tv Bloomberg Markets Asia Bloomberg December 30, 2018 9:00pm-11:00pm EST
out the year that many would like to forget. so many headwinds. it does seem to continue for the time being. yvonne: but that phone club between president xi and president trump, both saying progress made in trade negotiations. we will see what that means in january with mid-level talks. the markets are open, not a whole lot. we have the likes of hong kong still trading but we are headed to a shortened day. we are 1% higher. singapore as well as australia, sydni stocks up .6%. india will be open here today. all looking positive given these headlines. the pmi figure coming out of china showing some disappointing signs. the first contraction we have seen since july 2016.
perhaps, we are still struggling to find a bottom. let's look at futures. we are seeing a softer dollar story. most asian currencies catching a decent day. let's look at the u.s. futures as well overseas. still pretty positive. futures .5% given the trade headlines. oil also catching a bit here today as well. currencies.t we mentioned the dollar as the safety haven trade for much of 2018. but the yen has done pretty well. in fact, the yen has appreciated for three straight years against the dollar. i guess you can say it shows how risk-averse these markets are. we can look at the japanese economy in general. relatively speaking, it could be doing a little bit better than the rest of the world at the moment. we are seeing that haven bid when it comes to the yen.
some say perhaps we could see signals of that, given the volatility we have seen in the first half of 2019. and any change from the boj on qt and tightening as well. we have seen some signs of that. bond buying has paired off. su keenan now joining us with more. su: we start with china with plans to rein in lending by regional banks. the banking and insurance realtor commissions says those lenders, including world cooperatives, must have proper licenses orioles wind down their businesses. smaller, regional lenders have become major rivals a shadow banking in china as they seek ways to enhance profitability. south korea says north korean leader kim jong-il and wants more -- kim jong-un once more summits. south korea's president's office personal letter
of well wishes over the weekend. meetaid he is willing to more often in 2019 to achieve peace talks and a more nuclear free korean peninsula. the u.s. will welcome the new year with the government still in partial shutdown. little indication of any imminent agreement to resolve the standoff. some 400,000 federal employees are working without pay. furloughed. president trump has stepped up his attack on democrats, blaming them for the death of two children at the border with mexico as he stresses is demand for wall funding. and on the brexit front, liam fox says the chances of brexit happening are only 50/50 if parliament rejects theresa may's withdrawal agreement. fox told the sunday times, if lawmakers vote down the deal, there will be a sense that the government had betrayed the people who voted in the
referendum. fox says that it is a matter of honor for lawmakers to back the prime mr., and he would rather asked -- the prime minister, and he would rather accept the deal rather than brexit failure. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm su keenan. this is bloomberg. ♪ china's manufacturing sector contracted for the first time in two years. the possibility of a long drawn out trade war. yvonne: stephen is here to break down the china pmi numbers -- stephen engle is here to break down the china pmi numbers. stephen: it was the same rating as the previous month but it did enter contraction, the official manufacturing pmi, at what he 9.4. missing the consensus surveyed
by bloomberg. it is the first time below 50 in about 38 months. we haven't seen this kind of pessimism since the beginning of2016. new export -- of 2016. new export orders was 46.6, down from 47. they further indication that perhaps these tariffs and the trade were with the u.s. is further hitting the manufacturing sector. the official pmi muslim effects -- mostly reflects the optimism. has lesscturing pmi activity in construction, the service sector, including telecom and property, rising to 53 point eight from 53.4. some analysts comments, the slowdown will continue into the new year. this according to larry hu at
macquarie securities. he says a week pmi could result in more government stimulus even though we got comments friday from the pboc officials saying that maybe it's not the case that there will be more accommodative policy coming from the pboc in the new year. rishaad: the phone call on saturday between xi jinping and donald trump, what do we know about it? do we get ahead of ourselves? stephen: we always get ahead of ourselves are the market gets ahead of itself and bulls back. there's a -- and pulls back. there is optimism. progress had been made on the trade front in the negotiations. the u.s. delegation will be headed to beijing a week from today, at least at the beginning of netsuite, january 7, to get the -- beginning of next week, generally seven, to get face-to-face talks.
economic the chief right hand man of xi jinping went to washington when he thought he had a deal with steve mnuchin and company. is this progress? sure, but how much is it? negotiations are at a vital stage. china wants china and the u.s. to meet halfway in the disputed issue. yvonne: let's bring in our next guest, hannah anderson at j.p. morgan. good to see you. we have seen these measures from china on the trade front. some folk calls -- phone calls being dolled up. does that give jpmorgan confidence that the trade truce in march could be extended next year? >> any turn in sentiment is a good in sign -- a good sign. seeing the leaders strike a
positive turn is encouraging. however, keep in mind that those two parties are only at the very head of their negotiating table. more has to be done by the policymakers who will be meeting on the seventh. when you look at the messaging from the white house, with a more positive tone, it is an interesting contrast to what we saw from various u.s. agencies. we saw the commerce department highlighting all the work they have done, trumpeting their own actions. it was a very hawkish statement towards china. the actions over the past year that secretary ross was trumpeting as achievements this year were getting tougher on china. while any positive sentiment is a little more encouraging, it will lift markets. and it's a little too soon to get optimistic on the actual project -- actual prospect. china has agreed to a
third round of tariff cuts starting tomorrow. they resumed soybean purchases and will buy u.s. rice. they have temporary lowered the retaliatory auto tariffs. these are measures that china was going to do anyway. -- isgger issue is 2020 china 2025. there is also intellectual property rights protection, whether china is making deliberate moves on these. >> -- deliverable moves on these. >> that is the key word, deliverable moves. most of what it has put forth as policy proposals are that same things that were on the table that were unacceptable to the u.s. administration. when it comes to the 2025 initiative, it is its own domestic economic goals. i don't think.
we can get excited about an abandonment because of a sentiment change. yvonne: some lines coming through from nhk come at imports from japan saying that the tokyo court has approved the extension carlosrlosh -- of ghosn's detention. rishaad: he will be held now until january 11. there he is. please, hannah, carry on. lots more to discuss. where are we with the trade talks, would we go next. yvonne: plenty more to talk about. the fed in 2019, the bond currencies in the -- a look at bonds, currencies, and the like. this is bloomberg. ♪
clouds hang over markets. one of the dark its is president trump's repeated attacks on jay powell. is there any chance of a truce in the new year? rishaad: kathleen hays is here. it is not just donald trump criticizing the fed. a lot of respected personages as well. kathleen: many market participants. irony is, the more the president has publicly criticized the fed and jay powell, the more it seems to be one of the many factors that he markets so hard, particularly last week. a new -- a bloomberg news team in washington followed up on a story a week ago that they are trying to arrange a meeting between these two men. it comes after the repeated attacks. maybe they are trying to have a rapprochement. is this really a good idea , they may saywell
president trump? el-erian, a barrel -- a bloomberg view columnist, now that chief economic advisor to on that owns -- it talks about the things that powell can do better. here is what he said. is understanding that it needs to communicate better. it needs to do two things in particular. juan, show that it is more sensitive to the markets and what is happening outside. what the president has called sentiment feel for what is going on. the fed has to realize that he cannot keep a really important policy tool on automatic pilot.
it needs to be more sensitive to what is happening. i think the fed can regain control and we can stop the self-inflicted wounds. kathleen: also on "face the one guest was asked, look, the president cannot fire the fed chair unless he is doing it for cause. he said powell is doing a good job. yvonne: the fed had a slightly more dovish message. exactly are they saying is driving the forecast now? kathleen: goldman sachs, like other people, say that the signs in the u.s. economy says it is not so robust, especially in the
housing. lookingcast for 2019, for for rate hikes in 2019. now he's got that down to 1.2. so let's call that one rate hike. that is a big change. from 2%the gdp forecast to 2.4%. he seems to be getting in step with what the markets have been saying more and more. the blue line is the fed rate hikes today. the white line is expectations for rate hikes next year. you can see that is way, way down. jay powell will speak on a panel later this week at the american economics association with ben bernanke and janet yellen. they meet next on generate 31st. -- january 31. there's plenty of chances for the federal reserve to give us a signal amid growing concerns about the slowing global economy. we saw the slowdown in the china pmi today.
it is something that policymakers need to be watching closely. rishaad: kathleen hays. us back to's bring our guest. communication the biggest risk for the fed next year? >> communication is always a risk for the fed. it doesn't matter really what the fed is doing. the markets don't seem to be particularly happy. we have seen this throughout come even when the economy was booming in early parts of the recovery, when asset prices were booming. investors were not quite happy with whatever the fed gave them. forward,that, looking the fed is likely to return emphasizing its data dependency, which i think is the right thing to do. rishaad: how does data dependency set alongside being on autopilot? they do seem to contradict one another. however, we need to differentiate that parts of the
fed policy that may be data dependent versus what is on autopilot. what is on autopilot is the quantitative tightening. that will probably continue throughout 2019. the fed does want to remove some of the distortion added to the fixed income markets. what is more data dependent is rate hikes. when you look at where the u.s. economy is versus what markets are telling you about the economy, i think the fed is caught in a bit of a trap. if you look at the and employment numbers out of the u.s. the fed should tighten. if you look at inflation, the fed should tighten. if you look at the markets, potentially, there is a bit of instability that the fed seems to have gotten fixed abide. we are seeing this trend locally with central banks, moving to a more macro prudential, mobile stability, financial stability. you see the single mandate with inflation and a dual mandate for climate and inflation for the
fed. i think we will see more fed-induced volatility as the message shifts over the year. yvonne: do you think these turbulent swings over christmas week -- what does it mean for sentiment stock? does it feed the selloff we get the negative feedback that rish had mentioned? or do you look at valuations, do you see that it's a screaming buy at the moment? or do you look at the vix, which could be elevated to 35 as well? >> volatility begets more volatility. investors. but if you look at the last two weeks versus what will likely happen throughout january, we will probably see a bit of a bounceback because it does seem oversold at this point, based on the fundamentals of the u.s. equity market. but you can't discount from the long run perspective what those signal, which is what investors are pricing in. rishaad: probably pricing and more than that currently.
then you've got the government shutdown on top of all this. does that have a market impact? >> i think so, simply because investors pay a lot of attention to political headlines. there ise -- but little direct impact on the stock market and onto the economy outside of the consumer confidence channel. -- we't underestimate i's can't underemphasized the impact of the u.s. government shutdown. the u.s. workers make a small but it'sf the workers, a lack of confidence and stability. from a u.s. perspective, i do think is political headlines will be more important in 2019, which 50 back into what we were talking about, a negative feedback. yvonne: i guess we're looking at the next catalyst for upside. you see growth signs of a slowdown.
when it comes to valuations, have we reached a new paradigm where they will be materially higher than average now? >> i think, from an earnings perspective, we will probably see positive earnings. but i doubt we will see positive earnings, the growth of a level at which would surprise investors enough to create a big positive lift in sentiment. simply because we see year-over-year gains will probably be smaller and earnings, but also because we will see more margin pressures in the u.s. from rising wages, higher inflation, etc. that will all lead into -- all it into margins. not as positive as what would create surprise positive sentiment among investors. rishaad: hang on with us. yvonne: catch up on all our interviews on tv .
yvonne: the latest business flash headlines. back on track after the delayed opening of the flagship store in beijing. the event was on hold as tensions between canada and china has collated over the arrest in vancouver of huawei executive. rishaad: it is the rise of the -- to keep sports program flowing to customers. the deal was due to expire at 5:00 p.m. new york time.
yvonne: the ft is reporting the china nine-month freeze on videogame licensing. the chinese gaming executives said it could take months for officials to clear the more than 5000 games waiting for approval sors.nso -- by cen markets we have many shut for the day. sia equities on a bit of a [indiscernible] stable progress as xi jinping describes the talks with donald trump.
maybe it's all been priced in the chinese economy. the first contraction in chinese manufacturing pmi since 2016. it raises the question of how much of a stimulus measure are we expecting from beijing next year. not seeing a quite yet. the hang seng up 283 points here at the moment. we have been talking about the volunteer today as we count down to 2019. a look at what is going on with the likes of trade. here from 22% lower the peak that we saw back in january. rishaad: it will take a lot to turn this around. it is the worst year for global equity since 2008. these are the movers in hong kong. yvonne: there is a lot of confusion. they suspended the stock last year on reports of
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free shipping too. just go to buyleesa.com today. you need this bed. su: i'm su keenan with the first word headlines. activity at china's factories exploding after concern of the slowing economy. manufacturing pmi came in a 49.4, compared to the average of executive 50. it was the first contraction since july 2016. nonmanufacturing pmi beat expectations, coming in at 53.8. has revised down its u.s. growth forecast for the first half of 2019, and further trimmed its fed rate hike expectation. a chief economist wrote a client
note that the bank now sees 2% growth in the first half of the new year. that's down from 2.4%. to hikes inbably 2019. that compares with an earlier forecast of 1.6. italy's parliament has approved meeting audget law, deadline after a standoff with the european convention desk commission -- european commission. they agreed to lower a 2019 is it targeted 2.04%. the initial 2.4% target was rejected by brussels as breaching eu rules. the blinded they see -- the leader has won elections.
seats are being contested. but the opposition has called the vote "farcical." it was the prime minister in position to extend her rule as the longest since its independence in 1971. that's latest. back to you. the united states will begin the new year with the government in a partial shutdown. jodi schneider is here with more. yvonne: bring us up to speed with the shutdown. are there any signs it could be ending soon? really.t . the house down the senate had a very short session today. they will be taking any votes. there's really no given the positions. president trump has said he wants $5 billion for that wall
at the u.s.-mexico border. democrats say that it is ineffective and wasteful. they are standing on the opposition. however, there are some lines of kim between the democrats and the white house. we will see what happens with that -- lines of communication between the democrats and the white house. we will see what happens with that in the new year. the smithsonian institution says, in a few days, it will closed the museums and it will not be operating. that is a visible symbol of the shutdown. rishaad: did they sayrishaad: -- rishaad: is there any potential for a solution? maybe donald trump is lessening his will for the wall. jodi: new congress kicks off and democrats are in charge of the house. so likely nancy pelosi is the speaker. at that point, they will likely
take a vote for spending without the wall money. perhaps we will see some negotiation. there is talk that trump may not mean a wall. the wall is not necessarily what he is talking about. what he is talking about is some kind of structure, a barrier, steel slats. perhaps there could be a solution or importer security funding that the democrats might be go -- be able to go for. but that is after they take a vote not to fund the wall. yvonne: talk more about the wall. will that still be the dealbreaker here? is there any kind of compromise you can see between the democrats? jodi: perhaps. this will all be about border security. democrats say that they support border security. it is hard not to support supporter -- support were security. rishaad: we are showing all these pictures of different types of fencing. [laughter]
lately, they are saying things like it's a structure. there is something we need there. perhaps, a figure be something that was not so much of a wall that also dealt with immigration issues and more of a border security funding kind of thing, that is something perhaps democrats go for. they cannot come in good conscience, they cannot acquiesce to the demand for the $5 billion for a wall. they have been against it since the beginning. when they are in charge for the house, they will not go for that. perhaps, there's something around the broader issue once the house would go ahead and come up with something that the white house and the senate said they would take it up. but they would only take it up at that point. the senate will remain a republican control in the new year in congress. rishaad: thank you. we've got [indiscernible]
hannah.ing to ask a lot of people that we talk to say that it's down to algorithms, down to robots. us perhapstory tells we have been seeing gyrations that have not been as violent us today. back in 1929, a 45% down into months. black monday in 1987, 31% well.de in 15 sessions as perhaps the volatility we are seeing pickup is something that is business as usual for us. but again, we are dealing with different issues, the trade were a particular, the government shutdown. let's bring hannah anderson back from jpmorgan asset management. what do you think this is about? is it about trickling liquidity and the structural issue when it comes to the algorithms and
passive funds? or do you think this is bad fundamentals at the moment? >> i don't think fundamentals are that poor. however, sentiment has deteriorated on the basis of the news flow. whether that is concerns about the fed, concerns spurred by the treasury department about the liquidity of banking systems and tightening liquidity overall, on top of that passive trading and algorithmic trading, it's a toxic cocktail for markets. have lowrly, we may trading volumes are on the holidays. that may amplify those moves. is it as bad? later in the cycle come as the fed continues to tighten, whether passively or actually hiking rates, unfortunately, we will see more volatility. rishaad: this is definitely the year for active management. 2017 was the reverse. >> the happens when you see
periods of rising volatility. in 2019, you will see more of that. there will be higher volatility simply because there will be a deterioration in fundamentals as the economy slows and the we see markets react to that isn't simply, ok, it is a binary recession and not a recessionary environment. any slowdown in activity, the market tends to read as recession. yvonne: what is the allocation? what is the right kind of allocation? you say that single-digit earnings and estimates -- single-digit earnings. is that a rally that sustains itself also? >> for the average investor, you need to be careful you are not too spooked by the short-term volatility in markets just because you are used a low volatility the last couple of years. valuations in the u.s. equity at an right now are point.ive entry
but investors should be moving their portfolios slyly more defensively. whether that is reallocating desk slightly more defensively. whether -- slightly more defensively. throughting to think the strategy want to put in place in your portfolio heading into a recession, which we will probably see in the u.s. sometime in the next couple of years. yvonne: that is -- rishaad: that is a been there has been factored into the markets. surely, the year that we've had, it is a situation that people are wary to did in -- dip into the water. >> we are seeing investors have a more capital preservation conversation rather than what gains can i make in the next couple of months. and for some investors, that means looking outside your traditional assets. we see more conversations and more interest in more
alternative traditional strategies. and there is a liquidity premium that comes with that. we see investors more comfortable with tying up their capital for longer if it means preservation of that and being able to sit out some of the volatility. yvonne: we see the asian markets less durable. in the u.s., we see some signs and the equity market. how do you see the region overall? >> it has been a tough year for emerging markets, particularly in asia. we know asia is one of the engines of global trade. any kind of pull down, especially between the u.s. and it effective sentiment more this region more than another's. for an asian investors -- more than others. for asian investors, i do think we are seeing a rising interest in income generating strategies, which i think is a reasonable place to put your money considering you are looking at a more volatile year globally in equity markets, not just about
the u.s. additionally, i do think that investors here need to be concerned about currencies, simply because, even though a lot of that price, a lot of the inn from liquidity concerns em currencies has been priced in threat 2018 and some are looking a bit oversold, i don't think it will be the end of volatility in currencies and 2019. yvonne: is that because of dollar strength overall? >> dollar strength, tightening global conditions, and developing markets. rishaad: when were question come a few take your jpmorgan had off -- one more question if you take your jpmorgan hat off. >> 2019 will be a tough slog for trade tensions. i don't think we will see a resolution in 2019. rishaad: you heard it there from hannah. yvonne: global market strategist from jpmorgan asset management. guest has a next
wild ridet has been a for investors with the market experiencing big swings, just to put it mildly. yvonne: yeah. klinghoffer says now would be a good time to get back in the bond market. think the very good news for investors at this point is rates and credit spreads, broadly the fixed income complex. it is fairly priced. our view was that the market was complacent. now with the recent pullback, the entry point is much better for investors.
>> let's talk about the recent pullback. what the heck happened in the end of 2018 in your view? are you able to sum it up? >> for sure. isestly, an analogy perhaps that, in the broad market, it was sipping champagne on the top titanic. for a while, they had been failing to pick up their heads end it is the iceberg directly in front of them. is theely, the reality challenges we've had with china, whether the trade relationship or their broader geopolitical risks, the ongoing challenges with brexit, the fiscal deficits happening in italy and now france, these are all things that have been here for quite some time. but the markets work too caught up in strong economic data coming out of the u.s., which was always generally a one-time phenomenon. it was fiscal stimulus through the tax plan of 2018. the central bank continued softness and evening and corporate buying from central
banks around the world. these were not laying into long-term growth and investors family picked up their head to realize what was in front of them. su: we are just at the heels of the december rate hike. there's a lot of questions about the comments and the actions by fed chair jay powell, particularly with the balance sheet. give us your view. some believe he is too rigid. others believe that the balance sheet ask as a tightening and that this is a policy mistake. -- ask as a tightening and that as apolicy mistake -- acts tightening and that is a policy mistake. >> i do want to remind all investors that it isn't necessarily just a question about the fed. it is a question about central banks globally. realistically, most global economies, until recently, have been growing well above potential gdp. it is a central bank mandate to rein that back into extend the cycle. when it comes to balance sheet and the comments from jay powell
thethe recent presser, reality is the fed is on a preset course at this point. they have done what they should have done to spur economic growth, to encourage economic actors to take on debt, to hopefully put that into productive use, which they'd largely haven't done, and to try to build on that -- which they largely haven't done come and try to build on that. what we saw in the recent meeting was exactly what investors should have been expecting. su: let's talk about the outlook for 2019. thathings, key challenges you as an investment manager faces. >> the reality is, as central banks have embarked on this unprecedented journey of quantitative easing with the specific goal in mind to encourage investors to take on debt, again, for productive purposes, the challenge is migrating now.
global economy, the u.s. economy actually continues to be on relatively strong footing in my opinion. unfortunately, we will have to face that increasing pilot debt. as investors have picked up their head, they realize that we are now climbing to the top of that mountain. and what faces directly in front of us is a deleveraging event. i do think it is coming in the next few years and investors are having to, for the first time come truly confront the massive amount of debt that not just the u.s. has taken on, but the global economy has taken on. su: let's talk about the bright spots, the opportunities for investors. what should the focus be in your view? >> their do continue to be bright spots. one of those is the u.s. consumer in particular. generally speaking, within the u.s., debt has risen significantly. but it has been primarily on corporate bounce sheet and the government balance sheet. the u.s. consumer, at least in the rearview mirror, the cause
of the previous crisis, has deleveraged significantly. one area in particular is the housing side of the balance sheet. a bright spot of the economy today for fixed income investors is to focus generally on the u.s. investor. granular, focus on the housing portion of that. new securities being issued, the underwriting is much strong of than it has been in the past. there remains a significant supply imbalance for the millennial generation and first-time homebuyers. i continue to think that that homebuyers.u.s. i continue to think that that part of the u.s. economy will perform well and provide an opportunity for investors in 2019. yvonne: that was jeff klinghoffer. we are counting down to the opening of the session in india, just a half hour away. our bloomberg reporter standing by in mumbai. you been watching the r.b.i. banking report.
not exactly a positive picture. >> certainly not. at this point in time, a lot of concerns are being brought forward by r.b.i.'s annual trending progress report. it does suggest that the funds set aside for bad loans by indian banks not enough to cover potential losses for these indian banks. it also says, for its revival in the credit cycle, a lot of these banks need to clean up their balance sheets. haveow, considering we seen so much strengthen the banks over the last one week, this report could be a little damp now. if we do see an increase in provisioning going forward, which may be dictated by the r.b.i., that means low possibility for a lot of these banks over the next few orders -- quarters. we could see some concerns coming in for the banking sector. time, the thisn
-- we are likely to see a soft opening markets. yvonne: let's do a quick check of the latest business flash headlines. -- scrappings fear together a last-ditch effort to buy out of bankruptcy. the plan needs approval from creditors in the bankruptcy court. liquidators could also outbid lambert, shutting sears and selling it off piece by piece. goldman sachs is poised to be the top bank for takeover advice in 2018 for a second year in a row. dealmakingf global exceeds 28% this year, up from 26.4% in 2017. morgan stanley, j.p. morgan,
citigroup, and barclays roundup the top five. the overall deal volume was shy of the record set in 2007 as market volatility takeover -- volatility put takeover aspirations on hold. the first global news network design for social media offering life video coverage and updated news reports verified ray hereby ask him a on twitter and follow verified bloomberg -- by bloomberg.
yvonne: time now for the battle of the charts, the last one of the year. the owners can access those charts using the function at the bottom of your screen. rishaad: what is your offering for the day? is probably the best chart to talk about on the last day of the year. this indicates a paradigm shift taking hold an equity markets. thehe chart, you can see , foreign inflows.
we will see, that the dependence on it in equity markets is reducing. some more perspectives. this is despite the outflows this year been the largest in a decade. this shows the rising strength of local investors, driving back support for the equity market. millions of mom-and-pop investors, many contributing as little as $20 a month through mutual funds, is slowly becoming a force to reckon with and t. yvonne: i like that. rishaad: very interesting. >> my chart is about the yuan. lot andppreciated a still one of the least performing currencies and asia so far. market sentiment took an abrupt turn toward the end of this year.
the chart captures that. the line in the chart runs a one-month risk reversal. back there paring bets in the options market very quickly and turning a bit bullish on the currency. global investment banks are forecast with a 3% rally next year. rishaad: that's a nice one. with nopa.ng to go yvonne: really? i like her chart. rishaad: it has a predictive quality perhaps to it. yvonne: but they were built positive charts, just what we need, right, before we wrap up 2018? rishaad: i'm sorry.
i don't like the judging at all. yvonne: it's part of the game. it's part of the competition. thanks so much. congratulations. you want to check a gtv to check out those charts that we feature on bloomberg television. you can also see our guest says well. you can get the key analysis and save those charts for yourself. have hang seng up 1.4%. just about an hour of trading left.
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yvonne: top stories this hour, new evidence of a slowdown in china. factory activity contracted this month for the first time since july 2016. but there is some hope on the trade front. xisident trump and president both optimistic. set to ring in the new year with the government still partially paralyzed. this is bloomberg asia. ♪ rishaad: entering the last hour
of the shortened trading session hearing hong kong being new year's eve. down about 14% since the start of the year. nearly 22% the fallback for the hong kong market. looking at the new zealand market, up by 1.3%. shutting up shop there already. australia is also close now. and malaysia moving .2% higher. let's look at what is going on currency-wise. with the jakarta market down -- the dollar down 120 rupiah against the indonesian counterpart. elsewhere some of the price of about 45l below -- dollars a barrel for wti.
that is also the position for the start of the session in india. yvonne: a bit of a relief on the trade front. we see a lot of green when it comes to equities. in mumbai. , looking to follow those gains in the equity market with the .ifty up 4.1% the rupee break below that 70 handle at the moment. points.-year 11 basis -- india 10-year up 11 basis points. the current provisioning levels are not painting a good picture according to the central bank. are watching some of these banking stocks in india today. in the meantime, let's get the first word news. debra: japanese media reports a carlostor has extended ghosn stay in jail.
setback for him. he is accused of understating his income by tens of millions of dollars and passing trading losses to carmakers. a plan -- announced plans to extend lending. the regulatory commission says the regulatory commission says lenders, including rural cooperatives, must have the proper licenses or else wind down their businesses. smaller, regional lenders have become major drivers of shadow banking in china as they seek profitability. goldman sachs has revised down its u.s. growth forecast for the first half of 2019. a chief economist wrote in a client note the bank sees 2% growth in the first half, down from 2.4%. it also expects that the probably waited rate hikes to .wo
the u.s. will welcome the new year with the government still impartial shut down and with little indication of any imminent agreement to resolve the standoff. some 400,000 federal employees are were he without pay. and 350,000 are furloughed. democratstrump blames for the death of two children at the border. kim jong-un wants more summits to resolve the nuclear impasse that has stalled negotiations with the u.s. kim said he was willing to meet more often in 2019 to advance peace talks and achieve a nuclear free korean peninsula. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm debra mao.
this is bloomberg. ♪ of china'sauge manufacturing sector has contracted for the first time in two years, highlighting concerns about a slowing economy and the possibility of a long, drawnout trade war. rishaad: stephen is here to break down those pmi numbers. when you go down, the news is quite bad. stephen: if you drill down to newsub indices, export orders are also below expectations at 46.6, down from 47 last month. so there was already negative sentiment in the manufacturing space. the overall pmi coming down to 49.4, we were expecting 50, which is the same rating as the previous month. going back in time, we can see this is the first time it hit below 50 since july of 2016, the lowest reading since the first couple months of 2016. nonmanufacturing pmi's little bit better, 53.8.
better than expected. industry,s services construction, property, and telecom. are saying the slowdown in china will continue into the next year. the week pmi could result in more government stimulus -- the could result in more government stimulus. industrial profits fell for the first time in almost three years. more bad news. kind of predictable given the extent of the trade dispute between china and the united states and the tariffs put in place early this summer. it perhaps could have been even worse where it not for this truce between the u.s. and china on the new further round of tariffs. yvonne: tell us more about the phone call between presidents xi
and trump. negotiations happening in early january and the trade truce. stephen: a delegation headed to china will be in the first week. that will be the anniversary of when trump and xi first met in argentina. the markets here in an abbreviated session are liking that. again, we have been along this path before. back in may, we thought there was a deal. they thought they had a deal with steve mnuchin only to because bosch -- only to be kaboshed by trump. rishaad: we might get some clarification as to what happens. we have xi jinping talking later today, the new year's message coming through.
and perhaps something that the taiwanese will look at in a couple of days. >> there will be a second speech. xi jinping will give an important speech at 10:00 a.m. on generally second, the day afternoon as dave local time in beijing, to my -- afternoon newsday local time in beijing. no indication what this important speech necessarily will be. but again, we have heard some overtures from china that they want to rein in any separatist plot on the island with the dpp president, the weakend dpp president. yvonne: our next guest, gavin perry. always good to see you. look a moreeadlines
positive, the pa numbers are still showing the economy trying to find a bottom. do you think beijing -- the pmi numbers are still showing the economy trying to find a bottom. do you think beijing is tried to find something positive? >> let me take a little step here. increasehave to services and value add in the economy as you have citizens living in urban environments. what you see for the first time is a positive cannibalization of the marketing sector versus the servicing sector. the pmi shows an expansion in services while manufacturing trends contracted, for the first time under 50. prior, we had them both accelerating, with a subdued exhilaration. now we have an equalization going on. part of it is cannibalization.
all we do is look at the make up of gdp in china, which is 60% of services that are value-added versus manufacturing. so it's better news. are you suggesting that state owned enterprises have been dealt with properly and reduce the role of zombie companies? >> i don't think we should react in relation to what these numbers show. rishaad: but if you drill down the numbers, forward-looking aremeters within the report warning of new orders going ahead. beijing is really focusing on domestic demand for the economy as opposed to investment-let. that is an underlining current. these numbers in these figures
actually fit hand in glove for what they are turn to do. it just happens we have this trade aspect going on that is impacting the buildups. rishaad: can we expect -- yvonne: can we expect nonmanufacturing to lead the way ? >> where china is tried to do is to move from that developing nation status to a developed nation status. if china is using the u.s. as a template, being recognized internationally as a developed nation. basicallyward, templating the u.s. economy. externally looking yen, it looks like china is slowing down. but gdp is still over 6%. and on a multiple basis, the
china market is massive. these numbers are pushing forward home the policies beijing wanted are actually occurring. -- because of this trade conflict? does is itat it does bring some evidenceto bring to the table -- evidence to bring them to the table. it may make them say, hold on, we need a solution faster. rishaad: that could lead to policy errors. that is the thing. >> china looks forward in policy. to their it is a case, internally, they are -- there are slowing
aspects, and some overheating. beijing is definitely moving of a enterprises into more laissez-faire situation where they are saying we won't partner up with -- we will partner up with more market companies. from a macro point of view, the economy is exhibiting what beijing really want it to do. that is more from export-investment led to domestic buying. yvonne: what would you be buying at the moment? we talked about how every civil sector has been beat down so badly. is -- every single sector has been be down so badly. >> consumption names. part of the whole urbanization. its eastindustrialized coast west in the 1930's.
china has added consumer credit to consumption. they are educating the economy in relation to investment products and we are seeing that with,, we have come had a a period where 2006 massive stimulus aspect to get the economy going. now they are turning around and saying, guys, you now need to learn to consume and to invest as a mature market anywhere else in the world. they need to educate the population had to do that. yvonne: targeted stimulus is a healthy sign. stay with us. a new year in jeopardy for thousands of federal employees. do you look ahead forand -- we end to thefor an government shutdown. rishaad: this is bloomberg. ♪
rishaad: we are back. bloomberg markets as we head into 2019. one of the big questions is what does the fed do next? and how can this be affected by president trump's continued criticism of jay powell's performance? are we likely to see not the trump and the fed verge? >> there seems to be a lot of confusion around the fed. it seemed to cause a lot of confusion among fed watchers. do they hike by lesser than anticipated? do they go on a prolonged pause? and then there is the political aspect from the white house, which is somewhat unusual in more recent years. together, it is murky for the
fed. the challenge for mr. powell will be managing the perception, if they do go slow on rate hikes for economic reasons, he has to make sure that he is doing it for economic reasons rather than being seen to bow to political pressure. rishaad: it backs him into a corner in some ways. reporting am ame colleagues running around, if you had to meet mr. trump in a meeting, that is not unusual. but the risk is whatever will come out of that meeting. rishaad: stick around with us. what are you making of all this? what is the path for the fed? >> we are incompletely uncharted here.ical path the outlook is that they will pause here.
we have got to remember they do have a secondary tool, the balance sheet post qe. rishaad: but is it a danger? we saw how quantitative easing itself managed to lift up many asset prices and some of them ballooned. should the key be the router -- the reverse should be concerned about pressure to the downside? >> with the federal reserve liquidity -- the increase in the cost of capital will have the effect of having increase in the cost of capital. >> it was their plan to let things mature. thesehey can do is let things roll over to keep liquidity going, if they need to
move to a more easy stance without cutting rates again. rishaad: do you think, even if the fed is [indiscernible] is that liquidity injection offsetting what the fed is doing? >> we are in a strange world with a massive disconnect in central-bank policy. you have a fed that has to stay in pedal to the metal as far as the committee case in. seen to waver on increasing liquidity to push up asset prices. in the northern end of the region, the fed wants to raise rates. interest rate differentials between the states, they cannot technically do it because the impact of the aussie dollar would disadvantage exports and commodities.
particular -- they're trying to [indiscernible] particularly down in australia. i know i sound like a broken record on the show, but they can't keep all three going at once. effective currency policy, currency controls, and keep it going. >> capital outflows. >> you can keep all three going indefinitely. long-term. with quantitative tightening, we were in uncharted terrain with qe. we are in chartered train with qt, are we not? there's no point in trying to charge it. >> no, no. it has been very telegraph to didstreet that the fed
indeed expect to not roll over its balance sheet. the regional presidents are talking about an accommodative stance of the numbers don't come through. they could let some of the stuff shrinking the liquidity in the system. jgb yields are back in negative territory now. we have seen what oil prices have done to breakeven. could that go further into negative territory? >> we have seen appreciation in the end recently. this is u.s. dollar stuff, right? i don't think there is a huge issue here. it's just that the boj needs to be seen doing everything at the program. and has gone so far down the road to keep confidence in the market. rishaad: it's the law of
diminishing returns. what is there left for them to buy? that cameth softbank, out last week. they had a soft dividend yield. how long can that be sustained, even though equity investors said, look, this is like a fixed income investment. with consumption tax due to come in later next year, are you expecting tweaking? will they be heading for the exit at all or doubling down? >> the bank has done all they can do. -- ofs down to the abenomics. [indiscernible] >> do think there will be some fiscal -- >> yes, there will be some fiscal packages coming out.
they haven't got a lot of options. they have to continue to expand. yvonne: what about the ecb? will they face the same pressure that the fed did now that growth is slowing down? you have brexit and italy as well. >> one has to wonder whether the italians will have to do their thing and come through the budget. we have friends coming down the pipe taking the rules next. yvonne: we have seen a rally. but yields were not that high and elevated and did not stay that way for that long the first place. is there any kind of value long-term? >> we will see a lot more volatility in these market assets, just like we have seen in the last couple of weeks or month. that's purely because the market is fully realizing that the fed is not hitting the market with a put. so you will see more compression coming in. you will see a lot more volatility.
yvonne: a quick check on the latest is this flash headlines. goldman sachs is the top bank for takeovers in 2018. its share is set to exceed 20% this year -- 28%. morgan stanley, j.p. morgan, citigroup, and barclays round out the top five. looking at canada onse, negotiations back track after the delayed open of the flagship store in beijing
♪ >> 11:29 in hong kong. i'm debra mao with the first word headlines. president trump reported big progress in trade talks with his chinese counterpart, xi jingping , after a phone call on saturday. he tweeted a deal is moving along, and will be comprehensive if made. spoke as the u.s. delegation repairs to travel to beijing to the resumption of trade talks, days before the 40th anniversary of diplomatic ties between the u.s. and china. activity at china's factories slowed in december, underscoring concerns over the slowing domestic economy. the official manufacturing pmi came in at 49.4, compared with the average economist estimate of 50.
it was the first contraction in the factories since july, 2016, but the nonmanufacturing pmi beat estimates. italy's parliament has improved its 2019 budget log, meeting a year-end deadline after standoff with the european commission. the anti-migrant leak and five-star movement agreed to lower a deficit target to 2.04%. the initial 2.4% target was rejected by brussels as breaching eu rules. u.k. trade secretary liam fox says the chances of brexit happening are 50-50, if parliament rejects theresa may's withdrawal agreement. he told "the sunday times" that if lawmakers vote down the deal, there would be a sense of the government has betrayed the people who voted in the referendum. he says it is a matter of honor for lawmakers to back me, and he would lather except a flawed agreement than brexit failure. the bangladeshi prime minister's political party won a landslide
288 ofon, winning the 290 seats contested, according to the election commission. the opposition has called the vote farcical, and it puts the prime minister in a position to extend her rule. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm debra mao. this is bloomberg. ♪ >> let's get the last trading day of 2019, curtailed for the other markets. hang seng extending its games, -- its gains, and the prospects for a positive start to the session in mumbai. up.y futures are let's have a quick look at the
company is making waves. tencent reports that the chinese government could be loosening its grip on those video games. >> so-called video games. approval with a project, sinopec up after eight due to theses suspension of two officials. >> let's get back to the u.s. ringing in the new year with the government still in a partial shutdown. the standoff over the border wall continues. >> jodi schneider is here with more. the shutdown is entering its second week. do we have any concrete evidence of work? >> it is starting to have an impact. several workers will get their first paycheck without pay on
january 11, so we will start to see the effects. they get the paycheck for work they had done before. we are starting to see the smithsonian saying it will shut down its museums, which is a very reasonable sign of washington closed. we have seen some parks closed, new homeowners, people trying to buy homes who need flood insurance have had their home sales delayed because the federal emergency management agency, which has to provide that flood insurance, has been shut down. we are starting to see the effects of this. no real signs that they are coming together on a deal, certainly not in the next day, so the new year will start with the government shutdown. >> what would a compromise even look like? when it comes to the border wall funding, that could be the sticking issue. >>. that's right president trump has said he
wants $5 billion for the wall. democrats have said no way, that they find it an ineffective solution. democrats take over the house of representatives in a few days, and at that point, nancy pelosi, who was in line to be the next thater, will bring a bill will have funding for the government with no wall. it is at that point, may be then there is some compromise, and probably around the issue of it not being a wall. president trump in recent days has spoke with one of his senior advisers, saying that we aren't talking about a wall, but a fructure or a ence. the term steel slats keep coming up. the question is could the democrats come to an agreement with the white house on
something that's might entail border security, but not an actual wall? it seems like that's the sticking point for them, and perhaps there would be some give on the dollar amount. maybe that is where we could see a compromise. nothing on the table yet. >> thank you, jodi schneider, our senior international editor. let's get insight from gavin perry. we have been talking about how markets are not too concerned about the shutdown. why do you think that is? >> i think it is because we are sanitized. in the previous administration, we went for a period -- it was 10 days, basically. it's more the fact of being desensitized to being shut down, where we have seen outcomes that have come together and we have had compromises, but markets go on. it comes down to that.
sayingle are just whatever outcome -- >> we have the fact that, seasonally, there is a low turnover period and increases in volatility. but we are coming up to a fresh year. people will need to deploy capital. people will need to start working on performance. tend to give the markets in january. >> the 1000 point swing we saw in the dow, is that kind of the new normal? >> to a degree. there was a 19 intraday reversal. but lowite extreme particularlying -- in the equity markets, seeing the spreads coming, that is
going to be something that will bring a bit more volatility and pain as people get around the new norms. norms.he old ,aybe 2018 has been the year especially the latter part, the year of cheap money coming to an end. we all realized it was coming down the pipe so it shouldn't be the problem with access to capital and the low cost is that companies are re-gearing to that environment. even a small decrease in access to capital will have an amplifying effect. that is going to be the period as we morph out of that. >> what about valuations?
s&p 14 times at the moment. do you think it is tempting or do you think that in the end there are still parts of the market that are expensive? >> obviously we have seen tack and what really happened in 2018 was we saw loads of capital, the biggest market, then back to new york. we have seen that capital flow and reversal a few times. the fact that we are in uncharted territory, that is thanks to the central banks and all the way back to the greenspan era. we have to realize that asset price discovery continues to grow and i think we need to look at real estate, and my father -- .very 10 years it would double
it's a rule of farm, population creation. all these factors, you need to keep in mind the cash equity process. >> it has been a bad year for virtually every asset class. it was his worst year ever for this. >> the punch bowl was being refilled which means the liquidity had to find a home somewhere. while rates and yields were so low obviously the stock market was a place to get capital gains, as well as some dividend yields. is, what happens? it's about preservation of capital more than anything else. >> it might be too late. we have to come to grips with the fundamentals. carl icahn made a comment that
he was a bit concerned that america inc. was not putting to use the access to capital. he was concerned there was too much focus on r.o.e. there were share buybacks and m&a. when peoplea degree are doing the fundamental analysis -- money,e had all this would it be responsible to employ it as share buybacks rather than investing? saying is what he was and we could be looking at some of these pushers in the hollowons, a little bit done on the back of r.o.e. activities. >> should we be looking at the first half of 2019 -- it seems like it will be march madness. you have a fed meeting, the next one where they will hike.
brexit will happen, the tree truce is set to expire. we are still dealing with a lot of uncertainty in the first half. >> true, and i want to make sure i am not viewed as a bear. everyone is looking for these markets and buying opportunities. fundamentally it is going quite well. there's loads of historic unemployment, and growth is taking on quite well. >> chicago pmi's at 65, is incredible. >> the underlying fundamental macroeconomic story is quite good. a lot of these overlays, the geopolitical stuff, the trade and so forth, need to be sorted in digested as we go along. but the long-term story is still quite good. it's the inflation side of things, people will preempt what it change a -- does little bit on the easy side with
the shrinking balance sheet? or does it move back into a tightening cycle? it will be all about perceived inflation. >> a few months ago people were saying this could be the bigger risk, that we would get this absurd inflation -- the millennial impact, the disruption -- let's not underestimate how much inflation pressure is disrupting the system. it is hard to quantify to a degree but it certainly runs the creates ant area and easier capability. to a degree there is some deflationary pressure. >> so the way it is calculated is wrong? overlay to a simple basket of goods and services. that effectively detracts from
optimism on the trade front after optimism. to our reporter standing by. this r.b.i. report is raising concerns. will it have any impact on the financial sector? >> well, certainly. we do have the annual trend of progress report at the r.b.i. and it does talk about the fact that funds being set aside by banks to provide for bad loans are not enough, and this can lead to more problems and could to some impact when it comes to profitability. and balance sheets are clean when it comes to the credit cycle, and the asset liability mismatch is likely to be made stricter when it comes to shadow banks. it doesn't have much of an
the niftyause both and pnc bank are trading higher. i would like to make a mention -- this bank has a deadline to reduce stakes according to norms , which is why we are still seeing a little bit of pressure but on the whole markets are trending higher. >> thank you. our guest joining us from mumbai. india, be talking about a rising star in southeast asia with growth near 7% per year. the driving force has been a 14% lumen exports. back in september the prime minister's head any escalation in this u.s./china spat would have an impact. the trade war between the
u.s. in china, the two biggest economies and largest trading partners of vietnam, will surely impact our country. as a resilient member of we will rely on our internal strengths and get our house in order to overcome any obstacles. what will be important for vietnam is that we continue to maintain our growth, maintain macroeconomic stability, maintain levels of exports, and maintain the living standards of our people. >> but can you quantify the impact of the trade war on the economy, considering that close was exported to countries like the u.s. and europe? we are seeking new ways to grow.
we already have 12 free trade including with the eu and others. we want to maintain good relations with the u.s. and china. >> is it possible that the u.s.-china trade war could be more of an opportunity, as the u.s. moves away from china? it is bringing both opportunities and challenges to us, but more opportunities than challenges. it gave us the chance to open new markets, forced us to balance our trade. we are expanding our markets for mutual benefit. they need us and we need them and we can cooperate on an equal footing. >> how concerned are you that ariffs would be focused on vietnam, given that
trump himself said he would be looking for trading partners in asia? >> last time i told trump i agree with him, but we need to balance our trade. what we ship to the u.s. is benefiting american buyers and investment inflows from the u.s. to vietnam are also very positive. >> that was our exclusive interview with the vietnamese prime minister. if you are a bloomberg subscriber, you can catch up on our interviews by using our interactive functions. check it out at tv . this is bloomberg. ♪
time. feesare charging higher even though many have considered switching off. >> sears may have another chance of revival with the chairman scraping together a last-ditch effort to buy out of bankruptcy. he persuaded lenders to finance the offer, according to a statement from an investment firm. is awaiting approval from creditors and the bankruptcy court. andould also close sears selling it off piece by piece. claims million to settle over sales practice scandals. the district of columbia is investigating wells fargo's practices from 2002 to 2017, previously disclosed conduct included improper mortgage fees and forcing insurance policies on customers. >> "aquaman" remains the
champion for a second week running. bros.vie made by warner collected an estimated $51.6 million, beating "mary poppins returns," which got second place. let's have a look at the hong kong markets to close at the year, taking a look at what we have, and what a year it has been. today's, helped by recovery. what have we had in terms of the moves? if you had invested in china resources, you would have made 30%. if you had invested in aac technologies, you'd be up by 67.5%. >> those tech stocks were on a roller coaster ride through 2018. investors have plenty to worry about this year.
they saw a record rallies and volume surges, giving way to turbulence that wiped out $5.2 trillion of market value. >> it's mind-boggling, incomprehensible. our reporter is tracking some of the biggest news. it's a wild ride. >> absolutely. that $5 trillion figure, half of that came out of china, the worst-performing stock market -- >> $2.3 trillion. >> just about. staggering, the losses. when you are talking about their markets, asia-pacific is in a bear market, and then you ran major markets in the region, -- japan hong kong, shanghai, korea. worry,e tech is the big what about next year? same thing? year the conversation
will continue to be what we have been talking at this year. it is going to be around until it isn't. the fed as well, coming into the end of the year, it seems like maybe they have pulled back a little bit on the talk of the rate hikes next year. that will continue to be a big part of the conversation. uptick in techee next year. obviously we also had a big selloff in commodities, and we will keep an eye on that. overhanging all of that is the global economy. you haven't been talking about that this much -- we are talking about bitcoin. what happened to bitcoin? what's going on? >> the prices have been kind of itgnant for a while now,
just hasn't caught up as much in conversation. bitcoin has been mired for the last while, with some price moves where maybe it seemed like it was rallying a little bit at the end of the year but it really hasn't been able to seeing the things we've been talking about through this year, that the institutional investments or inflow of money just hasn't come in, and my conversations of people -- these miners are underwater while they are dealing with bad prices. they are going to shut down and at some point it balances out but we will so have to wait for the inflow next year. >> all right. let's take a look at the markets before we go.
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