tv Bloomberg Daybreak Australia Bloomberg March 31, 2019 6:00pm-7:00pm EDT
>> welcome to daybreak australia. i am heidi -- haidi. so we are counting down tophia -- tohie: we are counting down bloomberg asia's open. these are the top stories we are covering in the next hour. more signs of ability -- stability in china. theresa may us conservatives prepare for a snap election. the eu's patients will not last forever.
they're looking for an overall victory in turkey. >> lessee start with a check of the markets. the s&p 500 saw its best quarter since 2009. health care and utilities led the gains on friday. lyft had the biggest tech weston of the year. the nasdaq is up 8/10 of 1%. we are seeing futures game grounds. they are very much focused on what happens with brexit. we could be headed for another general election in the u k. we could get a trade deal out of china and the u.s. anytime now. the focus seems to be on those two concerns at the moment. busy are setting up for a street of q2. these are inflation figures from
across asia. this would be from india, australia and the meeting is on tuesday. asian featuresve that are mostly higher. we are seeing potential gains at the start of cash trade. we are keeping a close eye on iron ore miner survey. this monday has a few data points from australia. we are seeing this manufacturing pmi all touch. we also get a gauge on houses, home prices, inflation, as well business indexes. but check in on the aussie dollar. afters all getting a left china's factory activity
rebounded in march. we had that number rising the most since 2012. haidi: good news. -- good news on the chinese economy. first, we will get you to first word news with su keenan. su: we had the latest on brexit. theresa may's conservative party is preparing for a snap election with just 12 days to go until the u.k. potential he crashes out of the european union. the house of commons will take control of brexit later money. -- take control of brexit later. members are threatening to resign if all this happens. italy is being want that there is no money for popular spending plans with growth grinding to a halt. the economy has expanded a
percentage point less than it eu peers for years now. it will show no growth in 2019 as even germany faces slowdown. --ly has enormous part national debt. to turkey not, the ruling party the ruling party seems to be ahead in the election. the opposition looks certain to win the capital. this media says that alliance has taken just over 50% of the national vote with the main opposition camp at 38%. the king of thailand has made a rare foray into politics, revoking honors given to the former prime minister, making it more likely that it from military party will take power
following a disputed election. a party went to this man claims to have won the most seats in this election a week ago. global news, 24 hours a day on by and on tictoc, powered more than 20's and hundred journalists and analysts in more than 120 countries, i am su keenan, this is bloomberg. china signals stabilization. this is easing one of the biggest worries of the global outlook. tom mackenzie joins us from beijing for more. what is it about the distortion in the data? tom: those who are looking at this data with a skeptical eye macy distortion in there. most are looking at this as a
positive on the surface. you are looking at manufacturing of come in at the level 50.5. that compares to 49.2 in february. that is the biggest increase in years. well above expectations. and you dig into the data point, new export orders have increased the most in months. a question ofn to demand. this manufacturing pmi follows the likes -- they are starting to see stabilization in the economy here. we happily indications about a gauge.o medium size you can see this critic gauge. they are suggesting the stabilization may be starting to take hold in the chinese economy. there are industrial profits falling about 14%, that was pretty concerning for many.
we are expecting additional tax cuts to really kick in. cuts in the manufacturing sector should prove supportive. bloomberg says they don't think this is a large enough number to stop the policy support. they expect continuing measures to support the economy despite the stronger pmi in march. >> china's onshore bond market gets included in this index. how significant is this for china's financial system? tom: this is the conclusion into , barclays, global advocate. -- aggregate. this will be phased in over a. of -- over a time of months and years. bonds andvernment policy banks that are being included in the index. this allows fund managers to start to include those in their
portfolios. it is significant and it is a significant move in the reforms of china's financial systems. this is largely through the bond connect. that will pick up pretty significantly as a result of this. those, including morgan stanley 100others expect between and $200 billion worth of inflows as a result of this indexing. it is a further move to open up the capital markets. there are still concerns about the quiddity and the costs involved and whether or not foreigners can get their money out of it. time, analysts are starting to grow cold on chinese equities. brokers -- brokerages have sounded the alarm's about this. 84y have downgraded companies, that is the largest
since 2011. the government may be pressuring these brokerages to take some steam out of this. downgrading pmi cc. you saw some moves by state media to lambaste stocks like this. it is another example of the government trying to take some of the heat out of a stock rally that has increased five about 24% -- by about 24%. >> that was tom mackenzie in beijing. for a closer look at china's economic situation and the trade talks with the u.s., we turn to an advisor on investment and policymaking. he joins us here in our new york studio. great to have you with us. so much to talk about. >> some us to talk about.
>> -- so much to talk about. >> i have to ask whether this is a one off, we have seen some fluctuations. could this be sustainable recovery? >> think you for having me on. it is good to hear your voice again. regarding china, i would like to stick to my knitting. that is more on the policy side. if you have a question about whether this is a one-off and whether there is some one-off affecting this, i don't think that the chinese government is ready to call this a mission accomplished on the stimulus. what wehearken back to heard in december. china had a round of meetings.
there is a lot of planning that goes in, this is rubberstamped a little bit. at that meeting, they expected that the first quarter would be the slowest quarter of growth for 2019. sassan: they said that growth would pick up afterwards. the reason they expected that was twofold. --t assumption was dedicated take it with a grain of salt. it is a government forecast but this is an internal expectation. it is predicated on the stimulus that goes in and secondly, they do not say this exquisitely but --a positive outcome explicitly, that they were positive on the outcome of trade talks. time 2019 rolled in, they up to this to 2 trillion.
they called an audible. we look at the situation and they decided to add some extra juice. i think this is exactly what they were expecting to see. they think the numbers could up to to 6.4 -- pick 6.4 in the coming year. >> analysts think that policymakers don't want another bubble in their hands. >> that has always been the tension in beijing. theyn: every time stimulate in this round of weakness, they always go out of their way to say this was in 2008, this is different, this is a mess stimulus. that is because of the concerns -- mass stimulus. this is because of the concerns of a bubble. they are looking the other way
and instead of putting a lot of that credit growth onto the national federal balance sheet, they are doing it at the local government. there is that going on. it is deliberate. they are looking at this point. they are saying this is worth it for us to juice this up a little bit more. on the monetary side, i don't think they have too much rule on that. a lot of it is on the fiscal side. -- physical side. >> they could have a more dovish lien when it comes to fiscal policy. haidi: it looks like they are resorting to a lot of the same pages out of the old playbook. they are rebounding and local government issues. concern that this is kicking the can down the road in terms of structural reforms? they are not going to get done now. sassan: i think that is a concern. they will take care of
that later when they have to deal with it. it is not something that you need to do with at the moment. we have a lot of questions toward the turn of the year. if you look at the numbers are on the turn of the year, they were very weak. there were questions that we got from the clients. why are they being even more aggressive? -- why aren't they being even more aggressive? you have to give them credit for not dramatically cutting interest rates. a lot of people thought they might do that more aggressively. will it create problems down the future? perhaps. the hope in these circumstances is that you can grow out of this. if you can stabilize growth, that takes care of some of the credit problems.
haidi: let's get over the slow and the trade war first. that is what they are thinking. us throughouth the course of most of this hour. still ahead, china's $13 trillion debt market is getting a boost. we will be hearing exquisitely the thoughts of j.p. morgan's china ceo. eu's patients -- patience will last forever. we will bring you the latest brexit drama. this is bloomberg. ♪
more votes to go -- come. >> i think the big focus will be whether parliament can't spend -- find any common ground on any of the options that have been discussed for brexit. rejected byight parliament. that was not heartening. it will be important to watch that. had them say this will not last forever. it will be interesting to see how markets take that when trading kicks off a little more. katherine: the eu is being patient with the u.k. and trying to find their way out of the eu has been very important. pound traders have been trading so much over the last couple of years. what has been the biggest beer over the last -- fear?
katherine: a no deal. that would be to a depreciation in the pound. the markets are saying the same thing. that is nobody's base case. before thes to go exit, that is becoming more and more of a risk. us is sassan. mayre hearing that theresa is considering a full version of her brexit deal. this is doing the same thing over and over again and expecting different outcomes. sassan: you took one of my quotes from me, i think that is exactly what is going on. it is appalling that we are at this stage. through meaningful
vote 1, 2, 3. they call them indicative votes. in the states, we call them show votes because they are meaningless. it shows where you're leaving but it is priceless. -- where you are leaning. it doesn't mean anything. you mentioned earlier that it is nobody's base case scenario. a hard brexit. chances are very high -- higher than 50% that we do go into a hard brexit. i was in london a couple of weeks ago. it seems like a lifetime ago that i spoke to a tour remember torrie member-- of parliament.
they were trying to find a way to say yes. i asked where they thought it was heading in their gut. it is crazy that you still have a problem with the back stuff in ireland. takeid we will not ourselves into a hard brexit delivery. nobody wants to have a hard bre xit at this point. he said the eu might make that decision for us. this is one of the things you mentioned earlier. we are coming up to some deadlines where they turned the decision-making process over to the eu. the fate is in their hands a little bit if may can't get her deal past by this week -- passed by this week. it is up to the eu if they give them a long extension or a short
extension. i think the eu has run out of patience. an economic reason for that. it is tied to the slowdown. it is not just italy and germany. this is having some real costs, this long, drawn out brexit struggle. something, people brexit in the currency markets. it has been 132-133. awould argue that having resolution, even if you get some short-term pain out of it, it may be a far better situation for the markets than having this drag out into collections and more uncertainty.
also, more voices for a second referendum which would create riots in the streets. >> let's talk about this from the eu perspective. we have the minutes coming out this week. will we see more clarity on where the ecb is heading? they want to study ways this could be softening the impacts of interest rates. sassan: this is any knowledge been of the reality that negative interest rates will be -- notth us with the ecb just through the end of 2 -- 2019. it will probably go well into 2020. that is where they have the markets priced. it is not a given. i think there is some mixed views within the ecb about whether they should do this or not. thatig issue for them is
the timing for them is terrible. they went to try to normalize policy. now they have changed that language. you don't call it normalization anymore. they say they are normalizing the interests, not the policy. right when the big growth of 2017 was tapering down, it was a bad time for them. they are having this. brexitto tie this into again. i was in frankfurt again before going to london. i spoke to some policymakers there, they talked about the slowdown in germany. this is in industrial production. there are some temporary factors that were listed. to give you an antidote -- when orders picked back up again for this company,
a quick check of the latest business flash headlines. shipments from iron ore operations are likely to be low than expected due to disruption caused by cyclone veronica. this is added to problems they were already facing after a fire in january. 14 is expecting around million tons of production this year. >> tesla is for perry to tell investors how many cars they built and sold in the first quarter. there could be a surprise in store. the total could approach $80,000
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>> it is 9:30 a.m. in sydney. a little bit of a cloudy day. we are expecting an early game when it comes to sydney trading. .5% is how futures are trading. ant since 2009 despite up-and-down set of sessions ending on a high note last week. 10 year treasuries ending up of 2.4% after that plunge over the week. i am in sydney. shery: 6:30 p.m. in new york. let's get the first word news with su keenan. su: china shows signs of stabilization.
manufacturing pmi rose the most in seven years, exceeding every estimate by economists. both new orders and new export orders rose to the highest levels in six months. fors seen as good news global investors as china's weakening demand had weighed on factors, such as auto producers and commodity exporters worldwide. china says it will continue its policy of no tariffs on american auto and car parts. it will bring the u.s. trade disputes to an end. they remove totalitarian measures on cars. the finance minister may name an end date, but welcome the resumption of talks. a latest round of discussion moves from beijing to washington this week. president trump has repeated his threat to close the border with mexico. saying detention centers are full, and the u.s. can accept no more illegal immigrants.
he said that mexico must do more to stop people heading north, which, the homeland security secretary said is causing "a meltdown on the border." the president also tweeted that u.s. immigration laws could be fixed easily, and democrats do not care about crime. bangladesh have arrested two of the owners of a commercial tower that caught fire last week, killing 26 people and injuring at least 70. the 22 storyay complex had no fire protected staircases, and some of the upper floors had been illegally constructed. the owners have been charged with negligence and violation of a building codes and may face homicide charges. onbal news, 24 hours a day, air at tictoc and twitter, 27 hundredmore than journalists and analysts in more than 120 countries. >> let's get a check of the markets with sophie kamaruddin
in hong kong. sophie: that rebound in chinese manufacturing rebound could drive stocks higher. the look at u.s. equity futures are looking at that by the early end of asia sessions. areshares and wellington snapping a four-day rise after the best quarter since the end of 2015. we do have the kiwi dollar climbing. the aussie, both at five day highs. tone with a south african rand strengthening, despite the continued weakness we are seeing in the turkish lira, which is back above 558 a dollar after the istanbul election results. here is a preview of what to watch. south korean export data has confirmed pmi data indicating a turnaround. there are likely to post a fourth straight month of falling exports. early indicators point to a less severe decline in march.
boj's we will get the first-quarter survey, expected to show business conditions for manufacturing's weekend sharply. tuesday, watch to see if the rba can sound confident as central banks back away from their tightening bias. and when the government unveils see voter, we could friendly measures including tax cuts. on wednesday, the chinese vice premier heads to washington, d.c. after lighthizer's visit to beijing. haidi: trading is getting underway in asia. let's get over to bloomberg's global markets editor to see what to expect. let's start with china. a good news story. their distortion is bond does. it does set us up positively. >> it is a bit of a relief. really what investors are looking for after this rally in bond and stocks is some kind of ratification for the data around
global economic growth so they can get a picture of what is happening. over the weekend in china, it it was a positive to ease the concern around global growth. it is one number, but it is enough to add a kicker to the appetite for risk at the start of the week. a goodback of what was call to the chart on the gtv library shows you. it finishes with the msci's global world index, the best since 2010. there is a sense that we do need to continue to get news that will push on risk assets. we need some kind of developments in the u.s./china trade talks that we may or may not get this week, given what will be debated later on in the week in washington. the china data is a line in the sand for those who say it is just every data point that came out was getting weaker and weaker. this provides some level of comfort and support for a market
looking for a bit more positivity after what was seen. it was a tough place. juan's have had a particularly big rally. bonds have had a particularly big rally. rally we had the bond teetering out. this week we have u.s. data from retail sales to the jobs market data. what are we expecting in terms of how that will affect the fixed income space? adam: remember, the back end of last week was the end of what has been a very pronounced move in yield across sovereign debt markets, not just in treasuries, but in the bonds below zero on 10 years there. in japan, got further into negative territory. it has been a global move. starting offweek, at the china data at the start of the week but looking later into the back end of the week when we get the u.s. jobs
report, do we see more signs in the data that confirmed the move already in bond markets? growth is under significant pressure. are we starting to see signs of some kind of bottoming in the first few months of this year? and some indications that we get a slight uptick in growth indicators. the friday march jobs report will be as important as ever, i think, in giving investors the latest read. we have some fed officials that may speak to the idea of rates being on hold for the for seeable future.] no one is influencing policy to greatly. you probably do not want to put too much emphasis on that. really gearing up for the jobs report on friday. shery: bloomberg's global market editor adam haigh. you can find this on gtv on your bloomberg. president said he is not forecasting any rate
hikes this year. he said the recent bond market rally reflects slower growth. he spoke to bloomberg's kathleen hays and bloomberg. >> we are in a slowdown that one or two quarters of percent growth says it could be worse than that. we will have to see. that is what you are seeing in the bond market. and sluggishism expectations for future growth. shery: we are back with the president and ceo of -- who has been with us the whole our. is this why we are seeing this outperformance in treasury gtvected security for the chart on the bloomberg. the expectation of the dove is -- dovish privet. go we see inflation on the outside? toi think people are trying play for that. some people are looking at this collapse in yield that is not just in the u.s., but also the
global collapse in yield. there are looking specifically at tips, inflation protected security. they are seeing maybe the fed will be able to pick inflation up a little bit if they keep pushing in on the economy. they are also looking at rate expectations for this year in the neil -- in the near term. some people attempted to take the other side because the markets have started to price in over 25 basis points of rated cuts for this year. it has gone into as 33 basis points. people are trying to take the other side of that. they may be tenuous about that because the fed, and the global central bankers have really told is a good- kaplan bellwether within the fomc -- that they are on hold for probably through the duration of the year. if something happens, it will be at the end. shery: what happens if we get trumps fed pick?
will this exacerbate the move we have seen so far? think that has been a big part of the move. he has been a controversial pick. he is part of it heritage foundation. he has been an active supporter. there has been a cut by 50 basis points. we think there is a good chance that he actually might not just get the formal nomination, that -- but that he might get full confirmation. a lot of the criticism is from people in the markets and academics. i think if you look at the political class, the republicans sense some political capital fighting. one of the other appointments that the trump administration tried to put through, they that she was too strict on the regulatory side. i don't know that there will be that much political capital to try to fight stephen moore who wants to cut rates. independent, for
example. i don't know that they care that much. a --: is there already when it comes to how much the markets have priced when it comes to further easing? sassan: yes. i think powell would hate that answer. in january, after the meeting, and given the sharp pivot that the fed did from the december rate hikes to the more dovish position. times asked two or three about this by journalists. i thought this was one of the areas he could have communicated a lot better. or he communicated it very poorly. he could have said it is part of our financial conditions and so on. more importantly, i think they need to explain why they are pivoting so dramatically, and it is not just because of the financial markets. it is a part of that, clearly.
i think the markets rightly feel that way happened in december really scared the be jesus out of policymakers. they don't want it to happen again. in thewe are so late cycle, but there still seems to a pretty hefty part of the market that thinks that goldilocks scenario will continue into the rest of the year. assumption that we have structurally had a breakdown of things that will continue to get robust in growth and benign inflation until the end of the cycle? sassan: i think there is a very important element in the scenario that you just described. with the change in the fed evolution, notn a new thing. whenever they talk about hitting their inflation target, they talk about it is -- about it as if it is the metric 2% target.
when ever they talk about a 2% target, they talk about it as a symmetric target. they will juice the economy to deliberately try to get -- not all of them across the board, but broadly speaking it is the fed's goal to get inflation above 2%. for risk assets, that is a benign scenario. they are telling you that we do not expect growth to collapse, but we will keep the accommodation to make sure it does not drop a low that 2% level, which they already have baked in the cake. juicedll deliberately inflation over so that they will not be trigger-happy on killing the rally. then the external things. brexit and china. i think they will play out. once that is out of the way we can keep the rally for a good long time, for the rest of the year. haidi: really appreciate you spending time with us. sassan in new york.
haidi: investors are watching incoming results from teslas local election. -- has been tracking the developments from istanbul. there is a lot of controversy where you are any stumble. what is the state of play? >> it has been a thrilling race for istanbul. that and that to the very end. just when they thought the votes were counted, the ruling party candidate came out and declared victory in the stumble. -- in istanbul.
this prompted the party to contest the results and say they had actually one victory in the city. it is unclear where they stand. the ruling party has lost on kara. when we look at the overall picture for turkey, the party has kept their ground. this is the first election since turkey switched from a parliamentary the presidential system last year. giving them sweeping executive power. the turkishe seeing leader losing ground against the u.s. dollar. that is one thing in the negative. what is the expectation from investors right now. is slightlyira lower against the dollar. with the uncertainty hanging over the fight for istanbul, there could be more uncertainty in the market this week. last week, markets had a roller coaster ride. preventedter turkey
foreign investors from shorting the lira. this stabilize the lira, but foreign investors dumped other turkish assets instead. they raised most of their gains in 20 -- in 2019. the yield on turkish tenure government bonds are up more than 130 basis points. near 80 -- 18%. year at has fallen below 14%. again, a lot of uncertainty around these elections. this could play into the market. shery: thank you, simin joining us from instanbul. policy bank securities will be added to the bloomberg barclays aggregate index on monday. speaking exclusively to bloomberg, the head of jpmorgan china that the $13 trillion bond market in china is close to surge as it makes its double index debut. >> when you look at the bond market, we see massive potential. the stock is not the size of the bond market.
gdp and china is that andy percent. when we look at the g3 economy, the size is around 200% to 250%. despite it being the third biggest in the world. that is the excitement of when this market becomes bigger to properly represent the gdp, it has to be done through a market driven securitization of the debt. big,has to do with regional, and smaller banks. it has to be more securitized. it needs to be more market-driven and the pricing. that is the whole point of securitization. i think it is undergoing a very tempered, but meticulous evolution right now in opening up. tom: and the inclusion of chinese bonds on the bloomberg index and other indexes, the impact of that will be what? hear we are excited to
that the bloomberg barclays index has included the chinese government and policy bank bond market into the index. on top of that, we know that there are probably up to the first top three indexes. if you look at the impact for passive and active combined, the inflow could drive up to 300 billion in u.s. dollar inflow. that hopefully is a start. i think the market will fully develop in size, sophistication and product category. theree investors come in, are active peripherals, it including the derivatives market. it could enhance the risk transfer and risk offset ability for banks and free up capital and liquidity concern. this development is somewhere that global investors camp a a key role -- can play a key role
on top of that global development and security rise product. how we look at property pricing and transferring risks, especially the more difficult. even crediting or type of names. that is where i think it would help the market develop much quicker. tom: since i last spoke to earlier this year. between then and now, what have you heard from clients in terms of their appetite? have a increased or are they getting more cautious in terms of the macro environment? mark: i think people are actively engaged in the dialogue. are separate sessions talking about chinese markets opens. extent, the level of anticipation and interest in 2018, thequick look, size of the bond market has generally grown from anywhere around 1.6% to 2.3%.
that is a pretty big move on a very, very low base. gdpalk about smaller -- would also grow exponentially. ae number of participants foreign investors have grown aroundywhere to 800 to 1100. the index inclusion that -- jpmorgan, as well as ourselves are actively exploring. will we look at signals of how the bond market development is it is all trending in the right direction. was a jpmorgan china ceo speaking to tom mackenzie. the parent company of bloomberg news owns the bloomberg barclays brand that they were talking about.
we will talk more about the inclusion later in "daybreak asia." china macro strategist will join us next. stay with us for that. you can get a roundup of the stories to get your monday morning going in today's edition of "daybreak." go to dayb on your terminals. bloomberg anywhere app. you can customize the settings so you get the news on the asset classes that matter to you. this is bloomberg. ♪
shery: let's get you a check of the latest is this flash headlines. facebook has entered the debate about social media responsibility and internet regulations 10 days after the livestreaming of the shooting in new zealand. toldook's head of affairs bloomberg that regulators around the world would agree on expander's, rather than rules. it echoes calls made by the
weekend. is sending a software team to europe to brief aviation regulators after european safety officials declined to attend the plane makers 737 max up grade meeting last week. ae eu is expected to play lever old to bring it back to service. role.eveead they have criticized the training plan is insufficient. the uae energy producer is revising plans on the stock exchange to win a better valuation. we are told it is dusting off a 2011 plan to offer shares in the u.k. after its prospects in eu rac -- in iraq and egypt improve. back in march, they proposed a 10% share buyback in the uae saying its business was undervalued. look at whattake a
is ahead when it comes to the market open here in sydney. sophie: aussie features are hinting get gain. ares are fathers -- falling, sending the 10 year yield back in the 180 zone. aussie trading at the highest on the back of china pmi data. we are looking at a decent start to potentially offer the asx 200 as the best since september 2009 62 a rally in metals and manufacturing. rio tinto is among the biggest. miners remain in the spotlight as prices may be driven higher as the biggest quarterly event in 2016. rio tinto adding to the supply futures forecasting that shipments will come back at the lower end of guidance. shery: plenty more ahead on "daybreak asia." we are counting down to the survey in japan. we will discuss the reading with the ceo ed rogers. that is it from "daybreak australia."