tv Bloomberg Daybreak Asia Bloomberg October 9, 2018 7:00pm-9:00pm EDT
australian markets have just opened to trade. shery: good evening from bloomberg's global headquarters in new york. inhie: i'm sophie kamaruddin kuala lumpur. welcome to "daybreak: asia." our top story this wednesday, asia-pacific's stocks off to a -- tencent is one to watch in hong kong, $220 billion, more than
any other company in the world. finance chiefs and central bankers gathering in bali as clouds are gathering over the global economy. we are live at the imf-world bank meetings. shery: a quick check of how markets closed in the u.s.. underw and s&p 500 pressure, the dow reversing yesterday's gains in the s&p 500 finishing at the lowest level in a month. material stocks were pressured. ppg warning that its profit forecast will fall short. the nasdaq ended flat. a little bit of a rebound on tech stocks but not enough to lift the broader market. as heidi mentioned, yields also retreating. those growth forecasts from the imf and trade tensions not helping. let's see how things are treated -- are shaping up in asia. a 7 -- sophie: a seven-day decline in asia could
have investors considering -- take tencent's's slump. today, we are setting up for a mixed session. in sydney, we are seeing the asx 200 notch slightly higher after a two-day decline. bgh group making an offer to buy the rest of navitas at a premium. court machine orders due out later this morning and markets are back online later today. the kospi playing catch-up. kamaruddin,e checking on the markets. it's getting the first word news with jessica summers. jessica: president trump has renewed his criticism of the fed , saying policymakers are moving too fast with rate hikes. he dismissed concerns about inflation and repeated he likes low rates. fed chairman jay powell remains
on course for tightening in the near future. people are expecting another hike in december. president trump greeted septembers increase by saying he wasn't happy. a major u.s. telco is said to have found manipulating hardware from supermicro in its network in august, fresh evidence of alleged chinese tampering. evidence was provided after a bloomberg businessweek report said chinese spies planted malicious chips in supermicro server motherboards. that the chips were implanted. the head of germany's industrial federation is warning that brexit without a deal would be a disaster for both britain and the european union. he says negotiators should focus on finding a compromise as soon as possible. a deal needs to be agreed within weeks if the european and british parliament's are going
to have time to approve it before the split. >> europe must prevent a worst-case scenario, a separation of the united kingdom from the european union without clarification is still possible. situationworrying ahead of the possible summit. this would be a disaster if it happened on march 29. about winds gusting at 129 miles per hour in -- and what is described as a life-threatening sea surge. gulf oil production has been cut by 40%. hurricane florence hit north carolina last month, killing at least 39 people and causing about $45 billion in damage. a top u.s. auto commentator says the world is a long way from seeing self driving vehicles and
robo-taxis on the street. he's the chairman of the automobile dealers association. he says there is enough data to prove one way or another whether autonomous cars are safer. speaking in detroit, he said, "we've reached peak absurdity on the subject." global news, 24 hours a day, on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 100 countries. is jessica summers, this bloomberg. shery: let's get started with one of the most shorted stocks in the u.s., tax law. a new fund is betting on a -- in the u.s., tesla. a new fund is betting on a drop in share price. this chart on the bloomberg library showing the short interest is hovering around 26% of free float right there. the fund is not the only one
trying to short tesla. how much conviction do they have? >> this is what you would call a crowded trade, the shorts against tesla. on the part of fahmi quadir is on the lower end. shorts based on the conviction they have. they do say there are real problems with the balance sheet. they point out, accounts payable is actually in excess of the amount of cash the company has. , as she sayspany in our story here, a company that is having trouble paying its bills to put it bluntly. she also made the bet ininst valeant at its peak
2015. craig: that was before it was about to crash. two companies. it is reminiscent of last week when we heard david einhorn betting against lehman brothers. he said a lot of the behavior on the part of tesla in that time is reminiscent of lehman at that time. , ie, you have a company that think there are some worries about tesla's accounting. use of the chief investment officer leave recently. to have another company come out and talk about the books in a negative way is something that has a chance of drawing elon musk's attention. >> we know that elon musk hasn't exactly been contrite in recent days, but when it comes to tesla 's prospects, is basically
think elon musk is confident in that, he thinks he's going to be able to generate the cash that he needs for tesla to be sustainable going forward and that he can answer the problems about the company's finances. haidi: and prove all his detractors wrong, no doubt. thank you for the latest addition to that very crowded tesla short. indonesia has a message for the fed and other global policymakers gathering in bali this week. now more than ever, they must be mindful of emerging economies. kathleen hays is in bali, covering the annual imf-world bank meeting. tell us more about the conversation you had with the indonesian finance minister. she sat down with us yesterday afternoon and echoed there are twot
very mindful that there are spillover effects of their policy that is really real. having the meeting in indonesia, in bali, i hope chairman powell, i hopejapan, europeans, they will do the right thing and we have to be very vigilant with the global economy. kathleen: in addition to five rate hikes since may, they have stayed in a preemptive rate hike stance. noting that she had her colleagues are mindful that credit costs and borrowing costs arising, and it makes their navigating a little bit tougher. indrawati was pretty outspoken about the damage that the u.s. and china are inflicting as the trade war
escalates. i asked her, what do you think the impact is on the global economy and for indonesia? for indonesia, she said they are fortunate because they go into economy. a strong she says the impact of the global trade war on confidence global governance, the global trade mechanisms, that can be huge. she said the u.s. and china have to realize it is not just about them, it is about many other countries in the rest of the world. ms. indrawati: the dominant discussion now is focused on the u.s. and china. the first largest and second-largest economy dominating many of the policy discussions within the g20, the imf. we will be able
to recognize that this is not only a matter of two countries, this is a matter of hundred 89 countries. -- 189 countries. kathleen: i asked if there was any chance that leaders from the u.s. and china sit down at these talks and find some common ground? she said it was just about economics, maybe so. when you go home, you face the politicians, politics, and that is when it gets really tough. haidi: you will be attending a symposium. what's on the agenda? kathleen: john williams, president of the new york fed, spoke to bloomberg last weekend made it clear that more gradual rate hikes is what he is in favor of. moving toward normal, exactly what emerging market
policymakers are concerned about. i will be speaking later with the central bank of south africa , also the head of the banco de mexico. a very full agenda. said trade,wati emerging markets selloff is going to be front and center in all of the discussions this week. starbucks has a new investor. later in the show, we will ask why bill ackman is betting on coffee. up next, president trump speaks his mind on the fed again and says the fed is moving too fast. this is bloomberg. ♪
shery: president trump has renewed criticism of the federal reserve, saying he's not happy with rate hikes and doesn't think the current rate of inflation worries a higher borrowing costs. let's head to tokyo and discuss with steven oh from pine ridge investments. it seems that president trump can't help himself from talking about the fed. what is your take on his stance on monetary policy? steven: virtually all politicians would prefer and accommodative policy. it is not a surprise to hear such comments, but it must be separated from central banks as they look at their dual mandate overall. when you look at what economic data looks at, peaking economic growth, very low unemployment,
it is correct that inflation is not really picked up to any meaningful level to warrant fears for the fed. the fed is managing to manage future concerns rather than necessarily what they are seeing today overall. their gradual pace so far, we believe, has been warranted today. we looker concern, as forward, will growth start to decline and, therefore, will the fed start to pull back on their ?ate hikes going forward gtv chart on the bloomberg illustrating that. index,uld be the high-yield securities. $900 millionabout last week. we haven't seen such a move since president trump's election in 2016. where do you find shelter in
such an environment? steven: we are in an environment where shelter is hard to find relative to historical areas. typically, shelter represents tong into government bonds protect against macro shocks overall. that they are elevated today at both ends of , the credit arena with both investment grade and high-yield, which really doesn't have the valuation cushion. at the same time, concerns around interest-rate volatility is really picking up. today, a safe haven is not --essarily going into areas reserving capital, they would be cash substitutes for short maturity bonds soar assets where you are really preserving capital in a cash-like manner.
given how spread thin some parts of the market are, are you saying, if we see escalation in the trade war, even more of a global and regional downturn, there will be very little buffer space? steven: that is right. right now, when you look at credit spreads in the u.s., it doesn't reflect the downside risks of a trade war overall. byle spreads are buoyed strong fundamentals and warranted because you do have ,trong warnings growth outlooks the problem is the valuations fully reflect that. anything including the negative impact of a trade escalation, there simply isn't a cushion to absorb much of that overall right now. what does the downside we
are seeing -- are we act an inflection point? i think it is a little too early to say we are at an inflection point. when you peel back the onion and look at what is causing that volatility, it really has been very targeted. certain specific countries, economies really are suffering under the current environment now. part of the emerging markets has stable. the emerging calm, there is still the risk of a contagion effect. while that is not our base case scenario, i think caution is still in order. at the same time, valuations
within some of the asian arenas, have become more attractive to six months ago. jdb yields30 year are within striking distance. insaw the outflow investments and fixed income assets. could we see this reverse and what impact could this have if we continue to see rising yields in japan? the rising yields in japan really could have a negative impact on the u.s. in particular because of the negativity of the global demand for government bonds overall. what we are expecting to play out over the next several years, as the boj starts their very gradual slow path toward normalization of their policies -- by normalization, we think it will be a very gradual resetting -- at some point, should japanese bond yields rise to a
level that makes it more attractive for japanese assets, weis-a-vis could see an environment by which demand on the margin for government bonds in the u.s. pullback right when the federal budget deficit would resuscitate a greater supply of issuance in a few years time. at the beginning of the year, we were talking about what happens when a 10 year yield goes closer to 3.5%. what is your view on how the market reacts? is that a sort of milestone level we are looking at? one could argue there are technical thresholds that could push yields up to our net 2.5%, 3% level. yields,, at current u.s. treasuries are trading .loser to the top of our range while we could see shorter in the shortields
term represent value for us and we believe our base case, which is in contrast to a lot of other strategies and firms, is that we are likely to trend down closer to 3% within the next six months. much, thank you very steven: -- steven oh. today's edition of daybreak, go your terminal. more on the chinese hardware hackings we have been reporting on. you can customize your settings to just get news on industries and asset classes you care about. this is bloomberg. ♪
check of the latest headlines. a billionaire is said to be in bringwith daimler to ridesharing services into china. they are now discussing a 50-50 venture to take on the chinese market leader. underwriter says the capital markets are finally shaking off the lull after the surprise election win five months ago. the revival of activity is said to be especially noticeable in treasury markets. put profits this year and turning around the bank shares. >> there has been more optimism in the longer term. it has been very quiet, i must admit. especially in the month of may, june, and july. we have seen some pickup in august and september, the last two months we have seen more
haidi: market in sydney trading for about 30 minutes. up 0.25%. uninspired, aussie stocks have wiped out gains for the year, pretty close to a four-month low. haidi: 7:30 p.m. in new york, where markets closed down. s&p 500 now at the lowest in a month. we have seen some bargain-hunting in the tech sector, but really not enough to pull the benchmark higher. haidi: you are watching "daybreak: asia." let's get you the first word news with jessica summers.
jessica: indonesia has a blunt message for both financial chiefs as they prepare to meet in bali, saying they must be more mindful of spillover effects on the emerging economies. indonesia's rupiah has weakened to 1998 lows. minister indrawati told bloomberg indonesia is being punished by doing the right thing in reforming its economy. >> we hope in the bali environment, that every policymaker from the u.s., euro, japan, emerging market countries, will have more activity to agree and restore confidence in the market and global economy and have the common corporation -- co oporato -- cooperation. the benchmark soft measure snapped six days of losses, while dollar-denominated
declinedurning in 2027 the most since late july, seen as a response to the imf's call for weaker exchange rates. report says banks in hong kong are cutting property valuations as the housing market weakens. that threatens to trigger a downward spiral in prices. it says it is a self-fulfilling prophecy. the hong kong chief executive announcing measures next wednesday, countering the crisis in a city that is the least affordable in the world. luxury leader lvmh confirmed china's demand for high-end goods remained strong. perfume handbags and extended in the fourth quarter.
yuan,ns over the volatile escalating trade war, and speculation among a customs crackdown on luxury imports. global news 24 hours a day on air and on tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: malaysia is devising plans on how best to whether the rising trade tensions between two of its biggest partners, the u.s. an chinad. s trade minister spoke with bloomberg in kuala lumpur. >> it is happening everywhere, not only isolated malaysia. most of us are trying to find ways to mitigate this. one of the mitigation is getting our infrastructure ready for the next wave. seenext wave to me, and i
this from what is happening all over the world, where there may be diversions into our particular region. when they come in, we have to make sure they are first, welcome. secondly, that the infrastructure we have can accommodate when they are burning into malaysia. -- bringing into malaysia. there are policies that have been formulated to make sure we can counter these impacts we already see happening in our region. whatu flesh out more policies are being put in place to minimize this impact? >> we believe malaysia is open trade, but we want fair trade at the same time. incentives,e some not necessarily fiscal only, but business tose of
come into malaysia. at the same time, they are diverting trade into our nation. >> other southeast economies are looking to benefit from the affect of the trade wars, opening centers as the way to mitigate the impact. how can malaysia compete with incentives? them at the plenary ahead we should, never take advantage of anyone's problem. the trade war is a problem between two nations. we must never take advantage of it. but whatever comes out of it, we must be ready to accept it. where people divert trade to malaysia or other regions. everyone is getting ready for this spinoff, or possible trade
diversion. we for our part in malaysia are doing something more than most. while they are probably creating policies, making it easier for other divergences coming to this region, malaysia is a wonderful place for all. we've got great people, smart who export friends all over the world can tell friends the kind of wonderful national market you can here. and we new policies, will act upon their request. haidi: we have breaking news on softbank. the wall street journal reporting softbank is in talks to take a majority stake in wework, the office cochairing company. we are hearing investment in wework could total $15 billion
to $20 million. the wall street journal saying softbank is in talks with wework on a majority stake. we are now hearing from the wall street journal they could get into the co-working office space with wework, and they are getting around $15 billion to $20 billion. the workspace sharing company raised about $1 billion already from softbank in august, so this partnership continuing. haidi: very much so. that when billion dollars news broke recently. it looks like, according to this wall street journal story, that softbank is going all in on we work. sophie is with us in kuala lumpur. sophie: kicking off with sydni shares. 200r a two-day decline, asx
pushing higher on the back of iron ores advanced and 10 year yields being ahead of an auction of 2030 bands. now because shares -- this after receiving an unsolicited $1.4 billion bid from a group that represents a 26 day premium to tuesday's close. closer toen they move 113. creative markets today looking at a muted start. kiwi shares could clock an eighth day of losses, set for 2018.rst run since halt: we saw tech stocks their three-day selloff. yields on 10 year bonds retreated, while the dollar
dressed lower. su: it certainly looks like we were seeing a strong rebound, then it ended almost unchanged with the mixed market. nasdaq ekeing out a gain. you had the yields coming in from the seven-year high. s&p 500 materials index has been the worst performer all year. it got worse in this latest session, down almost 3.5%. let's go on to the big movers. you have on the top what is called the chinese telsa one of the. it was revealed one of tesla's biggest investors bought a share in the company. ppg, theilliams and rose.tryint and
ppg taking off after hours when it was revealed a millionaire and his fund management has a stake in the company and is said to be a very engaged investor. looking at some of the other big movers of the day, you've got zynga. there is apparent interest from one of the game makers. that stock shot up. ebay also jumping up. an activist said to be taking a big stake, pushing the stock higher. haidi: you mentioned 10 year yields have retreated. the view is volatility in bond markets will continue. su: gtv is where you can find our library of charts. one is called u.s. yield rates breakthrough.
we have seen a rise in the last three days. there are some saying this could be a new range for the 10 year, and that more volatilities are coming forward. the 10 year yield moves ahead of the trend. the largest since april. now that we are back, many say it is buckle your seat belt time for bonds. more volatility likely in store. shery: in commodities, oil climbing is part of what we saw with hurricane michael. a call calling opec to boost output. su: hurricane michael is hitting the florida coast, but because the trajectory is still very wide, a lot of the gulf production had to shut down. 40% of output right now shut down. whether or not the hurricane is indirect hit, taking the production off-line will take
down production, boosting prices. let's look at how the energy futures moved on the day. 75 in these to regular session. note also you have gasoline down, down much further on the regular session as president trump talks about having reserves of ethanol to bring the price of gasoline down. underscoring what president venezuela,about moving a lot of oil from the market. let's take a look at how some of the metals performed. imf caught a bid when the gave it a shot in the arm to take down its estimates for global growth. the first time it has done the in many years.
haidi: this is "daybreak: asia." shery: investor activism is giving starbucks shares a caffeine rush. bill ackman announced a major stake in the global coffee chain at a conference in new york. ramy inocencio has the details. sees coffee as aspirational. it is still pretty expensive compared to what people make in the country. he will go to starbucks and see people sitting there for hours.
not only that, starbucks itself says they open a new store every 15 hours. compare that with what is happening with slowing same-store sales in the united states. this is a recipe, i guess pun intended, for a good ca caffeine fix. 15 million shares. that is what that buys. this also confirms some hints, s ackman told us in august that they were looking at an $8 million stake at an undisclosed company at that time. starbucks is be in public. -- being polite. they say they view the active engaged dialogue they have with shareholders as critical to their strategic approach. we can show they are looking forward to maintaining a productive dialogue with mr.
ackman, as they say with all of their shareholders. looking at the share price, when the news actually hit earlier this afternoon, the share price pops very quickly almost to $60 a share. still ending in the green, up by about 2%. that is still at its highest in the past 4.5 months. haidi: bill ackman's track record has been a bit patchy of late. are we starting to see a turnaround? ramy: we are. through the third quarter this year, pershing square has returned under 16% to its shareholders. compare that to what has been happening on the s&p, which is just under 8%, you can see where the money gains are clearly happening. let me walk you through the biggest changes in position for pershing square. you can see the ones over this
year. united technologies. bill ackman wants to break up the company, a huge advocate for that. he has a new position lowes as he tries to improve the company's performance. also they are taking money off the table, a soul position with nike. about $100vocacy, million. there is a sale for part of a stake in chipotle. 7.4% is the stake they now have. looking ahead, it seems bill ackman is on track to make his investors quite happy. haidi: let's take a look at some of the stories trending across the bloomberg universe. goldman lost another senior executive. terminal subscribers are reading all about the departure of a top sifixed income salesman. more on the china chip hack
shery: breaking news on the bloomberg. japan's machine orders beating estimates for august, core orders raising month on month. the estimate was for a decline of 3.9%. it is still at a slower pace than in july, when it jumped 11%, but still huge month-to-month, gaining 6.8% instead of falling. core machines year on year jumped instead of just 1.8% as estimated. a little bit slower than in july, which rose 13.1%.
suffice to say a huge beat. core machine orders are the lead indicator for capital expenditures. this is good for investments out caveat -- ifgh a trade tensions worsened, you could see appetite in new facilities. machine orders will pick up in the fourth quarter as well. haidi: a show of resilience at the very least, given the trade and investment uncertainties in asian. let's get your latest business flash headlines. ford takes a pounding as investors criticize its piecemeal appeal to cost cuts. ford says it is moving its ad business away from a long time partner to save $150 million a year. that is still a long way from the $11 billion the restructuring is set to cost.
ford is down about 30% this year. shery: uber setting to investors on a $1.5 billion junk-bond offering. we are told the right hail -- dealsail may offer eight -- earlier this year the company sold bonds in a rare south led financing deal. andi: lyft set to underwrite ipo last year. it is targeting a sale in march or april. rival uber has been aiming to lyft next year. lyft being the first could help, because underwriting one deal annot deal with direct competitor. shery: elon musk has taken interest in its chinese rival,
with $515 million as of monday's close. it soared on the news it raised more than $1 billion in a new york ipo last month, wrapping up reduction of its first commercial fcar. haidi: google has new pixel phones, a tablet computer, and latest gadgets aimed at big tex rivals. -- big tech rivals. >> has been an eventful couple days for google. on monday wall street reported what it found a software bug in one of its services in march that could have potentially exposed the data of 500,000 people, but decided not to release that information for fear of being lumped in with facebook. the company found no proof the
data was used for bad purposes, that it wasn't necessary for them to put it out. on monday, their hand was forced. that made it all the more awkward that on tuesday the company had a large hardware isn't that had been planned -- event that had been planned months in advance to compete directly with the iphone. the company announced a new template with a keyboard, also what it calls a home hub, like the amazon alexa, but with a seven inch screen that can show you the weather and youtube videos instead of just talking and answering your question. this is a play to compete directly with amazon. google's pitch is it wants you to put a device like this in every one of the rooms in your home. but with security questions hanging over the company, consumers have to wonder if that is something they want to do or
not. shery: defend the sydney opera house. that was the call of protesters as the building was transformed into a giant advertising billboard for a horse race. hundreds of protesters tried to shield the images with lights, and more than jupiter 60,000 have signed -- 260,000 have signed a petition against the promotion. haidi: anti-gambling campaigners say the opera house ad is another sign the industry is intruding into everyday life. i am not sure if you can blame them. the prize money is $9 million. i think the prime minister was waiting in -- was weighing in. shery: she is pretty agnostic about the whole thing, saying this is the best big board sydney has, why don't we benefit from it?
there is another adjusting angle to the story, which has to do with the influence of conservative media in this country. the whole thing came about after this extraordinary interview with alan jones, who berated the ceo of the opera house. that went to the state government, who said no, you will be going ahead. they essentially ordered the sydney opera house to show these ads for this lucrative horse race. the debate rages on in australia. we did not get a great deal of an inspired lead from wall street. tech shares snapped a three-day decline. a downside when it comes to trading in sydney and new zealand. nikkei futures seeing volatility. seoul rejoining trade after yesterday's public holiday. a reminder markets in taiwan are
haidi: a very good morning. shery: good evening from bloomberg's global headquarters in new york. sophie: welcome to "daybreak: asia." haidi: our top stories this wednesday -- asia-pacific stocks set for a volatile session on wall street. equities hoping to snap a seven-day losing streak. nikki haley to step down as u.s. ambassador, but has no intention of making a white house run for 2020. >> central bankers are in bali
as clouds gather over the economy. we are live at the imf meeting. growth cut its global forecast down from 3.9%. we have glowing trade tensions. the s&p 500 at the lowest level in a month. let's see how this will be felt in asia. here is sophie kamaruddin. sophie: that wall of worry continues to mount. valuations may be looking more attractive. take for example the record slump in tencent. we have some news lines to chew on today. machine core on the upside in japan, along with a firmer yen on a four-day gain. we are watching moves on softbank, set to take a majority stake in weworks. tech shares may play catch-up. sydney stocks are fluctuating
with utilities and financials dragging. navitas is soaring on a buyout offer. kiwi shares could clock in an eighth day of losses. looking like a mixed start of the session. haidi: let's get you the first word news with jessica summers. hasica: president trump renewed his criticism of the fed, saying policymakers were moving too fast with a rate hike. he dismissed concerns about inflation, repeated his liking for low rates. jay powell remains on course for gradual tightening, with markets expecting another hike in december. president trump greeted december's increase by saying he wasn't happy. a major u.s. telco is said to have found to have manipulated hardware and its network in august. that is fresh evidence of alleged chinese tempering in key components bound for america.
a security expert provided evidence after a bloomberg business report said chinese spies planted malicious chips in supermicro server motherboards. denies chips were implanted. warning brexit without a deal would be a disaster for both britain and the european union. head of the federation of german industries says negotiators should focus on finding a compromise as soon as possible. a deal needs to be a great within weeks if the european and british parliament's are to have time to improve it before the split. >> europe must prevent a worst-case scenario. a separation of the united kingdom from the european union without an agreement on exit and transition and without clarification of the future relations is still possible. this is a worrying situation a few days ahead of the crucial eu
summit. it would be a disaster if this happened march 29. shery: hurricane marco intensifying -- michael intensifying as it barrels towards florida in what is described as "life-threatening" sea surge. meanwhile gulf oil production has been cut 30%. hurricane florence hit north carolina last month, killing at least 39 and causing at least $45 billion of damage. global news 24 hours a day on air and on tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. imf's decision to cut its global growth forecast for the first time in two years was not enough, warning that risk of financial conditions could send tremors through the global economy.
bloomberg's policy and economic editor kathleen hays is covering the meeting of the imf and world bank. theis here with latest on global financial stability report. is quite a red flag being raised by the international monetary fund, noting that asset valuations are relatively high in some markets, particularly in the u.s. the imf notes in this global financial stability report that in the u.s., stockmarket valuations have exceeded levels they reached before the global financial crisis. that is an interesting active to give us. this report was put out by the imf capital markets department. saying it looks like investors have grown overly confident, maybe even complacent. of course it is not only the
united states, but after a long bull market in stocks, much of it predicated on fiscal stimulus tax cuts in the u.s., which something is a sugar high. trump and his team thinks this will continue. in the midst of trade hikes, that is why the imf is concerned. that is why they downgraded their economic outlook yesterday. let's put this into perspective. this morning comes on the 10th anniversary of the collapse of lehman brothers. it seems like it can't be a coincidence they are focusing on this aspect of what they see -- and maybe not in the short-term -- but in the more medium-term, something that could come home to roost, and investors may not be preparing for this. shery: you spoke with indonesia's finance minister. she is concerned about the fed and others not being mindful about the spillover effects from
their policy decisions. surell as of course, i'm you talked about the trade war. kathleen: we did. i love what she said, it is not just the u.s. and china, think about the other nations affected by this. think of some clearer path. when it comes to the federal reserve and rate hikes, she says you have to focus on the domestic economy first. but more and more global central banks have to be mindful of what these rate hikes can mean for the rest of the world as well. here is what she said to me yesterday afternoon when i sat down with her in bali. >> the u.s. policy needs to be mindful that the spillover affect of their policy affects many other countries. having the meeting and bali -- hope chairmani, i others will be,
doing the right thing. yet we have to be particular with the global environment changing very fast. shery: let's see what indrawati versus what the imf is saying, a global tightening of financial conditions. that is not central bank rate hikes, it is the market reaction to these rate hikes. we have seen the bond yields in the u.s. pushing up sharply. if the stock market declines around the world, you can see global seeds of a financial condition, a tightening of that, those seeds could be sowing now. that is the concern the imf and others are seeking.
haidi: what else will be discussed during the course of the meetings? kathleen: indrawati said everyone will be talking about those two things -- trade war, emerging market selloff. the conrad hilton bears many venues around bali. this will be a joint forum sponsored by the new york fed. centralonesia, that bank chief speaking as well. they are looking at many things. john williams is speaking about normalizing u.s. policy. i am sure he will get a lot of response from the emerging central bankers in the audience. in the afternoon, there will be an emerging markets symposium and the response to them. this has been on the back burner for a while. federal reserve commissioners tend to downplay, you have to do
your own domestic economy, and maybe if the rest of the world has problems, it is their own internal problems. it will be harder for u.s. policymakers to come to terms in , more cautious, complete way andake note of their steps what it means for emerging-market nations and others. shery: kathleen hays in bali at the imf world bank meetings. still ahead, head of geopolitical research joins us to talk about the future of washington foreign-policy amid the trade war, and the latest recognition of its u.n. envoy. haidi: bnp paribas gives us their outlook next. this is bloomberg. ♪
haidi: the recent selloff in u.s. treasuries has shaken financial markets from stocks to currencies. asian assessors evaluating against a backdrop of deepening trade tensions. let's get some insights from bnp paribas asset management ahead of global em corporate. have we seen the start of a turnaround when it comes to the vulnerability that has played out against asian bonds, in the wake of what has been going on with the trade war, now this selloff in u.s. treasuries? >> yes indeed. this year we have navigated through very tough headlines, which has seen asia bonds selloff. if we look at the most recent history in e.m., asia has been quite tight compared to global e.m.
on the back of what we have seen this year, we have seen significant and material widening in asia bonds. we see it as a good time to build positioning there. haidi: how selective are you, given you have vulnerability across asian economies, those with deficits, those with depreciating currencies that are vulnerable when you talk about dollar-denominated debt in particular. are you being selective this point? alaa: i would say that is key moving forward. this is not a blanket statement. positioning shouldn't be , but it haslanket to be very selective. nameer it is by sector or specific. so it is very key for us. looki inle, we
terms of ratios, we are looking at specific four names. name selectivity is absolutely key here. shery: what about the countries? what regions would you be looking at? we have seen china, for example, get a little bit cheaper. is that a market he would go into? alaa: what is interesting is we see pockets of value everywhere. obviously china we see pockets of value, but we do not discount india and indonesia either. we look at asia in general. we see pockets of value across all these countries. shery: how much liquidity is in china's onshore valuations? alaa: i would say liquidity is still partially an issue. that is why we remain very
selective, and also where there is an opportunity to book profits, we do not hesitate there. so far this year we are expecting more forms of china easing to come. does that make a difference in terms of actual transmission to the markets? alaa: it is encouraging. the recent triple archive we saw was expected. it is quite encouraging to see this materialize. in terms of liquidity in the markets, we do not see the complete dryup for liquidity, which is important. it is for liquidity to be channeled into the right places. elsewhere in emerging markets, let's say there are idiosyncratic issues -- lots of question marks over turkey and argentina.
are you looking opportunistic ally over that space? alaa: we do expect volatility to continue being an issue for the rest of this year into next year. that is why we remain selective. of course that is not just asia, but within global e.m. as well. shery: how much corporate supply will be out there for the rest of the year? alaa: if we look at corporate supply this year, it has been much less than last year. we expect the supply this year to end less than what we saw last year. sector specific. we seen this less net supply across all regions and all sectors. haidi: what about supply in southeast asia? we have currency weakness, twin
deficits there. net supply to see be less than last year. we see, specificallys in the high-yields space, their funding level has increased. haidi: just want to get your view sector-wise. tech and energy, two compelling stories. but is there just a lot of risk assigned to both? alaa: indeed. we see a lot of opportunities in the energy sector. opportunity still moving into next year. in the tech sector, we have seen specific names selling off on -- on thef trade war back of the trade war concern.
really the global supply chain that we focus on, and how it affects the smaller players. shery: thank you so much for your time. and right now, president trump holding a "make america great again" rally in iowa. hisas commentating with supreme court nominee being sworn in, just as brett kavanaugh. he was talking about building that wall between the u.s. and mexico, saying it can be built within a year. president trump commented about the federal reserve as well, saying he does not think the u.s. should go as fast as it has, that the u.n. does not have a problem with inflation. president trump speaking at iowa. he has been out there a few
shery: this is "daybreak: asia." i'm shery ahn in new york. haidi: google has debuted new pixel phones and tablets in a product show aimed at its tech rivals. >> it has been an eventful couple days for google. monday the wall street journal reported the company found what it calls a software bug in march that could it potentially exposed the personal data of 500,000 people, but decided not
to release that information for fear of being lumped in with facebook as one of the great transgressors when it comes to data security. the reason, that the company found no proof the data was used for bad purposes, there was no reason for them to put it out. on monday, their hand was forced. that made it all the more awkward than on tuesday the company had a large hardware event planned months in advance brand-new pixel phone aiming to compete directly with the iphone. the company announced a new tabl et with a keyboard, and a home hub, something like alexa but with a seven inch screen, so it can show you the weather and youtube videos instead of just talking to you. this is the company's play to get deeper into people's homes and compete directly with amazon.
want youpitch is they to put devices like this in every room of your home. with questions of security, consumers ask themselves if this is something they want to do or not. shery: malaysia's biggest bond underwriter says the company's capital markets are shaking off the lull that followed the prime minister's surprise election win five months ago. cimb group ceo says the revival electively is especially noticeable in trade markets, which could help the target of reaching record targets and turning around the bank's shares. >> there has been more optimism in the longer term. it has been a very quiet period after the election, especially the months of may, june, and july. but we have seen a pickup in august and september. the last two months, we have seen more activity in the
capital markets, especially the treasury markets. shery: a billionaire said to be in talks with daimler to set up asia.ailing services in a source says they are now discussing a 50's and she denture -- 50-50 venture to take on the chinese leader. the wall street journal says softbank is in talks to take a majority stake in weworks between 15 billion and $20 billion. investing $4.4 billion in weworks last year, and in august added another $1 billion in convertible note. the most recent fundraising round valued the company at about $20 billion. australian education
provider navitas jumped. the offer of five australian dollars $.50 per share was a 26% premium to tuesday's close. taking a look at the state of trading in the asia-pacific. a little upside when it comes to trading in tokyo on the back of strong machine order numbers. a little bit of downside. the aussie continuing to languish when it comes to trading in sydney. looking ahead to hong kong, it doesn't seem necessarily like asia will snap the seven days of decline. >> despite the headwinds we see from the u.s. markets, s&p 500 fell to the lowest level in a month. new york crude under a bit of pressure, falling 3/10th of 1%. we had seen crude rise.
storm michael strengthening, also shutting out u.s. oil output. gold ground -- gaining ground for two sessions already. bloomberg commodities index has been gaining for three consecutive sessions, now at the highest level in a week. take a look at the currencies, because we are seeing the dollar drifting lower for a second session. the japanese yen unchanged at the moment at 112.96. we had seen strength in the japanese yen, gaining for the past four sessions against the u.s. dollar. korean won strengthening up 3 /10th of 1% against the dollar, that after three sessions of weakness. we are seeing the aussie up, as well as the kiwi dollar.
away: an hour in hong kong from the start of training. hong kong looking like it could snap the longest losing streak, an upside when it comes to trading across the broader asia-pacific after seven straight days of declines. shery: you are watching "daybreak: asia." let's get the first word news with jessica summers. jessica: indonesia has a blunt message for global financial chiefs as they prepare to meet in bali, warning they must be more mindful of affects on emerging markets. reacheda's rupiah has
1998 lows. minister indrawati told bloomberg indonesia is being punished, despite doing the reevaluating its economy. >> japan, other emerging countries will have a much more ability to agree and respond in confidence in the markets and the global economy, and have the common mental cooperation to not give up on the global environment. shery: pakistan devalued the rupee as it seeks an imf bailout . the measures snapped six days of losses while dollar-denominated bonds in 27 climbed to the most since late july. the valuation seen as a response to the imf's calls for a weaker exchange rate. leader lvmh has confirmed
china's demand for high-end goods remain strong. sales of louis vuitton handbags and dior perfume extended the sector's recent surge. investors sold shares of lvmh in recent weeks over concerns about the volatile yuan, escalating trade war, and speculation about a customs crackdown on luxury imports. and a new report from seal sa says banks in hong kong are cutting property valuations as housing market weakens, and now threatens to trigger a downward spiral in crisis. it says it is a self-fulfilling prophecy. hong kong chief executive denounced new measures wednesday aimed at countering the prices -- announced new measures wednesday aimed at countering the most unaffordable prices in the world.
chairman of the national automobile dealers association says there simply is not enough data to prove one way or another whether autonomous car's are safer. speaking to the automotive press association in detroit, he says we have reached peak uncertainty on the subject. global news 24 hours a day on air and on tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: treasuries snapped declines. u.s. equities also had a quiet day overall. our bloomberg strategist joins us from singapore. is the threat over? mark: not necessarily. a few things came together to cap yields yesterday.
we saw donald trump once again telling the federal reserve he prefers lower interest rates. it is a huge week for treasury auctions. yields backed up so much last week that they are probably looking attractive for those that need a fixed income instrument. demand at the auction should be decent this week. also that the dollar has been reasonably strong, it all adds to a bit of foreign interest in the auctions. of that, the fed is still on a tightening path. american data still extremely strong. we have seen a peak in the yields -- it is too early to say whether they could go lower or higher. haidi: oil prices rise, political challenges -- what could be the outlook for e.m.?
mark: it is going to be tough. you heard from the indonesian finance minister, they are really feeling it. currencies get into a bit of a tangle when yields are rising and people worry about what is going on in the major economies. who gets hit first. if you have a current account deficit on top of it, investors are quick to withdraw their money. so not easy. i am sure when they discussed it at the imf meetings this week, other countries will also say to be more careful. the data is so strong in the u.s. that it is difficult to see yields coming down in the short-term. shery: you can see the pboc being more supportive. mark: yeah, but it is about the sentiment with the u.s. and
china over trade. there seems to be nothing in the short-term helping that. we heard from donald trump yesterday that he is not willing to meet the chinese president until china puts a list of concessions from the table. we have a g20 meeting at the end of november. if they continue to be like this where they are not willing to compromise, then it is not going to help chinese stocks. the sentiment is bad, and it not get any better while this is going on. we have seen more stories about china possibly sabotaging microchips in america. all of these are adding to the negative tone. to get more than a short-term rebound is the best we can hope for right now. cranfield, thank you so much. you can follow mark and his commentary markets live blog on the bloomberg.
you can get a market run down and of course commentary from mark cranfield and other expert analysis to see what is affecting your investments now. risl fromtingg trade tensions. singapore should have reason to be concerned, the u.s. and china among its top trade partners. the central bank chief remains upbeat and refuses to overreact. take a listen. werethink the cylinders firing at the same time last year. some of those cylinders have started to slacken a little, as you would expect. i think you are seeing a maturing of the business cycle. certainly in the eurozone and in japan that is happening. and of itself, that is not to be concerned about.
the u.s. economy continues to chug along strongly. all indications are it will continue into next year at least. you have a revival across the housing market, the labor market, fiscal stimulus and so on, which is why the fed has been hiking interest rates. i think overall global growth this year, yes, a shade lower than last year, and probably another shade lower into next year. what is interesting is the underlying resilience of the global economy. you are not seeing collapses in growth in any part of the world. emerging markets are slowing from last year, but a slower rate of growth coming from a high peak is not caused for concern. ofchina accounts for 40% global growth. a slowdown in china could affect the rest of the world.
ravi: the baseline outlook is still healthy, albeit slower than last year. i think what has changed is the heightened risks. as you rightly point out, trade frictions are a major source of concern. if they escalate, you are looking at a deeper impact in 2019. but we need to look at this in proper perspective. first, on the downside. as trade tensions between the u.s. and china escalate, it will start affecting business confidence. the casualty may not be trade, but investment. if corporates start feeling uncertain about the future, they will hold back investment. that will have a much stronger impact. on the other hand, the u.s. economy is chugging along despite the trade tensions. ahina's slowdown is more o
consequence of its own adjustment to a more sustainable rate of growth. i would only be concerned if it 6%.rts dropping below all indications are it will be in the 6.5% range, which is healthy. the trade tensions between these two countries -- if you recall hasmonths earlier, the u.s. substantially resolved its issues with mexico, with canada, with the eu. the big fear was of tariffs on automobiles. that was also in the background. that is not to say everything is hunky-dory, but some bilateral trade tensions have eased, including korea and japan. u.s.-china is the one that
impacts singapore and asian the most. that remains cause for concern. as of now, no signs of turnaround in that. ofry: that was ravi menon the monetary authority of singapore speaking to us exclusively. president trump says he is considering five people to succeed nikki haley as you and ambassador. we are asking how this may shape u.s. foreign-policy to come. this is bloomberg. ♪
macroeconomic and geopolitical research. thank you for your time today. we have seen ambassador haley. she had a careful balancing act between president trump's "make america great again" stance, and the traditional gop foreign-policy view. how important will it be for the next ambassador to keep this balance? >> it will be very important. nikki haley is one of those rare political creatures who managed to oppose president trump when he was a candidate and support a lot of his opponents, and nevertheless did not make it blacklist,st of, his so to speak. she was brought into his administration. she argued for some of his more forceful views on china and the middle east. what will be interesting going
forward is how he replaces that voice in his administration, although it is one less and less engaged in the united nations. that role may be less important. shery: ambassador haley took a big role in pushing back against the united nations. it is interesting this comes a month ahead of the midterm elections. depending what happens november 6, what are the risks global investors face if we see more political gridlock? christopher: the baseline is more political gridlock in washington. the democrats look likely to win the house of representatives. the senate at this stage looks to remain narrowly and republican hands. you have to remember with two years of republicans controlling both houses, there has not been a lot of forward movement on many parts of the president's agenda. we don't notice the gridlock so
much in the next two years. what would be a surprise is if republicans managed to maintain control of the house. that would create a lot of expectations for further tax cuts. the market would have to decide whether that was progrowth or pro inflation. shery: with the u.s. china trade war, it seems to be spilling into more of the geopolitical sphere -- you saw collusion of u.s. and chinese warships, this new show of force from the chinese navy. mike pompeo coming away saying there are fundamental disagreements there. that does not seem there is any chance for a circuit breaker. christopher: it is really looking like there will be a worse relationship before it gets better, at least in the near term. the other piece you didn't
mention was lost in the brett kavanaugh confirmation hearings. vice president pence gave a very hawkish speech on china, outlining his views about how china is moving against the u.s. on the board. china is a country that is growing increasingly large and more influential in economic and political spheres. the united nations needs to find ways to manage that rise of china. chinese leaders on their part need to understand how to best live by the rules. they have been able to live a more isolated existence for many decades. they emerged as one of the leading countries on the world stage. it is incumbent upon them to look at how they are complying rules,ade issues, trade investment rules, how they engage with their immediate neighbors, so that the immediate
suspicion when a country like that large can be laid to rest. china working on its domestic agenda and finding it role in the world. does it come down to an ideological fight, or a purely economic fight? christopher: what is interesting from a historical point of view, from the united states's angle, we spent a lot of time worrying about the soviet union, which was just a military threat. we worried about japan, which was just an economic threat. china is a rival across the board. we need to find ways to engage with them. they need to find ways to engage with us across a series of institutions created since world war ii. in many ways, china has begun to
integrate with them, but in other ways has -- president bush and president tried through their presidencies, tried to create a consistent message that we welcome china's rise as long as it recognizes these rules we have established. president trump is much more confrontational. it remains to be seen whether that delivers a better result or not. the focus on institutions is where we are likely to see success. shery: we see that confrontational stance when it comes to the chinese yuan depreciating, weakening more than 9% in the past six months. now the treasury saying the u.s. is concerned about this depreciation. but when i speak to analysts,
they say the fundamentals are trumpke the way the administration is portraying it. >> the data does not suggest china is going to be labeled a currency manipulator, because they don't meet the three criteria to be labeled as such. the only criteria they meet is this big trade deficit with the u.s. otherwise they have a small current account to surplus, not as big as what is implied in the treasury or to be labeled a currency manipulator. they have not been intervening in either direction, whether to buy or to sell. shery: yet could the trump administration break with tradition and still label china a currency manipulator? christopher: the labeling of a currency manipulator under u.s. law requires certain criteria to
be met. your guess is right that china does not meet those criteria. president trump will continue to rail against china for what he calls cheating on the rules. but the currency charge against china is not one backed up by the facts right now. china yet, do you expect to have less of an incentive to support the chinese yuan if the trade war wages on? christopher: chinese policymakers face a difficult set of choices. in the broader context, they are undergoing three fundamental transformations, from a central plant economy to a market economy, from economy driven more by industrial investments to one driven by consumer demand. on the third level, they are moving from a closed economy to one more integrated with international financial markets.
ehey are trying to have th level of the currency, interest rates, adjust to market forces, but at the same time they are retaining the rights to manage the currency a little bit lower. they don't want it to go too weak, because that could trigger significant outflows. at the same time, a little bit of weakness helps support domestic demand -- sorry, demand for chinese exports in the face of these tariff confrontations. it is not a surprise to see it go weaker, but the chinese government should be careful to keep it from losing control. haidi: i want to pivot away from china and asia. with brexit negotiations, does not look like theresa may is going to get much of what she wants in the agreement. what do investors do in this
scenario? we have seen the swings in sterling. it seems impossible to price in any kind of outcome. christopher: is a very binary outcome. the base case for brexit, as the case is for most of europe, is that a messy compromise is a great at the 11th -- agreed at the 11th hour, whenever that deadline happens to be in the weekend summit. the problem theresa may faces is she has been dealt a weak hand. she is trying to square a circle in terms of restricting movement of some goods while retaining market access to the european union, and faces a difficult test at home from any agreement she brings back from brussels. the question is, can she get it through her parliament? the baseline case, there will be
, some kindcompromise of review of goods across the northern ireland border in return from some other softening of recognition of mutual recognition of regulatory bodies. compromise that is messy enough that allows the political forces within the u.k. and the european union to bless a temporary transition. that is certainly not a done deal. for an investor who can't count on that, many have been planning for the worst, setting up operations on the continent, in ireland itself, beginning to plan for the worst, although i think that is still a low probability outcome. haidi: christopher, i really appreciate you joining us.
minutes' time, we are going to speak to the head of the six party talks, ambassador christopher hill. we will discuss the prognosis for another summit between donald trump and kim jong-un. the last one four months ago in singapore. he says did not necessarily go the u.s. way. we will discuss the u.s.-china trade spat as well coming up in a few minutes. shery: that is it from "daybreak: asia." we look ahead to the start of trade in hong kong and shanghai. this is bloomberg. ♪