tv Bloomberg Markets Asia Bloomberg November 18, 2018 9:00pm-12:00am EST
>> markets came out of apec in stride. lack of a communique did not shift the market in any way. it needs to be a little more optimistic. hawkishnesstle less from the fed. the 10 year is 15 points lower. em.reates some runway for suggestingrlier on, it is time to get overweight on the 10 year. with all these different things going on we have japan gdp -- japan trade data earlier. a bit of a disappointment. looking also at brexit. that continues to weigh on sterling.
currently down to the possibility of a hard brexit even know there is a deal on the table right now. that is really what we have a few moment. hong kong. a bit of weakness for australia. let's dig deeper into that. mark joining us from singapore. what do you make of the moves given that apec ended in disarray? we are not seeing the markets give too much focus on it at the moment. mark: i think people would have been hoping for a stronger start to asian markets on monday given how last week ended. obviously there is different agreement over the -- there is disagreement. getting a trade deal will still
be very difficult. hopefully it will focus the minds of people through g20 and make them realize they cannot afford to relax. they have to work hard to get something on the table that president xi and president trump can agree on. to take itis going very badly and i do not think everyone wants a repeat of what we saw. there is still a lot of hard work to do. it is a good reminder of the need to keep going up to the last minute and get something that looks at least like some kind of agreement is better than no agreement at all. david: smile for the camera to start with. until we get something like that. to that point i want to look at the bond markets. two things that caught my mind, you have the comments and is a rally we are seeing in chinese bond markets.
is it relative importance, is it due for a correction, chinese bonds? mark: they do have something in common. in a way they are both telling you where people see growth going in 2019. china is probably the more extreme case and i think people are getting used to the idea the chinese economy was already willng this year and maybe further the slow in 2019. we could beat reaching the point where we see a lot of small moves by the pboc. they are helping small banks and businesses and they are targeting specific measures. what we have not seen is a big bazooka. we have not seen an official rate cut from china. maybe the bond market is telling you that that is getting closer. maybe early next year, pboc lowers official rates. as far as treasury yield is concerned, there are some
similarities in the sense that people seem to be pulling back from the idea the fed will raise rates indefinitely. at one point the market was almost priced for three rate hikes in 2019. that has already come back to two rate hikes. we might even see that still shaved further back. people are worried about world growth. the u.s. is outperforming other countries but they are not immune. that is the big overhang for everyone right now. if it will slowdown in 2019. will january be good for bond markets? yvonne: of course this brexit turmoil role -- broyles on. what does that mean for the direction of the pound? mark: it is uncertain. the pound has been very difficult to trade. you can see how volatile it has been. it is still extremely high on options for the pound.
for investors you can see reasons why they don't want to get involved. it is too difficult to guess from one headline to the next. we had a report a few hours ago, 48 peoplea possible may have a no-confidence vote against theresa may. if sometime during monday trading if that number reaches 48 and means a no-confidence vote will go ahead, you can see the pound slipped quite a bit on the uncertainty that will bring. if theresa may does not face a no-confidence vote, it could be positive for the pound. it is very difficult to trade it because you are jumping from one headline to the next. whatever happens, getting the brexit deals through parliament is still extremely difficult. of information on bloomberg saying it will be very hard to get enough votes to pass the deal in the first round. so lots of people will be thinking this is too difficult, i do not understand what is going on, i do not want to trade it. for the people who do want to
trade, it they need to be nimble and jump from one minute to the next. volatility is very much guaranteed. david: no time to even go to the bathroom. mark live for us in singapore. they have started the coverage at market action. one click and you get a rundown analysis from mark and his team. check it out. yvonne: let's get you first -- caught up with the first word news. the royal commission into misconduct at estrella is big banks has resumed. heardsion has previously the bank extracted fees from the accounts of people who had died. the whole sector is accused of lying to regulators and falsifying documents. the final phase of the inquiry torted with him unable explain why things went so bad.
>> how does that happen? how does an organization of cba's size have inadequate capability in critical areas? adequatet have an explanation for that. paul: president trump visited california, seeing firsthand the devastation from the deadly wildfires that have killed at least 76 people and left with and what thousand unaccounted for and caused billions in diverge. dachshund damage. -- caused billions in damage. >> see what has happened here. nobody would have ever thought this could have happened. so, the federal government is behind you. we are all behind each other. jerry and i have been speaking. we are all going to work together.
we will do a real job. this is very sad to see. the european union is working on new rules to prevent foreign investment threatening security amid increasing concern of the pace of acquisitions by china. it may be announced on tuesday which would include how members can push concerns. earlier this year germany blocked the chinese conglomerate from buying a robot maker. a series of natural disasters jewel to the economy. 8.2% from a year earlier, slightly below forecast. imports climbed almost 20%, leaving a deficit of $4 billion against estimates of $620 million. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
i'm paul allen. this is bloomberg. david: coming up, the reserve bank of india and the modi government. together for talks later will they find common ground or will the rift worsen? yvonne: we would discuss the outlook with andrew tilton. rishaad: don't forget terminal subscribers can join the chat by sending an instant message.
all of these are lower compared to their previous forecast. yvonne: let's take a look at this closely with the goldman sachs chief asia -- some of these reductions were steep. tell us what you are seeing that others are not. china weirst of all in have had a combination of tighter credit conditions earlier this year reflecting past regulatory measures which has been slowing growth alongside worries of the trade outlook. more broadly, slowing global growth will probably limit trade growth and export growth in the region next year. finally there are a couple of countries, indonesia and the philippines, which have tightened monetary policy quite substantially. that will likely weigh on their growth next year. david: the philippines put in i believe five hikes this year.
in terms of central banks you expect to join in hiking rates next year, i would imagine south korea might be a candidate. maybe thailand, new zealand. andrew: we think we will have broader but shallower tightening next year. i mentioned a couple places were quite significant shifts in policy in indonesia and the philippines. next year i think you will get a number of places which will nudge higher for a variety of reasons, in some cases because of financial imbalances. thailand has concerns among policymakers. those are some places we think we could see a touch higher rate but not the dramatic tightening we could see in indonesia and the philippines, which is partially brought about -- yvonne: do you think we have seen the bulk of indonesia's tightening? there are still some concerns about the inflation side of
things, external funding. is that still more important than growth? andrew: we think the policymakers in indonesia are more concerned about the external, keeping the currency relatively stable. more concerned about this than they are with pace of growth in 2019. the good news for a lot of asia is you are a lot closer to pricing in the tightening cycle then you were a year ago. forecasts, we have long predicted 13 hikes. another year worth of hikes to finish at the end of 2019. cumulativelyng in roughly seven of those. now you are pricing in 11. as the markets adjust, that has been a painful process. we think there is little adjustment left next year, but not as big as an abrupt -- adjustment.
david: i want to ask your opinion on india. 7% ofe averaged over growth. what is your estimate of potential growth? despite seven plus percent growth we have really see no real problem with inflation. i'm wondering whether or not they are lowballing themselves. andrew: we think potential growth is in the mid to high sevens in india. quite a strong potential rate of growth. ultimately is a -- it is clearly making progress. in theory it should grow quickly. , betweenve a dichotomy inflation, which has been fairly benign. core inflation has still been running high from a standpoint of central banks. for now we think the central bank can stay on hold until
second-quarter next year. yvonne: can india take the reins for global growth in general now we have seen the u.s. and china are stuck in this trade war? china is still seeing signs of a slowdown. or 10 yearsing five we think india can make a much more significant contribution to global growth. weight isic significantly smaller than the u.s. or china. we think it can outgrow them over the next several years, but it has that economic have to before it has its weight in global activity. of theto china, one underappreciated developments this year is you have your current account narrowing significantly, if not folding into a deficit. how big of a deal is that? and why are people not talking about that? because usually that should be a big deal. andrew: i agree.
particularly looking back a decade when china had a very large current account surplus. immediately after the financial crisis when china had a stimulus which eroded significantly, and coming out of the downturn,, you saw pulling more imports, pulling accounts down to roughly zero at the moment. it is a tricky balancing act for policymakers. if you want to rotate the economy towards more consumption, more domestic demand, that probably means a weaker current account. on the other hand the model has been to run with current account surplus. policymakers have been trying to prevent outflow. we do think on balance continuedly if we see posture from the u.s. and more trade escalation, one way to
square that circle is to let its appreciate more. improve we would expect to see the currency weaken in 2019. yvonne: the stimulus we have seen for now has been not the same as what we have seen in the past. we have a chart that shows why. it is still pretty low in china when you have a property market still a very elevated levels. there's not enough us as is on stimulating the housing markets anymore. what sort of affect could we see for the broad em? it seems like at this point it is limited. andrew: agreed. policymakers have changed their tact towards stimulus. they have reiterated the do not want to do a 2019-like big bang stimulus. this time they mean it. they do not want to apply more stimulus than is necessary to keep growth above six. of course they reiterated they
will be there if things really slow and will do more stimulus as necessary. i think in this episode they have been doing it out bit by bit trying to calibrate the appropriate amount, and not do more than necessary. 2016, i thinkven that probably brought about a greater appreciation in more determination to avoid rebuilding that the next time the need to apply stimulus. we think we are going to see less stimulus overall, less monetary stimulus, more focus on fiscal measures that maybe have less side effect. david: when you look at the bond markets, looking at a rate cuts, that is a bit misleading. andrew: we think there could be a tad lower rates. we have a seven-day rate about 25 basis points lower in our own forecast. relative to the type of fiscal stimulus for other measures which we think could be applied
if the economy continues to slow, that really will not be the primary focus. we expect to see more special bond issuance. probably some corporate tax cuts as well. yvonne: always good to have you. andrew joining us in hong kong. next we're going to hear how australians banks cut corners in the pursuit of profit. this is bloomberg. ♪ is is bloomberg. ♪
goldman sachs says the market is too relaxed about threats to supply. david: blackrock is said to be thinking about applying -- sources tell us the company is in talks to sell its 16.5% stake in china a investment management. blackrockid he hopes can become a strong player in the market. the money laundering whistleblower is said to be fully committed to working with parliament, even with the threat of prosecution under bank secrecy laws. howard wilkinson let their operation from 2077 to 2014. he left after alerting management to suspicious amounts of money, and loader spoke out to the media. banking executives testify this week as an inquiry
into misconduct in the financial industry enters its final phase. yvonne: matt was the first of face theour ceo's to commission after banks pursuit short-term profits at the expense of basic standards of honesty. >> how does that happen? how does an organization of c ba's size have inadequate capability in critical areas? >> i don't have an adequate explanation for that. emily, ours bring in asia finance reporter. profits over honesty. not a good headline. emily: no, it has not been a good year for banks. we are the final stages of this long-running inquiry. over the next two weeks we will hear from the very top of the banks. they made it very clear this morning she did not want apology. she wanted actual answers.
that has been the tone so far. there has been granular questioning about how the banks -- it has been very focused on what the banks can or should be doing to change. there has been a number of quite telling moments. he saw that clip there, he was put on the spot and difficult. read out the and from the ceo from senior executives. one from the head of the retail bank compliant business saying some criticisms made of cba's processes made her feel vindicated. so, there is still a lot of material coming here. yvonne: yeah. we continue to see these grilling's we have seen when it comes to these inquiries. seenght of this we have banking stocks take a lot of pressure over the past year. is there any upside for the
banks? emily: i guess the upside for the banks is we are getting towards the end of this process. the bank stocks have been hit tremendously hard. some have been in excess of 15%. these are from institutions that are still making huge profits. the fall is all coming on the back of reputational issues and weighing on falling profits. the upside for the banks, well, we only have another two weeks of this. they can finally see the end of the tunnel. rish, we are headed into the lunch break. rishaad: as we head towards that lunchtime break, this is the position. nikkei moving to the upside. tech companies are coming back. softbank up about 4%. says they t-mobile
paul: i'm paul allen with the first word headlines. japan's exports rebounded last month after their first a client intwo years -- declline two years. it was slightly below forecast. 20%,ts climbed almost leaving a deficit of $4 billion against estimates of $620 million. of central american migrants have arrived at the u.s. border at the city of tijuana saying it cannot cope. people queued for hours, but u.s. inspectors are only
processing about 100 claims a day. president trump tweeted the backlog could last six months and the u.s. would not stand for what he again describes as an invasion. german business newspaper says the volkswagen emissions scandal could have been averted after senior executives reported manipulation in 2011. they say documents show the whistleblower alerted the authorities put in place to allow vw staff to report illegal activity. volkswagen confirms someone reported the manipulation, but not the exact issue which later trickled the scanner -- trigger the scandal. tesla says it is-- sk tweeted the rocket will have only minor changes to improve reliability. he says spacex will now focus on the falcon heavy booster with an accelerator program he describes
as delightfully counterintuitive. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. yvonne: vice president mike pence traded sharp barbs with chinese leaders xi jinping at apec. neither side appears ready to give ground. take a listen. >> mankind has once again reached a crossroads. which direction should we choose? --peration, openness or closing one store? win-win or zero some? countriesst of all and the future of mankind hinges on the choices we make. >> the united states will not change course until china changes its ways. >> let me make this clear. it is an open platform for cooperation. it is guided by the principles of the consultation and cooperation for a share of the
benefit. it is not to serve any hidden geopolitical agenda. it is not targeted against anyone and is not exclude anyone. >> know that the united states offers a better option. we do not drown our partners in a sea od debt. the u.s. deals openly and fairly. we do not offer a constricting road. when you partner with us, we partner with you, and we all prosper. yvonne: breaking data coming through from thailand. third-quarter gdp missing big-time. growthexpecting 4.2% but coming in a 3.3% for thailand in the third quarter. edging lower from the 4.6% in the previous quarter. this is due to what we see when it comes to weaker exports and investment in the country. it seems likely the bank of thailand will probably keep rates unchanged, especially now
that we have that election in february as well. david: it is quite a divergence. context,ut this into 3.2% missing even the lowest of estimates, which was 3.7% out of ing. context, thatre would be the slowest pace of growth going back to late 2016, early 2017. yes, it is the slowest pace of growth in about two years for thailand. something to monitor as we head into the open. back to the other story, this lack of agreement between the u.s. and china. we heard from the u.s. vice president and chinese president xi jinping.
eswar, very nice to see you. if you base it on the comments we just heard, assuming you heard them, it seems the sides are positioned for something more than trade. eswar: it certainly looks like besides are positioning head of the g20 summit where trump and xi jinping will be meeting. or at least they are expected to meet. it is clear the u.s. is signaling a very hard line stance. seems to be channeling the hawks in the trump administration who not want to give an inch to china. china is clearly concerned about being corralled into a pen whereby the u.s. creates an alliance with other trading partners. all concerned about trading practices of china. china seems to be pushing back aggressively against any notion that unfair practices are its
fault rather than those of the u.s. spinhave been trying to that the u.s. is imposing unfair trading practices. rishaad: who actually is in the stronger position here? eswar: at one level it seems like the u.s. is in a stronger position because the chinese economy is slowing down. the currency has been weakening for a while, although in the last few days it has perked up a little. the reality is the chinese are not willing to be in a position where economic policies, especially mainland china, are put aside because of u.s. pressure. they cannot be seen to giving in to u.s. pressure in terms of changing the structure of the economy, which is what they hope to do and plan to do. what thety is that u.s. is demanding is not just a negotiation, but essentially an unconditional surrender which
the chinese are not willing to give into. what we are really after here is a long-term economic conflict between me two -- the two countries. it is really a small part of the broader picture between the countries. rishaad: the narrative in beijing in terms of some of the newspaper editorials which are largely controlled by the state, is that the u.s. wants to take china down. how much of an element of truth is there in that? if that is the case, there is no way they will make a deal, is there? eswar: the concern among the hawks in the trump administration is that china does mean a negative outcome for the u.s. what you see the economic conflict in a zero-sum game it will be difficult to think about a path where the two biggest economies in the world can come to an agreement. it is more narrowly defined in the context of trade, certainly
you could argue both sides could benefit. trunk demonstration who see trade as a small part of the big picture that china is taking unfair advantage of the u.s., and the u.s. has been hurt in terms of its own economic development because of china. so long as that narrative continues to drive washington's policies towards beijing, it is hard to see how the science can come to an agreement. end up seeingight some easing of trade tensions because that is not good for either side. come to theons have fore and will unlikely to be put back in the bottle and a time soon. yvonne: what does this mean when it comes to other apec nations or more developing countries in the region? are we at an inflection point where they have to make a binary choice between washington and or beijing, or can they stay in the middle? eswar: many countries in asia
and elsewhere in the world i think are going to try to diversify the relationship. neither side would like that. both china and the u.s. would like the choices to be binary and for countries to choose them, of course. the reality is given these are the two biggest economies in the world, for many countries these are two very important trading partners. it will be difficult to cut them off. particular, they face a sense that the u.s. could be seen as a trusted ally who can watch their back seen as a thing of the past. they cannot afford to back off from china. they have to stay. even though they may have security and economic concerns about getting too close to china. the reality is they have no choice but to get somewhat deeper into the embrace of china without going too far such as they alienate the u.s. david: how do you do that?
yvonne: investors are watching that power struggle in india. they prepare for a board meeting that promises to be anything but dull. nominees arement pointing to the board as key to whether a compromise can be found, or whether this very public spat turns even uglier. spat, we have been talking about this for some time. how did we get here?
>> it has been simmering for quite some time. the issues of the government is heading into an election. a higher proportion of results from central banks. it wants higher lending from the weak banks, the ones which have been struggling. financialliquidity conditions which have tightened considerably to be loosened so credit takes off robustly. some of the results that the government is -- it will have to sell assets, num ber one. weak banks are still very weak. my posted record losses again last quarter. as well as financial conditions, their view is the shadow bank has to actually put its house in
order before it can ease liquidity. there are these issues where there is a gulf between the government and the r.b.i. yvonne: are we likely to see any kind of compromise or will we just see this get even uglier? what i gather from the rbi officials is there will be some kind of compromise that will probably good for into use, especially on the capital of the reserve bank which the government pace is very high in it needs to do away with some of it. the rbi could seek a middle ground to buy somje time easingther time is liquidity conditions that are prevailing in the banking system. it will probably pump in more funds through open market bonds operations in november and
december. these are some compromises the reserve bank and the government will probably work on. yvonne: thank you. joining us with the latest from mumbai. still with us is esqar prasad. these government attacks are threatening the rbi's credibility. concern surrounding and yet we have seen with the fed independence? maybe the turkish central bank as well. how is the rbi concern different? eswar: the fed has independence. the central bank of india does not. the reality is the central bank in a country like india is very important because it is seen as the one institution that has good technical competence, is reasonably efficient, and over time it has built up credibility
despite its independence hangs by a thread from the government. that independence is crucial in order to manage all the bank of india has to manage. keeping down inflation, supporting growth come maintaining some stability of the country and financial stability. all of that if the government starts threatening the independence of the central bank by urging it should put growth ahead of inflation and financial stability objectives, that could pose a serious problem. not just for reserve bank of it could lead to a hike in interest rates and a further fall in the rupee. david: is that the issue? simply the government saying you are not supportive of growth? or is it the elections next year? would we be having this issue if elections were not next year? eswar: in the lead up to the elections, this government would like to prioritize growth over other objectives, especially
because inflation does not seem to be that high. the consumer price index is now below 4%, although inflations are still worrying. about risksf the -- are lower than what the central bank of india thinks about. politicsnly election have something to do with it but i think there is a broader issue that this government seems to think the bank of india has grown too big for its britches. i think that is the real threat to the r.b.i. and institution stability in india as a whole. rishaad: you said election nearing may be part of it. don't forget this is already the bank which has interfered, when he was heading up the rbi. a money grabbing
exercise? eswar: that may be part of it but i think there are deeper forces working here. what the bank of india is trying to do is reduce credit growth to certain sectors of the economy which the government would like to continue supporting. there are some politically connected lenders who continue to get funds from the banking system. all of that causes political pain, and especially since it causes pain to some people that are very closely connected to the government, that may be what we are seeing here. certainly using some of the rbis rainy day funds to ease the government budget constraints so it can go out and undertake more populist measures in the lead up to the elections would help. i think there are many of these factors mixed in. the toughness in terms of the banking system is one of the primary issues at play here. yvonne: what would need to
happen for him to resign? a compromise that could potentially be worked out here. it has stabilized. it has gone up a little in recent weeks. the r.b.i. could come to some sort of accommodation where it is willing to ease liquidity a little bit. perhaps also transfer some funds. the difficulty is what it sets for the future and what future governors might do. i hoped he would not be pushed to the edge but certainly if his independence is threatened and he is forced to take certain measures he does not view as being in their interest, such as transferring and large amount of money to the government, that would precipitate a resignation which i think would be a very harmful thing for the r.b.i. and institutions in india more broadly. david: what would a compromise look like that would not put at
the the reputation, or president in the future? key thing is whether the reserve bank of india can put in place measures which would satisfy the government but think -- that can also be justified on economic routes. -- grounds. reducing policy interest rates because economic circumstances warrant it. that might retain the banks credibility and allow it to reach some sort of compromise with the government. economic indicators work intern against that sort of compromise then things would get very difficult. i think even the sense that the rbi independence might make such a compromise harder. the last few days made me a little more optimistic what things could turn around in an instant. david: we will just have to wait
yvonne: no music today. david: we were shot out of a commercial break. anyway, today we have our managing editor and asia assets reporter both with us. yvonne: if you want to access those charts, they are at the bottom of your screen at gtv go. chart is all about credit. ge specifically. this is a story that has not been getting as much attention as it should. even though ge is still a triple d rated credit, still investment grade, it is trading already like it is in double d territory, which would be junk. the reason i like to talk about ge is i find it to be a microcosm of the macro trends and credit.
ge is a company that basically traded off its credit. borrowed $115 billion in debt to finance some weird business ventures. now of course it has encountered trouble. repricing is rapidly that and that feeds into fears of how much double d rated debt is out there and potential for double d rated debt to sink deeper into junk territory. david: we will be the judge of that. let's see the other one. >> the chart i have is taking a look at hedge fund expectations for the fed and treasuries going into next year. showing the yield on 10 year treasuries which came down last week. by more thanslahsed half, the biggest cut in 18 months. less than half of what was in
september. the conversation is what will the fed do next year. you have concerns about the trade war escalating over the weekend. all kinds of concerns about stock markets. a lot of talk about what the fed will do. the fed is expecting a 35 basis point next year. we are already seeing a lot of behavior in treasury markets already. david: they are both good. what do think about this chart? rishaad: i think it is -- yvonne: i think it is good. tracy has a great chart looking at a specific company. yours is broader. are great. which would you pick? yvonne: you cannot do that. they are competing. david: just because i think the
ge one is more interesting. simply because as you mentioned, they have been using their credit rating to finance what have you. then yourt to do that -- eric, you are runner-up. yvonne: by default. [laughter] well.th sold it very i would have gone with eric. no, tracy's was more interesting and different. i am not judging today so it is not my problem. bloomberg users can look at our charts on tv . save those charts for future reference. missed the mark big-time. seems like we will see how
things play out when they open. david: should be good. that is the close on friday. we are seeing weakness. 10 year yields. 3.3%. well below the median forecast. the lowest one was 3.7%. if you look at thailand as a trade, these numbers should not bode well for that. a big day in india. this is bloomberg. ♪ ♪
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david: you are watching bloomberg markets: asia. we are entering the last hour of the morning session, which is the same time thailand gets up and running following the release of the slowest pace of third-quarter growth in years. 1635 was a last close. you already see the reaction with dollar thailand on the way up. we will get you an update on this when that gets underway in a couple minutes. gmm is the function.
mostly mixed., an idiosyncratic factor in the philippines. japan closed a third of 1% higher. we are entering the lunch break in china. later for tenths of 1%. nothing as far as currency markets are concerned. when you look at the treasury markets, here is where it gets interesting. the fed vice chairman really talking about how maybe it would -- we could be closer to neutral. 2.8year, 290 to . 15 basis point slider on the 10 year. theing, no big change in two and 10. it comes down to december. ou look at they
other function. a couple days back. we are now towards about 60%. still a rate hike is expected but expectations are being lowered as we speak. with yields pushing lower, we actually saw the emergency market -- emerging-market currency index close above this 100 day moving average. when this fell below the support level, yields ticked above 3%. as we head towards that we are getting more support when it comes to emf. have a look at that on the bloomberg library. very interesting where this goes. we half the equation goes next year in the absence of what happens with the u.s. dollar. fairly busy morning so far.
india, it is a big day. yvonne: it just brings the question of what mliv is asking. here is what it is. feel free to chime in. how much does it matter that futures see fewer 2019 fed right hikes? what will be the impact of this repricing we have seen? we will see how that goes when it comes to em. looking at india futures as well it will be a pretty high stakes day when it comes to this board meeting from the r.b.i. this rift between the government and central-bank hitting a fever pitch today. we are seeing futures heading higher today. some weakness on the rupee as well. a lot of questions about whether we will see more of the government's role in the rbi as well. rishaad: a high start of the trading day. let's get more on the question of how britain leaves the european union. and indeed, the woman fighting for her political survival. here's paul allen.
paul: theresa may is continuing to sell her brexit deal, saying her eurosceptic opponents do not have the numbers to remove her. the vote on her leadership has been threatened but yet to be formally announced. may told her critics that relieving her will not change the situation. at the same time the ft says the chief eu negotiator is proposing the transition period be extended to the end of 2022. it is populist coalition says it is ready to talk to the eu about its budget, but the major spending issue must remaining place. the prime minister says the government is ready to a rhetoric -- is ready to eradicate whistle programs, but the basic reforms plan will stay. brussels is expected to reject that when it issues a review wednesday. the trump administration will issue its report into the murder of saudi journalist jamal khashoggi on thursday.
the killing was ordered at the highest level. there are reports to cia has concluded the crown prince approved the murder, although president trump says they met -- that may never be proven. the president also says the caa report is premature. >> well, will anybody really know? but he did certainly have people who are reasonably close to him. and close to him that were probably involved. we put our very heavy sanctions on a large group of people from saudi arabia. but at the same time we do have an ally and i want to stick with an outline that in many ways has been very good. paul: the royal commission into misconduct of australia's big banks has resumed with cba the first to face a growing. the commission previously heard the bank extracted fees from the accounts of people who had died, and the whole sector is accused of lying to regulators and falsifying documents.
the final phase of the inquiry started with cba unable to explain why things was so bad. >> how does that happen? how does the organization of cb a's size have inadequate capability in critical areas? >> i don't have an adequate explanation for that. paul:global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. summit winding up forilling -- by failing a joint communique. they balked at the use of the language in a pledge to strike all unfair trade practices. yvonne: the u.s. china trade war overshadow the talks.
it gives rise to fear of an economic cold war possibly dividing asia. mankind has once again reached a crossroads. which direction should we choose? cooperation or confrontation? openness or closing one store? win win progress or zero-sum game? the interest of all countries and the future of mankind hinges on the choices we make. >> the u.s. will not change course until china changes its ways. >> let me make this clear. the belt and road initiative is an open platform to cooperation. it is guided by the principles of because of patient and cooperation for a share of the benefit. anys not designed to serve hidden geopolitical agenda. it is not targeted against anyone and is not exclude anyone. >> know that the united states offers a better option. we don't drown our partners in a sea of debt. we do not compromise your
independence. the u.s. deals openly and fairly. we do not offer a constricting belt or a one-way road. when you partner with us we partner with you. rishaad: let's get more on this. thank you for joining us. are they jockeying for position ahead of the g20 meeting taking place in buenos aires where the two presidents are supposed to meet, or is this genuinely their position? this is the on trade conflict is likely to be a long presence. it is unlikely to be resolved anytime soon. we might get some encouraging noise out of the g20 summit. rishaad: if it remains just noise them what is the point? >>manishi: for investors it incorrect to get too
enthusiastic about a near-term solution. it has immense implications for how investors should treat this. thatuld recommend investors still remain defensive. they still stick to high place. i still suggest they avoid large u.s. importers from china. obviously the company's -- yvonne: most people are quick to point the blame on the fed, as well as the trade war for what equity markets suffered so much in october. once we get that hurdle passed and we see a reversal, is it guaranteed that you think the stocks can rally by the end of the year? manishi: the fed policy is very important in this respect. we believe fed could possibly hike twice in 2019 after may be a december hike in 2018. which means by the first quarter or second quarter of 2019 we would see the u.s. dollar begin
to peek out in comparison to other currencies and possibly moderate thereafter. isnne: if the fed pauses, that also at that time for the market that perhaps there is legitimate concern the growth is slowing? manishi: the fact that growth would slow in the u.s.in 2019 and 2020 form the levels in 2018 is not a fact. that would not come as a negative surprise to most market watchers. the extent of slowdown would be a concern. u.s. growth should be in the range of 1.8% to two point 2%.ent -- to if it does that it should be fine. david: it is not if it does fall we do not see it coming. we see it in the terms of earnings growth, then this happens. is there anything in your research that suggests we are
seeing that at the moment? manishi: at the moment we are not subscribers to it. at any pointsion in china is in the near future. we don't think that is likely to happen in 2019 or the first half of 2020. if that is the case, if our global forecasts are correct, it would mean that what we have seen in the u.s. recently is a pew are valuation correction. pure valuation correction. i should point out they have been tremendously strong. most and each and every sector we have seen estimates moving up. that trendhink that would possibly die down in the next quarter. we could see earnings come down in the second half of 2019. majoro means that the correction we saw in you -- in
october in the u.s. was he early a valuation -- was purely a valuation correction. rishaad: u.s. treasury has been in 46ing $220 billion days. that's $4.8 billion eachd ay. that's unsustainable. manishi: the fiscal position of the u.s. is clearly a concern. other fiscal measures like another tax cut, you do not just hypothetically talking here. it could lead to another pop in the credit market. over the longer-term it could not be healthy. these are the variables that equity investors would have to watch carefully. rishaad: that rising at that level is waiting for the fiscal
stimulus fading away, too. which, ok, economy it's going ok. but the risks are to the downside, for sure. manishi: i think you are right to point out the risks are possibly to a downside. the question is if it could really fall off a cliff. we do not think it would because consumption.ies in as long as you have employment at the level it is today, i think consumption, and consumer confidence. when you put all this together you would possibly come to the conclusion that the slowdown is possibly given fact, but not a collapse. david: what do think the evaluation correction, assuming your economists are correct -- the question i have is that is
does that money come to asia or elsewhere? be careful what you wish for because if u.s. equities go in one direction that is usually work the globe goes. manishi: correct. if it is sharper than what we expect that would have an impact on asian equities. over the past two decades, and we looked at this in some detail, there have been only two instances of movement between u.s. and asian equities. that is something we have to be careful about. having said that, whether money comes back to the markets depends on how the dollar behaves. we think the dollar would possibly detail in the second quarter 2019. it should actually be better in terms of flows back into asia. david: you are staying with us. . a lot more to talk about. . a big day in india. yvonne: stay with us. still ahead, we're going to
rishaad: investors watching the pound struggle in india. the bank of india prepares for a board meeting that promises to be anything but dull. it is all about supervision and the allocation of funds, which is not something which normally would be of great interest but it is this time. they may be key s to whether a compromise can be found or whether the very public spat -- issue thatbroader this government seems to think the bank of india has grown too big for its britches. that is a real threat to the r.b.i. and institutions in india
as a whole. >> personally i am more sympathetic to the government. the central bank has been running a pretty tight monetary policy in india. they are running monetary policy around concerns of the currency. saying is monetary policy is to type. >> one of the reasons why we thought india was a really good emerging-market to invest in was because of the solidity of these institutions. an attempt over the last you used to go at them i do not think is inductive for any government in the long run. still with us to talk more about india. we continue to see this rift between the r.b.i. and the government.
will this really hurt india's image as a place to invest? economic -- difference of opinion is quite usual. it has happened from time to time. recently the u.s. unfortunately in india it has come into the public domain. there have been speeches made by both r.b.i. defenders and government. that has created a degree of risk perception as far as financial markets and valuation. --haad: if this somehi: if this leads to disruption obviously that would not be good news. willingness of foreign institutional investors to renew their investments in india. that is something we have to be careful about. there are three main issues that they have differences about. one of them, injecting liquidity
. on that i think r.b.i. is willing to start open market operations. two, the r.b.i. has a serious difference of opinion. irbi,two are capital in sharing -- their asset quality norms to enable -- banksa re prevented from lending by the rbi now. yvonne: how are you viewing the indian market at the moment? we have seen the worst of oil prices for now. we have also seen the worst of some of these defaults from the shadow banking sector. have we reached an inflection
point? manishi: india is in a very curious situation. improving macro with possibly declining micro. if you look at the most important variables like oil prices, they have declined. india's current deficit has the client, the currency has stabilized. growth to 8.2%. you will not have that strong growth-- rishaad: then you have to have some sympathy with the government. they think interest rates are too high. in some senses they quite possibly are. our country has the economic profile of india. how much can they really control? of course the currency is vital, but inflation, it is debatable. manishi: inflation has been undershooting. the rbi's reference range is the past three months.
if you reduce interest rates you can help the micro side is what i am saying. manishi: it could. one must also be careful about increased competition you have seen in the consumer sectors. one must also take into account the really low capacity violation just presented private sector from taking in. that situation is likely to change going forward. n data is telling us it has gone up to about 76%. i tend touidity side agree that possibly the real interest rates are too high. yvonne: have you been buying these? manishi: collectively. we currently are neutral on india. we downgraded to neutral in late june and have maintained that stance. consumer discretionary is, particularly the front line,
management of suspicious activity. he later spoke out through the media. yvonne: blackrock is said to be thinking of applying to a licensing china to exert more control there. they are in talks to sell its stake in china investment management and has asked about a majority controlled joint venture. the ceo said he hopes blackrock can become a strong player in china. rishaad: aluminum producers will need additional smelting capacity outside china as inventory shrinks in the coming years. aluminum demand remains extremely healthy but china may not be such a significant exporter. bloomberg has a positive view on aluminum. the market is too relaxed about threats to supplies. david: in terms of whether we were too relaxed, something we did not expect was growth in thailand not falling off a cliff, but missing every
estimate by a mile. the lowest estimate was 3.7% for the third quarter. 3.3% is what we got. you look at this collapse and export growth in blue. manufacturing to a lesser extent. those are related, and that really relates to the broader picture. you are seeing similar forward-looking indicators across asia. thailand being one of the most open economies, really open to trade, relying on what happens when it comes to this. have a look at that. that is something we did not expect to happen. the other thing we want to point out is what we are seeing in the markets in thailand. you have the equity markets just opening up about 20 minutes ago. then you have the currency markets. not so much reaction in the equity markets. the other thing i want to point out is china is headed to its lunch break. have a look.
>> 11:29 in hong kong. i'm paul allen with the first word headlines. the apec summit wound up in papua new guinea by failing to issue a joint communique for the first time since the event began in 1993. official said china balked at the wording of the statement on trade, objecting to the use of the language. the u.s.-china trade war overshadowed the talks as the two sides traded barbs in back-to-back speeches. >> let me make this clear. the belt and road initiative is an open platform for cooperation. it is guided by the principles of the consultation and cooperation for a share of the
benefit. to usurp anyigned hidden geopolitical agenda. it is not targeted against anyone and it does not exclude anyone. it is not an exclusive club closed to nonmembers, nor is it a trap that some people have labeled it. thailand expanded less than economists were expecting. gdp rose from a year ago, well below the median estimate. it also sharply down from the june quarter. the benchmark interest rate was left at 1.5% last week, with the" signaling a hike is near. more than 2.5 central american migrants have now arrived at the u.s. border in tijuana, saying it can't cope. people queued for hours to start the asylum process, but inspectors are only processing about 100 claims per day.
president trump tweeted that the backlog could last six months, and that the u.s. will not stand for what he describes as an invasion. working onn union is new rules to prevent foreign investment threatening security amid increasing concerns that the pace of acquisitions. draft legislation could be announced on tuesday, which will improve how far eu members can push concerns. year, germany unsuccessfully tried to block the chinese conglomerate lidia from buying a robot maker. japan's exports rebounded last month when a series of natural disasters jolted the economy. forecast,htly below with shipments advancing 9%. imports climbed almost 20% with a deficit of $4 billion against estimates of $620 million. global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries.
i'm paul allen. this is bloomberg. ♪ >> thank you. let's have a look at the state of markets as we approach midday across the region. equity markets are not consistent -- u.s. futures are down a blog for tenths of 1% and if you put it all together, volumes are at about the 20 day average. is where we markets are trading sideways when it comes to em fx. in fact we have a chart on that. we showed the chart at the top of the show -- msci emerging market currency index at the top. at the bottom, you have the 10 year yield in the u.s. as you can see, right when we breached 3%, that is when we
fell below the hundred day moving average, a reversal, closing above the 100 day moving average on the top index, as we approach 3.2 back to 3% on the 10 year yield. lasts, we not this have been getting more back, more bullish calls on use. treasury on the gt the library. the other thing we want to point out is oil. we are on six straight weeks of decline, but this price collapse is the rate cut -- in terms of $88 per barrel in the price of global crude, six weeks of declines. back to you all the way the start of 2014. let's have a look at majors.
some movers we are following -- do we have it? we should have it. there we go, thank you. there's a headline that's out, it is unclear whether it is related to the 20% drop in share price. the headline is saying that china will crack down on manycial innovation, didn't get a contract in australia, a property developer in the philippines. we heard from a company executive saying rates are higher but it is not affecting sales. we are just coming out of the lunch break right now, seeing more games. >> all right. let's get to the latest out of the u.k. prime minister theresa may facing a tough week once again with both her brexit deal and leadership under fire. >> she is sent to appeal support
for a withdrawal agreement that faces widespread opposition in parliament. jodi schneider is with us now. and where latest, could this drama play out? >> it is going to be a tough week for theresa may. she has to get this plan through parliament, where there is a very narrow path to do that. at the same time, people who oppose her are trying to get a vote of no-confidence and get those 48 names to get it going. looks like they are still somewhat short, but that is something going on. but theresa may, to her credit, continues to push forward. she is saying that there is not -- there's really no room for distraction, she's pushing on, talking to the eu, pushing this plan that would have this transition period to try to settle that irish border
dispute. going to businesses and saying we need your support. >> what is the likelihood now that she could get this deals are parliament? >> very narrow. there's a path, and people can change their vote, but it would be extremely difficult. -- thening to be tough she started losing some of her ministers, her brexit minister. that has made it even more -- this is going to be extraordinarily challenging. but at the same time there isn't another plan, and that's the point she's making. to have a disorderly brexit, no deal brexit, would be worse than trying to do this with a transition period. that's the point she's making. we will see if anyone else comes up with something or if they have enough no-confidence votes before she even tries to get that through. ,he's going to businesses
which like the idea of having a plan that would allow more certainty. businesses like the longer transition period for the reason that progressive people don't. they see the possibility of having stronger customs ties in the future with the eu. they would like to see that. >> thank you so much. jodi schneider. this withting more on our corporate services strategist. thank you for joining us. this is an almighty brexit. where do we go next? how does it really impact business, markets, etc.? >> well, it's generating a lot of uncertainty. in terms of sterling, it is bearing the brunt of it. obviously u.k. bond yields as well. the deal itself, it is clearly
on the transition. we haven't even gotten to the stage where you are trying to negotiate the new trade deal. it's a lot of uncertainty. i think theresa may is facing a tough week. the likelihood now that there's going to be a challenge is quite if a current deal doesn't get through. it is going to keep u.k. assets, particularly sterling, quite is said to beit lower over the next few months. you might get a short-term reprieve if theresa may manages to avoid a confidence vote, but the likelihood of it getting through parliament is quite slim now, given the very slim majority she has. still a lot of uncertainty and a lot more volatility to come in sterling. ,> a range of possibilities people are saying that the pound
is untradable. do you agree with that view? it is very hard to take a strategic view over the next few months. last week it was trading around 1.5%, sometimes within that range three or four times. it's hard to take a view over a multi-month period. as i mentioned, this is only one step in the process so there's a lot of uncertainty this week. if there is a no-confidence vote and a change of leadership, the market is likely to extrapolate that this means the probabilities of a harder brexit has increased and it will underperform quite broadly. if theresa may avoids a no-confidence vote, you are likely to see a short-term relief rally, but what's the likelihood that the draft
agreement gets through parliament? it is probably still quite slim. it certainly looks like it is untradable at the moment. >> peter, david in hong kong. i want to ask you about the fed. we are going into this week with yields substantially lower. do you think the market is correct in adjusting their expectations, that the fed may not be as hawkish as we thought? >> i think it is quite valid. if you look at last week, you had powell set the tone. objectiveed that the of policies to elongate the cycle -- there's no real sign of overheating. then you had that followed up with a number of said speakers. the u.s. isn't immune to a slowing in the global economy. it has an impact on inflation and u.s. growth and the
uncertainty around trade is starting to come through. while we have a chance, we had the dollar turnaround last week, the first time in something like five weeks. the question lends itself quite gracefully -- is this representative of a turning point? >> i don't think you can call it the absolute high but we are reaching the point where the dollar is quite lofty. look at the fed expectations, particularly next year. the market pairs of some of that back, and if you look at the u.s. economy, it's a relative slowing in growth momentum. that is why you are likely to see growth in a number of other countries. europe was impacted by some transitory impacts, likewise with japan. those relative differentials should start to move against the u.s. and u.s. dollar heading
into 2019. the fed is coming towards the end or a pause in its cycle, other central banks come into focus, and the ecb is normalizing. you have? 's about how long it can stay on hold and it should be quite a positive for em assets once the said signals upon us. there's a lot of cross accounts coming through and as we head into the next few months we are likely to see a stop in the u.s. dollar. >> what is the line if this dollar strength starts to wane? is it like the aussie dollar that has seen some gains? what are these trade tensions playing out in the g20? >> exactly. it's a lot of cross currency to come through but if you look at the said, which takes some of it
out of u.s. interest rates and u.s. dollar, it should naturally benefit em currencies. a proxy in g10 is aussie and kiwi. if you look at the domestic data out of new zealand, particularly in australia, despite all the focus on house prices over the next few months, the broader economy is still doing quite well. the unemployment rate is at a multiyear low. there's still a lot of momentum in a number of sectors. if we head into 2019, i think the aussie could be a good story, but i think the market is a little too pessimistic. >> peter, thank you so much. joining us from sydney. india.ng up here, the central bank versus the modi government. we will assess which side is likely to come out on top of
♪ >> welcome back. we are about a minute into the session in india. our guest is with us to set the course on where we go from here. well, we are seeing the benchmark advancing for the third straight day and both these indices are trading higher by as much as half a percent. the banking index is also trading largely flat but we are seeing some state-owned banks. it is important to note that halfway through november, portfolio investors have put in half $1 million in equity markets. januaryest we saw since
is an important factor to watch out for. the indian rupee will be another important factor. >> all right, thanks so much. joining us from mumbai. struggle in india -- the r.b.i. is comparing for a board meeting that promises to be anything but i'll -- it's all about supervision in the allocation of funds. >> our guest has been tracking going on behind the scenes and it all came to light -- how did it come to the open? playis is a classic power the bank of india believes the autonomy and independence -- it all came out with the deputy governor of the bank of india gave a public speech saying that
they do not respect central bank independence. that is compared to a lot of on the economic affairs secretary which put out a snarky tweet targeted at the r.b.i. we've never seen this sort of language being used. tensions reached a peak when the government exercised special powers to direct the government -- direct the r.b.i. to do its bidding. it clearly shifts at the board meeting taking place in mumbai and one of them has been extremely critical. >> right. people have been questioning these nominees. of there other chances reaching a middle ground, or do you think this could get even more ugly? >> your guess is as good as
mine. it's likely to be a stormy affair. there is a bag loan cleanup believe thisthey is hurting economic activity. the second area is that the modi administration believes we have access capital. put about 20%anks of their assets as capital reserves. the government is saying let's concentrate on how much capital you need. -- third one is liquidity there is a liquidity crunch in the shadow bank system and the government believes to support liquidity. argument that it raises
fundamental questions on the and this isr.b.i. likely to be an extremely stormy affair. >> if there is no compromise, it is bad to hurt india's image. one of the reasons people invest in india is because of the institutions which are highly regarded. one of those is r.b.i. >> you are bang on. there are a couple possible outcomes -- if they do agrees on the contentious issues, then it is business as usual. if not, it could come down to boating. that is seen as infringing on the autonomy of prime minister modi may not want any outcome that destabilizes the market or
dilutes the credibility of his government that is seen as interfering with the affairs of an independent institution. let's wait and watch how this plays out. unprecedented, and we have to figure this one out. this is likely to be an they will not be taken to kindly by the market. >> thank you. have a look at jet airways. it is not looking good. last check we were down 8%, it should be the biggest drop in three years. we are down. >> it had taken a serious beating up until that point. somebody could will take a stake in the bank.
they don't have a stake at the moment, so they are not in play here. flights, 10 domestic passengers stranded because of operational reasons. preliminary talks so far -- rescue hoping to get a but that isn't happening. themarket is giving back talk in these last few days. at the moment we are trading at about 3.18. the biggest drop is about two months. the president and ceo has 24%, so there you go. >> next to come on "bluebird
♪ xiaomi's service business will report results later this evening and we have been looking for evidence that the company is becoming an internet company. in,s bring tom mackenzie with what investors want to see. be addenly there will focus on whether or not there's is any proof that this transition is happening and at what pace and speed. on of the companies revenues the latest data we have came from smartphone sales, versus less than 10% from internet services. certainly investors want that shift to happen, particularly as you see smartphone sales start all.
a very saturated market with a lot of competition. in terms of internet services revenue, bloomberg thinks the profit growth will be there and will remain robust, and that could transition to the growth the company is looking for in terms of games and music. certainly bloomberg intelligence is saying the operating system is an important factor. there are about 200 million monthly active users. factors but many couldn't be looking beyond it for online services. >> the stock has been under pressure since it's listing. do analysts see this as an opportunity? >> it has lost about a quarter of its value since that ipo in hong kong. --lysts are divided citigroup says it's an opportunity.
they came in with a buy rating on the stock and say there are opportunities for xiaomi to expand, to take its low-priced hardware and let the internet services businesses get on top of that, extrapolating revenue streams. lynchf america merrill has downgraded its rating on the stock, particularly concerned about the emerging markets, foreign-exchange reserves, and fx impact. 95% of xiaomi sales come from emerging markets. 70% of their costs are in dollars. fx is a key concern for those analysts but there is certainly division. we are going to get the results out after the close in hong kong this evening. >> thanks for that. don't forget, jd.com is out with its report has well.
♪ >> this is "bloomberg daybreak: middle east." our top stories this morning. >> asian equities post modest gains even as the u.s. and china spar over trade. tensions run high. theresa may wants british business to back her brexit plan as markets brace for a possible no-confidence vote in the u.k. prime minister. >> president trump says we may never know whether the saudi crown prince was involved in the killing of the journalist. the saga continues to weigh on sentiment. >> and as global risks rise, so too does the tightening path. ♪
>> it is in :00 a.m. across the emirates. this is "bloomberg daybreak: middle east." i yousef gamal el-din. >> i'm tracy alloway. you just mentioned the tightening path, and we have some charging bond bulls this morning. we have the yields on the benchmark, currently hovering at 3.06%. that is down from 3.23% a little over 10 days ago, which is pretty amazing. lots of people reading into the latest that the fed speak as dovish. a little bit for the bond bulls to hold on to. >> brent as well is in focus. yes, there is speculation that opec will take the supply out of the market, but then you look at
the reality in terms of rising production in the united dates, that is being priced in right now. we see the number at the highest level in about three years. then you take into consideration that the bullish bets have been cut by those hedge funds and money managers. >> yeah. speaking of the markets, let's go over to yvonne man in hong kong. let's start with you, yvonne. >> we are eking out some modest gains. certainly leaving a lot of discussion on where the g20 is going to be. that is not helping sentiment. and you mentioned richard clarida, the fed vice chairman, his views about how growth could be getting closer to neutral. that sent more upside when it comes to equities and where they go. yields are ticking lower as well. the nikkei 225, up about .5%.
china is also up in similar fashion. the hang seng is also seeing gains. the equity turnover, the lowest since july. perhaps traders are winding down for the year. the biggest loser, given the fact that energy stocks and financials are weighing on the index, with that banking inquiry taking place in australia. perhaps we are seeing volumes pretty low this week. our otherring in guest. --ian markets are up .5% what are you seeing in the trade that indicates some form of threat? >> well, it is the third a veryt day of games, positive start to the week. as you already mentioned, both markets are advancing. what also stands out is the nifty banking index, largely on account of the state-owned
banks, which are leading the index higher. the indian rupee is largely flat, but it is important to note that halfway through the month of november, portfolio investors put in about half $1 billion, the highest we've seen since january of this year, and that could bode well for markets going forward. >> right. and we have the r.b.i. also meeting with the indian government officials today. that might be interesting for market watchers. thank you so much. let's check in on the first word headlines from around the world. here's debra mao. >> theresa may is continuing to sell her brexit deal, saying her eurosceptic opponents don't have the numbers to get rid of her. a vote on her leadership has been threatened, but has yet to be formally announced. critics say removing her won't change the situation. at the same time, there are reports from the british press that michelle barnier is
proposing the transition period be extended until the end of 2022. the trump administration will issue its report into the murder of the saudi journalist on tuesday amid increasing indications that the killing was ordered at the highest level. there are reports that the caa has concluded that mohammad bin salman approved the murder, although president trump says that may never be proved. the president also said the cia report is premature. >> well, will anybody really know? but he certainly had people that were reasonably close to him that were probably involved. we saw that report on sanctions, a large group of people from saudi arabia. but at the same time, we do have an ally, and i want to stick with an ally, that in many ways has been very good. >> italy's populist coalition says it is ready to talk to the eu about its rule busting budget, but the major spending issue must remain in place.
thety prime minister says government is ready to eradicate race will programs -- eradicate wasteful programs. they are expected to reject that when it issues a review of the eurozone's ending plans on went they. spacex says it is not planning to update its rocket booster, dropping plans to make its second stage are usable. elon musk tweeted that will have only minor changes to improve reliability. willad he says spacex focus on the falcon heavy booster, with an accelerated design program he described as delightfully counterintuitive. global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm debra mao. this is bloomberg. tracy? >> thanks so much. there are rising fears of an economic cold war dividing asia after the summit in papua new guinea ending in disarray.
our chief north asia correspondent is back from where he was covering events -- what happened and where do you think things started to go sour? >> as the leaders and vice president of the united states -- mike pence and the leader of -- they castgping a very stark differences of opinions on the state of global trade, and again, there was no communique that came out. i have covered a number of different summits over my 28 years, and this is the first time i have seen no communique issued. usually they can at least agree on a watered-down document, but this time they couldn't even agree on global trade to the world trade organization and the rule of settlement process, the belt and road initiative. don't take my word, listen to mike pence and xi jingping. >> [speaking mandarin]
>> mankind has once again reached a crossroads. which direction should we choose? cooperation or confrontation? openness or closing one store? win-win progress or zero sum game? the interest of all countries in the future of mankind hinges on the choices we make. will notited states change course. until china changes its ways. >> let me make this clear. the belt and road initiative is an open platform for cooperation. it is guided by the principles of the consultation and cooperation for a share of the benefit. it is not designed to usurp any hidden geopolitical agenda. it is not targeted against anyone and it does not exclude anyone. >> the united states offers a better option. we don't drown our partners in a sea of debt. we don't coerce or compromise your independence. united states deals openly and fairly. we do not open constricting --
when you partner with us, you partner with us. >> they did not only just trade barbs but what turned out to be sales pitches to the other 19 aipac nations. the prime minister of singapore said -- this was quite surprising -- he said at some point they will have to choose between china and the united states. mike pence pretty much put a line under the underline, saying that we are not going to change our course until china changes its ways. >> excellent reporting, as always. anderson,g in hannah our market strategist at jpmorgan. she joins us from our hong kong studio. investors were for the most part clamoring. calls were quite a bit lower. investors, instead of any progress, got the possibility of
more zero-sum games and asian politics. give us a sense of your initial reaction and what this means. >> so this is perfectly in line with what we've been expecting. the dustup between the u.s. and china at the apec summit is, i think, preview of what's to come at the g20 when president xi and trump have a discussion about trade. we have been anticipating that trade tensions will continue, that there is no easy offramp between the u.s. and china when it comes to this conflict over trading practices, and it will continue to affect the region. investors are starting to price that in when their optimism may have been overdone. the apec summit is a good indicator of what we can expect going forward. aboutwere talking earlier how the market reaction has been fairly muted to an exceptional
meeting. what are you watching in terms of gauging the economic or market impact of these trade tensions? have you become an armchair soybean watcher, like i have? thosedo need to look at primary commodities, particularly on the agricultural front. i think for me, one of the biggest things investors should be watching is the details in corporate reports of their u.s. corporations that just wrapped up earnings seasons. those are the ones that are really going to be facing tough headwinds. >> these trade tensions are only going to weigh even more on global economic growth, and that appears to be trickling through to some of the fed conversations. we put together a graphic to show what's happening. it rose by 4% in 2016. it used a little bit last week.
what do you think the possibility is now, that we will see a fed push the possible? >> so i think while trade tensions will remain a pressing andern for investors geopolitical turmoil creates a lot of headlines, when it comes to the fundamental investment outlook you need to be a little more nuanced in your interpretation of how it feeds through. interest rates are rising because the fed is hiking rates. the fed is hiking rates because the u.s. economy is in a good position. while you might see a little bit of growth taken off the top from rising trade tensions, it is still going to continue to grow. it looks to be late cycle but not as late as you would expect. i think the fed will continue to hike rates. >> should the fed be worrying about international developments? not necessarily in terms of impact on the economy, but on
the impact of u.s. dollar denominated assets? we have seen some color commentary from morgan stanley, who sees waning appetite for that. there's another drop in overseas purchases. if you take a look at u.s. treasury yields versus the equivalent in terms of fx hedged returns, you can see that jgb's are yielding more than u.s. treasuries. >> you certainly do see some u.s. dollar assets becoming less attractive, and we do know that the fed looks at international developments. but the channel the fed looks at his financial conditions, and because you get a little tightening from a high dollar -- so far they have been able to leave financial conditions where they are and keep tightening interest rates. if the dollar takes some decline, it is because we see asset reallocation. that actually eases financial conditions and reinforces the stands that they need to keep hiking rates.
youo where does that leave in terms of protecting where 10 year yields are going to go? we are off the seven-year high of 3.26%, currently at 3.06%. where is it going to go? are going to we see some sustained rise in 10 year yields left to come. this recent movement notwithstanding, the core interest rate as set by the fed is rising, will continue to rise, and i think we are headed up into the mid-3's. >> all right. we still have a lot to get to. hannah anderson stays with us. let's get you a snapshot of what's coming up. saudi shares fell the most in more than a month as u.s. argue overfficials the journalist killing. >> up next, theresa may prepares to ask british business to back her brexit plan as markets brace for a possible no-confidence
♪ >> this is a live shot of the sun rising above the financial center. u.s. equity futures are called a little bit lower. around the progress trade tensions between the u.s. and china weighing after the optimism late friday. let's talk about the other major story we are covering, theresa may. she is continuing to sell her brexit deal, saying eurosceptic opponents don't have the numbers to get rid of her. a vote on her leadership has been threatened but has yet to be formally announced. critics say removing her won't change the situation. >> i am not going to stand in
the tory leadership contest. i am supporting the prime minister. i will not be supporting anyone who is sending letters, and in a vote of confidence i would support her. >> meanwhile, there are reports in the british press that michel barnier is proposing the transition period to be extended to the end of 2022. hannah anderson is still with us in our hong kong studio. this is a sense of the volatility that we have seen in the sterling trade. is theresa may going to survive in the next few days the kinds of challenges she has? >> for investors, i don't think that's particularly a relevant whoever is in charge of the brexit process, it is still
a brexit process and that is what markets are focused on. unless that changes in a way that alters the text that seems to be taking shape, it really doesn't matter that much for investors. that being said, there are going to be a lot of headlines over this, and we need to buckle in for more volatility. i totally agree that what we've seen is a lot of headlines and talk. brexit is still ongoing. but you have people like alliancebernstein, saying they think assets are uninvestable because of the discord in the chaos caused by this process. is that something you would agree with, or do you still see some value in certain u.k. assets? >> i think investors, if you can stomach the volatility, there may be some opportunity. keep in mindto that a lot of u.k. assets are drawing revenues from the u.k. the vast majority of the revenues in the u.k. equity markets come from outside the u.k. ratets should be a decent
and feasibly achievable. you need toaid, take currency exposure into account. volatility could really mess you up when it comes to making a reallocation. i can see how you are trying to separate the noise from any meaningful shift in the trajectory of the story. but i want to get a sense from you about what is the biggest risk in the wider brexit process? that could trigger a much bigger selloff that would concern you, more importantly. >> for me, when it comes to the u.k. exit process, what i think be the biggest fundamental altering of the narrative would be a political development in europe or the u.k. that would
require a rewriting of the text that has already been agreed to in a way that draws a much firmer line between the u.k. and eu. >> brexit clearly means volatility but we have seen volatility creep into the wider markets. what are you telling investors when it comes to hedging that risk? >> when it comes to higher levels of volatility, what i'm telling investors is you need to have prepared for this to happen. there are higher levels of volatility and as an investor you may not want to spend the cost hedging against it in a wholesale way when you know that's a normal part of late cycle behavior. you look atn reallocating your portfolio toward higher-quality names and more core areas of asset allocation, you may be able to avoid some of the worst things but you will not be able to run away from it completely. >> no escape.
♪ >> we have the bank of japan governor haruhiko kuroda speaking in tokyo this morning. most of the lines coming through from the event seem to be squarely focused on financial stability and japan's banking system, maintaining stability on need toe, but banks potentially lower profits if competition starts to grow. also talking about the impact of aging on bank business models, saying they need to adjust the business model for the aging challenge. obviously demographics in financial stability to long-running themes when it comes to the japan story. >> absolutely.
they just had their bond purchase announced, that they left unchanged at their regular operation a couple hours ago. this is a regular routine for them, the latest decision was october 31 and the next one will not be until december 20. we could get some color on some level although stories and speeches have not necessarily yielded anything fresh. >> right. let's see if we can get some fresh material from debra mao. >> telecom italia's decision to name a new ceo marked another victory for elliott management and its push for a radical overhaul. merrillse a former lynch banker. entrenchedn influence.
google cloud is having a change of leadership. the ceo will step down in january and will be succeeded by a former oracle executive. he will join the operation later this month and will work alongside her until she leaves. google cloud expanded rapidly under greene. she says she intends to remain on the board of the google parent, alphabet. money laundering whistleblower fully committed to work during -- working with danish parliament under the bank secrecy laws. the baltic trading operation went until april of 2014 and left after alerting management to a suspicious amount of money and later spoke out through the media. and that's your bloomberg business flash. >> thank you very much. let's get a quick recap of what happened.
it was a mixed picture. reaction to airst very heavy week of news flow around the killing of the saudi journalist. the dow losing 2.16%, capital goods, media, consumer services. banks including the heavyweight names on the index have a national commercial bank. there's slightly less liquidity off the back of the regional emirates. with .8%, a through it is reallyt 2.1% stocks are coming in stronger after the last few trading sessions. let's get you a snapshot of what's coming up.
♪ >> it is 11:30 a.m. -- excuse me, p.m., in new york. this is midtown manhattan. the bloomberg index ticking higher, a little over .1%. u.s. treasuries holding onto their recent rally after a bunch of speculative accounts rushed to put some of their short positions. we will have to wait to see if it goes into the new trading week. let's check in on the first word headlines. the apec summit wound up in papua new guinea by failing to issue a joint communique for the first time since the event began in 1993. china balked at the wording of a statement on trade, objecting to
the use of the language in a pledge to fight all unfair trade practices. the u.s.-china trade war overshadow the talks, and the sides traded barbs in back-to-back speeches. japan's exports rebounded last month after their first a klein in two years back in september, when the series of natural disasters jolted the economy. it rose 8.2% from a year earlier, below forecast. the shipments to china advanced 9%. imports climbed almost 20%, with a deficit of $4 billion against estimates of $620 million. theresa may is continuing to sell her brexit deal, saying her eurosceptic opponents don't have the numbers to get rid of her. a vote on her leadership has been threatened but has yet to be formally announced. may told her critics to removing her won't change the situation and there are reports from the british press that michel barnier is proposing the transition period be extended to the end of 2022.
the israeli prime minister benjamin netanyahu says the nation is facing one of the most serious security challenges since the founding, and cannot afford an early election. he made a last appeal to his government, stressing his security credentials and why he will take on the defense portfolio. last week, the defense minister brought the government to the edge of collapse. >> during such a sensitive time for israeli security, it is not right to come to elections. we remember well what happened with elements inside the coalition taking down the government in 1982 and 1999, when we had the oslo disaster. we need to do everything we can to prevent repeating these mistakes. >> global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm debra mao. this is bloomberg. let's get over to yvonne man for a look at the markets.
at what we arek seeing when it comes to equities. we are seeing a mixed picture when it comes to stocks. the philippines really gain some influence, up close to 2%. the rate hike we saw last week has lifted. we are seeing singapore down a about .6%. we are seeing some strength coming into the japanese currency this morning. broadly speaking, we are seeing more dollar strength. down on theto note, back of those gdp numbers for the third quarter in thailand. bigger loss than expected, a 3.3% growth, which missed expectations by quite a bit. the market is now pricing out the probability that we could be seeing a rate hike in the next december meeting. we are seeing it on the back of this dollar strength, losing the
strength we have seen recently. it begs the question of whether we are reaching a peak when it comes to the dollar. take a look at the greenback. we are snapping out of five straight weeks of gains when it comes to the weekly gain we saw in the greenback. it means we have reached a peak. morgan stanley joining in on that course, saying it is time to sell the dollar, given the widening credit spread and falling stocks, which could start to hurt the greenback over the long-term. take a look at what we are seeing when it comes to em. that will help the developing nations stocks if we take a look andhe performance of the em they are starting to outperform what we are seeing in the u.s. and that part of the world stop one thing we are watching here is a jet airway -- this is the
biggest drop we've seen in two months after we learned that 10 domestic flights have been canceled due to operational issues. there was a report of a shortage of pilots and people had been stranded which hit the optimism we got on friday. been -- xiaomi has been the one to watch. the big question is will they start to deliver when it comes to the internet side of the business. local reports are saying one company is now looking at cutting the salaries of their senior executives to bring down costs. that is certainly weighing on the stock today, given the uncertainties we are seeing in the u.s.-china trade war. there is some optimism about this tech board that china wants to launch.
>> a nice overview. let's stay with the markets and talk about saudi arabia and stocks, which declined most in the month yesterday. the index fell more than 2% as the journalist news weighed on sentiment. let's bring in jacob to shankill. still a lot of liquidity coming back online -- we could see even more in the next few hours. >> yes, we saw volatility picking up yesterday. it was a declining trade for about a month now. this goes back to the level of where he was in october, the worst-performing session since the middle of october. scenariock to this where we were in the peak of attention. ideas forave a lot of
what might come up over the next and we could clearly see more sharp moves, especially with the big names in saudi arabia. yesterday we saw a sharp decline within the banking industry in saudi. stc telecom, all of them have a very important take. there could be a very clear reaction today. >> good morning. tracy alloway in hong kong. walk us through what you see in terms of the flows going into the saudi stocks. what have you observed so far? fromacy, we have numbers oft week, since the end thursday. we saw again that qualified met withnvestors were
4-6 trade weeks and it's important to note that it was the highest for almost a month. if you look back to the moment where we had the peak -- there was a pick up in the selloff. this very specific and important these numbers do not reflect what happened yesterday, and they still show the picture of a week that was probably, than the one we are going to see starting today. we can see a pickup in these outflows, and we are talking about a very number. they have been trying hard to bring this money in, to convince the international investors that this is the right moment to put their money to work. it is definitely not good for the saudi stocks, for the companies, dan for the authorities to see this money going out. >> let's talk about the uae.
religious holiday on sunday, and on monday we will see first reaction. they follow the saudi's lead in many cases in terms of sentiment. >> that's true. usually uae markets react to geopolitical tension in a much sharper way than other markets in the region. yesterday, the markets here were closed. trading,her markets but that is not what we could say -- dubai has been going for a very bad moment when it comes to volume of trade. the big stocks are not at the best moment, and for example if we look at more properties, they have the worst week since june. numbers were not good. they are trading at very low could be morere
♪ >> it's a little after 1:40 p.m. in tokyo. we have the japanese trading at 112.74. a little bit of strength creeping into the u.s. dollar market this morning. but we also have analysts warning that there's waning appetite for u.s. dollar denominated assets, all of which would be good news for emerging markets. our guest on to standby in mumbai.
emerging markets have so far seemed to be shrugging off the trade fears. ?ow was india faring >> india fared rather well. indian markets have done butonably ok for themselves frankly if we look at the msci market index, you can see a decoupling of the last few sessions, that emerging markets have done well. that clearly shows you how the emerging-market -- the currency is stable, the bond is stable. we are in fine form, is a good
start, arguably a good end. >> but as you know, we have event risk coming up in the form of that r.b.i. board meeting -- what our markets actually bracing for? >> we are hoping it doesn't turn out. the last 15, 20 days everyone has been talking about this, and whether the tussle between the government and bank comes to a head. this those issues are met amicably we won't have a cause for alarm but if something untoward happens, it's a bigger threat than the g20. i must say before i sign off, liquidity and currency markets are approaching this event in a decent fashion. the currency levels have strengthened quite a bit versus a couple months ago, which have
done reasonably well in the run-up. markets are pricing in nothing untoward, but if there is no amicable solution, than the currency for starters and equity markets would follow -- one hopes that doesn't happen. >> thank you very much. let's get back to this part of the world and talk about president trump. he says the u.s. will issue a full report on the killing by tuesday but is denying media accounts that it includes mohammad bin salman ordering his assassination, giving this assessment in an interview with fox news. >> well, will anybody really know? will anybody really know? he did certainly have people that were reasonably close to him, that were probably involved. we put on massive sanctions on a large group of people from saudi arabia, but at the same time, we do have an ally, and i want to
stick with an ally that has been very good. >> bloomberg's executive editor for the middle east joins us on set. this report that the are keen on issuing, it has to check a lot of boxes and competing interests. do we have any sense of what could be in their? >> "the washington post" seems to be pretty sure that the cia concluded that he was directly involved in the killing. it is something that trump doesn't seem to want to accept. hass saying that the cia not reached that conclusion and that we will see a full a report tomorrow. we will have to wait and see what is published. but what is clear from the fox news interview, he is still really struggling with putting the finger of blame on mohammad bin salman on. he wants to separate the crown prince even though he excepts -- theyple close to him
hem to be reporting that should have known, that he needed to have known. >> right. i want to press you on this point. trump is also saying he has so far refused to listen to that tape. why do you think he refuses to do that? surely at this point critics will say it is willful ignorance. he is saying it's a terrible tape and he doesn't want to beenn to it, but he has consistent in saying that saudi arabia is a key ally and mohammad bin salman on in particular is a key ally to the efforts against iran and the relationship of israel that the trump administration seems to be working on. but above all he is mentioning the massive contracts that they have signed with the united states, weapons purchases, other purchases? -- creatingthing
jobs for u.s. citizens, he has been big on that. he has really sold this to his electorate in big success. moving away from mohammad bin salman would put that success in question. >> all right, our executive editor for the middle east and africa, thank you for joining us, for walking us through the chess game of geopolitics. xiaomi is internet services business will be firmly in focus from the tech firm reports results on monday evening in hong kong. investors are looking for evidence that the company is he coming less reliant on hardware sales. our china correspondent joins us from beijing. what exactly are we expecting from xiaomi? well, exactly what you are theyo, which is managing to transition to becoming less dependent on smart phone sales, as they expect to
produce less profit going forward? deriving more revenue from the internet services, the founder being so important going forward? until now the last few courses have showed that 70% of revenue comes from smartphones, than less than 10% comes from the internet business. they will want to see that transition happening, and they want to see it in third-quarter results. the stock is down about 23% since the ipo in hong kong in july of this year, and analysts are pretty divided. citigroup came in with a rating that is a buy, saying xiaomi could do pretty well by expanding overseas. the company says they are already notching up sales in spain and other parts of europe. india is a major market for this company beyond china. but on the flipside, you have the bank of america merrill lynch downgrading their rating, saying there's a big risk that
xiaomi will be hit by emerging-market foreign-exchange as a result of the fact that 90% of their sales take place in countries like india and china. 70%have the chinese yuan, of the bookings are the costs. that is a potential risk, according to bank of america merrill lynch. of the 24 analysts that look at the stock, 18 have a buy rating. they expect the stock to increase from where it is now, we will find out who is close when we get the third-quarter results at the end of play today, hong kong time. >> the stock price has seen the steep declines. great to see you this morning. tom mackenzie joining us from beijing. let's get back to this part of the world. developers are planning ahead with new bills, but growth in dubai has noticeably slowed. real estate prices are plunging,
stock markets having its worst year since 2008. reporter is looking at why dubai is losing its shine too many investors who favored it in the past. what is exactly unfolding in dubai? >> there's a change of paradigm. some of it is structural and some of it is a matter of supply and business that continues as usual. the amount of supply that developers are throwing into the that is outstripping the demand for population growth, for spending tourists and investors. here there is a structural shift in the region that dubai has nothing -- is not able to effect --h, the region is becoming the rest with qatar has hit a lot of people in confidence in
the region. they always look at the gcc as a bloc that you can put your money into it and it rolls off the conflict of the region and now it is shifting and changing and making a lot of people worried about bring their money here. >> right. on that note, what kind of response have we seen from the authorities so far? it feels like they really have to balance the need to raise more revenue with the need to make the uae and appealing destination. >> absolutely. dubai has been really proactive about this. they reached out to business executives for a meeting to ask what they can do to help and so far we saw a flurry of invitations -- they decided to play with schools and have been trying to redo the cost of living and doing business.
they have been relaxing visa rules for foreigners. there's quite a bit that's happening and a lot of these decisions aren't concluded. we will hear more of that throughout the year. >> one of the biggest issues is the property prices. just a couple days ago, you made the argument that regulators should not intervene, that this is going to sort itself out over the next two to three years. why do they keep building? that's the fundamental question. >> this is the question everyone says. why do they keep giving permits when they say it is sinking the market? the answer to that is that the gets aovernment lot of money from the sale of properties. a lot of the big developers are throwing a lot of supply in the market, in the government of dubai has some steak.
we talk about dubai properties and so on, but there's a lot of supply coming to the market. dubai willretail in be increased by 50% in three years. in a markete amount that's already facing a downturn. >> yeah, that's a stunning statistic. thank you so much, fantastic story. you can find it on the bloomberg but it ismberg.com, time now for size and scope. every week we break down one superlatives and today's number is69% your to explain why our friend from the hong kong studio -- walk us through the number. number today is taking a
look at the gap between the share performance of nintendo and analyst forecasts. it really got hit pretty hard on friday. there was an analyst downgrade and expectations from a key supplier, nvidia, that is forecasting weaker -- it translates because they are a key supplier for nintendo. and we are talking about the holiday season already, so there some concern about the nintendo switch, their popular console, and how it will perform. it all translates to a really big yap. in what analysts are forecasting and what the market is telling us. i admit my personal bias because i have fond memories of spending hours and hours on my nintendo game boy. what exactly are the challenges the company faces? back then, it was this huge name and video games. >> obviously they have steve productsrs in the sony
and sony's playstation. they also have some games of their own that they will be pushing at. they just released a new pokemon game for the switch, which they have high hopes for. they have another release in december which they hope will do well. and when you are looking at next year, you also have detective pikachu, scratching the live action pokemon itch we never knew we had. obviously if they do get those sales then a lot of these problems will go away. >> detective pikachu aside, what else are they doing to bounce back? >> i would say the fact that the analysts overall -- a majority of them have a buy rating. the fact that the gap even exist 's show that the analysts still have positive expectations overall. it's just that there's been a
value gap that has come out. >> eric, thank you for that round up. let's check back into these markets. the msci asia-pacific index coming through with some upside, stocks in china trading a little bit higher stop important to point out brent crude futures, this is off the back of six weeks of losses, considering a return to output costs, which cut their bullish positions. u.s. 10 year yields, it is the very epicenter of a global, contentious conversation. treasuries gaining as the u.s.-china resolution outlook is fading. that's the reality in southeast asia, and that shows you why we are the way we are with u.s. equity futures. that is the situation as it is