tv Bloomberg Daybreak Asia Bloomberg March 10, 2019 7:00pm-9:00pm EDT
>> a very good morning. australian markets have just opened for trade. >> good evening from new york. sophie: welcome to daybreak asia. haidi: our top stories, making progress. china cyst trade talks are moving forward with meaningful discussions and general agreement. theresa may facing another difficult week. her brexit deal is expected to fail again and she is losing support of her cabinet.
new concerns over boeing's most popular plane after another crash. everyone on board was killed. ramy: a quick reminder of how u.s. stocks ended. you can see across the board in the session friday, the s&p 500 down to 10 survey percent a similar story for the dow and nasdaq. the big reason was the february jobs number coming in at just about 20,000. expectation was for 180,000. what does that mean for the entire week? week for thest entire year so far. down five days and around. a lot of investors are wondering, are we finally seeing the first jaws of that u.s. economic slowdown people are talking about. let's see how things are shaping up for the asian markets. some softoks like sentiment at the start of the sentiment for stocks in sydney.
a 5000 off by 810 survey percent. .8%.f concerns over moderating growth. we might see some pain continue after regional stocks in asia lost $384 billion in value over the last 10 trading days. when it comes to some movers and automotive parts retailer down 3.2%. beach energy down nearly 2%. perhaps we are seeing reaction to norway preparing to divest $7.5 billion from companies like beach energy and more. look at how the yen is faring this morning. we are seeing it gain some ground against concerns over global growth. low onhed a one-week
friday. haidi: some global growth also. powellhearing from jay speaking on 60 minutes saying china, brexit, europe are risks to the u.s. outlook. the biggest take away we have gotten is him saying the fed is in no hurry to raise rates. that same theme of study as she goes. he did not stop rate hikes because of pressure from president trump. positive.s. outlook is and financial conditions are generally healthy, saying the fed rate policy is in a good place right now. they will not be reacting to inflation, which is holding modestly above that 2% level. fed chair powell says the u.s. economy performed well. but the global economy is slowing and he declined to comment on trump's criticism of the fed, the strength of the dollar, and a tendency for fed rate hikes we have seen criticism from the u.s. president.
jay powell saying he plans to say or -- serve his entire term, trump cannot fire him. also saying the baking system is more resilient than it was precrisis, but the large amount of corporate borrowing could potentially amplify downturn. but patience is still key when it comes to fed chair powell. he is also speaking about some global risks from china to brexit. we will get a lot more in terms of the context of what he is saying with kathleen hays, but in the meantime she will bring us the first word news. kathleen: you did a wonderful job of the jay powell headlines. boeing is sending a team to assist in the investigation of an ethiopians crash which killed while all 157 people on board. it came down shortly after takeoff and the airlines as the plane had not shown any problems on an earlier flight from johannesburg. it raises more concerns about the max plane, after the same
play -- plane crashed earlier. reports say theresa may lost the backing of all but two of her cabinets. members have discussed whether she should resign and some say that would happen this week if ofour wins a new vote confidence. her appeals fell on deaf ears. >> we need to support the prime minister. getmission is clear, to political declarations through so we can move on to an agreement built which offers more opportunities for colleagues to scrutinize the arrangement, to potentially amend how we do this. announcedindia has dates for the upcoming election with voting beginning in early april and the final result in late may. around 900 million people are eligible to cast ballots for the 543 members in lower parliament
with the prime minister short of an overall majority. his movement law support over concerns with the economy and jobs. north korea voted for the national legislation in an election seen as just an endorsement of the kim jong-un regime. they were selected by the workers party. kim jong-un is the most prominent candidate, despite his complete control of the government. he is seeking reelection. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kathleen hays. this is bloomberg. officials in both washington and beijing are indicating progress in trade talks are being made about china continues to push back at some u.s. demands. larry kudlow says he is
optimistic of a deal being struck. the pboc isn't general agreement on fx. nows take a look at this with tom mackenzie. what are you hearing? well, certainly the press conference we went to yesterday, sunday, he said they had come to some kind of consensus in key areas. heyou rightly pointed out, also said in terms of this demand we had heard from the u.s. around keeping the yuan stable this was more be conversation agreement between decides to commit to their post-g20 commitments, not to depreciate their currencies. saying in effect they both so also agree to respect their monetary policy systems, which is quite a different interpretation from what we heard from steve mnuchin who said this is the strongest currency deal the u.s. had ever
achieved with a trading partner. of course we know the trump administration is concerned child you -- china could devalue the currency. they said it was not on the cards as part of retaliation or part of a step they could take if trade tensions continue. we also heard from the vice commerce minister and a man at the heart of these conversations, these trade talks. he was asked about this enforcement mechanism, which we know is something of a sticking point between decides. there needs to be more details in terms of those conversations. he said in terms of enforcement mechanisms, it would be two-sided. take a listen. >> any enforcement mechanism equal. two way, fair and
i feel hopeful. tom: quite exactly what that means, a two way enforcement mechanism is not clear. he would not give more details. certainly this is something the trump administration wants to have in place because they said previous deals with china have fallen apart because they have not had a strong system for enforcement and verification. certainly the interpretation from the chinese seems to be that they do not want to portray themselves as bending over and being dictated to by the u.s. ramy: that would not play well to the audience at home. what are we hearing from the u.s. side? the word at least is optimism from larry kudlow. derek: the word is optimism from the u.s. side though it is hard to say without means. -- hardseen in the last to say what that means. we have seen in the last week
some divergent definitions of where the currency talks exactly arm of the u.s. and china not exactly on the same page in their comments there. still, larry kudlow said he is optimistic, that the u.s. and china are working on final details. i would caution viewers to not think that final details means small details, because that is definitely not the case. sometimes the last details are the biggest details. there is still quite a little bit to go here. what i'd like to call happy noises coming from the united states side right now, which is certainly better than it has been. there is no great time pressure right now because the march 1 deadline was pushed for higher tariffs, it was pushed to no firm time point at all. it is going as long as it needs to. the other thing i would hit on real quick as i would say the u.s. has leaned on china, it is kind of related to help with
north korea. with reports coming out that north korea may be preparing for who knows what at some site and north korea, maybe a space launch, mably --maybe a missile launch preparation. the u.s. has counted on china to lean on north korea. if there is a sense china is not leaning on north korea to stop any mall action, that will be a problem. ramy: of course this is the second week of the two session meeting in beijing. do we know what tools the pboc may deploy to short growth there? despite saying monetary policy remains prudent they have effectively been easing the edges to lower the rates and make it cheaper for private businesses to borrow. they have said in terms of reserve ratio cuts, because we have seen five of those since the beginning of triple -- of 2019, essentially they were running out of space. that was interesting.
governor, he said a priority for this year would be to lower the risk premium. financial conditions were improving but they stood ready to provide, quote, abundant liquidity for those particular businesses. in terms of the question of debt being a concern for some looking at china as they move their focus away from deleveraging, they said the total debt for 2018 fell by about 1.5%. many are skeptical about those kinds of numbers. the debt to gdp picture will probably rise for the first time since 2015. the pboc saying they want to keep credit growth broadly in line with nominal gdp. expect that to be around 10%. thank you so much to tom mackenzie in beijing and derek joining us in singapore. breaking news crossing the
bloomberg. china has asked domestic airlines within the country to suspend usage of the boeing 373 max. this comes of course after the sunday crash of the same plane which killed all 157 people on board, just five months after that october accident, a crash max whichn 373 crashed into the coast of indonesia, killing 189 people. now we are hearing china has ordered domestic airlines suspend the boeing 737 max model. this is a workhouse for boeing. ramy: looking at the year to date share price for boeing. it is up by about 30%. boeing shares will be in focus when they start trading in the u.s. on monday moving ahead,
haidi: we are counting down to asia's first major market opening. japanese futures looking like this. a pretty sluggish start when it comes to treating in asia. nikkei futures up about four tens of 1%. not much relief from wash -- from wall street. it was the worst week for the s&p all year on the back of a jobs report that wildly missed estimates on friday amid continued concerns about the pace of global growth. i am haidi stroud-watts here in sydney. ramy: and i am ramy inocencio in new york and you are watching daybreak asia. in nowell says the fed is hurry to change interest rates
and the u.s. economic outlook is positive. that, as employment reports show the least number of jobs created ever since september of 2017 and the strongest growth in wages since 2009. you got all that? kathleen hays is here with more. we just had headlines from jay powell on 60 minutes today. what did he say? kathleen: he did not surprise us. the fed can be patient. there is risk from overseas, but powell reminds -- let's remind people, 60 minutes is a paragon of u.s. news programs. people from all over the country watch. it is not a financial show, but this is a very important stage for a fed chair to speak. that is one thing we want to keep in mind. regular people, people who do not watch bloomberg all the time, they can understand what he is doing and why. particularly after the president has been critical of jay powell. when he was asked he said he did not stop the rate hikes in
january. he just raise them in december. he did not do that because of treasure --pressure from trump. he also said no, donald trump cannot fire him. we know this is all true. this is telling us nothing we don't know. it underscores what is going on and underscores the fed feels it is important to get the fed chair out there. he has made it a hallmark of his chairmanship that he wants to speak in plain language people can understand. this interview has been in place for a while but the timing is interesting, particularly after this jobs report which had a big pullback. now let's look at a big picture from our bloomberg library. you will know why we are watching snow. we had a big pullback and jobs growth in february and a lot of people think it had to do with the rough winter weather. now we are going to move on to jobs. here is the money chart.
rise in january. then you only grow 20,000. look at the change. the weakest since september 2017. we also saw the government shutdown, the bad weather, all kinds of things going on. i guess it really does arerscore -- we may be having a slowdown this year. the new york fed president last week saying something like 2%. not alarming. this will be a big question, certainly for investors and financial markets. ramy: kathleen hays there. let's dive more into this. the big question is how will the disappointing jobs report factor into the fed thinking. mike schumacher from wells fargo securities joins us from hong kong. reaction to get your on what jay powell just said in
that 60 minutes interview. quote, we think the u.s. outlook is a positive one. on top of that last week he said the labor market looks as favorable as it has in many decades. do you agree with him? mike: sure. labor market looks great. a lot of people are fixated on the 2000 -- 20,000 number. big deal. unemployment is sub 4%. hourly earnings up 3.4%. sounds pretty good to us. i agree with chairman powell. ramy: i see you are thinking there could be one hike in the second half of 2019. an earlier guest had a bias towards a rate cut in the third quarter. help me square the circle. mike: you have to focus on what the fed considers neutral. on the fed's perspective is as neutral funds is to 75. today fed funds is to 40. inflations picking up -- if you believe the phillips
curve is not dead, the hourly earnings is good. fed seems poised to have inflation rising. one side of the mandate is looking really good and that should mean at least neutral policy which implies one more hike. haidi: are we at that inflection point when it comes to yields this week? mike: i would say we are pretty close. when you talk to people in the market, what stumps them is how little rates have moved into thousand 19. was 278, nowury 263. very little volatility. message from the ecb was very negative this past week. i suspect that makes people think we are at an inflection point. haidi: in terms of expectations it has beenar, surprising how much dollar strength we have seen ever since the fed switched course earlier this year. have that surprised you and do
you expect that dollar rally to continue? mike: we think it is about done. the dollar can potentially tread water for a little longer but by large our currency team expects weakness over the next three to six months. when you look at relative central-bank policies, the fed has clearly moved towards an easier stance. you could argue it had a long way to go but the direction was towards easier policy. that should mean a weaker dollar going forward. ramy: in terms of the biggest upside weeks -- upside risks to any possible fed rate hike past change, we are all talking about u.s. china trade but is that what you are holding your breath for? in terms of details, what are you hoping? mike: we would say the biggest risk is not the trade deal. it is a big impact on equity earnings. when you think a very large u.s. corporations, 40% of their earnings come from overseas operations. trade is massive earnings.
with respect to the u.s. economy it is not that big. exports are only 12% of gdp. trade is not the biggest upset. what if inflation comes in relatively high? would've if the phillips curve is more slow? what if wages increase by 4%? it could happen. ramy: going off of what jay powell also said from the interview, the fed will not oh -- overreact to inflation above 2%. talking about that average in terms of inflation moving ahead, do you think that that is the wisest thing that could be happening, or is it something that needs to be more stricter than that? mike: it makes sense for the fed to have a symmetric target and let inflation run a little hot. you have to remember that when people estimate where inflation is today there is some error around the number. we think it is 1.9% but what is that confidence interval? you cannot be overly precise. i know that is the tendency when
we see all these numbers and whatnot. you have to describe a little chance there is fuzziness in the numbers. it makes sense around both ways. haidi: what are you expecting for this reasonably soon plan on the balance sheet we are expecting? mike: the balance sheet has been an enigma for the fed. it knows the direction has been right but it cannot tell you with the size is worth. if they cut by $100 billion does it mean it is worth 10 basis points. we think bottom line the fed will shrink the balance sheet this year and basically wrap it up. it will be at equilibrium. the fed is due to announce a plan sometime in the next two months talking about the composition of the balance sheet. that could be very interesting. have a bias towards shorter treasuries? probably so. in terms of the overall size we think it wraps up towards the end of the year. haidi: great to have the.
haidi: a quick check of the latest business flash headlines. they agreed on an $806 million deal, extending the recent run of dealmaking's in the sector. they will acquire a 70% interest in the mine. in january the forecast 2019 production of up to 38,000 ounces of gold, 76 million pounds of copper. ramy: a merger of deutsche bank and commerzbank is a step closer as germany's largest listed lenders are running out of time to show they can grow as standalone companies. they are intensifying talks as their turnaround efforts sputter and the ceo is said to has ended his opposition to a deal. deutche's management board has
kathleen: this is daybreak asia. china's credit growth slowed after a seasonal surge in january with the first two months showing signaling recovery. the pboc said financing topped $105 billion compared to forecasts of twice as much. money supply gained 2.8%, matching the slowest ever expansion. the head of the pboc said beijing and washington have reached consensus on many crucial issues per he said they are very meaningful. -- issues. he said they are very meaningful. use the exchange
rate for competitive purposes in china. discussednd the u.s. how to respect the other .onetary authority's authority they also discussed market exchange rate mechanisms. and the two sides should observe earlier commitments made at previous g20 summit's. kathleen: hong kong likely to raise borrowing costs after the central bank intervened for the first time since august. the monetary authority bought $100 billion hong kong after the currency fell. it cut the aggregate bound to a billion hong8 kong. it was $180 billion a few months ago. theresa may saying she lost the backing of all but two of her cabinet. the daily telegraph said numbers
discussed whether she should resign -- members discussed whether she should resign. that could still happen. her brexit bill faces defeat after concessions from the u.s. -- the european union fell on deaf ears. >> we only support her. the [indiscernible] so that we can move on, get to the withdrawal agreement which is more opportunity for colleagues to scrutinize the arrangement, to potentially amend how we do this. it gives them extra opportunity. kathleen: president trump expected to present his 2020 budget and reports he will -- reuters reports he will ask for $8.6 billion to help pay for the wall. the wall street journal said the budget will assume the u.s. economy continues to expand briskly while many independent forecasters expect it to slow. -- this is the first since the
democrats won control of the house. 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. hays.athleen this is bloomberg. ramy: let's check in on australian markets. like it is down. -- looks like it is down. sophie: extending friday's declines, the asx 200 off .2%. 10-year yield slipping at the start of a week that will see homeland -- home loan data and consumer inflation expectations. checking the australian dollar, good down but showing credit growth in china slowing more than estimated. inking at the laggards china, energy stocks. this as they move to have
holdings that focus. on expiration and extraction including woodside, beach energy and others. looking at invoke care shares which are falling 3% after resuming trading and completing the institutional share placement as the company accelerates is capital raising plans after positive results. optimistic notes, gold stocks gaining ground in sydney with potential catalysts. newcrest is adding 3.9%, rising after itust 2016 high agreed to buy a jb stake. on that, the ceo said the miner would open to any asset purchases in australia [indiscernible] the ceo said the potential listing in north america remains under consideration. kamaruddin.e
investigators are piecing together the fatal crash of an ethiopian airlines jet over the weekend. 157 people on board were killed. 737 and it brand-new was the second deadly crash in five months of one of those same jets. stephen engle is following the latest. what do we know about this accident? we are hearing china has ordered this type of airplane to be grounded in the country. it is awkward given the factory boeing has played in the ongoing trade talks. stephen: this is the latest development in a while. regulators have asked the carriers, domestic carriers to ground all of the 737 max in operation in china. we are doing operated -- our research to find out which airlines would be involved.
it could be quite devastating to boeing. this is a plane that is poised to generate $30 billion in revenue. they were going to be upping the completion per month ratio to 57 per month. it is the most important airplane in boeing's lineup and accounts for a third of boeing's operating profit. the 737 is a legacy aircraft. this is the latest version with new engines and software which has come into the forefront in this investigation. it is the most profitable commercial aircraft ever made, but right now in the spotlight. let's not lose sight of the real tragedy. it is not boeing but the lives and family members of those lost on this flight which plunged into the ground in ethiopia,
flying to nairobi. 157 people on board were killed. it is puzzling in many ways because this airplane was delivered to ethiopian airlines in november 2015. this is africa's most consistently popemobile -- consistently profitable carrier. it is one of the youngest fleets in the world, not just africa. ramy: rehashing what we were talking about earlier, china asking this plane to be suspended, air safety a concern in china and people who fly here. what have investigators learned from the current probe? obviously they are going to link the previous
crashes within five months. halt jumping to conclusions that it was the same cause but we can bring up what happened with lion air in october when it plunged into the sea when it was flying in indonesia. boeing had put a new piece of software in the plane, and apparently had not flagged it in training manuals. but this software in layman's terms is when sensors detect a potential stall, it puts the plane into a dive. air crash of the lion were puzzled why it kept automatically dipping its nose down and fought with it a dozen times before succumbing to its software and it plunged into the ground. the previous flight of that lion air reported similar problems.
that is why this ethiopian airlines crash is different. there were problems reported immediately after takeoff, but -- theere no investigation is still in its early stages so shouldn't draw any conclusions that they are linked to but should look for similarities. haidi: stephen engle in hong kong with the latest on that tragedy. coming up next the u.s. dollar the steps a seven-day streak following disappointing eco-data. this is bloomberg. ♪
we have the asx 200 trading down a quarter of a percent. little markets open in a over 18 minutes time. i am ramy inocencio. haidi: i am haidi stroud-watts. the dollar snapped a seventh straight day of gains after the weakest payroll growth since 2016. reporter joins us. strong when it comes to wage growth. in terms of relentless dollar strength we have seen so far this year, which has been counterintuitive as the fed switched the patient's, is that going to continue? >> [indiscernible] [speaking simultaneously] laundry.rts in the we have been saying. the reports were not as --cerning as the downtick
almost back to the lows of last year and earnings were picking up. for u.s. equity markets one of the things that troubled them was the prospect of a slower u.s. economy and higher wages. onpanies can't fas -- pass the high cost. but the underlying message is the labor market is still strong. the trend growth more than enough to keep down pressure on unemployment. not much to see. haidi: does that mean we are more or less done with at the above rally? againstwere bumping up the 2018 highs on thursday or that was a euro driven story -- on thursday. that was a euro driven story. if the dollar is going to push on and make new highs, it will be in the context of the euro continuing to weaken but there is a lot of bad news priced in.
this, it doesn't look like it is no means extreme [indiscernible] our sense is the u.s. dollar will remain elevated in coming months particularly in the context of the economy looking better or less bad. looking for its next year, we are thinking the rest of the world will pick up as we get that favored trade deal with china and start to see export growth in other parts of the world. conditions for the dollar eventually coming low or into place. that is the story for the next half of the year. bringing in china, in terms of the fx world, we had one official saying autonomy is the name of their strategy game with the u.s. some say it could be 665 in terms of its strongest year, but
what is your forecast for the yuan? war,subject to that trade china is willing to sign up for some kind of conditionality with respect to the currency. they will commit to not using it for competitive purposes through why in aes dollar-cn 680 range for many months to come. dollar-cny in a 680 range for many months to come. we can expect a volatility subject to the overriding imperative of where the dollar is going. more broadly we have been out on 670 as an anchor point for dollar-cny. subject of course to there being some kind of trade deal either at the end of this month or
weekend reports suggest that until april. ramy: words are one thing, actions are another. what do you think it would take for beijing to say we have said one thing but because what is happening with u.s.-china trade, really we have to make unwholesome levers with the yuan? ray: that revolves around the checks and balances the u.s. is able to secure, what mechanism that will be for judging whether or not china is adhering to the deal struck. if the rules are that you are deviating from commitments that we sign up to, we reserve the tariffs.revert back to that is a powerful check and balance for reconciling the potential difficulty of backing up words with deeds. haidi: here is a chart when it comes to where we are with the traders havency
maintained on the shorts for the year. we have heard outliers like j.p. morgan that have taken a long position. are we getting bearish are given the sense we are getting more and more people in the camp, we will not just see one cut but potentially two? is this on account of the rba being more dovish? ray: to some extent. the key thing is to look at where the market is. 35 basis points of cuts already priced in. i would say the rba cash threat of 1% versus the current 1.5% doesn't mean a lot in terms of the currency. it has driven bearish sentiment but the economic data that justify that change of you on the rba -- we have to allow for some time, $.70. going into q2, there is some potential to weigh on the currency.
68,ill characterize it as a 73. haidi: 73 if we get a trade deal? ray: no, we could get 71, 72. if i am an importer in australia and i see that level, i would grab it with both hands. haidi: the halfing -- thank you for joining us here. there is our interactive tv function. you can watch us live, catch up on interviews or take a better look at securities and functions we talk about. you can join in on the conversation if you have questions or talking points for our guests, send it through. it is for bloomberg subscribers. this is bloomberg. ♪ ♪
japan inc. is pushing back after years of pressure from shinzo to to give bigger pay raises restore stable growth. the result of which talks released this week will show smaller gains abe has been seeking. economying in the japan editor. this goes on for a while. why now for this pushback? that is a good question. under abenomics, japan inc. has payr given the kind of raises that the bank of japan would like to the to push inflation to 2%. for years the biggest business servicesically pay lip to prime minister abe's request butbigger pay increases, this year there is a sense that
there is too much uncertainty perspective,siness the economy, growth is expected to slow down, china's economy is slowing. you have china-u.s. trade war going on, and you have brexit. .here is a lot of uncertainty for companies that have never been in recent years at least in the mood to give out these pay raises, this is not the environment to do it in. chief was saying it is nonsensical for the government to take a role in the wage negotiations, but it is a pillar of abenomics being successful. >> that is unusual. it is key. these negotiations set the tone for businesses across japan, not as strongly as in past years but
definitely it is symbolic. even a year ago the former chairman said after prime minister abe suggested a 3% pay increase, the former chairman said we will consider it and suggested to his members to look at it in a positive light. that goes back to the kind of culture, business culture here that is strong ties between government and business. the new chairman took a different view. editor letter. a leading chinese online pharmacy provider the drug price reforms will cut costs in the industry and boost convenience for customers. bloomberg at the forum in shanghai. all we are a very
transparent, highly patient channel for doug -- drug distribution. 160,000 we partner with drugstores to help with distribution. we are highly transparent and efficient. this is why we are highly sought .fter by some companies they love to work with us. >> [speaking simultaneously] like eli lilly. >> especially our ipo, companies like pfizer, johnson and johnson, all of these companies love to work with us. high-efficiency and complete transparency. >> what do you think is the biggest change that you think might happen to the chinese
health care industry? what is one trend you are confident that will remain impact? moreople will have much convenience of seeing doctors and the cost of getting medication will be lowered drastically through all the efforts including ours. it doesn't matter, people can go see dr. ebert to a hospital or online -- dr. either through a hospital or a online hospital. expecting a lot of [indiscernible] and costs will be cut. co-founder the 111 speaking exclusively to bloomberg. let's do a preview of the market open for japan and south korea. sophie: we are getting more hits of a mixed start for asian stocks monday while the yen is extending gains for a fourth
session. when it comes to stocks on the radar, this one that could replace pioneer on the nikkei 225 index. watching reaction to a report that hitachi could sell its entire stake in hitachi chemical . also an eye on japan airport terminal on a report that the edated a airport -- the hand want to boost capacity. in seoul we are looking at kia motors. they could -- this nominee said the group needs to take cash for investment and not payout to shareholders. hyundai heavy, that may move as they sign a former -- formal deal with kgb for shipping. kdb for shipping. haidi: australia looking dismal,
declines of .25%. new zealand also we saw a record high for that market but declines of .2%. nikkei futures looking perkier, half of 1% to the upside and kospi futures looking lackluster, seeing more data coming through for the first 10 days on south korean trade, a bellwether for regional and global trade, exports falling 19% again. this is on the back of a dismal session in the u.s., the worst week for u.s. stocks all year. an important part of japan is about to quit the 1800s. banks are ready to advance -- abandoned the personal stamps required to validate all transactions for more than 100 years. they are allowing customers to transfer money and make payments
haidi: good morning, i'm haidi stroud-watts in sydney. asia's major markets have just opened for trade. ramy: good evening from bloomberg's's global headquarters in new york, i'm ramy inocencio. sophie: i'm sophie kamaruddin in hong kong. welcome to "daybreak: asia." haidi: our top stories this monday. making progress. china says trade talks are moving forward with meaningful discussions and general agreements. trading weaker after a few days. theresa may's brexit deal expected to fail again.
she has also lost support of her cabinet. ramy: that means caution is the word after the worst week for global equities since mid-december. markets are mixed, at best. ramy: let's get straight to the market action with sophie kamaruddin. taking a look at the opens for japan and south korea. sophie: starting off with tokyo. japanese shares may be an outlier this morning. we are expecting a mixed start for asian equities. the nikkei 225 adding 0.2%. -- .02%. helping to see japanese stocks gain. gains, is extending trading just above 111 against the greenback. on korea, the cost be is down -- kospi is down. electronics up 1.3%, climbing with other chipmakers. reactionlso be gauging
to the latest data from south korea showing exports falling 19.1% year on year in the first 10 days i of march. let's check in on how stocks are doing in australia and new zealand. players amongl the worst laggards in sydney. the well-funded looks to divest holdings.5 billion in australian companies like woodside, beach energy, and santos. the aussie dollar also on the backside. an earlier decline of 2.2%. growth is slowing. in wellington, stocks are under pressure. looking like a mixed start this monday. ramy: sophie kamaruddin, thank you very much. let's check the first word headlines. first up, reports from china. the government is asking domestic airlines to suspend
boeing 737 max after the alline crash that killed 170 people on board -- 157 people on board. it failed shortly after taking off. it showed no problems on an earlier flight from johannesburg. the disaster raises more safety concerns after the same model crashed in indonesia last october. theresa may enters a potentially defining week, with reports saying she lost the backing of all but 2 of her cabinet members. members had discussed whether she should resign. some say that could happen this week if a new vote of confidence is won. defeat tuesdayvy after concessions from the eu fell on deaf ears in brussels. >> we all need to support the prime minister. her mission is clear, to get the agreement through so we can move on.
the agreement offers more opportunities for colleagues to , totinize the arrangement potentially amend how we do this. it gives them extra opportunity. ramy: japan's as tokyo district court is expected to deny a request to attend an upcoming nissan board meeting. the request was made through lawyers after he was released on bail last week. his freedom includes the condition that he seeks court permission before having contact with certain people connected with this case. haidi: officials in washington and beijing indicating progress is being made in ongoing trade talks. china continues to push back at some u.s. demands. larry kudlow says he is optimistic about a deal being done. the pboc says there has been general agreement on talks regarding fx. let's bring in the executive editor. what is the latest we are hearing, in terms of these broad
strokes positive sentiments from both sides? it optimisticl caution. both sides want a deal. both have a reason to want a deal. the economy is slowing in china. the economy seems to be softer in the u.s., as well. there is motivation on both sides to get something done. i think they are also cautioning that is -- it is long and these are hard issues. they may not necessarily find a solution. ramy: from your perch on the ground, who has the upper hand? john: i think the u.s. has since the start of these talks. the u.s. instigated with tariffs to begin with. in there 25% tariffs offing that the president has postponed indefinitely. the chinese economy is softer. we saw the data over the weekend for credit.
came in less than expected. trade was worse, as well. ramy: bloomberg's greater china executive editor john liu. the latest from there as we hash out that he said she said between beijing and washington, d.c. let's get to the fed. jay powell said the fed is in no hurry to raise interest rates and the u.s. economic outlook is positive. bloomberg global economics editor kathleen hays is here to put his comments for us. what was new about the comments? things hehe repeated has been saying for the last couple of months with a different context. when the fed stopped raising rates in january after raising them four times and signaling more rate hikes to come, this sent the markets back on their heels. the fact that he takes this important stage, even a global stage, to make his point again i think is important. particularly the point about the fed being in a position where it
can wait and see. here's how he said it today on "60 minutes." >> we don't feel any hurry to change our interest rate policy. what's happened in the last 90 or so days is we have seen increasing evidence of the global economy slowing down. our own economy is continuing to perform well. haidi: it's very interesting. nothing new, but the fact that he said the u.s. economy has been performing well, the global economy is slowing. it's another thing officials are telling us. you have a strong labor market, you have weak retail sales. a good foundation for the economy to keep growing. maybe not like 2018, but something north of 2% in 2019. this is another important point he has made. i don't know how many times over the last them this question and how many times he will answer it, did you stop raising rates because of president trump? no. i think we can take him at his
word. haidi: he is going to be around for the rest of his four year term. does the february jobs report support the patience theory? kathleen: it's too early to say it opens a door to a cut. a lot of traders are asking these questions. when you add the slowdown in europe and questions over china's economy, what you suddenly see in the u.s. jobs report is we may have a slow, but not a recession. this is a chart that shows the change in payroll in february that was so shocking. after going up a revised 311,000 in january, payrolls only rose 20,000. we haven't seen anything like this since september of 2017. this is the three-month moving average. it went down to about 186,000
from 244,000. it is still in this range. if you average this out, that's what you will see. another important part of this story is the average jumped ahead. go back with me now. what we are seeing are two lines . look how much unemployment fell from the depth of recession all the way to hear. -- all the way to here. timeframechange the quickly so you can see better what we see now. it makes a point. here is what you want to see. paychecks, same thing with unemployment. in this past 1.5 years, you see acceleration. the low is 2.3% year over year. up to 3.4% in the february report. this is another reason why people say it does not show the economy is putting on the brakes. there was a lot of snow, a government shutdown, too early
to say the fed has do anything but wait and see. not for a rate cut, but more like something like a rate hike. that is still the big question. haidi: kathleen hays, our bloomberg global economics and policy editor. we will certainly follow this and wait and see. we saw a pretty terrible end to the week for u.s. stocks and a slow for china. joining us is our equities editor. it feels like we have been struggling to find momentum. by the end of last week, even china's stocks capitulated. >> last week was definitely a bloodbath for equities globally. people are concerned about the economic slowdown happening across the world. that has been well flagged, but it almost felt like the capitulation happen last week. people were selling out of offks, bonds, even the
stock journals i came out. it was the perfect storm that happened last week. haidi: and a lot of noise today. divya: we had the trade news that came out over the weekend, the jay powell interview, and there's this boeing situation happening that will weigh heavily on the dow jones industrial average index. that's what we will be watching today. ramy: looking ahead to the rest of this week, what is on the radar that investors need to watch? ? divya: there are quite a few things. looking at asia, china earnings aia, product,h, boj monetary policy decision coming through. looking across the world, u.s. cpi, the brexit vote coming through. there is a lot going on this week. ramy: a busy week to look ahead to. thanks to bloomberg's equity editor divya baljil.
i'm ramycome back, inocencio in new york. haidi: i'm haidi stroud-watts in sydney. you're watching "daybreak: asia." china has lowered its gdp target for 2019. that ensures a more sustainable pace of growth. the international founder and chairman spoke with us at the washington global forum in shanghai. moree current slowdown is policy driven.
china -- china wants to slow it down so you can have more sustainable goals going forward. china is different now from 10 years ago. $30re talking about trillion or $40 trillion of the u.s. economy. 5% growth, that is a very good growth, in terms of incremental. it is a high right now. you don't want to have such a large economy. we are high growth rate, mostly leverage driven. that is not sustainable. >> in your view, do you think the current exchange rate is fair value? or maybe even overvalued?
frank: i think it's probably very close to fair value at the moment. at aina can sustain growth ,ood quality level long-term china needs to make a successful transition in terms of its economic model. if it can do that, it may have room. ramy: that was seafront founder .nd chairman speaking to us we are joined by standard chartered china economist len shen. good to have you. we just heard him talking about good growth.% is we know it is slowing down. at 6.4%.ng, yours is that is above what a lot of analysts say. is aboveforecast
market consensus. it in china, given headwinds slowing and falling in the profit growth, as well as less outlook in china this year. moving to acy is , thingsportive growth like last year. growth will shortened activity by six months. likely to bottom out in the near term, given that you authority planned to keep the growth in line with nominal gdp growth. also, the fiscal policy, and the structure investment spending backed by the local government's special bought insurance. also the tax cut will likely affect the activity in 3-6
months time. see we are likely to economic indicators to bottom out, that's around the mid-of this year. ramy: to what degree are you concerned about cpi and ppi? we got those over the weekend. 1.5% for the most recent readings. down 0.2 percentage points. to what degree was this base effects? see there are some base effects in february's cpi inflation data. overall, it may stay contained thehe year of 2019, given slowing economic, and enough sense rise in oil prices. we expect it may pull some upside in the second half of this year. averagely, we see it will likely
be around 2% this year. it's still much less than the target affected by the government this year. more importantly, we see cpi inflation as more market focused. there's more down cycle for the ppi inflation. to contract in territories in the coming months, given the sluggish money supply and the weak housing sales growth. we see the implication is twofold. is the worsthina largest exporter. some of its deflation is exported to the rest of the world, which may have more meaningful implications for other central banks and investors globally. domestically,ee the following ppi inflation will likely enroll the industrial
profits and raise nominal gdp growth. even as real typical's may civilize at the end of this year. there's more -- it may elicit more policy response. haidi: you mentioned the credit data that came out in the last few days. disappointing as well. looking at one aspect, the aggregate social financing. that was underwhelming, to say the least. we also had the yuan loans deeply undershooting, as you can see when it comes to the combined aggregate financing. does this tell you that policymakers are still prioritizing deleveraging? toknow the pboc was said have communicated to some banks to manage the pace of their credit expansion after the january numbers, which were a massive overshoot. see that contained leverage ratio is still one of the priorities in china.
you see that in the government working report. the government plans to keep finance and growth in line with nominal gdp growth. also, the wording structure delivered largely intact. n drill outthat we ca any kind of growth that people used to expect in china when china is facing a downturn trend. moree second half, we see introduced.g to be rate to ease the credit conditions in china. we expect another 200 basis in order tor cuts
provide liquidity in the market and bring out the real interest rates for the real economy. meantime, we see them pushing forward to converse frameworkntroducing a improving the pricing for the long time right. -- longtime rate. we think it will be more material downward trends in the real borrowing costs. haidi: what are your expectations for the yuan? that they wanted to have flexibility but also keep it stable. what does that mean? expect it is likely to appreciate a certain extent against the u.s. dollar during the course of 2019. morey u.s./china and
capital inflows to china. fundamentally, we expect a decline in china's capital account surplus in this year. also, their interest rate margins with the u.s. we think we may see a changing landscape that current accounts be the most important driver of fx valuation. instead, we think the capital account may become more important. moreina's case, we expect than $400 billion of capital inflow to china in the next three years time, given the index inclusion. this can overweight the negatives from the differential and the capital account surplus to become a very important support of the renminbi in the future. ramy: great breakdown of china's economy and all of the eco-data
that has been dropping. lan shen thank you very much, standard chartered china economist . you can get a round of of the stories you need to know to get your story going in today's edition of "daybreak: asia." toomberg subscribers can go their terminals. it's also available on mobile. you can also customize your settings so you get the news on the industries and assets that you care about. this is bloomberg.
i'm ramy inocencio in new york. haidi: i'm haidi stroud-watts in sydney. you're watching "daybreak: asia." let's get a quick check of the latest business flash headlines. the debt laden chinese conglomerate hna is selling stakes in a hong kong construction firm to blackstone for about $900 million. blackstone will own more than 71% of the company after the deal goes through, making an
offer on the remaining stocks. hna has been offloading assets to pay down one of chinese biggest debt mountains. ramy: a merger of deutsche bank and commerzbank is a step closer as germany's largest listed lenders are running out of time to show they can grow as standalone companies. they are intensifying talks as the turnaround efforts butter and the deutsche ceo is said to have ended his opposition to a deal. we are told deutsche's management board has approved a negotiation with commerce bank. from: an $850 million deal mining canada, extending a recent round of dealmaking in the sector. it will crest to 70% interest in interior metals in british colombia. in january, imperial metals forecast 29 production at up to 38,000 ounces of gold and about 76 million pounds of copper.
haidi: this is -- kathleen: this is "daybreak: asia." i'm kathleen hays with the first word headlines. jay powell repeated interest rates and remain on hold as policymakers watch evolving conditions. he said inflation is muted and the policy is in "the appropriate place." he reiterated his patience mantra as they consider their next move. he is watching china, europe, and brexit. the governor of the people's bank of china said beijing and washington have reached consensus on many crucial issues. he has been part of the chinese team at the trade talks and describes them as meaningful.
he said the pboc has exited the intervention in the foreign exchange market and will never use the exchange rate for competitive purposes. and the u.s. discussed how to respect the other monetary authority's autonomy in monetary policy. the sides discussed how both should observe market oriented exchange rate mechanisms. thirdly, the sides should observe earlier commitments made at previous g20 summits. kathleen: hong kong is likely to raise borrowing costs after it central bank intervened to defend the dollar for the first time since august. the monetary authority bought $1.5 billion after the currency celled to the end of its trading them. that cuts the balance to a decade low of 74.8 billion hong kong dollars. -- $180100 billion billion a few years ago.
the upcoming election in india beginning in early april. the final result known in late may. around 500 million people are eligible to cast ballots for 543 lawmakers in the lower house of parliament. seenrime minister's winning the most seats, but short of an overall majority. lost support on concerns about the economy and jobs. has voted in a largely symbolic election for the national legislature. as merely aneen endorsement of the kim jong-un regime. they were offered a single sponsored by the korean workers party. kim jong-un was the most prominent candidate. he is seeking reelection in his pyongyang district. 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'm kathleen hays, this is bloomberg. haidi: let's take a look at our asian markets this morning.
risk has dissipated with asian stocks on the back foot while the yen next ends gains. the aussie flipping towards 70 again. up .04%.00 is the nikkei 225 has erased gains. energy and tech players with the kospi have fallen off. investors have this morning's data to consider exports falling 90% in the last day of march. flipping the board to check in on stocks moving in tokyo. highlighting shares and companies shortlisted by analysts to replace pioneer. .e have them up seoul hitachi is climbing. it's selling its entire stake in hitachi chemical.
in sydney, i want to highlight gold miners. 4.4% as as much as agreed to buy a jb stake in copper and a gold mine in canada. reducers in australia are under pressure as norway's capital wealth fund moves to divest $7.5 billion worth of gas holdings. that includes the stakes in companies such as woodside, beach energy, and santos. ramy: thank you very much. let's put brexit in focus. theresa may enters a very big week for brexit, with a bill expected to fail. reports that her cabinet have turned against her. she said senior colleagues persuaded to back her on tuesday, or risk a no deal divorce. >> many counts. i would love to be able to vote for it if she gets the ability to pull out, then at least it is
rescue able. in this whole process, i have been trying to get the prime minister to keep it rescueable. >> she has gotten us all into delay afteron where delay is mentioned. she is almost forced to go back to the european union. where they have said is maybe three months. there is no point in having a delay if she is going to run down and come back with the same deal. graspis very important we the opportunity. there is wind in the sails of people trying to stop brexit. if you want to stop brexit, you only need to do three things, kill this deal, get an extension, and have a second referendum. within three weeks, those people would have two of those three things. you can feel the tension in all of those answers. let's bring in our ethics reporter -- fx reported. given what we just heard, rescueable was the word he used three times. rescueable?
david: at the moment, it seems not. it looks like it can be rejected again when it happens tuesday. agreementl sentiment that the deal is not going to go through, the question becomes what happens next? with so many options being bounced about, the parliament doesn't know it self what will happen next. in terms of sterling, uncertainty is not good. sterling trading under 130 now. that uncertainty increases. more will be opportunity to trade lower. haidi: the no deal is taken off the table, there are so many different variations on this flowchart. we we look at what would be constructive in the short or medium term for the pound. david: certainly for pound, there is an extension to article
50, that's the main thing. the longer the extension, the more positive it is. it allows options to be discussed. a short extension, two were three months, does raise the question of what can be achieved in that timeframe. having said that, it is still positive. if there is no extension, a no deal becomes -- even if the government doesn't want it. the only way to avoid a no deal is to have an extension of article 50 or have a deal. deal looking like it will not happen, the chance of a no deal increases. haidi: our fx reporter with us in singapore. thank you. preparing to impose punitive conditions on the u.k. as there is in fact a delay to brexit. 20 days to go into the deadline. says surgingt emerging markets will continue. a trade deal would roundup
business confidence globally. joining us is john malloy, cohead of emerging and front tmr. two things that play here. time weed returns every get a headline when it comes to trade, given that we know a short-term deal may be possible. a long-term strategic competition is the nature of the relationship between beijing and washington. does the dollar rally continue? does it continue to go for ems its? em assets.s -- >> in terms of the outlook for markets, aserging we move towards a deal between the u.s. and china, which we think will happen in the next month, you should have business confidence come back. picks up, business spending increases. we saw a collapse in business spending in the fourth quarter. that drove equity markets that drove down economic indicators. as we have a resolution, you can
see the confidence come back. in terms of the dollar, one week ago we had trump talking about how the dollar is too strong and the fed should move beyond qt, back to a neutral easing stance. my view is the dollar is actually weak. the u.s. economy is facing a $1 trillion deficit this year, 5% of gdp. that is a big number. as we saw from the jobs number, the u.s. is starting to slow down a little bit. haidi: how much of this depends on the domestic economic stability in china? we see the yuan performing more than ever as an anchor currency in emerging asia. the animalt deal of spirit, or sentiment spirit, you talk about going to come from the idea that china can or cannot manage a slowdown? john: if you look at the
slowdown we saw last year, the consumer was good. consumer sentiment was ok. some consumer sectors did ok. what you had a slowdown in was investment export related industries, technology. the consumer park, which as we know, china is moving more towards a consumer driven economy, it will take time and shift toward that. as the economy becomes more balanced. in terms of the renminbi and convertibility, that's the key issue. at what point will china have a free-flowing exchange rate? what point will the pboc say they are not taking money out of the country? they say they are intervening, but you are a large entrepreneur and are bringing billions of dollars our, i suspect you have to go through the pboc. you don't have to do that in a place like the u.s., japan, and europe. that's the key in china,
liberalizing the exchange rate. ramy: explaining this to the emerging markets space, we had a bloomberg terminal showing it was trailing. i have my favorite seasonality function. index.i emerging markets what is really interesting is for january, it was the best january since 2012, 8.7%. more than 11% here. one thing that strikes me, you can pretty much close your eyes and buy it. do you still feel that way? john: yes. the risk reward margin for emerging markets is positive. was outrman powell friday night talking about how monetary policy in the u.s. will be easing for quite some time. the next move is down, easing, not tightening. the ecb is looking at a new bond buying program. japan continues to have low rates. in terms of risk on, the backdrop is pretty constructive.
if you look at the emerging markets, em growth is running at about 4.5%. you do have problem area. by and large, they continue reform. valuations are reasonable, at 11 or so earnings. ramy: we are out of the woods. i'm afraid we will have to leave it there. wc partners cohead of emerging and frontier markets. eight years after the devastating japanese tsunami, we visit one of the towns devastated by the disaster to see how the rugby world cup is playing a part in the long rebuilding process. this is bloomberg. ♪
reaction globally to the fatal ethiopian airlines 737 max crash that killed all passengers and crew on board. we are getting reaction from indonesia's national transportation safety committee offering to give assistance in the air crash. the chairman commenting on the jet. this is the second fatal accident in about five months after the 737 max jet crashed off the coast of indonesia, killing everyone on board. that was late october last year. they will also discuss the grounding of boeing max jets. we are also getting reaction from cayman airways suspending operations for its planes. singapore airlines says there 737 max flights are on schedule. it's on the back of a report we heard out of china that china is suspending -- grounding use of the 737 max for the time being.
ramy: more impacts happening to boeing. meantime, it has been eight years since the earthquake and tsunami in japan. you may remember this. it was in the fukushima region. it is continuing to rebuild. this year's rugby world cup is helping boost the recovery with one of the towns hard hit by disaster set to be a host city for some matches. tictoc traveled to kamaishi to see the progress. >> this person was running for higher ground when the tsunami hit her hometown.
most devastated areas hit by this and i may look like now? >> the north coast of japan was hit. it has largely been rebuilt today. if you go to some of the cities and drive around, you will see new homes, new buildings, new stores. also, there's a sense of emptiness. although the roads are rebuilt and the homes have been rebuilt, you still see empty plots of land that have yet to have new homes built on because some people have either decided not to live there anymore and move away from the region, or can't afford to rebuild on the same plot of land. ramy: kamaishi is one of the host cities of the rugby world cup. to what degree will this help boost the local economy? city is one ofi the 12 host cities of the 2019
rugby world cup this fall in japan. this city hopes it will get a expectedthe 400,000 visitors to come in and boost the local economy. i went into the shops that had new menus like the rugger ramen, a super spicy ramen noodle. a lot of hope for these locals that this area, this event, will get a big boost from the world cup. ramy: terrific reporting, thank you very much. still more ahead on "daybreak: asia." this is bloomberg. ♪
haidi: let's get you a quick check of the latest business flash headlines. newcrest mining has agreed to an $806 million deal from mining canada extending dealmaking in the sector. new chris requires a 70% interest in metals in british columbia. in january, the forecast 2019 production was 38,000 ounces of gold and 36 million pounds of copper. ramy: nvidia is set to make a israeli chipmaker to gain technology to accelerate the flow of information on data center. the agreement could be announced later this monday with a value
of just under $6 billion. -- we're sold told also told nvidia is one of the biggest, but no final decision has been made yet. hedge funds will look almost anywhere for an edge. do, theycomes to ninten are turning to a research 11 strong -- research center 11 strong. how did you find this unknown company, media create? nintendo got in the market, people knew ahead of time that they were struggling. hedge funds started shorting as early as may. i kept asking who and why they were shorting. the name kept coming up, people said there is a company that gives japanese weekly sales data and gave a big hint to hedge funds that nintendo would struggle. i went out there, it is in a
quiet neighborhood. it's known for guitar shops and old bookstores. i met with the guy. if you look at the article, the pictures, he wears a hat, brown suit, very old-school guy. he just start a collecting information about how many sales were going through. that was 25 years ago. he has built it up into a research shop that now has over two dozen hedge funds. he wouldn't give the names, but some of the bigger guys in new york, greenwich, hong kong, and singapore. he provides them with weekly sales data and forecasts for the future. week, whichevery means it comes a lot earlier than when companies reported. they report quarterly. investors can get the information much earlier. consumer research firms are not that unique, but just his character and how small it is,
and how it was really spot on last year i thought was worth highlighting. haidi: such a great story. the dollar isut, apparently available online for free. anyone can basically make use of this information to trade nintendo? yuji: yes, some of it is online for free. a lot of people do go there every single week. online a lot of people that upsets over that data every single week it comes out. to a certain degree, i think retail investors already use that data. it's only available in japanese. if you can scrape these websites, you can build a little model. when i didn't myself, i saw sales were not improving quickly at the end of last year, even after nintendo released new video games. sales were just kind of slowly going up. you could use the data to see that they would struggle with their annual target, which they ended up revising down.
by all means, check out the article. if you click on the link, you can google translate it and maybe make sense of the data. best of luck to you. haidi: great story. do check out the story on the bloomberg. of whatt you a preview to watch as chinese markets come online. sophie: we are watching chinese airlines on a report that china asked them to temporarily ground boeing 737 max jets after the fatal ethiopian airlines crash sunday. we are watching chinese developers after several slumps friday as the property tax legislation was performed for in 2019. another gain receiving approval from chinese regulators. separations are underway to prepare investors for trading of the new tech board. let's check in on what we are watching in taiwan. the likes of tsmc after sales numbers came through. taiwan posted a near 9% slump in exports last month, the biggest drop since may 2016 underlining
taiwan's vulnerability. sophie kamaruddin in hong kong. before we headed over to "bloomberg markets: asia," let's look at how markets are trading this monday this morning -- faring this morning. we see the jobs report, the worst week the u.s. equities all year. not exactly a strong tone for the asia open. the nikkei 225 giving back earlier gains, up by 0.4%. -- .04%. we see downside here in australia. ramy: that is it from "daybreak: asia." markets coverage continues as we look ahead to the start of trade in hong kong. this is bloomberg. ♪ you.
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>> it is not :00 a.m. in beijing. a.m. in beijing, i am tom mackenzie. yvonne: i am yvonne man. equities across the region are drifting after the worst stock in three months. >> china says negotiations are moving forward with meaningful discussions in general agreement. tom: new concern for boeing-esque about most popular plane after another crash. beijing is said to