tv Bloomberg Daybreak Asia Bloomberg January 6, 2019 7:00pm-8:00pm EST
haidi: good morning. asia's major markets have just opened for trade. shery: good evening, i am shery anh. sophie: welcome to "daybreak asia." haidi: our top stories this monday, asian markets set for start to the week after a strong jobs report and comment from the fed and monetary easing out of china. trade optimism helping things along. the u.s. delegation in a beijing
for the first face to face talk since the tariff truce. president trump moves closer to a radical move to fund his border wall by invoking national emergency. shery: we saw markets rally, one of the best gains that we saw in this bull market. potentially setting up a positive day for asia in the equities on this monday session. sophie kamaruddin has a look at this monday session. nikkei adding nearly 2%, recovering some of the drop we saw on friday. they really fell by more than 3%. apple shares among the biggest -- tokyo.n turkey of samsung and apple looking to tie services on samsung tds. sony adding a tenths of a percent.
quickly checking in on the yen, it is holding steady after losing some ground. aussie an eye on the dollar, back above 71 u.s. cents after falling to a 10 year low last week. oil extending gains as the u.s. count falls and goldman seeing more weakness for crude. cutting its oil forecast for 2019. goldman has also cut its outlook for base metals. it's three-month target for copper at $6,100 from $6,500. copper prices under pressure off by 2/10 of a percent. haidi: sophie kamaruddin on the markets seeing that reaction to the markets. we are set for a pretty robust open to the week after some positives. we had the surprisingly strong
u.s. jobs report, wage growth, and jay powell hinting the fed could be open to waiting and seeing what further data holds. is this kind of the stars aligning here or a delay of samples that we did not get? >> it seems like christmas came late this year. i think for asia in particular, there are signs that things might be starting to turn around. i was looking just now at the fx and it was showing resilience in october. asian currencies led the way down. they had potential he set a floor for us all back in october-november. they kept rising even as december was causing pain. i think it bears remembering that a lot of the pain in november-december came out of the u.s. and was sort of the u.s. catching down to asia and emerging markets.
powell hasat jay maybe conceded that it might be thinkpausing, i still that there is plenty of concern out there. i have a chart i would like to from the library, just looking how concerned some of the biggest markets out there have gotten. i'm talking about the rates market, futures, where people try to work out where central bank rates will be. that is the white line. the white line was up above the blue line. this was showing the actual average of central bank rates across the g10. as that was climbing, so was the expectations. then, late last year we had the sudden turnaround where the markets lost complete confidence in the idea that the global economy as a whole was strong
enough to cope with higher central bank rates. is why the markets are welcoming what jay powell said on friday. he is just talking about the possibility of a pause. there are other central bankers out there talking about the possibility of more accommodation. that leaves us in a dangerous spot. either for theed central bank to turnaround completely or what would be much more welcome would be for the data to get strong enough to get markets convinced that we don't need lower rates. markets again getting a bit o ahead of themselves. what happens to the dollar? with that kind of expanded space, with the fed waiting and seeing and maybe more room for the dollar to move lower which is what goldman sachs is saying. garfield: i think that is what
risk assets want. when thelot of angst dollar was so strong. a weaker dollar would help a lot of places around the world. how closely should markets be watching the trade talks in beijing between the u.s. and china? they are just working level talks, how important are they? garfield: i think it is more that they are important from the point of view of creating the backdrop for another wonderful conversation between xi and t rump. there will not be a strong resolution coming out of these talks. we need some sort of hope for markets to cling to that week can get -- even a resolution between the u.s. in china is hard to see. there are a lot of issues. talks are good. talks are an acknowledgment that
it is in both side's interest to seek a trade piece. if we could at some of the tariff measures taken off the table from the u.s. side and some concessions that would allow trump to declare some sort of victory, partial or otherwise, i think that would help to repair sentiment that has been severely damaged by the trade reactions over the past 6-9 months. haidi: thank you so much garfield. shery: you can get his charts on the gt the library on the bloomberg. let's get the first word news. u.s. and chinese officials are set to resume face-to-face trade negotiations on monday in beijing. it is the first formal meeting since president trump and agreed to a 90 date tariff truce. stakes are high as both sides
face tariffs in march if they do not strike a deal. trump says negotiations are going well and china wants a deal because they are being hurt by tariffs. renewed hisump has threat to invoke a national emergency as a way to circumvent congress and build that wall at the southern u.s. border with mexico. he says that would depend on to endppens with talks the partial government shutdown which is in its third week. democrats have threatened a legal fight if trump tries to declare. that inave to establish order to do this. beyond that, this would be a terrible use of department of defense dollars. may has stepped up her battle to sway the british parliament to back a breaks a deal. , warningomised more that the u.k. would be in
uncharted territory of lawmakers reject her plan later this month. speaking to the bbc she said that vote is still scheduled to happen next week. says his father will mount a vigorous defense at his first hearing on tuesday. the former nissan chairman is indicted on suspicion of violating japan's financial reporting laws and underreporting his compensation. newspaperld a french he expects everyone to be surprised at his father's version of the story. onbal news, 24 hours a day air and on tictoc on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. negotiatorstrade are in beijing for a crucial talk set to begin monday. the sides are aiming to reach a deal for a 90 day truce ends in march. many hurdles remain. hief correspondent
joins us now. marketsevere volatility in both countries. how much will this move forward or push these countries towards a deal? >> it adds a little bit of fire. keep in mind, these are not the big guns meeting in aging today and tomorrow. these are the deputies. we have jeffrey gerrish, the deputy u.s. trade representative arriving in beijing along with the treasury undersecretary. china says it will be represented in beijing at the vice ministerial level. , he metmind last may with steve mnuchin, they thought they had a deal. they announced the deal and donald trump tweeted two days earlier saying no deal.
they are cautiously optimistic. donald trump speaking in front of the white house overnight saying that the talks have been going very well with china and that chinese economy is being hurt very badly by the tariffs. in his estimation, the fire is under the feet of the chinese right now. whether the u.s. is feeling the pressure from the perception that the turmoil at the u.s. markets is in part caused the lack of progress on the china front. that could add a little bit to the united states. nevertheless, they are meeting and talking. lead to talk set a higher level depending on the success of the next couple of days. markets looking for many wins if you will over the next few days and weeks. there are so many different facets that will make it more difficult. it is about text of privacy, ,ntellectual property, huawei
what is going on in canada. his are not issues we find short-term solutions to? stephen: absolutely not, these are longer-term issues the united states is digging in the their heels. they want to see further pledges, timelines, and reform coming from the chinese on those technology transfers that have led to what they say is theft of intellectual property rights on a systemic level. they arese have said drafting new laws to give more teeth to the ip are laws. they will have to show much more promise more schedules and time frames into how deep the implementation would necessarily go. of course, there are all kinds of deep issues. if there is going to be a trade deal, it will be the chinese pledging to buy more u.s. products which they have done. also, more access to autos and
financial institutions which they have already done. you can see the pattern. it all depends on who gives and takes and how much of a watered-down deal to kind of alleviate the pressures so they can get to be tougher issues down the road. thank you so much. taking a look ahead at these crucial two day talks. u.s. officials in beijing. they commence on monday. ahead, we are back lie in this -- live in shanghai. we are joined to talk about the outlook for the country, why they are expecting a softer slowdown in china. will: up next, the markets be watching out for fresh comments from jay powell in the latest minute this week. we will have a scotia bank head of asia and economics, tuuli mccully, weigh in. this is bloomberg. ♪
shery: this is "daybreak asia." haidi: fed chair jay powell the strongerve jobs report as he opened the door to a positive in the interest rate. patient aey could be midmarket turmoil and global uncertainty. hayse joined with kathleen on what the job report means. itore we get that statement, was a plot report. leen: it certainly was. jump into the bloomberg library with me to see why he said yes, strong report. this is what he was criticized for when the fed raise rates when stocks were falling around the world. this, a surprise, a gain of 312,000 and payroll.
the forecast was for 184,000. the previous two months revised 158 thousand more jobs. the unemployment rate, you cannot see it too much. pretty decent jump, should be get worried? it looks like unemployment rose because the labor force got bigger because the participation rate rose. or people are coming back into the labor force. they are more confident that they are coming back, they're looking for jobs. that is the idea here. wages rising more than forecasts , 3.2 percent year-over-year. still a gradual move higher. one of the best we have seen since 2009. that is another plus. nonetheless, he also said he looked at all the things the markets worried about and said -- especially with inflation, the fed can be patient. apparently opening the door to a positive needed. path foris no preset
policy. particularly with the muted inflation readings that we have seen coming in, we will be patient as we watch to see how the economy evolves. shift always prepared to and shift significantly in order mote our goals and stable prices. ishleen: powell says the fed listening carefully to the markets and not too much to donald trump's criticism. he said he would not resign. this thursday, january 10 in washington, d.c., on wednesday. ahead of that we will get the minutes from the last meeting. we will get a more in-depth review of the debate with india. with the jobs report in hand and this very important set of remarks on friday, we will have a better idea of where the fed is. i thinkear to say
they are paid attention to the market and know what is going on. the economy is strong now, markets have been volatile. friday was a pretty good day. thank you so much, kathleen hays, our global economics and policy editor. our next guest said many of the region central banks will be in wait and see mode. is the head of asia-pacific economics for scioscia -- scotia bank. thank you so much for being with us. how much room to asian and central banks have to maneuver as we see the fed continuing its march towards a neutral, or even higher this year? i think the asian economic outlook is thoroughly solid for the time being. there suddenly is increasing growth concerns globally and
that will impact sentiment in asia. i think central banks will be closely monitoring what is happening but there is both itetary and fiscal room in most countries for that response in the future. shery: goldman sachs this morning cutting their forecast for base metal targets. given china's really decelerating notably, they are saying the uncertainty of the policy effectiveness of china their has waived on predictions. we have seen china cut the rrr again, they announced it last week. how much room to the chinese they see anuver as economic slowdown and potentially more trade conflicts with the u.s.? isli: the chinese economy clearly under downward pressure. there are three key reasons for that. the first is the trade conflict with the u.s..
the second is the government deleveraging efforts as they try to deal with the big debt problem in the economy. the third is the structural change that has been happening for many years when the economy transitions into a services driven framework. those, i think the economy will continue to slow but the central bank and the government will have lots of finance resources to deal with the slowing economy. i think the ratios are still fairly high and there is certainly room to cut them further, if needed. stimulushe other measures and fiscal stimulus as well. is thehow much of this impact of the trade war given that we have seen it coincide with a period where we are expecting a structural domestic slowdown in china? the trade conflict with
the u.s. is the biggest downside risk to the chinese economic outlook. seen a more significant deceleration in growth than we had earlier anticipated. a largesay it is to extent because of the trade conflict. about what thed pboc is doing and what you think they will continue to do. kicking off the new year with the rrr cut, i want to put up this chart that looks at what the fed may or may not do. comments fromvish jay powell that they are open to waiting and seeing. essentially still remaining dependent. the market is pricing in no more rate hikes for 2019. something the fed will be forced to do if the trade war
does not see a longer-term resolution? i still think the fed is fairly determined to bring policy rates to neutral or slightly above neutral. says they are dependent, as long as the economy is solid and wages continue to rise, they will likely strict to the gradual rate hiking cycle. if the real economy starts to aften then we will likely see rate increases in the u.s. as we see these tighter conditions globally, how problematic is the fact that we have the spike in global debt in recent years, corporate spreads climbing as well? very: i think that is a
important consideration. have increased significantly in recent years. when you combine title liquidity, it definitely is something to keep an eye on. there will likely be higher refinancing and pro-level risks in global pricing sector. it is worth keeping in mind so the increase in debt is in the corporate sector. thank you so much for joining us. missed part of that interview or want to rewatch it, don't forget our interactive tv function, you can see we have just spoken to axll weber. you can go back to the full interview there. you can check out the charts and all of the indexes on the right
this is "daybreak asia." shery: let's get a quick check of the headlines. apple and samsung have announced a new partnership which until recently would have seemed unthinkable. the iphone maker is bringing itunes movies and tv shows to its archrivals tv sets. analysts say the move is further evident that apple is moving away from the hardware storage approach and is willing to work with third parties to boost service revenue. the company which surprise camera lenses to apple says revenue fell by a third.
it is 8:30 in hong kong. we are in our open -- away from trading. the only one up after wall rallied on friday after a jobs report. damage comments from jay powell suggesting the fed is open to the idea of a pause in the rrr cut from the pboc, adding to risk on sentiment. markets are trading so far in the region looking good, robust gains. we are seeing some gains signal from shanghai, shenzhen and hong kong when they come online. shery: what is happening to the weather? sydney was foggy, hong kong is
foggy. new york is beautiful. you are watching daybreak asia. let's get to first word news. ,u: we start with goldman sachs which says the u.s. dollar could be poised to decline following the fed chair's comments friday. jay powell signaled the central bank could cause interest rate increases if the u.s. economy weakens. if at the central bank is listening sensitively to the message markets are sending about downside risks. >> there is no preset path for policy. mutedrticularly with the insulation what we have seen coming in, we will be patient as we watch to see how the economy evolves. shift always prepared to the stance of policy and shift significantly if necessary to promote our goals of maximum employment. su: china's central bank will
cut reserve requirements with a have quite cut from january 15 and another january 25. -- half-point cut from january 15 as another january 25. investors remain jittery about china's economic outlook after factory gauges showed retraction in december. on the u.s. national security advisor, he said american troops syria after they ensure the islamic state is defeated for good and that turkey will not go after that kurds. john bolton has been offering assurances on president trump's plans. last month the president announced he was pulling out of syria and declared the jihadist group had been defeated. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan.
this is bloomberg. update for asian markets, risk on as we see gains of more than 3% in japanese indexes. let's get to sophie. monday forisk on asian stocks to bounce back and japanese shares welcome after the slump on friday with the nikkei and the topix rising over 3% pure we have electronics makers and auto socks -- rising over 3%. we have electronic makers and are up.cks looking up the space, the korean won picking up nicely the most since december 3, and the dollar is looking softer after a three-week decline. investors wait on the first round of u.s.-china trade talks. let's check in on quick movers when it comes to equities across the region. we are seeing sony on the rise in tokyo as the new york times plans note sony ceo
to exit any of the entertainment businesses and will make them a priority. we are seeing takeda far making jumping the most since october .008 70 million new shares for its acquisition of shire. we are seeing moves in samsung electronics, adding 2.5%, climbing the most since december 3 as investors digested the tie up with apple to offer itunes on samsung tv's. and since i has cut its smart from production target -- has cut its smartphone production target. i want to end on the aussie hospital operator, sliding in sydney after rejecting a takeover offer from its largest shareholder. but is this group, saying it was opportunistic. kamaruddin.e japan inc. went on a record $191
million buying spree last year, and many are just getting started. japanese companies are sitting night -- $890 -- million. the asia responder who joins us in tokyo. what is driving this? we know they have the cash. yearter: 2018 was a busy for japan inc., and that will into new in 2019. some of the broader factors, driving the trend, one demographic, the japanese population is shrinking, so there are dim prospects for growth. there is pressure on global equity markets. that has made some target companies cheaper and more attractive -- more attractive for targets. are sitting on a ton of cash. a recent trend is they are starting to realize sitting on the cash makes them a target for active investors who want them
to return the market might to shareholders. the companies would rather just spend that on him and a -- m&a. haidi: what are the top destinations for japanese companies? the effect that is seeing most favorable? bankers are saying that active sectors in 2018 will continue into 2019. that will be industrial, consumers and tech. in terms of geographic location, the u.s. is the most attractive, large and growing market. some japanese consumers, consumer companies are looking towards southeast asia and china for targets. shery: we had a blockbuster deal , $62 billion merger agreement between takeda and shire. could we see more deals of this magnitude? the analysts are saying it
is not likely. it could be it will surpass 2019 but not the actual monetary size of the deal. as you have seen last week in the u.s., bristol meyer announced the $74 billion acquisition. so this is off to a really fast start. you can never say never. the asian consumers reporter in tokyo. shinzo abe said the government is considering measures to protect companies like nippon steel from asset seizures in south korea that would be linked to wartime forced labor complaints. our reporter joins us from tokyo. southould japan do if korea allows japanese assets to be seized? reporter: it is not clear what they could do but there were reports at the end of last year japan was considering taking this case to the international court of justice in the hague.
there is a hurdle to that because in most cases both countries, both parties are supposed to take part in submitting the case, and south korea might not agree to go with japan in this case. so japan says all these issues were settled under a 1965 treaty , former forcedea laborers is a they were never given any compensation japan provided at that time. there is a separate case going on in south korea were the former forced laborers are asking their own government for compensation for the suffering they underwent during this time. haidi: what are the implications for bilateral conversations given the other disputes the parties are involved in? reporter: tensions between the two are at a high at the moment. we have seen an unprecedented exchange of vitriol over the
past couple of weeks over the case of whether or not a south korean ship targeted a japanese fire control radar. south korea denies that. japan insists this what happened -- this is what happened. they have released videos to prove their point. we still have a long-running case of the women who were trafficked to japanese military brothels during the colonial time, and south korea decided to dismantle the foundation that japan provided to compensate the women. we are unclear how that is going to move forward. there is a lot of uncertainty between the two. this can really affect how they work together to deal with issues like north korea and other regional problems. are asia government reporter in tokyo. about china abound in
shery: let's take a look at some of the stories trending across the bloomberg universe. bloomberg.com, read about the seven key issues that will determine the success of u.s.-china trade talks. among the most read stories on the terminal, trump renewing his threat to declare a national emergency over his border wall as the shutdown drags on. and tictoc tracks one year since the times of movement -- times up movement. those trending online or on the terminal. haidi: let's get a check on business flash headlines this hour. the flagship hedge fund run by
bridgewater associates rose 16.6% as stocks fell broadly. the pure alpha strategy fund was the biggest with $160 billion in assets. documents shown by bloomberg reached an annualized return of 12% net since its inception in 1991. they lost 6.7% in 2018. the australian securities exchange is cracking down on chinese firms over posing -- proposing tighter rules to punish rule breakers. they are looking at changes like shortening trading calls and increasing disclosure requirements. companies including china dairy, traditional therapy clinic and others were delisted from the asx in 2013. the first annual drop in annual house prices since 2008. all prices fell 0.8% and
-- the company sells one third of residential properties in new zealand's largest city and also saw sales slump 25% year on year as well as a decrease in new listings. japanese businessmen [indiscernible] is facing arrest in the philippines over embezzlement charges. a trial issued a warrant for him and his colleague. the pair is accused of making unauthorized fund transfers from the manila casino resort worth over $3 million. the man says the charges are baseless. you can get a roundup of stories you need to know to get your day going in this edition, today's edition of daybreak. bloomberg subscribers can go to dayb on your terminal, also the mobile terminal. we are shaping up for round two of the negotiations or it you can customize settings so you just get the news on the industries and assets that are relevant to you. this is bloomberg. ♪ loomberg.
with key manufacturing gauges falling into further downside. it was a challenging 2018. let's get over to the ubs trader china conference -- greater china conference. we are joined by a chief economist and i head global research. the fact we have had a triple are cut to start off the new year, is this an indication the downward pressure is starting to weigh on the macro picture in china? indeed, i think the latest indicators suggest growth is still facing downward pressure and some of the negative impact from trade war is still coming through. also domestically credit growth is still flowing, so whatever measures china has been taking the last few months hasn't been sufficient enough to reverse that. that is why the central bank
with the call from the state consult started the year with a first rrr cut. haidi: is this the first of many more easing measures? will that be the trend? yes, we think both monetary and fiscal policy will ease further. on the monetary policy front after the 100 basis points cut which releases $1.5 trillion growth liquidity, there will be another at least 200 basis points of cuts, and to have one every quarter, that will come. liquidity would depend on how theyof the other liquidity will retire. on the fiscal side the government already promised more tax cut. we think the budget deficit will be raised and also they will issue more local government bond issues and increase spending on infrastructure investments.
there is a chart showing exactly those rrr cuts. in 2018 we saw four of them. the recent 1% announcement still yet to come, but you can see the rrr cuts have already happened in 2018, not much of a change for the one year lending rate which has been steady since 2016. how is the inflation environment and china? how important is this for more pboc measures to stimulate the economy? has not really picked up that much. it went up a little bit last year in 2018. it will end the year slightly below 2.5%. inflation is not a concern, but despite that, the central bank could be reluctant to cut benchmark lending rates. with more liquidity releases
through rrr cut, they will lead to lower market rates and the central bank may cut some of the repo rates as well. the actual borrowing costs for the corporations and so on will likely come down, even though the central bank may not cut the benchmark rates. shery: we have u.s.-china trade talks in beijing this week. how big of a threat is the chinese yuan in in the potential of weakness against the dollar on this trade spat? >> so china's current account surplus has already shrunk close to zero last year. it will be quite small of a surplus. that will be the one downward pressure on the currency. the second one is china's market rate is coming down and the u.s. rate, the fed is raising rates. the pressure on the yuan is of course on the downside.
nevertheless for the government it is very important to keep the exchange rates stable. i believe it is also part of the negotiation with the u.s., part of the trade deal would involve a dollar see ny stability. dollar-cny stability. we don't see much depreciation. haidi: we saw last week the major story was apple, and some say it is the first of many companies to start blaming china for the impact on their business . is that a story that suggests the rebalancing from the traditional manufacturing and smokestack economies to a consumer services oriented economy is perhaps not going as well as we can imagine? or is this the headmans of a slowdown as well? -- headwinds of a slowdown as well? i think the rebalancing
towards consumption which has been going on since 2011, that long-term trend is still in its -- in effect. consumption will slow. the biggest inception factor is income and wage growth. as the economy slows, we will see pressure on employment and on wage and of course in china the property market is also negativeso there is a wealthy side the stock market as well. all of these headwinds are going to hurt consumption, but in terms of over the longer term, consumption will still grow faster than investment. the rebalancing is still going to be there. is it time to abandon the gdp target? i think many economists and
people have argued for that, but the government, the gdp target to manageor for them expectations as well and for policy. i don't think the government will abandon the gdp target. .e expect them to tone it down maybe for 2019 the target is going to be either 6.5% or around 6%. we think around 6% is realistic. the ubs forecast is 6.1%. that will come with more easing, fiscal and monetary easing to support domestic growth. mentioned the pressure on the property sector. could some cities finally be easing restrictions on property the seer? -- this year? >> local governments, city officials are already sort of edging on the move. we think the central government
will remain very reluctant in easing property policy very soon. local governments at the margin rate is some of the purchase restrictions or sale restrictions and so on, so forth. overall credit policy in terms of down payment requirements will probably remain intact. the government will be worried about property bubbles or price going up too high. it is a dilemma for them. shery: after china had their annual war conference earlier this year, the pboc talked about further reforming the chinese financial institutions, financial market, but we have heard this before. will this year be any different? indeed. i think the government has reiterated further financial market reform and opening. we do believe this year could be
different. 51% equity our holdings. i think with the external pressure and also with mystically they are seeing increasing more support for reform and opening. we think some of these policy announcements can be implemented a bit faster than before. haidi: is the window closing quickly for structural reform? >> i don't believe the structural reform window is closing. we think that of course they will balance the need to still stimulate growth and the need for structural reform, but that reforms in terms of soe ownership, mixed ownership reform, in terms of opening up more sectors for private and foreign competition, we see
open financial and other services for foreign sectors, those are not necessarily in contradiction to support growth. these measures could support business sentiment and boost growth over a longer time. haidi: thank you so much for greaterus, the ubs china conference in shanghai, really appreciate your time. let's get back to the markets. it is a buoyant day. looking at the latest, sophie. sophie: when it comes to the i on we are keeping and casino operators after morgan stanley cut its view on the macau gaming sector to in-line from attractive and reduced its price target and casino stocks as it looks at what gaming forth revenue estimate 2019. looking at chinese health care players after sinha media reports the government will encourage the output of generic drugs to be bullish before the
end of june. in taipei keeping an eye on tsmc after morgan stanley cut the price over concerns on semi-conductor demand in smartphones. also this one on the radar after the company said revenue fell by a third in december amid weaker ask for iphones. itunes on offering samsung devices more interesting as they strengthen the business services. that is what we are keeping an eye on when markets open in taiwan. we are keeping an eye on these moves along with the move toward monday, andlks this that is ahead on bloomberg markets asia. this is bloomberg. ♪ this is bloomberg. ♪
rishaad: it is 9:00 a.m. in hong kong. this is "bloomberg markets: china open." pick up then stocks week with strong gains after monetary easing in china and soothing words from the fed chair. rishaad: trade optimism is helping. the first face-to-face talks since the territories. yvonne: president trump edges closer to a move to fund his border wall by evoke a national emergency. ♪