tv Bloomberg Daybreak Asia Bloomberg May 12, 2019 7:00pm-9:00pm EDT
cryptocurrency is on the rebound. bitcoin searches more than $1000. shery: we are seeing futures falling .8%. this after falling as much as 1.1% after a series of tweets, the latest one blaming china for breaking the trade deal, also saying that it would be wise for to ask on trade. levels below that 81 level where the u.s. closed on friday. we have a bit more optimism over trade. the talk did not completely break down over the weekend. theeard from they love saying they have been invited to beijing for further discussion. we have the u.s. dollar to falling -- u.s. dollar falling to session those.
let's see how we are setting up the market in asia. the optimism could evaporate as we are seeing nikkei futures dropping more than 1% at the start of trade. -- asian stocks could extend declines. flipping the board, we are seeing a move and assets. it is gaining ground with treasury futures. moveffshore yuan is on the as well. hong kong markets are closed for the holiday. let's get to first word news with su keenan. su: the white house is considering jody shelton for one of the vacant seats on the board of governors.
shelton has served as an informal adviser to the president and holds a phd. president trump has named two people, but none of them have made it through the selection process. brexit..k. and prime minister theresa may resumes brexit talks this week. that is amid increasing pressure to abandon her strategy and resign. senior members expressed concern that further talks might come to nothing. she is willing from polls that put nigel on course to win the most seats in next week's eu election. >> we voted to leave in the referendum. the year after that, delivery and conservative parties promised they would honor the result and here we are, three years from that referendum and brexit has not been delivered.
there is no prospect of these parties delivering a clean break accident. su: the south african president is vowing to clean up his party of what he called deviant tendencies after his ruling party -- it was the worst ever election showing for the party with its majority falling below 60% for the first time. they have ruled south africa since the end of the system 25 years ago. has election has reached its penultimate round. is contestingr two seats, one in new delhi and another in the south. he will have to drop one seat, if he wins both. the final 60 constituencies vote
next sunday with the final, final result to be announced on may 23. 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 su keenan. this is bloomberg. to our top story. the u.s. and china lashing out after the last round of trade talks ended in recrimination. deal must act now on a saying that far west could be in the cards if president trump is elected next year. saying washington should take full responsibility for the hiatus because of the tariffs that came into effect on friday. tom mackenzie and ross are watching the developments. let's get started. last couple of hours, he tweeted again saying that china is to blame, that they broke the
deal and wanted to renegotiate. he is not backing down. >> he is not backing down. not only did he say that china broke the deal, he said the u.s. is right where it once. last night, he said negotiate now or face worse terms win, not if i am reelected. he is really taking advice from some of his trade talks in secretary robert lighthizer and those who have long been suspicious of china and their motives. that is where president trump is coming from at the moment. in his world, it seems settled that the tariffs will start rolling in and they will be able to help the farmers affected by retaliation from china and it will be worked out neatly. he also had larry speaking
earlier, his economic director who mirrored the talk. there will be hurt on both sides in the u.s. and china from these stepped up tariffs. he said it is worth it in the long term and that the white house does not believe the white -- the worst-case scenarios. the lighthouse is -- white house feels like it is in a strong position. tom, you heard her talking about possible retaliation from the china side, but apart from saying that there will be retaliations, china has not given to many hints about what it might be. what might we see from the chinese side? there are two key questions. how exactly they will put in place the countermeasures that they pledged to enforce as a result of the u.s. tariffs that
were put in play on friday. response,f china's what they could do is raise the level of tariffs already imposed on u.s. imports into china. levelould raise the between five and 25%. they could increase that slightly, but the only import about $150 billion worth of u.s. imports. they could also rollback on previous pledges to buy soybeans. would reimpose tariffs on u.s. autos that was suspended in december. others might discuss whether they might devalue the yuan. there were concerns about capital outflows. there are a number of things that it will be weighing up. i spoke to an owner of a small
company over the weekend and he said he is looking at moving his factory from south china to indonesia as a result of the actions on friday. shery: we have not heard directly from chinese officials, but we have heard from chinese media. thatlobal times saying china has made full preparations for all situations and is increasingly preparing for the worst case scenario, psychologically and tactically, talking about the u.s. being irrational and that it will help -- it will hurt the u.s. economy. increased tariffs on friday, but potential 25% tariffs on $300 billion of goods. -- that will change the dynamic. china and its economy can whether the pressure. china feel the impact, just as
the u.s. will, but they can essentially weather the storm. itn we read the editorials, is a big commitment on the chinese side to make sure that they get a deal that is truly beneficial and not one-sided. you have the u.s. and china underscoring their positions. the concern will be that they are leaving less room for the two sides to negotiate. he wants to see all tariffs removed. again, he wants to see a deal that will leave china with dignity, a mutually beneficial deal, which is a long way from what president trump is saying. the space for them to negotiate seems to be narrowing, rather than widening. lines, -- of the silver lining, we can look towards the g20.
paul: we heard from they come though today. it is a negotiation. what are the chances of the u.s. jumping back into fresh talks? >> they are definitely possible. it could be sometime. it sounds like the invitation is rather open-ended. there could be some posturing in washington among different trade factions and the trump administration. a lack of urgency to get over there and get back to the negotiating table, as you mentioned. a possible meeting between president trump and president xi jinping at the g20 in japan -- but that is not until the end of june. so many weeks of uncertainty between then and now. things could change, if president trump were to get
direct outreach or a phone call from president xi jinping. he is responsive to outreach like that. if the market were to have a sustained slide, it could job the administration a little bit because president trump wants to be the bullish stockmarket president. , another tweet over the weekend, and easy way to avoid tariffs, make or produce your products in the good old usa. at his bottom line for president trump at the moment. easier said than done as supply chains get ended for a lot of businesses. i think the u.s. feels that they are in a strong position at the moment. shery: thank you for that. still ahead, we will be talking commodities with janet henderson. with henderson.
paul: this is daybreak asia. shery: it could be a roller coaster ride on wall street this week continued uncertainty over the trade defeated. su keenan joins us with the latest. we already saw a bit of a ride when it came to present -- president's trump -- president trump's tweets. su: we're are certainly seeing it here. it could be on the futures that you have less liquidity.
this is a lot more action than we typically get. take a look at where the futures are right now. he will see that will is near the $61 mark. we have seen oil very reactive to the trade story. gtd. go into the bloomberg you will see the title says it all. this was the worst week of the year for u.s. stocks. they came roaring back in the final hours on friday, but one springssaid that hope eternal. the market wanted to cling to help. you really do have a selloff that is akin to what we had seen in december. let's go back to some of the big stories that we are likely to focus on because of the earnings. alibaba and tencent out with earnings. alibaba up 30%.
these are huge online retailers. thes likely to mention trade talks playing a role. walmart is one of the top global marketers. it is a retailer having a huge online presence. they will be out on thursday, as will nvidia. one of the most prominent chip stocks and performers. what they say will be very instructive. we have advanced micro devices -- the first earnings since its first ipo. wel: the thing about ipo's, talked about the much-anticipated uber ipo and it ended up being a two star ride. critics are firing up and we have a lot of investors waiting to see if they can redeem the stock on the second day.
let's have a look at how the stock traded on friday. there was a delayed open that ended up trading below where it had been priced at 25. it was close to 9% and seemed to come back in the final hours before falling. andcompetition from lyft yft shareshat the l had fallen 13% in the last three sessions. that weighed heavily on uber. paul: su keenan, thank you for that update. the trade war between the u.s. and china continues to loom larger with no deal insight at the moment. let's dig in deeper with capital investors senior economist. thank you for joining us today. says it is not a war, it is a negotiation. where do we go from here?
what will the impact be on the markets? >> thank you for having me on the show. i thought i would see some resolution on trade, but it has not happened. ultimately, we see the next few weeks as a chance for the u.s. and china to go through negotiations. see some kindll of agreement in place, but it could take a while. in the near term, things will get worse before they get better. because of stance the risks and trade. it is looking a little bit concerning, particularly in pocket in the u.s. we do not see either country benefiting from the trade war, did what president trump likes to tweet out. this is a negative hit to the global economy. why ourr question is
current cbx. -- reacts. which currencies will get the most beaten up in the next pete sessions? -- theoes look straight next piece sessions. >> one of the currencies we are looking at is the australian dollar. we have a lot of domestic impact on the aussie dollar, given that the rba is expected to cost -- cut interest rates. for us, we're are seeing the most near-term momentum happening in the australian dollar. we are looking for it to move well below $.70 in the near-term. mixed we continue to see signals. imports are doing better than expected and credit growth is growing more than expected. i cannot get a hold on where the
chinese economy is now. at least stabilization has started to take hold. where is the chinese economy ?eaded >> it is fair to say that. the stimulus measures that they had put in place -- they have been a lot of things that have come out of china. they had a tax cut for consumers and corporate. interest rate cut, more liquidity easing measures put in place for the bank to increase lending. ultimately, we think that growth in china could get to 6.5% this year, above consensus and growth last year. i think that the mixed data does indicate that you see this stabilization and conditions there. the number i like to look at are the credit growth numbers, showing please -- pretty
positive signs. shery: we have more data when it comes to economic activity. the charts on bloomberg showing the acceleration that we had when it comes to industrial production, investment and investment in real estate, not to mention retail sales. we have seen it higher in the past few months. does this have to do with the lunar year holiday being in the mix in the last couple months? what can we expect going forward, as we look towards the rest of the year? >> the lunar new year probably played out its major impact on the data now. those indicators that you are talking about are signs of cyclical activity. they react quite positively and quickly to what happens in stimulus. directu have seen is a result of the stimulus. i would say that with the trade
hit someon, it might of the near-term indicators, particularly around sentiment. i would not be surprised if they moved a little lower in china and will bleed. paul: i wanted to get back to a point about the aussie dollar. it is just low 70's right now, but there are more pressures out there. willare something the rba be watching closely. >> we do think that the election played a bit of a large role than what the market was expecting. the rba did not want to seem political. a rate cut is still likely. we are going for a june rate cut. weakening jobs market in the next team months. we do not see negative jobs growth, but if we see employment growth between 10000 and 15,000,
that would be enough to lift rate a little higher and slow that momentum. if you read the statement, any signal of a slowing labor market would be enough to get them over the line to cut interest rates. paul: that is the final denominator. thank you. you can get a roundup of the stories that you need to know to get your day going in the addition of daybreak. subscribers can find it on their terminals. it is available on mobile and you can customize settings to only get news on the industries and assets that you care about. ♪
calls the unreasonable pressure on chinese companies, pushing back at the trump administration decision to deny access to american wireless. rejection of eight years of application is about reason or basis and contradicts the trend of globalization. injecting $8k is billion, according to a person close to the deal. they offer funding to company's and animal growth has more than doubled since 2015. at 2.5tbank values it billion dollars and we are told the money will excel rate plan between china and india. shery: china's costco shipping would consider buying all singapore's specific mind, if they decide to sell. mind, if they decide to sell. the operators are informal
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su: this is daybreak asia. we start in australia. prime minister scott morrison has launched his liberal ,ational coalition campaign appealing to the have a go nature of australian voters. it is a chance for those who want to realize their dreams. the opposition labor party is heading for victory with the leader of addressing climate change and australia's greenhouse gas emissions. the trade wars, president trump is warning china to be wise and act now in a trade deal, saying far worse could be in the cards
after his potential term in office. he tweeted beijing feels it has been badly beaten in the current round of trade talks and the government may feel there waiting for the next u.s. elections. he added we are right where we want to be and repeated claims they meaning china broke the deal. the iranian government has rebuffed president trump's suggestion that ministers call him to defuse tensions. saidal senior lawmakers this is nothing more than a the horizon. is on antagonism worsened after trump eliminated exemptions to u.s. -- the north korean cargo ship that was seized by the u.s. has arrived in american samoa. the ship which is called the after aest arrived
three-week voyage from indonesia where it has been detained in april last year. washington claims it was used by pyongyang to deliver north korean coal to china and other buyers. news of the seizure came amid reports the north has resumed test launches of short-range missiles. 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. i am su keenan. this is bloomberg. thanks very much. let's turn our attention to cryptocurrency because bitcoin has surged more than $1000 over the weekend to the highest level since august. editor joins us to unpack this move. in bitcoin the extraordinary is all too often the ordinary. ,ne thing to stress here
bitcoin is about the only liquid thing more or less that trades over the weekend. it trades on electronic exchanges that don't close down, so back when it was soaring up to $1000, you had some weekend traits but they were more often two-sided. this was a takeoff and keep going for most of the weekend. $900 butup with under at one point it was something like -- from the friday close. people were getting interested in bitcoin, more than they have done since 2017 over a weekend. so a little bit of a loss as to exactly why this is going on. when there troubles was a probe by the new york attorney general into some of
the architecture of it all. it is a bounce back from that and the moves seem to have caught thee consensus off guard. no one was expecting this. a lot of assets -- this is a response to trade. not necessarily as a haven. also because a lot of the interest in bitcoin especially over the weekend tends to come from china in particular. perhaps there is something going on there. war playes the trade for bitcoin and also they say bitcoin -- this trend is sort of backing that up? >> it has been noticeable the last little while but bitcoin has been leading the charge. all of the cryptocurrencies rose
over the last week or so, but bitcoin rose more and rose more steadily. there were days when it was up and some of the others like ethereum and ripple were actually down. shery: thank you so much for that, garfield reynolds. we have the latest tweet from president trump which has been affecting market trading. dreaminging china is that sleepy joe biden or any of the others get elected or they love ripping off america. he continued with this narrative of the democrats being easy on china. he is targeting joe biden, the former vice president who is running for the nomination for the 2020 election. the latest tweets from president trump have had an impact on u.s. futures which at one point fell .9% now. 1%, down
saying china has broken up the deal, they are the ones who are trying to renegotiate so the president, not backing down and using this platform to again target the democrats. stopsget a check of what we should be watching in asia trading. sophie. sophie: softbank shares could extend declines after uber's dismal trading debut in which it lost a 13% stake. softbank shares had their worst day in more than four months. stores,ching duty-free reporting the korean customs service will raise the limits of up to $1000 from $600. the finance ministry is not reporting this. in sydney cba is in view. it was dented by an additional remediation charge indicating the lingering earnings risk
could weigh on aussie banking shares after what would be a short look back from april by 5.5%. thanks very much. let's stick with commonwealth bank and bring in the asia investing editor. some more provisions there for cba. what is that about? fusion, $700rge million. this is a mind advice. whoe are financial advisors are not employed directly by the bank but operate under its financial services license and it is in use of a troubled area for the banks where they have gone through their own organizations but now they are looking at advisors who work outside of the bank. the problem here is they don't have the record-keeping and that sort of stuff, the banks had themselves. it is going to take a while to clear this out. this comes back to the no service scandal at the royal
commission. it is a big part of the new charges taken but also a big being setoney that is aside for refund, $150 million there. even though we are two years in to this, the problem still keeps surfacing at the banks. commonwealth has been the hardest hit. this takes proof -- total provisions for almost $1 billion australian. the total for australia the customer remediation is over $2 billion. shery: we are hearing from cba , including david higgins will retire as a nonexecutive or. this is one bank in an earnings season that hasn't been good for australian banks. as you look? >> the outlook -- what is the outlook? looke outlook doesn't
great. the sort of language is challenging time, headwinds for the industry and even today in commonwealth's update, we saw the loans for more than 90 days, personal lines, credit cards and home loans picking up. they are still small. not anything to worry about too much. the timeline is around point seven cents -- .7% around the book. but it isn't a great time for the banks. credit quality is declining. the outlook looks tough for them. paul: thank you for joining us. we are going to be talking commodities with janice henderson's matthew khalil area where he uses that's where he sees oil and trade going. this is bloomberg. ♪ this is bloomberg. ♪
i am shery ahn. paul: i am paul allen in sydney. pessimism is back and that's back in vogue. swelling u.s. output 10 killed crude's rally, it is believed -- can kill crude's rally. >> you can guess the big thing will be the trade tensions ongoing and the speculation over the weekend was the chinese invited the top u.s. are presented in fact to beijing for more talks. there are more information coming for windows talks will happen but it is tense. there is a lot -- when those talks will happen, but it is tense. oil is caught up in that. we will have to see a strong rally until we get clarity. supply constraints are offering the downside of
those markets. we have a big meeting and saudi arabia toward the end of the week with the opec joint ministerial meeting and they will discuss if they can extent reduction cuts of had a big impact on the price at the end of this year, whether they can extend those in the second half of this year. we will talk about trade on the also the increasing production out of the u.s. -- and also the increasing production out of the u.s.. prices are relatively robust. there is an argument that could be made for scaling back production cuts. opec, trade, what else should investors watching commodities world? of points i would point to. the african swine fever sweeping across china is having a big impact on work prices and raising fears about global food costs going up in the wake of that. -- pigs a pic industry industry conference going on.
we could get insights on the impact it will have on pork prices and food prices generally. another big meeting i would point to, the platinum conference or the year taking place in london. it has had a great run, strong rally but it has been eclipsed by palladium and surging demand for palladium in the electric vehicles. the talk at that meeting will be affiliation of the ev market and if platinum can pulling -- replace lady in. -- palladium. will ber next guest here to talk about global commodities. matthew khalil of janice henderson joins us now. i want to start with oil if we can. if you turn down a lot of that noise james was talking about, particularly the trade dispute, you can assume one day it will get resolved.
if you are looking at oil long-term, where do you see the market? is a clear voice for oil which was established in the last 10 years, and below $40 a barrel you get a response to cut. we have seen what happens. there is a real incentive to produce too much here the problem with the oil market is are muchnal barrels less than they used to be on the order of half a million to one million barrels of extra production can draw this price down. we have seen it a couple of times. the big issue i see is the swing producer is the u.s., shale oil, that is very loud in general. gasoline.cars and the u.s. relies on heavy oil from companies that countries like venezuela and iran. the problem we see is an underinvestment in the right
type of oil the world still needs, with the potential for a supply shock. there is enough oil but not the right type. ,aul: around the heavy crudes there is geopolitical risk, venezuela not terribly stable. mathew: that is right and it is bad luck. a lot of the jurisdictions which have that type of heavy oil, with a low enough sulfur content , precarious as we all know. our genuine -- our view is in the long run you could see lower oil production because they have been displacing oil, but the oil that is coming out would be priced much higher. in the long run what will the iran sanctions do? it is not just about iran but the rising geopolitical tensions as we see the u.s. sending aircraft carriers to the region as well. mathew: that is right.
oil and gold, they are not trading as commodities but as political or currency de facto items. a lot of the commodities reflect geopolitical tensions. the swing production can come into -- it is under 100 million barrels a day, so that is not a particular risk. but this highlights a significant tension that will not go away. one of the risks we see is a move into a hot wall as opposed to what we have got now, a lot of tension. you look at the u.s. and china and the u.s. and iran, they are manageable, not good for markets but if it gets to the next stage because something happens which shouldn't, you can see oil markets ripped higher. we have seen the president issue an executive order when it comes to uranium metals, steel, aluminum -- will
that have repercussions in metals prices? --hew: we see base muscles base metals being constrained generally. if you exclude certain markets where there is significant volumes, there is no difference in terms of too much soybean volume in the world now because of african swine fever. base metals in energy are a different story. there is significant supply discipline from the larger producers. upon supply of the economy globally is ok. demand is holding up fine. the risks are to the upside in a lot of these markets, if a lot keep getting pushed to a conclusion which is not good for the world, but you will see a significantly higher price response in some commodities. you mentioned african swine fever. we have seen pork production
declining 40% according to some analysis. how will this reshape the soybean market given it is used as feed? mathew: we are bearish on this in that you have a combination of good weather, the trade tensions that are not being resolved, too much soy in the fever hasthe exacerbated that. production is down significantly on the order of 30% very the numbers are not -- it could be more. if this further continues, and that is really bad for so i prices, but on the flipside it is good for inflation if you like -- inflation. if you like soy burgers, that is an upside. terms of pork production, significant ramifications. paul: one of the things you look at talking long-term is trade routes.
there is a mixed picture because the belt and road initiative provides tremendous demand for commodities but then again you have risks around the self -- the south china sea. mathew: we have never seen this level of volatility and uncertainty and we have been doing this for 20 years. expanding in one direction, that is positive for commodity demand long-term, but that comes at the cost of geopolitical tensions and other countries trying to contain that expansion. it is anybody's guess how that fors out, and it is natural -- you have a bipolar world with china and the u.s.. both want to effectively maximize their opportunities. china is doing what it would naturally do, and the u.s. would do the same, trying to expand trade opportunities, deal with more countries but that runs into significant issues. that only leaves to more volatility. talking about more
volatility, this chart on the bloomberg showing how much china has pledged to buy from the u.s. in terms of soybeans, the line in white but this is how much they have actually bought. what happens if china reneges and says, we will retaliate against u.s. tariffs and just stop buying from the u.s.? what will the impact be on the agriculture segment? mathew: short-term you will have downside in prices. we don't see a significant case for holding sway. long-term we believe this will is resolved through this significant brickman ship. it is game theory, everything believe itat's we
gets resolved to nobody's interest on either side to have this deteriorate from here. the risk is it gets to a point where neither side wants it to get where you go from pretending to be enemies to actually being enemies which is terrible for everybody. longer-term it prices in corn and soybeans. this is not good for farming come globally, particularly for the u.s. with a strong u.s. dollar and grain prices down, it will hurt u.s. farmers. thank you very much for joining us. the interactive tv function. you can watch us live and catch up on past interviews and dive into any of the securities and functions we talk about. become part of the conversation by sending us instant messages during our show. this is for bloomberg subscribers only. g subscribers only.
asia. this is daybreak paul: let's get a quick check of the business flash headlines. bumpy weekend for bitcoin that surged to $1000 the highest level since august as all of the major cryptocurrencies extended a rebound. they have been suffering with a new york attorney general --nging allegations of virtual exchange. from the ua -- the uk's say lotus is looking to hire 200 engineers to accelerate its turnaround plan that was bankrolled by china's geely automobile. they aim to triple production to 5000 cars a year and open a new design center in the midlands.
they took a controlling stake in lotus two years ago in a 100 million pounds deal. paul: one of the leading pharma companies says china has passed the u.s. and europe in the race to attract top scientists. he said salaries being offered for top talent is virtually the same in china as in the west and competition for skilled workers is rising. china is becoming a leading innovation center for the next generation scientific regions. south korea, japan and south korea get underway -- and australia get underway at the top of the hour. sophie: we have sydney futures swinging to declines. it tokyo could see a drop of more than 1% with nikkei futures hinting this. stocks could go down after bitcoin's weekend
surge. and the yen is gaining ground some the most against the aussie dollar, so it is climbing. 10 year cash yields will drop 10 basis points at the open after trump dialed up pressure on china. that is putting pressure on the offshore yuan which is on the retreat, trading at a four-month low and heading for a sixth straight day of declines, the worst since june. it could even be seven against the dollar. in a little over a week, we have gone from traders you 42 total misery. -- euphoria to total misery. md joinsa analytic a us to discuss the outlook for china and the trade talks. she says the counter offer from beijing could be coming soon. the market open is next, futures in an interesting place in the context of the trade dispute. this is bloomberg. ♪
and sidneyaul allen were asia's major markets have opened for trade. shery: good evening from bloomberg's world headquarters in new york, i'm shery ahn. sophie: i'm sophie kamaruddin and hong kong. welcome to "daybreak: asia." paul: our top stories, act now. president trump warns china to strike a deal quickly because worst could be on the way if he is reelected next year. oil slides with pessimism back and fashion. trade tensions on higher output
will smother the recent rally. shery: the australian elections swing into gear with scott morrison appealing to have a go with voters. the polls suggest a labor win. --kets in asia coming starting trade with a barrage of tweets probe -- from president trump. let's see how we are setting up for the session. sophie is there with a check of markets. sophie: looking at how we are faring in tokyo, stocks under pressure. the nikkei to 25 -- the nikkei 225, rising the most amid concerns of escalating trade tensions. seeing moves in treasury trade -- 10 year yields fighting three-point -- three to 4% basis points. checking on the kospi, it is off. down 8/10 of 1%. the korean won is eyeing the handle against the dollar.
this is the korean finance minister cautions the u.s.-china trade dispute may widen market volatility. checking in on this, losing ground, off to tenths of 1%. the aussie dollar slipping amid the sentiment. expecting losses after capping a fourth straight weekly decline. the kiwi dollar looking little changed, off by 1/10 of 1%. that is a snapshot of the open across the region. paul: thanks very much, sophie. let's get to first word news with su keenan. su: thank you. we start with the open seat on the fed. the white house is considering conservative economist judy shelton for one of the two vacancies on the fed a board of governors that president trump has struggled to fill. she has served as an informal adviser to the president and holds a phd in business administration. trump has named four people for the two open seats on the board but none of them so far has made it through the selection process. onto the latest with brexit. u.k. prime minister theresa may
resumes brexit talks with the labour party this week. this amid increasing in party pressure to abandon this strategy and resign. senior members from both sides expressed concerns that further talks might come to nothing. may is reeling from the latest opinion polls showing brexit party leader nigel virage on course to win the most seats at next week's eu election. >> we voted to leave. we did not vote for a deal. we voted to leave once. the year after that, both parties promised us in their manifestoes they would honor the result of the referendum. and here we are, three years on the referendum, brexit has not been delivered. given this government and this parliament, there is no prospect of these parties delivering a clean break brexit. reacheda's election has its penultimate round with 480 three of the 543 parliamentary seats now decided.
the congress leader is contesting two seats, one in delhi, the other in the south, to project and all india image. he will have to drop one of the seats if he wins both. the final 60 constituency votes next sunday with final results announced on may 23. prime minister scott morrison has launched his liberal national coalition selection campaign, appealing to the nature of australian voters. he says his aim is to offer a chance to those who want to realize their dreams. opinion polls suggest the opposition labour party is heading from victory while the leader pledging to address climate change and australia's greenhouse gas emissions. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm su keenan. this is bloomberg. shery: thank you. president trump says the u.s. is
right where it wants to be in trade negotiations with china. in a series of tweets, he has reinforced his message that beijing should act to secure a deal before next year's presidential election. derek wall back joins us from singapore. let's start with the reaction out of china or the lack of reaction out of china. we still have not seen any sort of retaliation so far. derek: we have not. that is notable. i think a lot of people had expected to walk into the market week with a really clear idea of what china was going to do, how they would react, what the scale of the reaction was going to be. instead there has been moderation and calls for moderation in the state. we are still waiting to see from the chinese, they promised they would retaliate with tariffs. but they have not spelled out what they will do. there is a trade in balance between the u.s. and china. it is not exactly an even playing field, given what the
u.s. can conceptually do and what it -- what it has threatened to do versus what china can do and what it has threatened to do. we are waiting and i think this is longer than a lot of china watchers had thought. maybe we will get something today. who knows? derek, always a fun question to ask yourself. beyond that, some of the analysis is interesting. the president seems to be viewing the talks to the president of the 20 election, doesn't he? derek: i think that is right. the president came out today and tweeted that china probably wants democrats to win because he thinks -- they think they will get a better deal out of it. this is an interesting framing. i think a lot of people had expected the president was looking at the trade deal, at least in part through the 2020 election. he has made that crystal clear. what people assessed previously
is the president wanted a robust equity market. and good news for stocks. this is the president who said, how are your 401(k)s doing? how are your 401(k)s doing, look at the market, things like that. instead, now the president is actually saying i am going to be tougher on china than some democrats would be. it is a shift. it still means the 2020 election is the under town. but it is a shift to say maybe that toughness is better there, and instead of saying let's go full on bet for the equity markets. it is a total shift, it still means 2020 is underlining. this is something that i think people should watch really closely. this i think will be an idea that people will probe more over the coming days. but i think if you are watching for markets, you should watch on this very closely, how is the president framing the choice and
framing what matters in the 2020 election? shery: we are seeing u.s. futures continue to take a hit down 1.1%. to session lows. let me ask you about the presidents base. this is gtv chart showing how much china has promised to buy from the u.s. when it comes to soybeans. the line and white. how much they have already bought. and you can see there is really a lot to go still. does the president have the backing of his base when it ands to foreign country these being the demographics that will get hit the most out of potentially higher tariffs coming from china and china not buying from the u.s.? derek: it is a very salient question. the answer is yes, he does still have the backing of his foreign-based. when you are talking about trump voters in the agricultural midwest, some of these people who really got him toward a
victory and -- in states like wisconsin, michigan, they are still with him. president trump's allies won senate really -- senate races a little bit ago. on promises of you know what, let's just stick this out with a president, he will get there eventually. short-term pain, long-term gain or that was i campaign talking point including a north dakota. it won some senate seats. --re is still that stick that from his foreign-based. this white house as hinted at the possibility of additional help for agriculture. there had been payments to agriculture off of previous tariff woes. there may be again. the president is very connected to this foreign-based so far. stayedreign-base has connected. it is something to watch in case there is future fractures. we have not seen signs of real fracturing yet.
paul: all right, derek wallbank, thanks for joining us. trade tensions bleeding into market action, affecting several asset classes. a guest is here with me in sydney. you have stocks and currencies on the move in the turmoil. what are you seeing. garfield: one of the interesting things we are seeing is stocks -- stock futures, they opened very weak. right from the get-go. 1.1% down. pulled back. now they are down more again. hand ares on the other quieter, especially in the early going. now the chinese yuan is falling seriously. that will have a major affect, as well as confirming that it will cause emerging-market currencies to have a tough day. that is a tough day for a lot of the risk assets that are open.
adding to the fact is that hong kong is away on holiday. that is a chunk of equity. we are also seeing a bid for treasury futures, and i would expect we will see gains for australian bonds and the japanese bonds. shery: hey, garfield. volatility subsiding a little bit. this gtv chart showing that. that is after a huge spike when it comes to the vix index. not so much when it comes to fx volatility which is pretty quiet. why the discrepancy? garfield: there are a couple of potential answers. is thing i think that definitely in play is central banks. central banks have shifted to be on the whole, fairly dovish, especially the fed has shifted from a situation where the fed was raising rates, and there was i do virgins with other central banks who are either sitting on their hands or thinking they may have to cut. that divergence could create
volatility space in the currency space. hand, theyhe other went down much harder than currencies did in the december meltdown. the fourth quarter meltdown last year. and they came back up very quickly. even as they come back up quickly, there were people, a lot of fretting. when is the u.s. recession coming? when is the correction coming? there was an extreme, at some stages, focus on technical levels and whether we would stay above or below the 200 dma. that shows up in the volatility. less certainuch that some of the extreme moves, both to the downside and the upside in stocks are sustainable. up for that.
the other thing you could argue is that up for that. the other thing you could argue is that currencies probably should be more closely attuned to the outlook for global trade, trade --ow global global trade needs currencies. you could argue that a lot of the riskier currencies had a priced in the dangers that the stocks market has only woken up to in the last couple of weeks. shery: thank you trade -- global trade needs currencies. so much for that. reynolds. a down day across asia. let's see some of the big movers across markets. sophie: checking in on stock movers. softbank is continuing to fall in tokyo. set for the worse today tumble since october in the wake of uber's trading debut. it owns a stake in uber. flipping the board to check in on cba, falling as much as 2.7%. after trading reynolds. updates which saw the lender report a 20% drop in profit, dented by more remediation cost. it brought revisions to an aussie dollar. i want to highlight the offshore yuan which is extending its
decline, it hasn't hit the weakest on level since january 4. it lost 2.1% as trump is ramping up the pressure on china. paul: thanks very much. still to come, brexit is back in the news with theresa may facing a growing result -- we vote in her own party. we will have the latest developments in a moment. shery: trade tensions collide with sallie mae. the outlook for currencies and bonds next. this is bloomberg. ♪
bank had a fixture strategy is with us. always great having you with us. let's take a look at the chinese yuan. this gtv chart on the bloomberg showing three months risk reversals when it comes to the offshore yuan, rising to the highest since november. these demands are wagers against the yuan. are the yuan bears back on the prowl such as yourself? being.the time i would not classify as as a massive you on their. but -- yuan bear. on theis a great gauge fear around trade tensions. we were bearish on the yuan short-term before, the most recent bout of trade tensions picked up. foro think there is room this to move higher as long as the trade tensions linger. hedge think it is a great
for allocations that otherwise long riskier assets like equities or corporate bonds. shery: how big of a risk is into your scenario if we see the u.s. dollar strength on these safe haven moves? for us, we are not -- we are more concerned in the short-term. we are looking at bearish for the next few weeks, the couple of months. we could see dollars go toward 690 and higher. but our baseline scenario is that after an incredible rally in risky outlet -- assets, we may be in for consolidation with the risk around trade more recently. from that perspective, where there has been a bearish theme, or potentially bullish on the yen. we think doing the short-term moves, we may see risky assets to take a breather. we would rather use those as a near-term hedge rather than altering some long-term allocations where we are pro risk. put to you, want to if i can, in my blog question of
the day, which is why are currencies in the face of trade tensions? we have a chart on the bloomberg terminal to illustrate this, for those who want to take a look at that. why are we not seeing some big moves in the currencies he might expect? which do you think might be most vulnerable? manpreet: that is a really good question. we think one has to do with the moves in q1. equities have seen a much stronger move on the upside. quite remarkable move for a quarter. you would expect if there is a correction, for consolidation, you would expect that to be larger on the equity side rather than fx. the second reason is on the fx side, and a lot of currency moves still are a mirror image of the u.s. dollar. you can see moves on either side, but if the dollar index at a broader level stays range bound, it is tougher for individual pairs to move in a
massive way unless you get a big risk event like the yen. if you look at the dollar, it is stuck in that tight range and trying to figure out which way it is likely to go. we think that is the big driver. that is part of the reason why we think the u.s. dollar is in the process of peaking. interest rates have been a driver of the dollar. the strength we have seen. and with the fed becoming more balanced, we think that big driver is slowly coming to an end. potentially an interesting week for the aussie dollar. we have a job it's -- out later in the week. saying they are so strong, it is the last bulwark against the central bank moving to an easing bias. where do you see the aussie from here? it is below $.70 now. do you see it unlikely it will climb above that level? manpreet: aussie dollar is range bound.
$.70, we could move above that. our bias will be for a slightly weaker aussie dollar. maybe oneart of that, of the last central banks holding out against cuts, but outside of strong labor market data, some of the other metrics looking weak. if you come back and think in terms of interest rate differentials, the risk is it is less supportive for the aussie dollar rather than pushing it higher. the you combine that with aussie dollar which is chinese growth, from a growth perspective or trade perspective, that means the next few weeks look soft. that is why our buys for the aussie dollar is on the downside. if we are putting on a trade, we are doing it against the end. -- the yen. from both sides, more sensitivity to near-term market wobbles. we think that or the next will be a more interesting place to be. looking at your
top fx trades and you are bullish on the british pound. we are expecting the prime minister we -- to reopen brexit talks on the future customs deal. what is your reasoning behind your british pound call? interestingat is an and controversial one. when we put on that the end of last year. the base for us is that we still think policy, government on both sides, would like to avoid a hard brexit. when you look at sterling, that is the most important thing. when you think about how sterling has behaved in the last two years, we have been in a range of 120-143 is sentiment has swung in either direction from pessimistic to potentially being able to reach a deal. hasn that u.k. parliament decided time and time again that they do want at least an avoidance of a hard brexit. as long as we get to that outcome, no matter what it looks
like, we think that means sterling should be higher. potentially up 135-140. as long as we get an avoidance of a no deal brexit. if we do get a positive outcome, we think sterling could be above 140. shery: thank you so much for that. gill, plenty more to come on daybreak asia. this is bloomberg. ♪ this is bloomberg. ♪
a quick check of the latest business flash headlines. china mobile is calling on the u.s. government to stop that it calls the unreasonable pressure on chinese companies, pushing back at the trump administration's official to deny access to american wireless. the company's arms says the fcc's rejection of the applications as "without apparent reason or basis, and contradicts the ongoing trend of globalization." shery: softbank's into 800
million dollars in two london-based finn tech company green cell according to a person close to the deal. the offers alternative supply chain funding to companies at annual growth has more than doubled since 2015. the softbank vision fund investment values it at $3.5 billion. the money will accelerate greenfield's plans to enter china and india. paul: the wall street journal says china's cosco shipping would consider buying all of singapore's pacific international lines if they decide to sell. cosco acquired part of the container manufacturing business. the report says the operators arms inform -- informal m&a talks and they have denied interest in selling its shipping business. shery: let's get a check of the markets. trading across asia. we are seeing japan's nikkei falling for a six consecutive session, down 8/10 of 1%. the lowest level since march.
the are seeing energy and health care leading the deck lines in the japanese market. down 6/10 of 1%. a lot to do with the trade tensions that have flared up between china and the u.s. president trump tweeting it was china that broke the deal. fx 200 down .5% after two sessions of losses, gains, that is, and kiwi stocks rising for tenths of 1%. look at what currencies are doing. we continue to see the safe haven moves toward the japanese yen which is now trading at about 109 level, below the 110 level which is now at the strongest level in months. the chinese offshore yuan, the weakness retreating on trade tensions as we see the korean won also weaker. the aussie dollar, stronger by -- weaker by 3/10 of 1%. coming up next, we will assess the impact of the latest trade
>> this is daybreak: asia. chinaent trump's warning to act now on a trade deal, saying far worse could be in the cards after his second term in office in 2020. he tweeted beijing feels it has they mayy beaten and feel it is worth waiting for the next u.s. election. theypeated his claim that broke the deal. the ukrainian government has rebuffed claims -- several
lawmakers have been appointed to the middle east. war is not on the horizon. eliminated exceptions to u.s. sanctions on iranian oil. the north korean cargo ships seized by the u.s. has finally arrived in american samoa. ae ship arrived after three-week voyage from indonesia, where it had been detained since april of last year. washington claims it was used by pyongyang to deliver north korean coal to china and other buyers. news of the seizure came amid reports the north has resumed test launches of short range missiles. south africa's president cyril ramaphosa is vowing to clean up ruling ancfter his party clung to power in elections. despite a convincing win, it was
the worst ever election showing for the party with its majority falling below 60% for the first time. the anc has ruled south africa since the end of the apartheid system 25 years ago. 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. >> let's get a market check now with sam -- with sophie kamaruddin. extendingtocks are losses after the worst week for the region since october. we have the nikkei two to five fighting for a sixth straight session off by 0.7%. the longest losing streak since september, with softbank the biggest drag. the kospi is resuming its climb. yuan set for a sixth day of losses trading at a
january low. the aussie dollar under pressure, off 0.3%. let's check on stock movers across the region. i want to highlight dna, which is soaring in tokyo. the nintendo mobile partner surprised investors with an unprecedented plan to buy back as much as 26% of its shares after it missed -- a mixed earnings report amid a changing business environment. also announced a new pokemon game. the most thisng year after a first quarter operating income beat on strong sales of tractors overseas. headed in thewide opposite direction, sliding by a record, as much as 26% after cutting its profit target. the impact segment has underperformed as a result of a decline in new home construction in australia.
potentiald be a negative impact on the american segment in fiscal 2020. paul: thanks very much. theresa may is going to try to break the brexit deadlock between her conservative party and the opposition labour party. that means attempting to reopen talks with european union. this ongoing saga, how do markets see the next potential chapter playing out? >> sterling has been very choppy recently. fromthe last four months, 128 to 134 range. mark carney said if it is a smooth brexit, we may raise rates. at the moment, negotiations -- don't seem to be going anywhere.
the conservative party, will they agree to what theresa may agrees to? it is very divisive. going nowhere to get more clarification. that may take more time. theresa may is under pressure to resign herself. is she replaced with somebody more in line with a hard brexit? >> some saying nigel faraj's brexit party has more support than conservatives and labor combined. how much uncertainty does this add to the scenario when it comes to brexit negotiations? >> that is not good at all. if you look at local elections, now to see with the european elections, it does look like they are going to go ahead.
they may say, look, theresa may, we do not want to customs union. certainly a lot of conservatives do want a hard brexit. they are going to stand their ground more, which will make it harder for theresa may to get consensus. that will continue to weigh on sterling in the near term. shery: thank you for joining us. now we continue to see u.s. futures trending down at the moment. they are falling 1%. we have seen the impact of president trump's tweets. the latest one taking a hit at democrats for being weak on china. also he talked about china breaking the deal. really pointing the finger on china for trying to renegotiate the u.s.-china trade agreement. let's discuss everything happening on trade also in the chinese economy and markets. we are joined by pauline loong.
always great to have you with us. we continue to see the market impact coming out of headlines. president trump continuing to tweet against china. have trade tensions been factored in and priced in last week given the plunge we saw in global equities? pauline: i think the market is finding it very hard right now to price in anything, simply because one day trump will tweet this, he would tweet something out different another day. punchdrunkis getting over this trade discussion issue . theve a feeling negotiations are actually reaching a home stretch in spite of what both parties may say. discussionnded the without announcing a deal. but that is not very strange.
the negotiations took place in washington. whatever it is they are negotiating will have a big impact on policy on how the economy is run in china. theuld not be surprised if team will need to go back and get this approved at the highest level. the way the chinese political system works. maybe the general committee, the political bureau, the top economy team, is saying ok, some of us disagree with this. some of us disagree with that. let us take a vote and see if we can say yes to this final thing. , is week, maybe next week expect news from beijing. shery: the markets really not waiting to get out of china. this chart showing how foreigners have been dumping chinese shares of -- a-shares
through links such as the hong kong connect. how much impact will this have on the chinese markets? especially at a time when msci is preparing to expand a-shares? pauline: it will have a big impact simply because markets are very volatile by nature. .here is one piece of news prices go up, prices go down. the volatility of the market, especially the domestic h-share market is not really -- domestic a-share market is not a good gauge of long-term investor sentiment. paul: we have seen bitcoin rising over the weekend. one theory suggests that could be the chinese moving to attempt to get their money out as well. i what point does this trade tension begin to have an effect on the chinese economy?
i am thinking particularly in gdp numbers where you are required to have suspension of disbelief. pauline: indeed. mucharkets realize very numbers, especially headline numbers like gdp -- i'm not going into how reliable or how great a sort you need to have looking into chinese numbers. that is a big can of worms. if you look at how the chinese leadership has been reacting, it is clear they think the economy is really on the knife's edge. to start with, they said no more deleveraging. the central bank has been effectively flooding the market with more and more liquidity. , president xiear has said we need to have
stabilization. there are six areas to be stabilized. jobs, foreign trade, foreign ,nvestment, domestic investment even expectations. the is the first time chinese politburo has decided that almost every aspect of the economy needs stabilizing. before they would say, we need to stabilize, how policy protection for jobs or for trade. have more orey less listed everything to do with the economy that needs stabilizing. clearly, the chinese leaders themselves think the economy is really on the knife's edge trending downwards.
another thing is that the gdp target, every year until this year, it has been one number. this year it is a range. 6% to 6.5%. that is the safe haven way of saying it is going to be more 6% and 6.5%. if you look at the way the policy is, not the way the agency puts out the spin they put out, clearly the leadership is very concerned about the way the economy is going. paul: i want to quickly get to a viewer question we have been sent on our instant messaging platform asking how long do you think it is going to take for pboc to react to? if they think changing interest rates, whatever, would
be helpful, they would do it very quickly, but it might spending how the committee is going to decide on the trade agreement with the united states. always great talking to you. thank you. pauline loong. and of course you can get a roundup of the stories you need on today's addition of daybreak. this is bloomberg. ♪
what does it suggest? >> it suggests it will be a close election saturday. the margin at the moment is 51% lead for labor over the coalition government's 49%. that has been about the same margin, two percentage points for a while now. that suggests perhaps prime minister scott morrison's election campaign is stalling for momentum at the moment. it just can't get enough attraction to push through for these final weeks. property in the potential vote winner in the liberal party's campaign launched yesterday. on who takesing the victory, the government or labor, what sort of the policies could we see?
the housing space, decided toabor is match the policy announced yesterday to guarantee 5% deposits for first home buyers. property is a big topic down under. everyone has some ideas about it. the labor in contrast is -- has decided it is going to strip perksome of the tax property owners enjoy. get lowers to try to prices, i guess, although prices have been falling in australia. the idea is to let first home buyers get a leg up into the property market. shery: thank you so much for that. our australian government reporter. in india, the ruling bjp maybe in trouble as a mammoth election
congress is not doing so well. let us assume for the sake of argument the government is able to take away 50 seats. that is the bjp's quarter. seats, theyay 50 take it away only from the bjp and its ally, i don't know how many they will take away, but if they take away anything like 45 or 50 seats, that is a huge blow to the bjp. paul: that was the former indian finance minister there. still more ahead on "daybreak asia." this is bloomberg. ♪
shery: let's get our check of the business flash headlines. a bumper weekend for bitcoin. it surged to its highest level since august as all the current -- major cryptocurrencies extended a rebound from last month. prices have been suffering amid an investigation into an allegation of a cover-up involving cryptocurrency and virtual exchange. say: reports from the u.k.
sports carmaker motors is engineers.hire theyunday telegraph says aim to triple production and open a new engineering and design center in the midlands. shery: one of the world's companies says china has surpassed the u.s.. salaries being offered for top talent is virtually the same in china as in the west and competition for skilled workers is rising. china is becoming a leading innovation center, well-placed to lure in next-generation scientific leaders. china's e-commerce giants tencent, alibaba, and by doing
all report profits this week. bloomberg technology asia executive peter elstrom joins us from hong kong. what are these earnings going to tell us? we have alibaba and tencent reporting on the same day. they are the biggest companies in china. they go back and forth in terms of which one has the bigger market value. billion more than $900 in market value reported earnings all at the same time. .hey are different businesses alibaba's core is the e-commerce business. they are going to give us insight into the state of the chinese consumer right now. we know the economy is slowing down slightly and that in the market, but this will give us more insight into exactly what is happening there as well as some of their expansions to new areas. tencent has been struggling with its gaming business, which is the heart of its operations. last year, the chinese government froze approvals of
new games, which really hit them last year. their stock price in particular. investors are looking for more insights into how that business is going. both of them have new businesses they are digging into. shery: who is more exposed to the ongoing trade war between the u.s. and china and the economic slowdown in china? >> both companies are pretty domestic at this point. they want to expand, but they are domestic. tencent in particular. alibaba has aspirations to get more global with their e-commerce business with new ventures including finance and entertainment. they are the ones that could get hit if the trade war gets much worse at this point. they talked about aspirations to go into the u.s. and europe and other markets in a much bigger way than they are right now. tencent has to get their gaming business fixed. making sure the government is on board with new games they are
coming out with to make sure they can drive off its and get into new areas like advertisement, which is becoming a bigger and more important sector for them. shery: thank you so much. of whatw get a preview to watch in markets later this morning. watching reports a shipping company is considering buying all its singapore lanes. the operators are not in formal m&a talks. the group isort looking to buy a stake of up to 5% to secure its investment. also watching chinese carmakers after sales plunged. one segment that keep -- did keep growing is electric cars. earnings indicate chinese consumers are boosting spending from the rising middle class
that is willing to pay more for faster delivery and other services. we will be watching more revised forecasts for the yuan. goldman cutting its forecast on increased tariffs while leaving its six and 12 month forecasts unchanged. the offshore rate has reached 687. the weakest since january 4. paul: before we hand over to "bloomberg markets: asia," let's look at how the markets are trading now. nikkei weaker down 0.7% across the upper half of 1%. australia off 0.4%. commonwealth bank of australia down, a bit of a drag on the market, by far the largest company on the asx. just under 10% of the index. let's give it over to you,
sherry. futurese have seen u.s. take a hit on president trump's tweets, falling about 1% after falling as much as 1.1%. president trump saying china broke the deal, that the u.s. is where they want to be in regards to china. we have also seen weakness in the offshore yuan. safe haven moves toward the japanese yen, which continues to gain ground and is below that 110 level. taiex futures under pressure at the moment. hong kong on holiday. the shanghai and shenzhen open our next. ♪
>> it is 9:00 a.m. in beijing. welcome to "bloomberg markets china open." >> here are the top stories. president trump warns china to strike a deal quickly because worse could be on the way. big week for earnings in china. we will look ahead to reports from alibaba and tencent as trade tensions rise. >> uber will be in the spotlight when wall street opens after friday's bruising debut. we hear from the ceo.