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tv   Bloomberg Daybreak Europe  Bloomberg  February 22, 2019 1:00am-2:30am EST

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anna: good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. this is "bloomberg daybreak: europe." president trump meets china's trop trade negotiator day. delay, eu sources say theresa may could be forced to ask for a three-month extension but still needs to get her deal through parliament first. sionsmissions that emis testing could be flawed. we will put the question to the heads of multiple companies today.
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welcome to daybreak: europe. 6:00 a.m. in london. two hours till the start of cash trading today. yesterday, we saw the s&p 500 dropped for the first time in four days. is there a reality check to this risk rally? s&p futures, pretty flat today. saw equities drop yesterday, you saw the 10 year treasury yield move higher by two basis points, lower by 1.8 on a 268 handle. the dollar index fairly steady. turning to the em space, you are seeing em currencies come under pressure today. there are various signs of caution around risk in today's session, even if there may be
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hope around progress in trade talks. growth worries coming to the fore after data from europe and the u.s. came through. the new zealand dollar coming under pressure with signals about signs of easing and wti crude flat in today's session but we are heading for a weekly gain. juliette saly is in singapore with more. how is it looking in the asian markets this morning? juliette: not such a happy friday. we are on track for the first loss of the week on the msci asia-pacific index, japan .2% but therey has been optimism in chinese shares. chinese brokerages getting quite a big jump as an industry group six news on tax cuts and optimism ahead of the talks in washington. elsewhere, it has been pretty negative for the asian trading session and we are on track for
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the first loss of the week. this regional benchmark index has gained 2% this week. stocks we have been watching, this time yesterday we were talking about the reuters report that the australian coal imports had been banned. that was downplayed today. you have seen australian coal miners take a hit. zte in hong kong, rising as much its smartphone is launching. also, getting a boost from president trump tweeting about the technology. and one of the massive conglomerates and south korea falling quite heavily after some of its underperforming assets weighing into the concern about global growth slowdown. juliette saly in
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singapore, thank you. donald trump plans to meet with china's top trade negotiator. this afternoon. bloomberg understands they are trying to form a preliminary deal. bloomberg reported china is reporting it could buy an additional $30 billion a year of u.s. agricultural as chinese government bonds are headed for their biggest weekly drop this year. yields moving higher as risk appetite took a turn on the trade talks. joining us is the global head of flow strategy and solutions at societe generale. i am wondering where the market view of trade talks are going now. much to the optimistic side? kouku: it has been a process going on for a few months. if you look at the fed pausing its quantitative tightening, the
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iss for an agreement or deal higher from here because the u.s. is slowing down, china is slowing down so a trade war is maybe not the best option given the pressure on both. nejra: the trade war wouldn't be the best strategy for anyone, certainly not the global economy but what economists in china sea is a pause, not a halt from higher tariffs. must we get a little reprieve by march 1 but the uncertainty remains? andhis clearly is a risk that is the way asset prices have been trading. -- clearlyis x pointing to what you just said, and having clarity the
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next few months. the bigger issue with investors we talked to are worried about 2020isk of a recession in and immunizing their assets against a restaurant. nejra: there are signs investors are more cautious than i suggested? what are those signs? is it a higher propensity for cash? merrill lynch recently surveyed that cash is overweight since 2009. is it cash or where they are putting positions? >> a little of both but cash is a very relevant point because if you look at the -- at the selloff november of last year, a lot of investors were overweight cash and of sharp rally we are seeing today, which was triggered by the fed chairman investors havee
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said this is the most unpopular bull market in a long time. nejra: let me ask about the balance sheet because this is something we have been thinking about. it showed most officials saw an end to the balance sheet rolloff this year and i was asking the question, is that which we should assume -- what we should assume? you got a note out today saying this is surprising, the timing of this. it shows the fed almost reacted in a panic mode to the market. and this took, the market by surprise and why we are rallying today. the is also surprising is data that was strong in january and forcing people to question whether the fed is behind the curve. that said, if you look at inflation data, it is pointing
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in europe and the u.s.. the fed's from perspective, it is more dangerous to be tightening to quickly and being effectively tosing is the best action avoid another significant drawdown in global demand. one other important element to bear in mind is the refinancing wall expected to occur over the next two years given the leverage of open balance sheets the past few years. nejra: the other thing some people attribute to the risk on sentiment is how suppressed term premium has become and that shows investors seeing a low inflation, low growth environment into the future and that could be painful if that unwinds. >> the yield curve trade has been a bit of a disaster. last year, a lot of possession -- investors were positioning for it.
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the 10 year yield going higher than the two-year and that backfired. now, we are in an environment where you can see a steepening of the curve where the two-year goes down, pricing a recession and a for the round of cuts. at this stage, the yield curve and bond market is more cautious than the equity market is. nejra: the global head of flow strategy solutions at societe generale stays with us. we will talk more about risk later in the show. let's get the first word news. the european union is expecting theresa may to request a three-month delay to brexit. the suggestion is the prime minister will ask for an extension if parliament backs a deal. may has repeatedly rejected the idea of an extension, though she has never completely ruled it out. rba governor says it is unlikely rates will rise this year, but
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-- is not a predetermined course. testifying in parliament, he says there may be a need for a cut if there is sustained unemployment and a lack of progress for the inflation target. probability it is up and the probability it is down is more evenly balanced than six months ago. >> spacex has launched, taking three into orbit including an airport force -- air force class and israeli lunar lander. spacex said a company record last year with 21 customer launches. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: olivia howe, thank you.
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the 5g era, the battle for the next generation of the global networks comes to barcelona, as does huawei. monday, i'll he speaking with ceos and the following day, i'll be joined by the vice-chairman of armed holdings. don't miss it. this is bloomberg. ♪
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nejra: this is "bloomberg daybreak: europe." i nejra cehic in london. we have seen a little risk off in the asian session yesterday. u.s. stocks loss for the first time in four days. a little nervousness around the risk rally recently. we've asked many times when that will fade. the hang seng, pretty much flat. dollar- is not movin -- dollar-yuan
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not much moved. today'sg well in session, but oil going for a weekly gain. on the bloomberg dollar index, we are fairly flat. 10 year treasury yields ticked higher as we saw the s&p 500 falling. futures not getting a lot of direction today. let's talk emerging markets. currencies coming under pressure in today's session. the philippine peso is one of the. best performers against the dollar over the last month. . the strength is allowing the central bank to inject money into the economy without reducing the amount of cash banks must hold in reserve. the finance secretary says he is confident the government will keep its budget deficit under control this year even as it ramps up spending on a multibillion-dollar infrastructure package. we talked a the deputy governor of the philippine central bank.
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thank you so much for joining us on this program. great to have you on the show today. let me start by asking a little about policy. indonesia, which was as aggressive as the philippines in tightening last year has become less hawkish following the dovish pivot from the fed. is a policy rate cut on the cards at all this year? be more cautious than that. we need to seek more observations that would show inflation is on a downward trajectory. there is still a lot of volatility in the foreign exchange market. we need to see how inflation expectations are. in 2018, inflation expectations implantond two to four
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-- percent inflation target. we need more time to digest what this -- what is unfolding before our eyes. 175 basis points, increasing the policy rate of the central bank last year and we want to make sure how this tightening works itself out through the banking system and the real sector, including the labor market. , including the so you want to see how the data plays out. all central bankers do. at the moment, would you say you are more on pause or the biases toward the hawkish or dovish side? >> we are more on the hawkish side in that we recognize the risks in the market. we recognize the possibility of oil prices surging again. we are trying to be more cautious about this potential
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risks that could impinge on our ability. have theo make sure we benefit of time and more observation that there is really a trend toward a leveling off of inflation in the next two years. based on our forecasts, inflation is expected at 3.1% in 2019 and 3% for 2020, but we need to validate these numbers. nejra: in that sense, it sounds like perhaps a bias toward easing is not really likely before 2020. well, anything can happen between now and 2020, so it is difficult to paint ourselves into a corner. nejra: fair enough.
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some of us are expecting the banko central to trim ratios as early as this year. that would be following up on the two-percentage point cut last year. when is the right time this year in your view to resume that reduction? >> well, there is always time for everything and we are waiting for the right time before we can adjust to a lower level from the present level of 18%. first, we need to see that such a reduction in reserves will not impinge on domestic liquidity -- actually no, we want to make sure that we have a proper level of liquidity in the market so as not to complicate the monetary policy. we want to make sure prices remain stable and inflation remains firmly entrenched in the
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two to four inflation target of what the government and bsp. second, we have to sure there is tightness in the market. right now, there is little evidence of that tightness in the market. on a weekly basis, we see oversubscription. if we look at the growth of credit and liquidity, they are fairly reasonable. in other words, the growth of credit and domestic liquidity continues to be consistent with and the kind of target we wish to achieve as far as inflation is concerned. most important, i think we have to make sure that our move on the reserve requirement will not affect inflation expectations.
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for every 100 basis point reduction, we are releasing -- will be releasing 100 billion pesos into the system. that could be inflationary, all things being equal. nejra: the peso is up .9% this year after dropping 5% in 2018. it is lagging gains in the rupiah, link it -- ringgit. how confident are you with the currency right now? >> the exchange rate of the peso is determined by market forces. in the last quarter of the year through the first two months of 2019, the substantial inflow of foreign exchange coming from the 's, on top of that,
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we have seen sizable inflows coming from foreign investment as well as foreign portfolio investment. this is something that is driving the strength, the resiliency of the philippine peso against the u.s. dollar. on top of that, there is also ability provided -- good market fundamentals we are seeing today. inflation has come down from a peak of 6.7% in september 2018, down to 4.4% in january 2019. rosenational reserves also by more than $3 billion from $79 billion at the end of december 2018 to more than $82 billion at the end of january 2019. these numbers are providing support to the currency. nejra: thank you so much for joining us today.
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philippine's central-bank deputy governor. great to have you on the show. let's get the bloomberg business flash. is seeking --einz sinking in extended trading. topoenas from the sec tied policies. it will announce a write-down on assets including most well-known brands. major shareholder berkshire hathaway says it cut value by $2.8 billion. ford has revealed its admission testing could be flawed. its -- it hasid hired an outside firm to conduct an investigation. the u.s. environment protection agency also signaled the company stepped forward voluntary appeared tesla shares have dropped as the model three lost a recommendation from consumer report. the brand was dropped from the top 10 of the magazine's annual
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ranking. owners complained about issues. it fell to 19 in rankings, down 11 spots from last year. that is your bloomberg business flash. nejra: thank you so much. could brexit be set for a delay? bloomberg understands brussels expects the u.k. to be forced to be asked for a three-month extension if theresa may gets her deal through the house of commons and signed off at the eu summit at the end of march. the so-called technical extension would give the british parliament enough time to pass printed laws but avoided the need -- brexit laws but avoid the need for british elections in may. kokou agbo-bloua, global manager of flow strategies at societe generale is still with us. i feel like this is what the market has been pricing for. we will get some kind of extension. is that is how you are thinking of trading sterling at the moment? it has beenutely, pretty high because you have investors buying insurance policies, but if you look at the
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path of the sterling versus the dollar and other currencies, it has been incredibly resilient and high probability of a hard brexit or no deal brexit, it is clearly not what the scenario is today. investors are clearly playing -- hoping for the best and preparing for the worst. nejra: hoping for the best, preparing for the worst. you mentioned implied volatility. hisve a chart showing volatility and it compares the pound to the aussie. we know the aussie is one of the most volatile currencies out of the g10 and has been andriy -- in recent days. is there some complacency on the vol front? kokou: this is a good point because one of the things we have observed is the disconnect with the market selloff last year when it comes to fx, equities. i think investors over the last three to five years, when you
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buck volatility, you didn't end up with the correction we were hedging against. the cost of protection and buying volatility has been pretty much significantly higher than what the realize quality has been on average over the past three years. investors have more of an appetite to reduce position as opposed to adding insurance to their portfolio because of insurance. nejra: kokou agbo-bloua, global manager of flow strategies at societe generale stays with us. we have a lot more to talk about. coming up, the risk rebound. perhaps not today, but this year. is it time for investors to gird themselves for a global downturn or does the rally still have legs? in toing to work, tune bloomberg radio on your device or dab digital radio in the london area. mark carlson is in the studio right now.
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i'll be joining him next from 8:00 a.m. to take you through the equity market on radio. this is bloomberg. ♪ i'm a veteran
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nejra: the optimism we have seen in the asian session, four days of gains this stalling today. the msci index is flat overall. we see a mixed picture beneath the surface. let's check on the markets around the world. maria tadeo. tell us what is happening in the indian market today. >> good morning. anticipated. and we anticipated we would have a
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start that was marginally often the session. you see some tremors in the nifty bank because one of the out andanks selling as a result, the banking index, the nifty bank, down 187 points. that is also because of an idiosyncratic reason. markets are waiting from the qs from washington before deciding what to do next. otherwise, no complaints because the last two or three sessions have been good for india. a bit of a catch-up. a down day is not unwelcome. nejra: maria, you are looking at the kiwi after the reserve bank of new zealand. >> first, chinese stocks are up today 1.9% and this is all to do
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with trade tensions, maybe not so much the idea we could get resolution by the march 1 deadline. president trump will need -- meet with china's vice president today. when you look at the currencies, the new zealand dollar is in focus. down today, to do with the central bank. rationale is new capital rules for banks could lead to increase lending costs, pushing down inflation. reportwn today is -- a by goldman sachs says concerns about supply are overblown. it is down for the second day in a row. moving on to my second chart, i want to look at metals and miners. it is no see great -- secret they had a rough 2018, but if you look at them on a normalized basis, they have had a good start to the year. seeing some returns in both, but the bloomberg mining index and
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metal index are seeing perhaps a rebound. we have seen some positive headlines come out that said there were reports the ban on coal was overblown. nejra: thank you so much, both of you. today, we are asking the question on mliv, metals versus miners? which has more upside in 2019? chat with the mliv team. kokou agbo-bloua is the global manager of flow strategies at societe generale and is still with us. i saw you were listening intently to maria's hit. what has more upside in 2019? metals or minors? kokou: i think miners because when you look at equities, you have the concept of forfeiting leverages.
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as the underlying commodity goes up, the equities will have more of a leverage. miners for me. nejra: thank you so much, kokou agbo-bloua, global manager of flow strategies at societe generale stays with us. let's get the first word news. olivia: president trump is set to meet with china's trap -- top trade negotiator today. china's viceith premier is set for 2:30 p.m. local time and will cap the latest round of talks in washington. the european union is expecting theresa may to request a three-month delay to brexit. the suggestion is the prime minister will ask for an extension if parliament backs a deal. it isn't signed off until an eu summit in march. may has repeatedly rejected the idea of an extension, though she has never completely ruled it out. germany is making it easier for top banks to fire top earners. the move adds flexibility to frankford as it tries to move
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financial firms unsettled by brexit. it will impact lenders such as deutsche bank and j.p. morgan. australia has denied reports china has banned coal imports. the country's ties remain exceptionally strong and he dismissed the idea that any possible ban could be retribution for australia's ban of huawei from its five g network. spacex has launched its second mission of the year, they include an air force class, internet satellite from indonesia and a lunar lander -- is really lunar lander. it launched from cape canaveral at a: 30 local time. the company record last year was 21 customer launches. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much.
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let's talk more about 2019's rebound in risk assets. global stocks in high-yield debt has soared following the fed's tone but how far can the rally go? one analyst says it is time investors got ready for recession like risks. he says now is the time to de-risk portfolios. let's get the view of kokou agbo-bloua from socgen. it is never that simple, is it? how are you advising clients to de-risk while not missing out on further steam in the risk rally? kokou: ultimately what we tell investors is analyze the different phases of a business cycle. like a credit swap, then a deleveraging phase, 6:00 is the real everything. we are between 6:00 and 9:00. formately, we are looking
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relative value trades that will give you a positive carry book while adding complexity to positions. you can think about trades like going long strong balance sheet and short week balance sheet companies. in our mind, that is the major risk today. i am thinking a corporate bond subprime we could be facing in 2020 because of the massive refinancing mountain. a lot of the leverage companies have taken on to buy back their own stuff is due to be refinanced in the next three years and short-term rates are 200 basis points higher. the cost of refinancing could be higher for these companies. nejra: i find it interesting you say and said the new subprime could be the high-yield corporate bond market. we can see on the chart the dovish central banks have really renewed the high-yield greed. you have outlined what you mean in terms of this being the new subprime.
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what happens to this chart in the new scenario? kokou: i think the major element to bear in mind is just the numbers. investment grade in the u.s. is dollars. half of it is triple berated, the lowest -- bbb rated and high-yield is $1.2 trillion. if we have this refinancing issue, you could have from bbb to high-yield, twice as much as the high-yield. -- kokou: this is what investors are worried about. if the market is going up and you are positionally bearish, you might miss out. what i like to tell investors, all roads to hell are paved with positive carry. of solid --ssue selling volatility thinking
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things are fine and losing money when the cycle turns. long equity production against your credit position could also be a nice way to immunize your position against drawdowns. being aware of where you are in in the cycle and being tactical will be very crucial. nejra: you brought it up. offset the long credit with puts for equity markets but the fact you are still long credit means you are at the moment buying into some of the credit euphoria we have seen at the start of the year. is that simply a momentum play? why is it you are so long credit when you see the cycle turning? are different parts of the credit market worth owning. you have your investment grade. there are probably less at risk compared to the u.s. and the size of the market. an important thing is liquidity. secondary trading liquidity
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for corporate bonds has been curated significantly over the last years because banks are not commending their balance sheets as much as before. investors have realized their ability to unwind from a large credit position might not be there. looking for hedges. is the solution. if you can't sell out of your credit positions, equity trades at a discount because of demand locations could be a solution to hedging portfolio in 2020 if we have a recession. nejra: do you think the market is coming to terms with a fed that actually could begin to resume hiking later in 2019? i know the fed fund future pricing bulls would say no. is the equity market coming to terms with her that? kokou: i don't think so because last year, when the market got close to 3.2%, the equity market started to take a hit. this is an environment where the discount rate for clash flows when you value equities could be
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higher than the growth rate. with equities, it is always a tug-of-war between the discount rate or bond yield versus how much companies are able to grow. at this part of the cycle, the long-term growth prospects are lower than what they have been in the past three and a half years when you had trump's stimulus, china running a massive stimulus and ample liquidity from banks. these three factors no longer are driving growth. nejra: kokou agbo-bloua from societe generale stays with us. next, testing times for carmakers. shares slump and i emission testing could be flawed. while on the road, tune in to blizzard -- bloomberg on your mobile device or bloomberg dab digital. this is bloomberg. ♪
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nejra: this is "bloomberg daybreak: europe." i'm nejra j hitch in london. ford shares dropped after it revealed emissions could be flawed. hired an outside firm to conduct an investigation that could stretch into the summer. the potential concern does not involve the use of devices. let's get the latest from bloomberg's automative reporter in germany. how is this different from folks wagon's diesel scandal that volkswagen's diesel scandal? ended up having to pay tens of billions of dollars for their role in their scandal. ford went to regulators and went early and said look, we think .his is a problem
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our employees came to us. if you look at the share price, there was a spike but then things settle down after that. nejra: how has the epa responded, then? the epa hasn't said much because we are still very early in this process, but there was some indication -- they said they were pleased ford came to them first, which is important. this is what will make the difference in this investigation. nejra: give us a little context, as well. is this the first time this has happened ford -- to ford? >> if you remember in 2014, they had similar issues with their cmax fusion cars. they had to reevaluate those mileages and there was a whole bunch of trouble there. it ended up with them having to cut a thousand dollar check to the car owners.
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they've had other issues, so this is not the first rodeo. nejra: thank you so much. coming up on bloomberg, two great interviews. we speak to chairman of bmw and daimler. don't miss those conversations today. let's get the bloomberg business flash. olivia: cost heinz is sinking in extended trading. it has received a subpoena from the sec tied to policies. it will announce a write-down on assets including most well-known brands. major shareholder berkshire hathaway saw its investment cut in value by $2.8 billion. there has been a bit of studied for mining. the world's second-largest gold producer is looking for a way to boost production. it has floated the possibility for some time. in 2014, the two were close to a merger until talks broke down.
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tesla shares have dropped as the model three lost a recommendation from consumer reports. the brand was dropped from the top 10 of the magazine's annual ranking. it cited owners complaining about issues including leaks in interior parts. it fell to 19 in rankings, down 11 spots from last year. that is your bloomberg business flash. nejra: thank you so much. trading missed after a weak u.s. session. our next guest is bullish on asian equities in the long-term. he calls the return potential of the region substantial as u.k. and european investors look for both. kokou agbo-bloua, global manager of flow strategies at societe generale is still with us. welcome to the show. >> very nice to be here. you believe in the case
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long-term for asian equities. is this something investors are getting on board with and i asked because we keep talking about an unloved rally from the start of the year. >> first of all, we strongly believe in the asian story. it is a long-term growth story and if you look at the j.p. asia, we haveor companies that we believe have compounded earnings growth over the next five to six years at over 15%. very good long-term structural growth. based on the rising incomes and so on. and in terms of your questions, last year we saw a lot of flows out of asia in emerging markets but this year, we have started to see some inflows. they are still small compared to the outflows last year. i think where valuations have gone, i think the belief that the trade tensions make these, -- ease, but critical is where the u.s. dollar goes.
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at the moment, in terms of exchange rate, the twin deficits, and the fed's signaling there will be a pause in interest rates may mean that the dollar flattens and that is great for asian equities. nejra: a flatter or weakened u.s. dollar will outweigh the prospect of a fed on pause, meaning there are concerns about global growth? isically, the flat dollar bullish asian equities over the fact you could see risk taken off the table because there are concerns over global growth? >> fairpoint. on that, global growth is not firing on all cylinders but we are starting to see some injection. in asia itself, inflation is quite benign. across asia, there are a lot of things policymakers can do to cut rates, ease monetary policy. see reflationl policy in. asia, which will boost growth.
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. we see that in china. the figures would suggest there is a slowdown, but the chinese think the monetary policy level and fiscal level are starting to do things to make sure the economy state stable. nejra: you recommend china asia specifically. is that because the stimulus already implemented or that might come will be effective? >> in the asian market, if you look at valuations in asia, they are cheap. if you look at the asian market as a whole, it gives you a broad spectrum of sectors to choose from in china. it has a lot of debt, a lot of of liquidity and allows investors to access things we want to buy. health care, domestic consumption, tech sector, things that are domestically driven which perhaps you don't have and the offshore market. >> one quick question when it comes to asian and emerging-market is over the past two to three years, you have
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and an increase in labor asian companies in general compared to the u.s., the assets like business model. stocksthink that these will be able to follow the u.s. model or developed market model of having more efficient ways of running their businesses? >> absolutely. we see those changes gradually happening. there is a lot of new automation and robotics companies, especially japan and korea, and china is picking those up. the demographics in asia, china now in terms of demographics is getting gradually a more aging population, so the need for isomation, more tech definitely there and we see a number of companies embracing this, as well. nejra: i will try to follow up. youttle more on the sectors
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are interested in in terms of where we are in the cycle in asia versus other parts of the world? there aref sectors, sectors we believe our long-term structural winners. those are in financials, particularly insurance companies. if you look at all the stats, which show the penetration rates are still very low. as people become wealthier, they want safety, insurance and we have great insurance companies we have helped for multi-years. we believe in compounded returns of that 15% annually. that is one. second, the health care sector. same argument. as people become prosperous, they want to improve their health and that continues to be a great theme. domestic consumption, you see chinese tourists in europe, i see them in asia. that is a classical example that people can see of rising aspirations at income -- as
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income levels increase. these are multi-your stories. on top of that, if you are looking near-term, near-term we are overweight financials. certain domestic consumption stories and infrastructure. there is a lot of infrastructure buildout. indonesia, thailand, and recently singapore announced a few things in their budget. companies involved in those areas in the near-term look interesting. , would you be advising investors to get exposure to asia and certain parts directly if you believe in the consumer story, or would you be looking to get it more via companies in developed markets that have that exposure to the consumer in asia? kokou: very good question, because one of the disconnects between em versus dm is the question i was alluding to. you have markets with lower growth rates in nominal gdp, yet
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earnings have been growing faster because if you look, a lot of emerging markets because of the income statement nature, have not been able to translate higher nominal gdp growth into high earnings growth and over i think few years, asian equities clearly have the ability to have a better conversion ratio to wield topline growth into earnings growth. the main condition is the quality of management. environment, social, and governance will be critical in terms of stockpicking and being able to capture that story. in the past, he used to be going through the developed market, having exposure to asian equities to play this game, but it will increasingly be more investing companies to deliver return investors are seeking. nejra: where are you seeing the best find? of that >>.
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governance,rporate we see a number of examples of that. japan is a clear winner. they have done many things over five years to improve that and have presented themselves in more independent board members, payout ratios increasing, and we see korea taking numbered steps to get there. they an early start, but made strong announcements and intentions of going down that road. china, dividend payout ratios the last few years, part of shareholder returns, increasing value, that has been improving. there is evidence of that. one of the best places for this is still india. in terms of efficiency and return on capital, it is pretty i. nejra: great to have you both with me. kokou agbo-bloua, global manager of flow strategies at societe generale. and jpmorgan's asset management asian investment trust manager. next on bloomberg, shares in
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europe's largest hotel group warns a newt loyalty program will weigh on earnings. we speak to the ceo next. this is bloomberg. ♪
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nejra: good morning. i'm nejra cehic. this is bloomberg daybreak: europe. these are today's top stories. president trump meets china's top trade negotiator after --jing could theresa may could be forced after a three-month extension, but she still needs to get a deal through parliament first. and the poster giant admits poster testing could be fraud. bmw and daimler today. ♪
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nejra: good morning. just under an hour from the start of cash equity trading in europe but the rally in the u.s. took a hit yesterday, s&p 500 falling the first time in four days and neither are european futures. you are seeing absolutely unchanged there. cac 40 features not doing a lot. it is the end of the week. there's not enough news flow to ride a risk-taking we did have some concerns about global growth yesterday with data from parts of asia, europe highlighting that. are we seeing progress on trade talks? is there any sign given that president trump is said to be
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emitting the top negotiator today? maybe there will be, but markets are grappling with. really again, not a huge amount happening. yesterday, after we saw the s&p 500 dropped, you didn't see safety in terms of the treasury market. bid, futurest a are reflecting that and not a lot of movement in bunds or bcb. perhaps busier later. juliette saly is always busy in singapore. great to have you with us. how is it looking? a little bit lackluster in asia, as well? juliette: certainly was for most of the session.
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nejra: final question, you were talking about the real estate sale. how are you investing? guest: as wisely as i can. i need to redeploy that catch at 10%. precisely what i've done yesterday. are investing we is likely to be a win when it
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comes to four years from now. i met four times when from the creation, that's probably 25-30% ir for my investor. i'm redeploying that cash to make sure i'm getting back much more than i would've gotten if i sold real estate. i've done it the last five years. i just need to spend more time with of those accounts, which is those company. food, great service. they were super nice. nejra: great to have you with us. the ceo speaking to us exclusively. coming up, could we see a three-month technical extension? we'll talk about brexit next. when you're traveling to work, tune into bloomberg radio live or on dab digital radio in the london area. this is bloomberg. ♪
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nejra: 7:20 in london, 39 minutes from the market open in europe. i'm nejra cehic in london. if my voice can hold up, i'll get through these markets. we same a lackluster session in asia, but we seem china outperform. we will talk more about that. the hang seng a little bit in the green, but overall a little bit of caution in the market at the end of this week after four days of gains in asia. dollar you one not going anywhere, oil now on the front foot. it's heading for a weekly gain, wti.%, $57 a barrel in let's look at the dollar index. pretty much unchanged. we did see the dollar in yesterday's session. 10 year treasury yields rose, as well, even though we saw u.s. equity selloff for the first
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time in four sessions. risk off and equity markets, but you some money moving off in bonds. euro stoxx 50 futures ever so slightly on the back foot. moves in terms of markets. .025%. the company announced it missed profit estimates and received a subpoena from the sec tied to accounting. policies it will announce write-down in assets. billion.it valued $2.8 for revealed emissions testing could be flawed. they say workers raised concerns in september and it had an outside firm conduct an investigation. ford managed to keep shareholders,. u.s. environmental protection agency signaled if the company
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stepped forward voluntarily. thea shares dropped as recommendation dropped. it was dropped from the top 10 annual rankings. it cited owners complaining. 19, down 11umber spots from last year. that your bloomberg business 5 --. -- bloomberg business flash. nejra: bloomberg understands it expects the u.k. to ask for a three-month extension. that's if theresa may gets her deal through the house of commons and is signed off at the eu summit at the end of march. the so-called technical extension would give the british parliament enough time to pass brexit laws, but avoid the need to take part in elections. also with us is paul dobson, managing editor for markets. esther, you first on cable. getting that now we're
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possibility of what the markets have been pricing for recently. yeah, i mean these headlines about technical extensions, those aren't really new. what we are seeing is that it is quite calm. what's more interesting in cable is definitely the opportunity at because everybody is waiting for a clear indication. nejra: paul, let me bring you in. i've got a chart of two month cable volatility. it did spike in december. it's come off a little, but not back down to the historical average. paul: it's interesting. looking at the various volatility this week, two months captures the brexit one is been in place.
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it's been in place. they're short inside volatility. the next 10 days or two weeks have been rising, as well now. are we getting closer to a deal? that's what the market is asking itself. the other interesting thing economistsonger-term are starting to revise down their forecast for how high the pound can get if there is a good result from the brexit negotiations. i think the economic damage this uncertainty caused is eating into the u.k., what the bank of england might do. people are not so optimistic about how high sterling could soar. nejra: that's interesting. esther, would you agree with that, that the upside to sterling is limited? esther: definitely. i think the chaos about
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negotiations is also decreasing optimism about what this government sees going forward. right now, we're only talking about an extra deal and extension. we still need to negotiate what the future relating to the u.n. is going to be. this is going to determine the long run growth output for the u.k. and right now there doesn't seem reasons for optimism given the negotiation strategy of the u.k. government. nejra: esther and paul, thank you so much for joining me. we didn't get a chance to get on the aussie dollar but i will show it to you now. there were reports that china be anned those reports are false, according to an official. we did see the aussie dollar weaker yesterday on those reports that china band coal
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imports. it is spiking since we've had the headline. trading at 71.14. that's it for daybreak europe. the european open is up next. this is bloomberg. ♪
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matt: welcome to bloomberg markets. this is the european open. i'm matt miller in berlin. let's make a deal. optimistic reports surface. chinese stocks soar. everywhere else, looking a little bit like buy the rumor, sell the news. the trade kicks off in 30 minutes time. ♪ matt: progress. president trum

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