. we are half an hour from the open of trading their and markets are not looking happy today as we see more trade tensions flaring up from china as well as the u.s.. i'm yvonne in hong kong. ramy: i'm rainy inocencio in new york and you're watching "daybreak: asia." but set to first word news with jenna degen hard. -- jenna degen hard. war is trying to be avoided before trade tariffs are announced. they've been gauging the chances for high-level talks the next two weeks. the bill is not looking likely
with the administration still in favor of penalizing beijing. the bank of england held a policy at its latest meeting and not all members of the committee agreed. dissentedof nine voting for an immediate hike. another surprise, policymakers voted to change the guidance on when they will reduce on a date of 80's -- monetary dating -- monetary easing. orderent trump signed an to end family separation at the mexican border. according to mrs. trump, she wanted to go on her own. federal agencies are reuniting families, and house will vote on an immigration bill that seeks a permanent solution to separation. >> we have to house these miners and house them safely.
themly, we have to house and we should be taking good care of them, and we should return them back to home. that is what we have to do. >> hong kong remains the most expensive in the world with central district's prices 30% higher than the nearest competitor. rows the third year in a that central hong kong has topped the cbrc first quarter survey. beijing came in third head of another hong kong district. midtown manhattan and the city of london did not make the top five. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. .'m jenna degen heart yvonne: thank you. joining us is mark, our strategist for singapore. mark, we see this spilling over
to the real world now. is there a sense that things are changing now? things are getting a little more real? mark: you can see the big car company was one of the first companies to say that their performance is going to be affected by these disputes between united states and china. we've even seen governor powell about he is hearing people delaying investment decisions because of the uncertainty of where trade is going. to get to theg man on the street. that is a sign that this is becoming a reality and people will no longer see this as being something that is often the distance. the trade war is in front of us and is beginning to hit to real business. until we get good news, people will assume it will hurt. markets, as you can see, asia
will have a weekday today -- weak day today. reality is sinking in and it is beginning to hurt. yvonne: sources, mark, are telling us the trump administration is restarting talks. surely this will be good news for the markets, the question is how much time they have left. mark: that is part of it. it doesn't appear there's any unanimous view within the trump administration. some people want to have talks and some don't. it is not a clear-cut thing. we have not heard anything specific in the chinese side which is important. what they have to say, i'm sure everyone would like to use get everyone around the table negotiating. the deadline is close and the sanctions are very specific. some of the tariffs are very specific. it is hard to see how they can back away from the initial space
of time. the market does not like uncertainty. investors want to have clarity and do not want people on their views from one day to the next. they want to have a clear statement that negotiations are on and they're going in this direction. many investors can make medium-term decisions. ramy: on strong dollar, the continuing narrative that we have here, the bloomberg dollar spot from the 18 low is up more than six and half percent. continuing to weigh on e.m.'s. what is the outlook there? mark: when you have u.s. interest rates rising at the speed they are now when you have two-year yields headed to about 2.5% that is the significant factor compared to the rest of the world. particularly the developed world. is u.s. dollar itself becoming an interesting asset for people based on its yield.
that is not good news for merging market currencies. emerging-market currencies need a widespread to make the more interesting. wars goof that, if trade on, the smaller countries have the worst to get hit by it. the dispute might be between united states and china but there are a lot of small companies in between who will get badly hit by a slowdown in trade. the outlook at the moment is not good. bloomberg cranfield, mliv strategist there. you can find more on today's trading news on our market blog. that is on the bloomberg at mliv go. you can get a rundown in one click with commentary and analysis so you can find what is affecting your investments right now. thailand's prime minister says his government is amended to holding an election early next
year that would end more than four years of military rule. his statement during our interview in london gives clarity to the country's political future. >> i think we have made very significant progress regarding the elections regarding our roadmap. right now we passed to organic that willher to facilitate the election is pending for the endorsement. according to the current situation, i'm sure we would be able to hold an election by february next year. just to clarify here, talking about the election timeline i'd could not clearly say -- i could not clearly say when the timeframe will be. we have procedures, legislation, but now we're pretty sure. in the past, people have asked where and when elections in thailand are. the important criteria is organic laws. we are ready for elections so i'm sure we would be able to hold election in february of next year.
>> are you considering staying on to be part of the government's him capacity? >> to be honest, i've not made a decision. right now i'm focusing on two important issues in thailand. the first is the coronation of the king. the second is the preparation of the election. i need to make sure the election will be smith, and after that, it is dependent on the situation. right now we already have the activity made by politicians. as for me, i have not made any decision yet. i'm focusing on the two important issues. >> can ask you a question about trade in the news at the moment? thailand has a big exporting economy, are you worried about being caught in the crosshairs between a trade war between china and the united states and what are you doing to protect the economy from the fallout of protectionism around the world? >> in order to cope with the trade war situation balance of trade is important.
negotiations between countries is important. i had theed earlier, opportunity to visit the white house and talk to the president of the united states about trade and investment between the countries. we had a very fruitful conversation. we understand the situation that both countries confront. negotiations in order to find the best solution for each country is important. apart from the u.s., i also talked to the leader of china and we discussed the same thing. a negotiation in order to find out the best practice. in order to cope with the situation, diversification is important. we need to make sure we can invest, export our goods to other countries to all regions. this is the region we are here, this is the region -- wizened -- reason we talk. yvonne: knows the thailand prime minister talking to bloomberg. let's bring in the chief agent economic correspondent.
our to bring up a chart to talk about the growth prospect in thailand right now. this is the new dtv library 4.8%.we see tight rope at this is the 10 year average we have seen for the country. what are the driving forces right now and you think thailand is at risk of getting caught in the storm? >> it is quite an economic --they are at a five-year high. there are a number of things going on, exports doing well, a very strong tourism industry creating inflows. that is pushing up current accounts and they have reserves of over 200 billion. that is giving them a significant cushion against the volatility in the central bank is fairly confident on what the peers of done. yvonne: investment has slowed given the political situation. enda: quite right.
trade is quite fragile when it comes to high spillover an impact in china -- china -- thailand remains to be seen. volatility will slow from a trade war. yvonne: the bank of thailand is bucking the trade that we have seen that all of these central banks raising rates. how long can they hold out? enda: that's an interesting question. they're different things going on with the central banks. with indonesia, it needs to defend its currency against external spectators, external forces. the philippines have had to move more for domestic reasons to get ahead of inflation. there are signs that the economy is overheating there. tylan does not fit either of those. that's why -- thailand does not fit either of those. that's why they are in a sweet spot. if this volatility continues to accelerate and if the trade war, such as it is, gets worse,
thailand will not be stay -- will not be able to stay under pressure like everyone else. ramy: if we push this forward for investors, when we you be likely to hike others -- hike like others in the ew region. enda: you have to see with the dollars going, where the fed is going and all indications that the u.s. economy is doing well. and that the fed will continue to raise rates that will push up the dollar and push up the cost of interest rates on global markets. that will flow through economies like thailand. the question is, will the pressure at some point reach a point where thailand has to respond. they currently have a strong position. the commonality in all of these countries is the deficit --
crude rising and brent crude falling in the session a positivity with sentiments from hours until we get to the opec meeting. the ministers overseeing the agreement have backed raising oil productions despite objections from one lead country, iran. it's recommended that 6000 barrels a day, to prevent a market from becoming unbalanced. is an consensus overwhelming majority to easing for thel cousin place which is 2.8. that is a nominal figure meaning once it is distributed, what is actually delivered to the market is a smaller number. ramy: let's bring in scott darling. he's had at j.p. morgan here for gas.
scott, what is the likelihood of getting 600,000 barrels a day? do you think you can be more than that like russia and saudi arabia wants? scott: our team was fortunate to present the opec seminar indiana just the other day, and it seems that the least consensus of additional $500,000 rose today .- 500,000 barrels a day sawink the comment you around half a million to maybe one million barrels a day seems to be the consensus. ramy: hop into the bloomberg as i want to show you this gtb library.- gtv this will take us into the range you can see on the right-hand side. russia has said they want to get it back to this range in the red underlined. 34 million barrels or so.
terms of the effect on oil prices, we have already seen that come off over the last couple days. his for the depression a prices moving? scott: we would agree with that. we did an update recently and we did not change our forecast. we are around $69 this year. next year, $63 brent on average. others predicated on details of global cash breakeven analysis where he looked at really companies whether it is international companies, opec companies, etc. which suggests breaking even from $50 to $60 brent and we stand by that. ramy: looking ahead to the second half, demand growth, there has been a lot of different analyses figuring out where this is going in terms of
pop up the price or not, what are your expectations? scott: that is an interesting question. if you look at the data, specifically for an analyst like ourselves, we have no evidence of seeing demand destruction to the high prices we have had. if you look at the recent oil product demand growth in china for example, we are up your to date at 7%. our forecast is around 3% or 4%. i don't see it yet. i'm watching the data and i think we are in the u.s. driving season watching demand growth month-to-month. at the moment, there is no evidence to support there is demand moderation. we have not changed our demand forecast. yvonne: 65 is still low compared to what others are forecasting, 80 a couple of weeks ago when we last talked. are you saying that we are going to reach a compromise? seems thehink it consensus will be something like this where if you have
production on aggregate basis, it is saudi or russia increasing production. overall you still get some increase which is acceptable to all members. yvonne: is that enough? 600,000 is what we are reporting but if we are talking about one million, will the offset the supplies given the geopolitical situation you will see in venezuela as well as iran? scott: i think opec have done a good job of getting infantry's down to your average. there are concerns around demand. i think it partly offsets some of the weakness in venezuela. we are forecasting at the end of the year, one billion -- one million barrels a day for them. at the end of 2019 even more. jpmorgan did a big energy conference in one of the concerns was upside risk to
supplies, taking away capacity and that was a big topic all of last week -- all of this week, sorry. when we talk to the companies, the conclusion is that a lot of producers are not changing activity on basis. is the most consensus including ourselves forecast this year and it seems reasonably solid. yvonne: is the u.s. a swing producer in your eyes? scott: that has been touted around a lot. i think you are seeing a change with u.s. management teams. this additional free cash they get for higher oil prices that they did not budget for, they're putting it on balance sheets instead of into the ground. you're not seeing a big hike in spending, it is more focused on delivering better cash returns or return to shareholders as opposed to topline growth. yvonne: scott, we will see what comes out of vienna.
ramy: i'm ramy inocencio in neon -- in new york. the share buyback is doubled to $2.2 billion up to the lender received proceeds of around 740 million for the sale of its australian life insurance operations. the on market buyback started january 15 and expects the buyback to boost its ratio to 11.2% at the end of march. yvonne: the timing of the saudi aramco ipo is back in the news with the energy minister saying it will be "nice" if it happens in 2019. they say the timing is not critical for the saudi government and what should be the biggest ipo in history has been pushed to next year after originally been flagged for 2018. much more is at stake than taking a box. ramy: singapore airlines says wall oil price volatility will impact operating costs, it is
looking at pricing based on supply and demand. the ceo told us as long as demand remains viable, pricing will not change to medically. he give us his view on the current trade tensions between the u.s. and china. i want to say i'm not qualified to talk about the impact of trade between the us and china. however, from a business perspective, we would like to see countries around the world work together to grow the economy rather than contributing to the slowdown. ramy: twitter acquired security startups and they might clean up the content on their platform. this marks the first acquisitions and 2016 when a --ght they were to fight online spam, abuse, and fraud. twitter has not disclosed the details. this is part of jack dorsey's
push to reduce toxic conversations on the platform. yvonne: and next few hours on bloomberg television, let's go to rich. >> we're talking to fred newman who it talk about thailand, europe prime minister, the general and perhaps when they return to democracy about an hour and a half. and what does the bank of china need to do? not much quite honestly. [indiscernible] he's taking into some of these conviction trades and they are having a look at chinese financials. over the next three years, they're getting those views and one from bernstein having that opec meeting taking place. yvonne: rich, thank you.
before we handed over to "bloomberg markets: asia," a look at the market trading. we are seeing a volatile session ending the trading week after trade tensions heat up once again from both sides of the u.s. and china. we are easing off a little bit on the nikkei 225. the cost be is also down a third of 1% -- kospi is also done a third of 1%. anz will be doubling their buyback program to $3 billion. this is what we're looking at for the china markets. we saw for the selling on a shanghai composite. this is where we closed. we're watching to see if we are getting closer to the bear market territory, rami. ramy: that's it from "bloomberg daybreak: asia" so stand by for "bloomberg markets."
rishaad: asian stocks facing a grim week as trade trauma haunts investors appeared the yuan fully and play as a trade more weapon, markets waiting on central bank support, cuts are further easing. china's plan hitting a speed bump after xiaomi's snub. i am rishaad salamat. also, opec and partners revealing a plan to boost output by 600,000 barrels a day, despite objections from iran. this is "bloomberg markets: asia."