tv Bloomberg Daybreak Australia Bloomberg September 16, 2018 6:00pm-7:00pm EDT
reports out of washington say china may reject further trade talks in light of new tariffs from president trump. shery: looking at the friday session, it was a mixed picture. we saw the s&p 500 gaining for a fifth consecutive session but wait down by news of -- weighed the trigger on $200 billion of tariffs on chinese imports. we saw the nasdaq pretty flat at 8010 but did see a weekly advance, not to mention the s&p 500 was led higher by energy stocks. look at oil because we saw a third week in advance when it came to wti which is unchanged in early trading. brentolding at 78 -- holding a $78. hurricane florence now downgraded to a tropical depression, not to mention sophie, looking stormy in asia
when it comes to the weather. sophie: we are going to be taking stock of the weather passesyphoon mangkhut through the philippines, hong kong and china. can see we had floating in low-lying areas and buildings with windows blown out. the wind speeds broke the record we saw in 1952 and 1999. t8was t10 on sunday but now and t3 in hong kong which means trading will resume. we are still taking precautions in hong kong. schools will be shut, and flights from the airport will resume. casinos, concede us -- will reopen after shutting down operations for the first time in the history of the island. looking elsewhere, we do have folks in malaysia and japan
enjoying a long weekend. we don't have futures up now. we have a mixed session. looking at the rest of the markets, little on the data docket. checkingaidi, will be reactions to china's home prices. they areapan, although on holiday, we have a big week ahead for traders. you have the policy decision, trade and inflation data do. haidi: malaysia closed as well. we have our excuse live -- exclusive interview coming up at 10:00 a.m., 8:00 in hong kong. let's show you to first word news with ramy inocencio. ramy: senate democrats are calling for this week's vote on brett kavanaugh's confirmation
to be delayed after a woman accused him of sexual assault when they were teenagers. the 51-year-old is a research psychologist and professor in california. the washington post reports a therapy session in which she called the alleged assault attempted rape. theresa may will defend her brexit plans this monday as speculation grows about a potential leadership challenge. in an interview, she will say the checkers plan is the only strategy that delivers brexit without a hard border with ireland. boris johnson told the daily telegraph her plan is a car crash. bossa jamie dimon says he is done with all attacks and blames much ismo for his -- machismo for the claims he is smarter than trump. he has no claims to run for the white house, saying -- he
boasted he could beat the president in an election before quickly backing away from that. fewer than one in five french people approve of emmanuel macron as president. the survey delivered a 60% negative view with 19% positive. top concerns include purchasing power, unemployment and tax relief. his government cut production for 2018 growth while raising forecasts on debt and the deficit. 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 ramy inocencio. this is bloomberg. shery: there is no sign of any easing in the u.s.-china trade tensions. president trump wants to go ahead with tariffs on $200 billion of chinese goods, and the wall street journal reports china may turn this down to restart talks. joining us is bernie kohn.
are we seeing a game of bad cop, good cop when it comes to trump and mnuchin? bernie: you have hit it on the head. the question is are they tired of trump's pressure tactics? have they struck trade deals with mnuchin before, only to have it vetoed before? there are signals in both directions. either way it sets up a week in which officials that were due to come to washington for talks, it may not happen at all or may not produce much. haidi: do we know anything about the timing of when such tariffs would go into effect? bernie: that is our understanding. it has been reported monday, tuesday. we have reported it might be in
the next few days. i had don't know any of that -- i don't know any of that is wrong. there are a number of wheels turning. one is whether the tariffs are at a point where you are putting added cost on things the economy cannot afford. the availability of the products, many other things are in the works in addition to the tensions in china and u.s. talking with each other. haidi: thank you for that, berniecrat own, our managing -- bernie kohn, our managing director. trade issues are most difficult to gauge. australia's head of global markets joins us. do you think we are being too sanguine about this? do the tariffs change the game? >> it does escalate things from where we are.
up, billion to step it almost going to the extent of saying we will match the tariffs to the level of our deficit with china. you look at trade in terms of the overall global picture. it appears as if all the negative news is between the u.s. and china but you have mexico doing a deal, canada hopefully with the united states and europe talking about trade. it can go in a number of ways. the focal point is u.s. and china, which to most of us is more than just trade. economic about an war. the u.s. will use that as much as it can and china is emerging as a leader when it comes to the overall economy. haidi: it is interesting to see this narrative of the president trying to clear off bilateral tussles because he cannot fight
a trade war with everyone. you are talking about basically it is difficult to predict the economic impact. this is how china is looking at the moment which the last chart shows eco-data pointing to essentially resilience but a weakening in the domestic growth policy. it is not hard to gauge the impact across the asian supply chain. if china continues to slow and his battered by tariffs -- is battered by tariffs. toby: we are comfortable with china deleveraging where growth will slow to a moderate level and be consistent. the most difficult element, it is not factored into a forward-looking view on global growth. china being so significant now, and you mentioned through the supply chain, all of the region and the globe -- yes, this escalation has significant impact. my guess is at some point they
will come to the party. there will be some way of arranging that. for escalation to the extent global growth gets displayed is likely. people can be impacted not only through actual economic activity but also sentiment. shery: it seems nobody is pricing it in, especially when you look at profit forecast. this gtv showing you that. earnings continue to rise for the s&p 500. there is stabilizing as opposed to asian stocks that keep falling. our u.s. stocks more vulnerable u.s. stocks -- are more vulnerable given nobody has priced it in? toby: if i was in the u.s., you would be vrabel that everything with u.s. dollar assets -- you look at the valuation and prices.
it is good. the economic data, i guess retail sales were softer than we would have expected, but generally the data has come out and the data over the next course is positive. in that sense, you are hard-pressed to get negative on u.s. assets at the moment. from our perspective, the economy looks strong, the leading indicators look good. the corporate sector is in good shape. it is hard to be too negative. shery: when will we see the downward pressure affecting earnings outlooks? toby: if you are looking at the most forward estimates about a change in the cycle and moved to negative growth in the united states, you are not talking until mid-2019. some are pushing that into the second quarter of 2020. you will not see it. the trajectory for the u.s. economy is still positive.
it is maturing to a late cycle effort. watching it closely, all indicators closely. it all comes down to how they perform over six months. haidi: what is your assumption with inflationary nature on the u.s. and that china begins exporting? toby: very interesting. the impact of tariffs is like a tax. it answer the cost of real product. it needs to be factored in when it comes to inflation. inflation is moderate. the u.s. remained fairly benign despite the fact of average hourly earnings increasing. is inflationon will not get out of control. it comes down to wages. , the consumer, it will have an impact on growth. doesn't impact the underlying inflation. is whereearly the u.s. safety goes to flee.
it is also accept -- very expensive. we would get to em in a little bit. you have got to be steely to get into that trade. where would you -- how will you allocate a portfolio from an opportunistic position? toby: at emerging markets i would look more regional. asia emerging markets get anchored more by china than say central america and africa. if you are looking for a relative em space, go for asia index versus global. generally speaking it is hard to buy.- see em's at a the spread is really wide. if investors want to have a go, and not saying it is the right time, i may look specifically around the asia side versus the global em. shery: given the inflation
outlook, are we in a predictable path for the fed? toby: i think so. powell's testimony post meetings, anytime he spoke has been clear and transparent and how they see rates going forward. we don't see the fed moving off-line at all in the medium-term, short of any shop of course. they are comfortable -- shock of course. i think central banks have learned from the global financial crisis more transparency than less, more direct for rates good for the market and the economy. shery: thank you. stick around. toby lawson is staying with us on daybreak australia. hurricane florence weakens to a tropical depression, but her fury remains. haidi: franklin templeton reckons the u.s. dollar is becoming too hard to predict as economic uncertainties way.
haidi: we are counting down to the opening of trading in sydney. this is monday morning shaping up. we have a bit of a gloomy day in sydney. .1% higher with sydney futures. we have japan quotes, aged a day closedn and malaysia are today. shery: new york stocks also inching -- kind of mixed picture. you are watching daybreak australia of course. we have seen the emerging markets stocks hammered in the last few weeks. the last few sessions rebounded.
toby lawson is still with us. we did see a rebound in emerging-market assets but only after the huge selloff we have seen. does the selloff have a cyber lining -- silver lining that it will limit the pain some kind of correction and the pain from further falls? toby: as an investor, you probably look at the relative value of em and say it looks like good value. look at the underlying fundamentals in emerging markets space, not too bad. obviously it is driven by u.s. dollar and how much debt is denominated in u.s. dollar for these markets and ultimately they have to respond through interest rates to protect currencies. they are still vulnerable in that sense, but for those looking at the absolute price
movements that we have seen, particularly in august with the 2.7% decline in emerging markets, that spread on fundamentals would say best value, but right now with momentum trade going on in u.s. dollar, it is difficult to say, let's get into em now. haidi: analysts -- shery: analysts are split on where the dollar is going. where do you see it going? without putting an absolute number on it because it is difficult to tell with the strength in the u.s. dollar is likely to continue web-based not only on momentum but fundamentals. the u.s. economy is strong compared to the rest of the world. investors are looking to the safest place to put money, particularly if you are concerned with the impacts of trade and what have you. you are likely to see even more. i guess with the central bank of the u.s., starting to withdraw
some of this, the demand u.s. dollar will be increasing at a time when there is less supply. you sort of get this back loop where we see the dollar stronger than it should and that has an effect on em currency where those countries have a lot of debt denominated in u.s. dollars. shery: you get the dollar and everything falls into play with the em space. this is dollar correlation, negative correlation to emerging asset stocks. this is one that very much makes sense. it is still pretty close. even if you remove the trade war issues, you still have policy divergence issue. is that part of the ok, looking at malaysian em because it is related to ongoing stability in the u.s.? toby: the em space is complicated at the best of times.
emna has a specific view of broadly. you can break it down, some are in better shape than others. we know where it relates to u.s. dollar and divergence. you are going to end up regardless of the reality of fundamentals underlying, you would get impact on the em's if we get a sharp move in the u.s. dollar and some sort of -- one or two of the em's having difficulties. that is why as an investor you say, what do i do? i have to look at the situation and focus on the areas where they are anchored towards stronger economies. china ask as a good anchor for some of the em -- acts as a good anchor for some of the em's. haidi: the valuations are so cheap, particularly for hong kong. would you be tempted to get back in?
toby: it is whether china is the largest em in the world. it depends on how you look at it. at the end of the day people watch china closely. the data is consistently one that shows rationing growth and stability. at some point the trade conflict and level of risk, you go, i want to put myself in china women have this messy escalation. fundamentally -- when we have this messy escalation. fundamentally i would get into that space with some degree of confidence on the basis the trade conflict doesn't escalate to the point where it will line up on growth. shery: with chinese markets rebounding, it was interesting to see -- this library showing you the turnover falling. we haven't seen this since 2016. as investors stay on the sidelines and prefer cash, how will this play into the markets? we have had the northern
summer. you are going to have less liquidity, less activity, more likely to be market movements, much more larger than they are in reality because of the lack of volume. we are coming out of northern summer. we have had our winter down here , but essentially speaking, people are getting their heads back into the game. you would expect to look to allocate money into assets over the course of the next couple of months as they get a clear view and have a more dedicated focus on the world economy. i see volumes pick up. main asset allocation will become an important part of decision taking. lawson, managing director and head of global markets at societe generale. if you missed any of our charts, gtv is your function. you can view them and save them
stroud-watts.idi shery: i am shery ahn in new york. a quick check of business flash headlines, tencent and another are teaming up to serve as a few -- service a huge number of chinese investors wishing to diversify away from the mainland. they plan to start taking money soon from retail investors who have existing assets internationally. the product will be a fixed income fund opened to individual investors. haidi: chrysler is evaluating new potential buyers for one of their units, saying an additional -- initial bid from kkr is too low.
that ended the exclusivity of the talks. a former -- final decision is yet to be made. the ceo said they could be possibly preferred to spin it off on the milan stock exchange. shery: south korea has softened newimpact of taxes with a contract. the sanctions throws a russian giant. that could disrupt supply chains for parts critical to the automotive and aerospace industry. the global illumina and this -- aluminum industry has been bracing for turmoil for the october 23 deadline. haidi: widespread flooding caused i florence continues to wreak havoc. the latest from the scene. this is bloomberg. ♪ ♪ xfinity mobile is a new wireless network
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sydney.:30 in this is the future session shaping up. not much of a lead from wall street. a late day rally after earlier sinking on reports president trump has already instructed a progressive attack of tariffs on china despite talks and other reports saying the chinese may reject any association of fresh talks given the potential new tariffs. great deal of trade uncertainty still playing out in markets opening today. we have japanese markets closed today with respect to the age day and malaysian equities not trading either. i am haidi stroud-watts.
shery: i am shery ahn. you are watching daybreak australia. let's get to first word news. there is ramy inocencio. ramy: in the latest u.s.-china trade tension, reports suggest beijing might reject an invitation to start talks. the wall street journal reports president trump's threats to impose $200 billion of tariffs could kill any new negotiations. stephen mnuchin proposed talks at the same time he threatened to ramp up tariffs. weakeningngkhut is after leaving a swath of damage across the philippines, china and macau. 2.5 million people have left their homes in one province while fishing boats have been ordered to return. hong kong schools and universities remained shut, but macau said casinos will open.
meanwhile on the other side of the world, florence has weakened into a tropical depression as it moves over the carolinas. dangerous flash flood conditions and major river flooding expected to continue over a wide area. heavy rain will continue to fall in many places. the effect is expected to be catastrophic with rivers swelling to record levels. barkindo saidmmed demand for oil is still robust to bring stock piles below the five year average. he also told bloomberg about headwinds brought on by unrelated factors over which the energy market has little control. he rejects criticism of the cartel and allies saying oil needs strong management. >> there is no viable alternative on the table. institutionalize and make this cooperation
between ourselves and our good partners from the non-opec in a prominent fashion. the world needs it, the industry needs it. ramy: and in the movies with the latest installment in the predator franchise topped the north american box office for 20th century fox. that is despite poor reviews and controversial rollout. comscore collected an estimated $24 million in the u.s. and canada, ahead of the horror movie the nun and a simple favor. they cut a scene involving an actor who is a registered sex offender after olivia munn complained. 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 ramy inocencio. this is bloomberg. shery: we go to sophie kamaruddin with a check of the markets.
sophie: after last week's attempted rebound, we could be setting up for a mixed session this monday with stocks in wellington set for the first day of losses. the kospi is lower after the summit in pyongyang. in australia we could see optimism despite resurgent trade was. -- woes. settingchinese mainland to resume. the storm was lowered to three t3 this morning. -- lowered to t3 this morning. futures slumped ahead of today's session. this is waiting for reaction to china's home prices and anticipates trump pulling the trigger on the next round of tariffs, which is causing china to consider skipping the offer of trade talks for later this month. folks in malaysia and japan are
enjoying a long weekend with markets closed. japan comes back online and has a big week ahead of them with a boj policy decision on wednesday and trade inflation data. and a new election set for this abe, it should see shinzo when another three-year term. melissa day was on september 16. -- malaysia day was on september 16. haidi: trading in asia this monday morning, adam haigh is here with us. it was a hard earned all of days of gains. can it be sustained? adam: the setup is clearly quite tricky, especially given the latest flareup in the u.s.-china situation. that settles on a negative tone this week. given the escalation in trade tensions, people are trying to work out where are the trade opportunities and what is the
strategy? one thing we are looking at is how the yuan denominated in hong kong, health stocks have underperformed relative to u.s.-denominated stocks. in and of itself that is not particularly a surprise but the extent of it, underperformance and outperformance has surprised folks at citigroup. this shows the disparity between winners and losers. ,ou have seen opec, -- sinopec technologies, those kind of companies that have performed very badly amongst all that is happening with trade woes, the slowdown in the chinese economy and how it is being managed your this kind of pattern will continue to play out. you should continue to not favor the yuan denominated companies come at generating most of their money in the chinese currency.
that is one way people are looking out for the strategy. it is a pretty bearish week for the equities. japan is off-line but mainland china and hong kong will be ok. shery: a different story with u.s. equities. a gtv showing you that markets have been gaining ground as opposed to world equities that have been underperforming u.s. stocks. we are still seeing fresh calls for new highs. how high can stocks go in the u.s.? adam: we have talked a number of times on this show about the disparity between america and the rest of the world, the america first trade that is favoring this push to u.s. assets. u.s. equities especially. the bull market has been relying on things they have relied on for the past few years which is strong earnings growth, an economy running really well, inflation not running away and
not being too much of a problem for the fed, kind of perfect scenario and a sweet spot for equities. have fort forecast we the nudging higher of the s&p 500 was the folks at ever court. they are happy with the fundamental situation, said there is no reason talks can't push on further. we heard from robert schiller. he is talking about the potential for stocks in the u.s. to move higher before we see any declines. for him it sensors around trump and what he is -- centers around trump and what he is doing, cutting taxes and fostering a corporate friendly environment which is pushing more people into equities, even at valuations that, while they look echo -- elevated, can not get union the tech boom heady days of the 2000. 2000s.
we could see that grow somewhat more. haigh.market editor adam don't forget to check out our gtv library for the charts we showed you, gtv on the bloomberg. haidi: a major poultry and meat company is starting to resume operations in the north carolina area as florence starts to subside. the hurricane no longer has hurricane force winds, but it has left communities underwater. taylor is in raleigh. florence has been downgraded to a tropical storm, depression, but we have seen several people dead, one million people without power. how bad is the situation? taylor: you just to the rain for us -- cued the rain for us. we are in raleigh because duke
energy headquarters even though -- headquarters are here. it is an hour inland on the coast but duke energy supplies most of the power to the region and the carolinas. one million people are without power. we spoke with david fountain, the north carolina president of duke energy. he talked about how 45% are without power. they have restored 800,000 of those very there is still 400,000 that remain without power. listen to what he had to say. >> over 48 hours since hurricane florence made landfall here, and we had 1.3 million who lost power. that is out of 4 million homes and businesses we serve in north and south carolina. is we have news restored power already to over 800-7000 customers. -- 807,000 customers.
taylor: to put things in perspective for those not million with the region, north carolina is positioned with three rivers that convert off of the coast. flooding in particular has presented a big challenge. david fountain, who runs that north carolina segment of duke energy, said they had a lot of problems because of the flood, rivers, and flooding is expected to continue for two weeks or so. that is more of a challenge more so than the wind or power outages as well. shery: what are businesses telling you about the possibility to open up shop and get up and running? taylor: it is sunday night here, so i said come one day -- monday morning, what is the situation? they are prioritizing hospitals and schools and make sure the downtown and major businesses
can be up and running. so far, so good. headquarters, in charlotte, that is two hours from here. charlotte is getting flood watch warnings, but in raleigh he said they are prioritizing schools and businesses to make sure they can continue business as usual tomorrow morning. heard another company owned by duke energy was breached. what has been the response? taylor: we spoke with david and he did clarify it was nonhazardous. 2000 cubic feet that was built. he is confident the public and the epa will find -- listen to what he said about that. >> it is nonhazardous. we believe most of the material was contained on-site. we certainly have confidence publics no threat to the
safety at this time. our team is managing that. once the floodwaters receded, we can perform minor repairs. we are very confident in the safety of the public and the environment. taylor: as you can hear again, all about the floodwaters. we will keep you posted. thank you so much for that, taylor riggs, in north carolina covering the aftermath of florence. uncertainty on the dollars future driving the future of editable trade. this is bloomberg. ♪ ♪
according the u.s. dollar across all currency trade, because it is getting too hard to predict. the california-based munging it -- money manager is [indiscernible] the dollar direction, although it looks like a one-way bet at the moment. >> they are basically neutral on the dollar. they underscored a lot of divided views out there. what they are choosing to do is example short the philippine peso against the dollar. we know it has been one of the worst-performing asian emerging-market currencies, has been caught up in the selloff. what they are also doing is playing the australian dollar against the new zealand dollar. the australian dollar has been under pressure because of domestic factors. there is no chance of an rba interest rate cut anytime soon. franklin templeton believes the
new zealand dollar had been by thepummeled tightening bias changed to an easing bias and because of consumer confidence being underappreciated in new zealand. they believe the hurdles for new zealand rate, it is pretty high. shery: when it comes to emerging-market selloff, are we near the bottom yet? [no audio] haidi: are we near the bottom yet is what she was asking. andreea: new the bottom but not out of the woods yet. -- near the bottom but not out of the woods yet. the selloff has been pretty orderly. you haven't had a huge flight to safety. u.s. treasury yields as we have seen the last week over 3%. shery: thank you very across
asset editor andrea poppa. papuc.reea must have you now. give us your view on emerging have seen. what you it seems franklin templeton says we are nearing the bottom. >> obviously a lot of uncertainty and volatility in the markets, particularly as it concerns the trade negotiation, so we will have to see what happens from here. there is good opportunities as well. fed's how much does the outlook play into that and what will it take for the fed to change course or continue going steady? fed appears to be well telik off -- well telegraphed.
asould think that as long the data continues to reinforce a good price policy in the united states, unemployment is low, wage growth is starting to come through, no need to change course. haidi: i want to throw up a quick chart because you guys are on the dollar alone. but you need to get the dollar right and everything goes from there. this is the correlation chart, looking at extreme levels of em, but you can extrapolate to look at other asset classes. what is your base case assumption? if you remove the trade war, it has got to be dollar positive at a one-way bet. if the federal reserve is continuing to raise interest rates and contrast to
an economy like australia, you will see real rate diversions continue to increase. you have the growth and economic fundamentals in the united states very strong, so that argues for continued dollar strength. by implication, currencies like the australian dollar could continue to see downside pressure. haidi: how closely are you watching the yuan? andrew: we are watching it fairly closely. there has been some depreciation year to date, stabilized more recently which is encouraging. is encouraging. we are watching it fairly closely to see if it has another move lower from here. so far there has been good stability. that is encouraging. shery: we have seen the 10 year yield pop higher than 3% for five times already.
and then it pulled back again. we could see higher than 3% again this week. how does that affect the assets you are watching? andrew: i think everyone is watching the 10 year fairly closely. had several looks at the 3% area, closed just last week below. we are watching bad. it is important to remember we are in a world where interest rates generally across emerging markets are very low. the united states looks like a regional -- reasonable value to many investors. you have those forces in play. on the other hand you have treasury supply that is coming down the pipes with fiscal stimulus now being transmitted through the unit is dates -- the united states economy.
you have factors that argue for high rates, strong fundamentals, improvedave also got risk appetite potentially if we can get through this trade hiccup if you would like. you could see higher yields, but there are forces in the other direction given the landscape of the united states. haidi: what about the political landscape? we see gridlock because of democrats taking over the house, for example? i think we will have to wait and see firstly what happened with the elections and then how the markets interpret this. there are many moving parts. i don't really have a strong view on the direction it takes, but we will have to see the political process. haidi: everybody is watching that. frank intent him and -- franklin investor of your you
stroud-wattsaidi in sydney. shery: i am shery ahn in new york. a look at business flash headlines. indonesian ride-hailing startup go jack is in talks to raise $2 billion to fuel and accelerate expansion overseas. jakarta-based company go jack plans to close a funding realm in the next few weeks. they are building up their arsenal to expand to southeast asia and take on the singapore-based rival. said: china renaissance is to have attracted the state-controlled people's
insurance company of china through its ipo. the hedge call call to management are planning to buy in. 377 millionseeking u.s. dollars in the hong kong offering, which is several times what was prescribed. alipay is a cornerstone investor. shery: china's home pays -- prices climbed at the fastest pace in two years, adding to the likelihood of official timing of property. new home raised 2%. that is according to consolation from 70 cities. -- calculation from 70 cities. haidi: you are watching developers in trading in hong kong as well as china. trading in new zealand is underway this monday. we are a few moments of from the open in australia as well.
we are looking more positive, building on the .6% gain with sydney trading on friday. markets are down in the doldrums, been down 10 out of 12 trading sessions, pessimistic with trading in new zealand. the kiwi seeing further downside but a strong argument is the currency is oversold. the aussie dollar 71.50, had its best week in january last week that the turnaround, the worst for these tariffs coming down between washington and beijing, adding pessimism when it comes to the aussie dollar. the choice of whipping boy when it comes to the straight story. -- trade story. shery: on friday we saw a mixed picture with new york stocks. have an we will exclusive interview with sergio ermotti. we will ask cam about the