tv Bloomberg Daybreak Asia Bloomberg July 29, 2018 7:00pm-9:00pm EDT
plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. ♪ it is 7:00 a.m. here in hong kong. welcome to "daybreak asia." monday,ies this asian-pacific markets are set for a decline. and ahead ofd 111 the bank of japan. earnings are making results. they show the current strength of the system. from bloomberg's global headquarters, i am ramy inocencio in new york where it is past 7:00 p.m. on sunday. team trump comes out swinging. a predict years of economic growth. picks up the baton and
bashes business. he says ceos are wrong to blame tariffs for disappointing results. ♪ ramy: good morning, happy monday. we have a really, really busy week ahead. central bank party in many parts of the world. chief among them is the chief of japan. --well as indian and england india and england. we will look at the bank of japan with the possibility of kingyield curve twea possibly. yvonne: speculation seems to be running rampant. we saw the doj step in and offered to buy unlimited amount of ions on friday just to put a cap on yields.
it will be central-bank driving bond markets this week. ramy: let's get a quick check of week in theed last united states. you can see that even though we got that stellar second-quarter gdp reading of 4.1%, it was not what was pushing markets higher. 6/10 of a percent. that was because of tech earnings and twitter being chief among them. nasdaq falling 1.5%. you can take a look at what is happening in terms of currency. 1170 five.ollar at year-old and british pound are slightly higher. chief among them, usd turkish lira cross 4.8. we are closed to near record weakness because erdogan said turkey will stand its ground to trumps sanctions. the latest of the tit-for-tat between both countries. be a perfectuld storm here when it comes to tech
and the gdp imprint, despite being the fastest in three years. it was missing the mark from what economist expected. let's look at what asia expected. it might be choppy. we are down a quarter of 1% right now. futures in sydney as well as japan and kospi all lower. asx futures down 4/10 of 1%. nikkei could be want to watch with the boj. policy meeting kicking off. early in the week. talking about dollar-yen, we are around 111. it is one to watch when it comes to currency and yield. 74 usm for the aussie. we australia rem and be dropped for the seventh week, the longest since 2016 at 682 against the dollar. -- 6.82. we want to do a backtrack here in the bond market. we saw the u.s. gdp miss. yield is lower.
we saw u.s. treasury at 295. the aussie following short that to 63. japan is a force in focus. we are holding at 10 basis points at the moment. after the u.s. economy hit that 4.1% growth in the second quarter, president trump and treasury secretary are delivering a rosy outlook. >> we can only project a couple of years in the future, but i think we are well on this path for several years. i do not think this is a one or two year phenomenon. i think we are in a period of 4 -- 4% -- four or five years to sustain 3% growth, at least. yvonne: let's go over to crossing to -- go over to washington. a lot of optimism coming through from steve mnuchin. there is a lot of debate from economist about whether this is feasible. there certainly is. as you are aware, and everybody is aware, it is difficult to
force the economy in one or three years. four to five years is a bold one. a lot of economists and the federal reserve see the structural policy headwinds coming up in the next -- even with the next quarter. a trade war, everything from the that president trump in his administration is pursuing. retiring baby boomers, the feeding of tax cuts, nervousness of the stock market, it seems that not very many people are getting on board with steve mnuchin and larry kudlow. there was an interesting question posed to mnuchin. he was asked about the big losses with facebook and twitter. he said, people need to have a diversified folio.
i am not too worried about them -- portfolio and i am not too worried about them. thinking back to the last time the u.s. had growth that the administration wanted, which was in the 1990's under bill clinton, that came to an end with the .com bust. yvonne: we really saw this productivity that was the reason we saw sustained growth. we also hear from economic council her larry kudlow, who said president trump should not be blamed for the damage from tariffs. trump'se say, president tariffs are damaging this, that and the other. i say, do not blame president trump, he inherited a completely broken world trading sentiment -- world trading. yvonne: many people are siding with kudlow. ros: one person that would not
be siding with kudlow would beat kudlow before he joined the trump administration. yvonne: [applause] -- [laughter] trader.s to be a free there is an understanding that there are issues with the world trade organization. there are measures around the world that may have disadvantaged the u.s. on trade. going full-blown with trade war might not be the right thing to do. even since we talked last we had news on our bloomberg terminal, bmw is raising its price to suvs in china by 7%. those are because of the trade war's and those suvs are made in south carolina. is and a lot of republican lawmakers are concerned about the unintended consequences of this tariff here, or that tariff they are and what happens on the other side. you kind of get hit in the back of the head.
i think there is definitely concerned. on top of all this, president trump threatened this morning to shut down the u.s. government over border security in a tweet. how likely is it that this will happen? think it is too likely to happen. one interesting thing about president trump's tweet was that he does not say when. ofdoes not say, at the end the fiscal year or before the election, which is one thing republican lawmakers are concerned about. he just said, shutting down the government may be a good to push this issue to a head. we have heard that republican lawmakers have had assurances from president trump and his top aides that the white house will not push for a shutdown before the midterm elections.
many republicans fear, especially if they are in swing districts. thenow from surveys that voters are still behind president trump. , or forundecided voters those considered independence, i do not think it would be great to do. i think mitch mcconnell, the senate majority leader and other republican leaders will probably prevail and not have a shutdown. therebloomberg editor ros for us in washington, d.c. joining us now is economic president jason. is the author of midterm economics the impact of economics on financial markets and the economy, which is especially topical as we are now 100 days away from the midterms. jason joins us from austin, texas. you just heard what we talked about with ros. do you think that people, that the electorate will blame donald
trump for the tariffs if the initial pain we are seeing continues in expanse? jason: i think that the electorate that might have already voted for donald trump i feel more entrenched. thatu are looking at areas donald trump took in 2016, if those areas are hurt economically because they are targeted by tariff reciprocation's from china, the map -- the argument is, i said china was after you, based -- you see they are, that could who arelly dig in folks voting republican who supported trump. i think that economically, those areas will be hurt, but it may not change the outcome. of folks know the adage, it is the economy stupid. 4.1 percent for the second quarter gdp, the best since 2014.
to what degree is the economy really going for donald trump right now? jason: i think it is more of a mixed bag. if we look at other data that was out in the last couple of weeks, housing has started to have fallen,les auto sales have fallen. that is normal when interest rates are rising. i think the rising interest rate environment is risky. the other thing to consider is, the most recent gdp report. business contracted for the first time since the third quarter of 2016. that had to do with inventories, that that is not great. as we look forward at what will happen with his this investment, can is an area where you see pullback because ceos are trying to do their corporate planning. they do it typically in q3 and they are looking ahead at next year. folks have told me, if i knew tariffs would stay, fine, it is tough for me to plan in this kind of environment. if that is the case, they pull
back their spending and that is a risk on top of the slowing housing and slowing autos for 2019. yvonne: is 4.1% good when it comes to the u.s. economy? numbers thatn have are at this level or higher from time to time, but given right now that you have monetary policy, you have concern in the equity markets that was triggered back in february, now you see more things coming up, questions about valuations, these things will proliferate going forward. for this cycle it might be as good as it gets. looking forward, the risk factors are weighted towards the slowing rate going ahead. report does this gdp cement the case that we could see two more rate hikes or should we dismiss the stellar results to the frontloading of soybeans and might
of these trade tensions? jason: we will see more rate hikes this year. that has been our forecast. we thought the tax cuts would go three for this year. since last october we expected none for next year. higher interest rates, they get you slower housing, slower autos and investment pulls back. isy: looking ahead to what happening with the fed, it is mnuchining that stephen was saying that the trump administration supports the independence of the fed. crossnk lines are being between mr. trump -- crossed between mr. trump? jason: jay powell has gone out of his way to say that trade is none of our business. the fed does not do trade. he has said that multiple times. yet, the fed forecasts don't reflect trade risks, but trade
risks will begin creeping into fed statements. there is the risk of that at this meeting because you are seeing ceos and economists around the country see an impact of expectations for those tariffs in the year ahead. there are still more tariffs likely to come what the next 301's likely at the end of august. around, we will talk about the economy and china as we steer closer to the china pmi report coming this week. jason from prestige economics. we are getting local reports in south korea. withdraw department store business from china. we are not getting details on that front so far. we have heard tensions between south korea and china before during the time that there were these reports in south korea. they also talked about selling their stores in china as well.
we will get more color on whether they are coming out of this market entirely. still waiting on details. e to withdraw from china. let's get you caught up on the first word news. social media sites are said to be facing tough new content laws in europe. brussels cracks down on hate speech and terrorist messages. they could face fines from september if they fail to take down propaganda and hate speech. germany has already passed laws that threat and social media platforms with fines up to $60 million if they failed to tackle terrorist content. australia's finance minister has rejected suggestions, tax cuts should be reviewed after the elections.-- the party retained the fourth
seed of what is contesting. of business.d the comments say australia must compete with lower tax rates in other parts of the world. biggest copper mine is facing strike action after union leaders rejected a pay. whether toting on accept what the company says is its final offer. support is said to be overwhelming. talks failed and triggered a strike that ended with no agreement. it contributed to a global deficit and higher pricing. global news, 24 hours a day on air, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ramy: moore with prestige economics in just a moment. just ahead on "daybreak asia."
yvonne: this is "daybreak asia." i am in hong kong. ramy: i am in new york. texaswith us from austin, is jason, president of prestige a book onnd author of financial markets in the economy. we talked about the fed in the last section. let's move ahead to what is happening with the bank of japan. day are holding their two policy meeting. folks are not expecting much but there is a fear from the market
that yield curves control, action might happen. what are your expectations? jason: the term being thrown , not is a tweak necessarily a major change, more of a minor adaptation in terms of quantitative usage. yvonne: what would those tweaks entail? do they need to raise targets, or is it about etf buying? jason: i am not sure which one we will see, but i think the etf the one theybably should focus on. this is the debate. will they raise the tenure target or not? -- itne we get, it is reminds me of what happened with the european central bank where there is an expectation would there be a change with the bond buying program? one was changed and
the change of rate was reaffirmed. i think we can get a mix of what we are going to see from them or maybe one is directly addressed and the other is hinted at moving forward. i would not necessarily expect something tectonic. what has been interesting here is that some folks have said this is not a question about monetary policy. it goes to government in supporting regulation. would you agree with that and how would that go? that, from my perspective, if we look at what is happening with the etf, i think we look at the intervention that the boj has done, the assets in their balance sheet. risk ofyou run a causing markets to reach levels of in balance. -- imbalance. the biggest concern is, have we
gone too far, and if we change now how do we not do too much? have anthe big thing we watching would china pmi, certainly seeing a bite from the world economy, whether from deleveraging from china. are we likely to see a more pronounced print on how these numbers will be projected? jason: on the one hand, you have china, critical to watch. we expect it to be above 50 but it is likely to come in and little bit and fall. if you look at something like markets,trial metals that gives you a clear signal of things going on in china. you look at aluminum, copper, nickel, lead, zinc, they are getting crushed on tariff concerns. also on concerns about chinese growth because china consumes the plurality of most of these metals.
weak that isls go a sign of problems for chinese manufacturing. yvonne: we have seen the reaching and the u.s. a truce on the trade front/ dude -- front. do think the eu can -- on the loss? jason: that chinese offset will be very tough to match. yvonne: i want to ask you about the currency. we talked about seven straight weeks of decline. chart that shows how money market rates are sliding. take a look at the onshore and offshore markets, the it is a signal that things could stabilize for the currency, but you could say it is virtually free right now. what -- where do you think
renminbi goes from here? see furthern weakness if we look back at the requirement ratio that was targeted to start on july 5. the most recent section said 34 million came in midnight at that night. i do not think it was a coincidence. we have seen a roman be weakening and reese -- women be weakening.- renminbi it could spill over into being a currency war because the bank of if growth slows, we will cut rates. the currency will weekend. the dollar cannot win that currency war at all because the fed is talking a hawkish game. yvonne: jason, we will leave it there. for steege economics president. check out his book "midterm economics." you can get your day going in today's edition of daybreak for go to dayb .
yvonne: click check of business flash headlines. revise its first-quarter profit to a loss of 792 million billion inthan $1 u.s. find. telecom equipment major had flag losses at 1.3 billion in the first half alone. back up to full speed after resolving the bank on purchases of critical american technology that shuttered its factory. ramy: komatsu reported bumper earnings even as the trade wars between u.s. and china threatens to derail growth and demand. maker wasequipment 506 $7 million, that is double the figure from a year ago.
yvonne: good morning, happy monday. 7:30 this morning, sunny hong kong, 30 minutes away from the first major market open, but steamy 29 degrees. ramy: stay inside. 7:30 in new york where markets closed on friday down nearly .7%. it was again because of tech stocks, twitter in particular. looking at apple earnings later this week, maybe respite, maybe something good. i am ramy inocencio. yvonne: you are watching daybreak asia. first word news with haslinda amin. haslinda: treasury secretary steven mnuchin has an optimistic
forecast for the u.s. economy, at odds with many including the fed. he told folks he expects for five years -- four or five years of a state -- of sustained growth. few economists support that, say the u.s. economy will barely obtain 3%. the top economic adviser for trump is a comes -- is accusing companies of failing to tell the truth about disappointing earnings. larry kudlow has seen some firms supporting weaker than expected results and blaming them on tariffs and the simmering global trade war. he said executes -- executives should admit poor management but declined to give examples. the cambodian minister has extended his power, easily winning an election that featured no meaningful critics. his ruling people's party got
70% of the vote, although victory was never in doubt. he silenced political dissent following the election in 2013 with the national rescue party nearly winning. assion impossible went to weekend victory at the global box office. raked in $51 million in the u.s. and canada and $150 million worldwide. the chinese comedy hello mr. billionaire cashed in with an impressive $130 million take on opening weekend. the film tells the story of a retired football player who finds unexpected fortune. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. this is bloomberg. yvonne: we are counting down to the major market open in the asia-pacific. let's bring in sophie
kamaruddin. it is safe to say we will be on edge with the boj says. we have plenty of earnings in the pipeline. sophie: i am watching how jgb traders are bracing for the boj decision. they think they will stay on the sideline. you can see how the benchmark yield has climbed the highest in over a year given the policies regulation. bloomberg intelligence reckons market reaction to the speculation has been overdone. we did see the central bank operation last week to cap yield, but should yields move higher, more buyers could be enticed into the jgb target and two of japan's artist insurers in april -- largest insurers said they would get more yields. we will have to keep an eye on those levels. emerging-market traders shifting focus to the boj, and volatility bets taking up with e.m. stresses on the rise.
implied volatility on em currencies, that has served its highest level in the year according to j.p. morgan. volatility has been vaporized for g7 forex. this month we are seeing the whitest divergence between the two measures since 2011. ramy: in japan, we are at the halfway mark for earnings, what are the highlights? sophie: given concerns around trade tensions, we are keeping an eye on the outlook for companies from japan. we had komatsu with a bumper report despite trade concerns and we had an eye on bank earnings, estimates kicking that off. a focus given the rally we have seen related to the jgb market. tdk due to report. keep an eye on the tech space after what intel endured. the chip tech could be pushed
out. we will see look at health electric. interested forecast, plus the company seeing deals to buy out alpine electronics has received regulatory approval. some of the highlights on the earnings radar when it comes to japan. today we have data, japanese retail sales due shortly, 1.7%, so a lote to keep japanese investors busy. yvonne: thank you. she mentioned the banks, japan's megabanks start reporting earnings monday. it seems like investor attention these days will be focusing on the upcoming boj meeting. let's cross over to gareth allen, our thinking reporter in tokyo. everyone is watching for the central bank. what credits and clues can we see with yield curve control?
what can we focus in first-quarter earnings? gareth: that is right, the three largest banks reporting this afternoon, and listening to analysts in the past week, we are thinking there could be a slow earnings this time with on target. the boj it is traveling with slightly less than 20% progress. interest rates have gone in the last 12 months or so. they had been faring worse in the ultra low environment because they lend to larger corporate customers which has a lot of spreads in the first instance. we will be looking to see how the three banks have fared in the negative interest rate environment, but as you have been saying the banks of japan and what they do will be the larger effect in how the banks are impacted. we saw that last week with rumors of policy tweaks emerging
over the weekend and next year jumping on monday and reaction to that. ramy: expectation to talk and action. let's go deeper into options the boj might have to tweak policy tomorrow and in the likelihood of that. the boj has plenty of options. they hold the 10 year yield around zero, and they have a tolerance of .1 and -.1. that could expand their tolerance and allow the yield to rise, which would ease pressure on interest rates and help. when the target the 10 year yield, they could change it to five years and allow the 10 year to come up. other things to do, tweaking the etf purchasing policy or tweaking the way they buy jgb at the moment. in a stealthy way they have been doing that, buying less. happening,for that
bloomberg analysis seems to say now is not the right time. waiting for more to happen in the fall or later in the year. it is always possible. it could happen tomorrow, but the consensus is it will be status quo at the moment. enough. will know soon thank you. morning staff, let's look ahead to what is on tap -- more earnings now, let's look ahead to what is on tap. let's look at caterpillar, a bellwether. they did get hurt on the growing tensions. warit is a proxy on trade concerns. let's go right into the charts. the company has posted a series of better than expected results and despite rising metals as a concern, quarterly wins, the street would be apt, although analysts reject that income reach an all-time high --
project that income reaches an all-time high. stocks falling because of trade war concerns. as go to the headlines analyst look for. half the sales outside the u.s., escalating trade war is the biggest threat, so it will be interesting to see what they say on the call. this really fueled a lot of strong sales from the signature yellow, diggers, bulldozers. the biggest manufacturer of these equipment, this equipment in the u.s. the biggest risk is the trade war. revenue forecast $14 billion in the second quarter, net income 2.59 a share. record profits, the trade war concerns, the question. yvonne: it was a similar picture with komatsu, their rival in japan. earnings on friday that may affect this week, exxon and twitter. su: both were down am a witch could weigh on the monday trade. let's go to big oil first.
exxon, very disappointing. the stock was down 4% intraday. you see they cut the full year profit target that was really what the concern was, as well as the fact they will spend $200 2025on on projects out to that might not be the right time, analysts are saying. the in -- they are talking about income, but expecting five point 95. let's go to the bloomberg, gtv 2301. gtv is where you can find our charts. twitter's active user growth flipping, down to negative, the big story. they lost one million users in the past quarter, and that overshadowed the big win in terms of revenue climbing to 700 700 11 million. you can see shares were up 80%
into the friday earnings, then down in the biggest single drop since february 2014. they gave a strong forecast, but a lot of analysts say there is no waiting and seeing. investors are holding -- hitting the cell button now. that could weigh heavily on tech on monday. yvonne: next we will talk about tariffs and trade with the former negotiator for the japanese administrations. this is bloomberg. ♪ ♪
good to see you. we were talking about the tokyo cpi numbers which were quite positive and picking up. what do you think would be behind the outlook according to the reports? inflation emphasis in japan remains well below what the bank of japan would like to see. the 2% target that has been in place for several years now remains nowhere on the horizon. i think speculation about the cut in the boj's forecast relates to essentially becoming a little more realistic, at 0.8% gains for the cpi on a year on year basis. we are not even halfway through the 2% target. i don't think there is any private economists that sees 2% over the next couple of years. so it would actually make plenty of sense even if the latest
indications are a bit of an upwards tick in cpi the past couple of months for the boj to cut their projections for the next year or two. ramy: the massive tick nikkei 225 holdings, what impact could it have if it switches its holdings to securities trapping the -- tracking the topix instead? of talkinghe context about the inflation outlook, in the context of the boj being nowhere near reaching its target, the speculation is that the boj policymakers are going to be making technical adjustments, essentially to keep their stimulus in place for the longer haul without being disruptive to markets and disruptive to the financial
system. one of the issues that have come up with regard to the etf purchases is that the nikkei 225 stock average is essentially a price weighted index, not a market capitalization index. stock purchases the boj makes in etf's time to the nikkei have led the boj to become a major shareholder in several individual companies. if you look at fast retailing for example, the boj holds more than 17% of the company. softbank, a couple of others have the same thing. people think if they do switch away from the nikkei, we will have individual stock reactions, but given the purchases overall will not change, there will not be any kind of across the board market impact.
great stuff, we will be watching that over the next day or so with the bank of japan. we will know imminently. we will be watching the markets in just under 15 minutes. let's watch futures trading happening. it is marginally down, a little under .25% down. but this is up half a percent. the u.s. and japanese cross, you can see that is further thengthening by .1%, under 111 handle. over the last several days, that has been strengthening from somewhere along the one -- 113 mark. it has been its weakest since the start of this year. going into the bank of japan, we will be looking at whether there will be any possible talk on yield curve control tweaking or possibly any action. analysts that have been here say no action but keep an eye out
for worrying. as we heard from chris, possibly talk about moving the re-waiting ing which would help. there is concern about the cpi outlook and whether that might be lowered. let's go for more on this and go back to tokyo where our policy editor kathleen hays is covering the boj meeting. take it away. we are going to take a look at something front and center to all global central .ankers, and that is trade no more important anywhere than in japan which is export dependent. this is a former trade negotiator from japan's foreign ministry, now a professor. so welcome back. >> thank you for having me here. kathleen: so much has gone on since we last spoke, but one thing consistent is donald trump continues to push back against
the global trading system. no tariffs for anybody, his ultimate goal. japan has taken many steps. how would you describe the stance of japan now? >> the thing about japan is it has been persistent in seeking large-scale free trade agreements. tpp has already been signed, also the japan [indiscernible] has been signed. last week there was a meeting on partnership which is 16 countries, free trade arrangement. that has been making progress. japan has been pushing forward on the mega deals to show the world that the trade liberalization is still taking place. kathleen: is there a defensive position instead of proactive -- definitely japan gained something, but e.u., but they lose a very big buyer from
a very important product, and not losing altogether but the question of the u.s., cars for example, looms over both countries, especially japan. yorizumi: the trade war, nobody will gain. japan is ready to show. it is proactive actions japan has been taking. hopefully mr. trump will also think about possible, the return to the transpacific arrangement known as tpp. kathleen: do you think there is a chance? yorizumi: unless the u.s. was back to tpp, they will be left behind in terms of agriculture market access to japan and developing further production networking across the asia-pacific nations. is one of the big risks to japan when it comes to the table next month for negotiations with the u.s., is
the biggest risk for japan autos? $4.6 trillion of automobiles are exported to the world, $2 trillion, 40% go to the u.s. this yorizumi: is very important for japan. yorizumi:it is true, -- but the: it is true, main losers would be the u.s. consumers because prices go up. kathleen: what if they say the car is too expensive, they will buy from somebody else? is this a challenge? yorizumi: certainly but now the local production within the united states is 3.7 million units of cars being produced in the united states, so the, this trade relationship be looked at more sort of comprehensive way, taking also account of investment flow from japan to the united states. what is the take away
for japan, for you of the deal, the agreement whatever you want to call that was struck last week between president trump and the european commission president jean-claude juncker? thatere any model, example works for japan or is the lesson that juncker has become successful? yorizumi: it is interesting development that we saw last a lot of things remain to be seen, but if those agreements will force those two super economic powers to get know, trade deal, maybe it is a kind of reset of trade andes, atlantic partnership, that has been under negotiation as well as negotiated during the obama administration. mr. trump did not like that, but maybe this is a kind of
[indiscernible] of these across the ocean. kathleen: the world trade organization, there are issues there. president trump would like to reform it, but what he in the way other nations like japan, the e.u. wants to reform? yorizumi: that was interesting there was mentioning of the reform of wto during this conversation between mr. trump and mr. jean-claude juncker. i hope this will lead to the talks, negotiations, not only u.s. anti-e.u. but also stakeholders to think about this reinforcement of the multilateral trading system and the wto. kathleen: will there be a bilateral deal by the end of next year? have already a bilateral deal in the framework of tpp 12. it is up to the united states whether it comes back to this previous arrangement. kathleen: the ball is in donald
trump's court. we will have something to talk about i am here. thank you. the former trade negotiation for japan's foreign ministry. i will send it back to you. yvonne: we got more data numbers to come and retail numbers in japan. in the month of june, when it comes to year on year numbers, expectations are rising 1.8%, that was after 0.6% back in may. we see momentum building when it comes to the spending habits of the japanese for the month of june. 1.5% with the month on month numbers which is online with estimates. sweeping to positive territory after the negative rate in may by 1.7% lower in retail sales. we did not see a big reaction in dollar-yen, but we see the strengthening counting down to the boj around 110.94.
yvonne: three minutes to go before the market open. we are set for a choppy session despite a strong month when it comes to equity markets. we are back to the level we saw back in january when it comes to the games -- games we have seen. we have seen very we will expect to hear more from the boj. ken governor kuroda pour some cold water on this speculation? from wallech angst
street on friday. we see futures in the red this morning. coming up next hour, the principal global investor tells us how the negative impact of tariffs on china could spill over to the wider asian region. much more coming on the fx as well with bank of america merrill lynch. this is bloomberg. ♪ . this is bloomberg. ♪ two, down and back up.
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yvonne: 8:00 a.m. here in hong kong. we are live from asia's headquarters. welcome to "daybreak asia." asia-pacific markets set for decline with the start of a new week. z/yen steadied around 111 ahead of the bank of japan. earnings,policy and we will watch fed, the rbi and the bank of england. ramy: from bloomberg's global headquarters i am remy inocencio in new york. zte seeks to rebuild trust and its bottom line. u.s. fine turned a first quarter profit into an $800 million loss. when the chips are down,
political decisions were behind qualcomm's failed approach. yvonne: monday morning here, seems like we have the perfect concoction of potential volatility in the markets. we talk about all the central bank said to me and set policy. we have the u.s. gdp that missed estimates. these tech nerds, when it came to earnings as well, it would be a perfect storm. here in asia it will be the boj. have been talking with analysts, no one expects anything major. even with that said, because of the size of the market, even something small could have ramifications. slated -- later on this week we will have the fed, the bank of england, it is not expected to
be a decision, but with the bank of england it is expected 25 basis points rise. yvonne: second rate hike for r.b.i. as well. just to tie a bow around the week, we have china pmi to wrap up the week. plenty on the agenda. it's good to your market open. central bankers in the driver's. asian markets are looking nervous. benchmark set to snap a four-day rise. stocks are sliding half a percent -- .5% on the nikkei 225. boj'sl be ahead of the decision for the yen. that is at 111, steady. the could see pressure as the boj is likely to reduce stimulus. you are keeping an eye on japanese retail stocks. this after sales rose 1.8% on year in june. rebounding after the drop we saw in may. in korea we are watching biotech
players. regulators watch in-depth audit counting some of those companies. on the earnings front, we have them delivering a beat for the second quarter at 2.2%. we are watching samsung. this after they reported a company is in talks with the government to make a large scale investment in south korea. details could be announced on august 6 on the finance minister finished -- visits a chip plant. has made jobn creation a crucial part of his agenda. this is local media reporting the group is considering withdrawing from the department store business in china and keeping an eye on komatsu. commodity prices and construction spending. the company did maintain its outlook. it does see a profit rise of 15% this year. that is below analysts estimates.
stock is at 3.3%. as the bank of japan readies for its today policy the latesttuesday, retail sales numbers show the depth -- japanese consumers continue to spend even as the impact of global trade war creates uncertainty around the world. the book economics and policy editor kathleen hays is in tokyo ahead of tuesday's boj decision. how important are these retail sales numbers fitting in for the central bank? leen: like any central bank, the boj is watching every number to get a sense of the health of the economy. yene really think mrs. would go to the store and say, i am worried about that trade war and not by something? we note -- buy something. ? we know -- buy something? japanese consumers,
1.7%, that is a good sign. retail sales, these figures are volatile. at your number. we see this steady, not exactly surge, 1.7% year-over-year in may and 1.8% in june. one pillar of the economy continues to grow modestly. the biggest question for japan is export growth, manufacturing, we get more numbers on those. right now, for the boj, the sense is the economy is doing well enough. it is other questions about their entire mandate. thatool they are using they are looking at for this meeting. this whole question about 10 bonds, how they are buying and how they will operate yield curve control. yield: you mentioned curve control. we have talked about the speculation for days. is there anything that kuroda
could do to kill the speculations once and for all our will have to tweak around the edges? kathleen: i would not be so certain he wants to kill the rumors. there are a lot of people in tokyo and around the world who think there is something going on at the bank of japan. the question is not if it will kill it once and for all, it is if the boj -- if they have some direction that they are starting to move in, how will the governor share it with us? will they talked about the boj at this meeting, or would he be ready to announce some kind of change in the way they target the yield curve? look at the bloomberg library. what happened a week ago, press from everybody said that the boj is considering allowing the yield curve to not just be
stuck firmly right at zero, but -- 0.1, around 0.1% 0.11. on the speculation was red-hot. the first part of the day we did not get the intervention to buy bonds, later we did. people are saying, ok, what is the message? when you think about what is going on, one of the questions is the banks. they are a big part of this because it is clear that regional banks are not making money. flat yield curves makes it hard to make money. the question is now, maybe the boj will take that into consideration and make a small switch and give them a little bit of yield curve and room to make some more money. the speculation that is getting stronger that they will be changing their etf fine. descent of stock market. as we wait for the meeting, that
that is not so much that kuroda will flat out deny it because there has been so much written, the question will be, ready to make an announcement or ready to indicate something on the drawing board that we will learn more about later in the year. yvonne: kathleen hays, our global economic and policy editor. .et's bring in west goodman run us through the possible outcomes here on what you think the boj could do. >> good morning. i think the consensus is that they want long-term yields to arrive. when long-term yields rise that helps banks in the nations. they want the yield curves to steepen. a couple things they could do is , as you said on your show, i'll out volatility in the bond market. it can reduce the amount of bonds, they could use forward items. they may use words to suggest what they see unfolding.
this -- there is this question about how we will know what the new plan is. i think the answer to that is that they will come in with another fixed rate operation. just how they came in to buy bonds. on friday, at 10 basis points. anothercome in with fixed rate operation, 15 or 20 basis points and we will know for sure that they are allowing greater volatility in the market. we have really worked ourselves into a frenzy. don't forget we are expecting a tweak, a small amendment. of energy andount attention people are giving goes to speak to what is to come when they do start to unwind. , youu want to get dramatic could say bond traders had a glimpse of the apocalypse. even though we are expecting a tweak now, it is a glimpse of bonds selloff that can ensue
once they start to unwind are using policy. now.e: it is global beyond japan, how do you think this decision will affect global markets at a point where japanese investors might consider bringing more money home? there is already a lot of speculation and we have not even had the meeting. on't forget that japanese lots of bonds in the u.s., australia, they own assets all over the world. yields are rising in their home country. they may bring money home and they get higher yields and more not have to curve hedging costs. there is speculation that this getting willbe lead japanese investors to bring money home. maybe it helps increase pressure on bond yield worldwide for help steepen yield curves world ride -- wide. it would support that yen.
this could all have global impact. west goodman there for us in singapore. goodman there for us in singapore. breaking news shares up by 1.3%. samsung second-quarter net myths, 106.6 billion want versus an estimated 105,000,000,001. that is where the bad news and's. sales beat estimates 2.2 5 trillion won. estimated profit beat them 152 billion won. beating both on sales as well as its operating profit. this specializes in developing ashium battery as well components for lcd. we are seeing samsung pairing games up by about six cents of
-- 6/10 of a percent. let's get the first word news. treasury secretary stephen mnuchin has an optimistic forecast of the u.s. economy. one that is at odds with observers, including the fed. ofexpects for her five years sustained growth after second-quarter data showed an acceleration in the fastest pace since 2014. willsay u.s. at -- u.s. hit trumps goal of 3%. >> we can only project a couple for the future. i do not think this is a one or two year phenomenon. 4% -- four period of of five years of sustained growth. president trump has floated the federal government if he does not get his way on
immigration and his border wall. he treated that he is willing to bring washington to a halt if the democrats failed to support legislation on border security. stephen republican say they doubt a shutdown will happen in an action on the border wall will wait. social media is upset to be facing tough new content laws in europe. they crackdown on hate speech and terrorist messages. face fines from september if they failed to take down propaganda and hate speech. germany has already passed laws that threaten social media platforms with fines up to $16 million if it fails to tackle terrorist content. haslinda: cambodian leader has expanded his three decades in power. he won an election that featured no meaningful critics after he disbanded the opposition. party one 70% of the vote.
they silence political defense following the election in 2013, which is the party. global news, 24 hours a day on than 2700d by more journalists and analysts in more than 120 countries. this is bloomberg. still ahead, we look at how the central bank decision will affect currencies. cohead of asia ranks and ethics strategy joins us later. policy meetings along with corporate warnings are set to drive markets this week. principal global investor kirk west gives us his playbook next. this is bloomberg. ♪
decisions and earnings reports are set to dominate moves and financial markets this week. joining us is in executive director of principal and global investors. will the boj be the most important thing that will move markets? kirk: it will be a positive thing? --. yvonne: how so? it gives you some faith that the authorities are starting to feel the economy is on its pass -- path. think they will have to tinker the world trade policy? do you see them dialing back on the expectations? think we have started the path. we have to remember, long-term interest rates are starting to edge up everywhere. we will have the 10 years in the u.s., higher rates in europe.
we are beginning to see higher rates in japan. it may not be significant changes this week, but i think the direction is clear. ramy: in terms of cpi and the outlook, there is an expectation the bank of japan will lower those. as that a concern or is it facing reality? kirk: i think it is just facing reality. of cpi,ook at the part it is headed in the wrong direction. we will probably see them bring it down to near 1.5. what is important is the path. the path is headed in the right direction. ramy: as we have been talking about this over the past week or so, the yen has been strengthening from 113 to 110. in terms of where this might yournue on, can we try to past the bank of japan meeting to see where we might be afterwards? we still feel by the end
of the year the yen will be weaker against the u.s. dollar. that will be one of the few currencies we believe that will be the case. that is relevant in terms of what will happen this week. any changes this week, at the back of people's minds it will be, what does that mean for the end. that is why we will be seeing tinkering. the authorities will want to see and strength. equity can japanese still rally if we no longer see the boj in the buyers when it comes to bonds or etf? expand can no longer their balance sheet further, will that be a derailment for equities moving forward? is one ofwe see japan the more attractive markets within asia pac. we would expect earnings to grow something like 8% this year, the fiscal year for japan. it will be more backend it -- the fiscal year for japan will be more back ended.
we see japan as the more favorable market. yvonne: what is driving that because it has been hit or miss when it comes to guidance. earnings expectations are still pretty elevated in asia, with trade war concerns, quebec be a headwind? -- could that be a headwind? kirk: earnings season just ended for japan. it is really the second half of the fiscal you that we expect the earnings share to come through. if you come back and you look at the technicals and it is looking good going through 2500 and the 200 -- 25 in the 200 day moving average, we have mobile growth. we are at 4%. aom evaluation -- from valuation perspective it looks quite attractive. yvonne: there are reports about buying switching from
from the nikkei to the topics -- topix/ -- topix. what happens when you do not have the boj influence on some of the markets and could have an overall impact? kirk: i don't think it will. we will see the same type of purchase in terms of dollar -- value. at a stock level there is likely to be adjustments. certainly, it will start with high ownership. that was something power was going to have to be adjusted. ramy: i want to bring up the bloomberg terminal for you and our viewers. this is one that i stole from our correspondent. it is also volatile since 2011. i know i see that asia is your preferred reason within emerging markets. had he put both your outlook together with what you are seeing here in terms of the
routes. ? , it isf you look at e.m. the cheapest that has been for 16 years let's take a step back. we had the first year for emerging markets outperforming the develop markets for six or seven years. we see that being a multi-year move. back certainly being held in terms of what is happening on interest rate concerns on u.s. dollar and trade protections. if you look at technicals, if you look at the valuation and the overall fundamentals, asia does look like an attractive market. we would be technically overweight asia at the moment. little bit dive a deeper, where are you focusing on this and think that is where i see good opportunity? a country level, we
are being encouraged by some of the policy responses in china. we still remain very committed to china. you have got that cloud of protectionism out there. within markets we are taking more of a domestic notice. maybe looking at consumer discretionary and health care where we would look for opportunities. somee: it has lifted appetites when it comes to investors. to what extent do you think this is the beijing put we have seen impasse? -- in the past? it seems more targeted. kirk: we have to understand the authorities will be looking for stability. quality of growth. you're absolutely right. some concerne about the growth rate falling to a level where it may create them into ability, you will continue to see these policy responses, both fiscal and monetary. to asianhen it comes
stocks overall, we are headed for the strongest amounts. their correction in february as well. are we likely to get back to those levels that we saw in january? i have a chart that we saw in it comes to the lag. there is quite a gap. that is an opportunity for you. at 2-3f we are looking years, we will be well ahead of where we were at the levels back in january. over the next few months, there is so much noise coming from the administration. for a fewtill be in more weeks or a few more months of volatility as we come up to the midterms. when you are buying equities you are buying on a 3-5-year view. from that perspective i would see us far north of the highs we saw earlier in the year. yvonne: kirk west, executive upector to for investments sensible global investors.
of theuick check business flash headlines. komatsu reported number quarterly earnings even as the trade war between the u.s. and china trends to derail global growth. basencome at the tokyo equipment maker was 567 million dollars, double the figure from a year earlier. if full-year profit jumping 15% to $2 billion. chinese biotech company aims to raise more than i had to 30 million u.s. dollars to a secondary listing in hong kong. from timeshare sales health companies have rose more
in singapore. pretty gloomy this morning. in the market. we have a whole slew of central markets. to fed and the r.b.i. trying pmi and u.s. jobs to end the week well. it will be busy in asia, as well as in the u.s. --y: very busy day and busy and busy week. you are watching "daybreak asia." let's get the first word news with haslinda. ramy, president
trump's top economic -- top economic adviser is failing to tell the truth about disappointing earnings. larry kudlow says he is seeing a than expected results and blaming them on the simmering global trade war. he said executive should admit poor execution, acknowledging, he declined to give examples. people says president trump's tariffs are damaging this, that and the other. president't blame trump, he inherited a completely broken world trading system, including a world trading system. most particularly, china. not only china. haslinda: the board is set to meet on monday i will discuss the future of embattled ceo. they say it is a scheduled meeting days before the company s.ports result he was accused of sexual harassment of six women. he acknowledges he made -- may have made some people uncomfortable decades ago.
copper mine just facing action after union leaders rejected to pay off the mine in chile, a voting on what to expect the company says this is -- is its final offer. support is set to be overwhelming. no agreement and contributed to a global deficit and higher prices. cruises six the mission impossible crews to a global victory. it raked in more than $61 million in the u.s. and canada, it 153 million worldwide. chinese company also cashed in impressive $130 million take on its opening weekend. it tells the story of a retired football player who finds unexpected fortune. global news, 24 hours a day on at on to talk on twitter --
tictoc on twitter. this is bloomberg. yvonne: time to see how the asian markets are shaping up. let's get an update. down for asian stocks. set to step a four-day rise. the yen is keeping below for 11 and they remained ahead of the boj decision. .heck out the korean won rising ahead of exports data in cpi due on wednesday. inflation expected to have edged higher in july and closer to the bank of korea's 2% target, which could put a rate hike in play in the fourth quarter. we have samsung sdi on the radar. we switch it out and check in on stocks in play this morning. given the emphasis on earnings. samsung reporting second-quarter results, it beat estimates. we have that stock down over 1%.
are climbing after posting record second-quarter results. 303% rise in operating profit there, given earnings boost, even in the face of worries against top -- tough composition -- competition. the company posted that are than expected first-quarter earnings. beloworecast is 2.6% analyst estimates. japanese stocks under pressure as concerns rise over earnings expectations. pharma and telco players say the topic, that on the stock off by 2% so far this morning. it really has been a big few days. it will be for japan with disappointing earnings season so far. as well as that decision do from the bank of japan. there is speculation about
policy as well as local media reporting the bank. made by fewer nikkei to tie five shares. it leads our asia equities team. what exactly is going on in japan? have had quite a few companies report earnings, but that is only about 20% of the company's on topix. it is about 50-50 when it comes to the ratio of companies that have the are missed earnings estimates. this week and next week are going to be that heaviest weeks for japan companies to be reporting. you have companies like toyota motor reporting. you have sony that will report. we will have to really wait and see what happens this week with earnings season. and then make a little bit more of a comprehensive decision on what is going on when it comes to earnings for japanese stocks. the boj has massive
holdings and the nikkei 225 has been talking about. it the next big thing to watch out for when it comes to the stock market? yes. i think we will have to wait and see what happens tomorrow. everybody is in a wait and see mode. depending on if there is a shift in their decision, could they come out and talk about their etf purchasing program, could they shift like these reports have said, shift from buying into the nikkei 225 to the topi x?} that will have a huge impact on the nikkei. that being said, there are other things going on in the market like the fed that will come out this week. there are also earnings in the u.s. that we will have to pay attention to that could potentially impact japan. then there is still anything that trump says that could potentially impact japan too. yvonne: it could take just one tweet. divya leads our asia equities
team. talking about more earnings. chinese telecoms continuing to count the cost of its run-in with u.s. authorities. it has revised a first-quarter profit to a loss after being hit by a $1 billion fine with the trump administration. let's get to tom mackenzie joining us from beijing. i would say the company has been pretty good in terms of telegraphing the impact of bands from the u.s.. was this a surprise -- u.s. was this a surprise? tom: no, not a big surprise. it does underline the cost the company has had to pay for these infractions. they highlighted to us. 3.1 expected losses in billion dollars. note price that they revised down their first-quarter earnings from a profit of two under 50 million u.s. dollars to a loss of just under it a hundred million u.s. dollars.
this is the second-largest largest chinese telecoms company. the company was caught up for these violations, sanctions violations around north korea and iran. course, you have this action from washington imposing this yingon the company from bu u.s. technology. that ban was lifted. it agreed that huge find that you pointed to -- saying it was one of the largest finds in u.s. in u.s. history totaling $1.4 billion. they agreed to that fine, and in thereed to oversight future. at least they are back to business having made that agreement. how muchion really is more financial pain this company will have to put up with as it repositions. ramy: that is a tremendous number.
the big question now is, when it is zte expected to return to profit? certainly, they are trying to ramp up production's. factories are in action. have about 75,000 employees getting back to work. they are still waiting for their shipment of components from the u.s. it is going to take some time. newkey challenge for the board of this company will be trying to convince her corporate customers and the telecoms can bees that they relied on. of course, though the political died in washington has down, you still get concerns articulated by the light of florida senator marco rubio who said, in light of china's failure to sign off on the merger, washington should relook
at imposing this ban. those political pressure points continue to exist in washington. the white house is managed to push back against a bipartisan approach to reinstate these penalties. an element of uncertainty for this company. ramy: china correspondent tom mackenzie in beijing. same industry,he as well as in technology because the boss of the semiconductor the reasons were probably behind qualcomm's $34 billion takeover bid. it did collapse when china failed to give its approval by a self-imposed deadline. they are now looking for new partners. nxp still has a good relationship with qualcomm. >> the transactions complete, it is ended, we have received to break up the back from qualcomm.
we are focused on the future and drive true share out of value. -- >>t to focus on where we want to focus on where nxp is going. to what extent do you blame qualcomm? i think that had nothing to do with approval in china. it could have created confusion. there was nothing about the regulations are issues that china could identify that cannot be involved. it has to be political or some other reason. it is not about the transaction itself. is not about the transaction and is political and has to do a trade or tariff issues. what is that say about any deal going forward now? rick: that is not something i am in a position to respond to. certainly raises questions when you think about it. there has been a few transactions that have an
approved. .anks purchase of toshiba for some reason they chose not to approve this transaction. for us it is about moving forward. >> qualcomm had legal disputes with apple and samsung. how is your relationship with them? rick: our relationship with qualcomm is fine. there would have been a huge opportunity to create powerhouse going slower, but we do not have that now. for us, we have a bright future. we are the leading semiconductors into the automotive industry. to make driving safer appeared we facilitate the ability to drive connect did devices, which will be 75 billion by 2025, triple what it is today. to govide unique to elegy through application processors to be able to use the machine learning at artificial intelligence to put it to work. yvonne: that was ceo and
what do you expect to be happening in the next time for hours? will they have to dial back the expectations of the move? this is the worst kept secret in the market. we have a number of unsourced reports from various sources all consistent in saying that the boj is reconsidering its staff. other centralhe banks trying to grapple with the balance between inflation, growth and currencies, the boj is stuck with a dilemma about sustainability and credibility of its policy. they have to dial it back to make it more sustainable. there is an expectation that tomorrow will get some signaling. it may be that they prime the market for a move later on in this year. again, the expectation is that they may try to widen the been around the 10 year yield point. , done: the 10 year gdp
think that market reaction is still too extreme or is it pretty on point for what we could be hearing tomorrow? >> i think it is pretty much a point right now. of save this move, it is probably more prudent to wait until the decision is made rather than try to roll the dice ahead of the decision tomorrow. if that is all they intend to do, yes, we will fade the steepening we have had and we will probably look for a dollar-yen to reset itself higher. i think the more powerful thing here is potential strength of the dollar. if there is something aggressive, they should target away from 10-year to five-year point of the curve and we may have a sustained impact in terms of a steeper curve and lower dollar yen. yvonne: what kind of effect could this have when it comes to global markets? the termthis change
structure globally for you now? rick: i think it -- claudio: i think it would and a way that, when we speak with policymakers the of session is about the fed. many of the policymakers in the region think if we dodged the bullet of the fed or of trade war this year, next year we have potential to grapple with tightening by the ecb. if the boj starts to move ahead as well, that means we are really in for the long haul in terms of emerging markets trying to deal with the effects of liquidity, or what has been that g3s qt in a way central banks take the punch bowl away from central markets. that would be problematic. it would be a lesser degree, but the bank of england suggests that central banks are trying to
get ahead and take away some of this excessive liquidity from the system. ramy: speaking of that, i see in there is a back-and-forth here between a rate hike expected 25 bids for the bank of england versus brexit on the other side of things. where do you see this evening out, all things considered? our economist is looking for no hike by the bank of england. clearly the markets pricing at 90% chance of this happening. the is fascinating because inflation data and the economic data does not necessarily to support the need for a rate hike. there is this thinking that you from banks around the world that we need to get ahead of a potential recession by 2020. we need to do that by building policy space and room by increasing our rates so we do get a recession we have room to
cut. of thinking going through some of the markets and policy central banks. bank of england will give the perception that global interest rates or global central banks policy are getting tighter among the developed markets, which is problematic for emerging markets. ramy: going back to china, we want to focus on what is happening with the u.n. and pboc. we are seeing unofficial or official easing coming out. to what extent do you think they can balance this without making the deleveraging campaign against -- i guess, nonexistent, or stopping that? claudio: this is where we have different sure directories -- trajectories coming through. china has move more aggressively now in the past couple of weeks leaning towards fiscal policy.
we got a pop in the onshore equity markets. the big thing will be on tuesday when we get the pmi data. the last pmi data we had exporters below 50. the question here for the yuan is, is the pboc and policymakers ahead of the curve, behind the curve or on the curve? the more we see the data deteriorate, we get the impression it will depreciate. i think that will be the concern if we get a soft print and the impression that the pboc has to do more to ease. you juxtapose that and we have a fed meeting this week, the only way for china is up. yvonne: talking about chinese easing, that should help boost the economy. shouldn't that mean for stronger renminbi? in economics and finance there is an argument for
everything. at the moment, it is the capital account that is driving dollar china. the years of the go-go day with a current account and the export led recovery and growth that would support a current account surplus which made being roman a a no-brainer --renminbi no-brainer. the capital account is driving this in the rate differential between china and the united states is there. to stump -- to some extent it has been aided and abetted and they have found it to be difficult. they are taking that money onshore. in terms ofhelped other investments in the financial account of the balance of payments. we havelem now is, if high u.s. interest rates making that more expensive, and if it looks like a stronger dollar and dollar strength continues, we might get chinese corporate
china paydown foreign debt and that adds more upside. the answer is, no, longer-term. if we get china pulling ahead with growth again and the expectation that we are reaching the and in terms of monetary easing, then we can get them and coming back in 2018, not 2019. yvonne: could a second rate hike find before? claudio: the market is saying 50-50. ab.i. does not like to be one-hit wonder, they like to follow through. we have to be careful. yvonne: we will leave it there. of asia rates and the bank of america merrill lynch. look at stories trending across bloomberg universe. outinal users are running just learning about president trump's tirade over the new york times.
business flash headlines. bmw will raise the price of some midsize sports utility vehicles in china by as much as 7% beginning monday. this is the latest since the global markets and the global u.s./china trade wars. last year they exported more than 81,000 suvs to china, valued at almost $2.4 billion. bank posted an unexpected loss to cover its debt. they saw provisions more than double last quarter, leading to an $18 million loss compared to a 200 $13 million profit for seen by economists. they were the lowest and 11 quarters. regulators are examining icici's accounting and practices. ramy: before we go over to "bloomberg markets asia" let's look a how markets are trading
in the active session. down 7/10e nikkei 225 of a percent. pretty much across the board as we do a handover from what happened on fridays markets. it was down by 7/10 of a percent. by a percent and the asx 200 down by a half of a percent. yvonne: a lot of speculation about what the boj will do tomorrow. we see yields continue to stabilize. there at 10 basis points. dollar-yen is continuing trend. equity futures in singapore, taiwan and malaysia set to extend those declines. plenty more on "bloomberg markets." this is bloomberg. ♪