tv Bloomberg Markets Asia Bloomberg May 12, 2019 9:00pm-12:00am EDT
>> 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.
tom: futures are pointing lower. the offshore yuan is weaker. investors trying to weigh how much risk to take off the table after these trade tensions increased on friday. we are still waiting for those retaliatory measures from beijing. yvonne: we saw a shift in tone over the weekend. talks are undergoing, we are to continue in beijing pretty soon. saturday we heard more of the rhetoric of president trump tweeting, look, you have a month to come up with some concessions, or i am going to have more tensions -- more tariffs, and china blaming the u.s. for these tensions. pretty vulnerable during the asian session this monday morning. we are off some of the low we
saw at the start. we are still low by 0.7% on the nikkei. singapore just coming online under a bit of pressure. you mentioned the offshore remembering. -- offshore renminbi. this brings us back to the highs for dollar china since january. we continue to see losses in the renminbi extended. australian trade profits lower. take a look at this when it comes to the future set up. you mentioned u.s. futures in decline after we saw the worst weekly performance when it comes to u.s. stocks for the year. we are seeing china futures, take a look at that. down more than 220 points. could be a pretty ugly session. rebound friday. interesting to see hong kong close here today. we will see how that plays out.
take a look at this chart. one of our guests frequently from medley global and visors sent us this chart that i thought was telling. he says sentiment has been worsening and we have seen in white here global financial conditions, this marks the eu, u.s., asia, japan back into negative territory. this is still the sentiment indices. the jp morgan a share sentiment index seeing a bit of a divergence. saying markets are still pricing in some optimism they are going to get some type of trade deal. could that come lower and may be back to what we are seeing when it comes to tightening financial conditions? it is going to be a key question . are there more moves for a correction when it comes to chinese stocks? we will see if things play out the rest of the session. that is what we are watching so far. the white house is
considering conservative economist judy sheldon for one of the vacancies on the federal debt on the fed board of governors president trump has struggled to fill. sheldon has served as an advisor to the president and holds a phd in business administration. to the latest on brexit. theresa may resumes brexit talks with the labour party this week amid increasing in party pressure to abandon the strategy and move on. senior members from both sides expressed concern further talks might come to nothing. may is reeling from the latest opinion polls that show brexit party leader nigel farage on course to win the most seats at next week's new elections. >> we voted to leave. we did not vote for a deal. the year after that, the labor
and conservative parties promised us they would honor the referendum. here we are three years on from that. brexit is not being delivered. given this parliament, there is no prospect of these parties delivering brexit. the australian .rime minister campaign change to to offer a those who want to realize their dreams. opinion polls are suggesting the opposition labour party is heading for victory. the leader pledging to address climate change and australia's greenhouse gas emissions. south africa's president cyril ramaphosa is bowing to clean up his party of what he calls deviance after his ruling anc -- power.
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 some 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. this is bloomberg. yvonne: thanks. the big question is, who broke the deal? chinese estate media claiming the u.s. while president maintains it was beijing. on twitter, the u.s. is right where it wants to be with respect to the trade talks and is in a position to take massive tariffs from china. a lot of advisors are saying duties are going to hurt both nations and talks will continue. >> want to be as sure as we can be. we do not think the chinese have
come far enough. talks will continue and i will say this. the g20 meeting in japan toward the end of june next month, the chances president trump and president xi will get together at that meeting are pretty good. >> i do not think the negotiation has broken down. it is a small setback in talks between the two countries, which is inevitable. we are cautiously optimistic for the future. next guest advises foreign companies on regulatory issues in china. , thank you for joining us in the beijing studio. where is your assessment of where things stand? shouldu.s. thinks china be more forthcoming and to some extent has pulled back. china really wants tariffs to be
lifted as a precondition to an agreement. we are at an impasse. both sides have to move to reach an agreement. tom: you have spent time in d.c. speaking to officials there. what is your view on the hardening of the stance in washington? is that an accurate way to describe the move? indeed. we met with many members of congress. we met with think tanks. the consensus with few exceptions is china needs to readjust its policies and take account of the fact it has acted with some degree of a substantial degree of unfairness toward the united states. i do not think the chinese government is fully appreciated the way in which sentiment in the united states has shifted against china. why do you think beijing backpedaled?
according to the report we saw, if there was some sort of law that was made between the u.s. and china when it comes to force tech transfers, ip protection, what ultimately do you think led to china to backpedal? was it a miscalculation to do so at the last minute? this is a fairly common negotiation strategy on the part of china. that is to say, it appears to be an agreement, but we have not fully finalized it and therefore there should be some adjustment. i think that is part of it. in addition to that there is also a strong perception on the chinese side that concessions which the united states asked for what amounts to a restructuring of the chinese economic system in a way that would inhibit growth going forward. they were reluctant to do so. what this means with ip, for example, is there would be more
effort in the united states, which is already begun if you look at statements from the former deputy attorney general, the director of the fbi, toward law enforcement as a way of policiesg for china's with respect to ip infringements. yvonne: when it comes to force tech transfer, you advise a lot of companies that do business in china. not set in stone how china tries to get this technology from these foreign companies. does that make it harder to enforce it? lester: you are absolutely right. there are some provisions in chinese law, some of which are changing, that were directly related to technology transfer, for example, the requirement to have a joint venture or restrictions otherwise on equity in order to enter the chinese
market. china had a regulation. went intotion which effect just after china entered the wto. despite numerous efforts by other governments and complaints by foreign business, it was only this year china abolished the most troublesome provisions in that regulation, which essentially required foreign companies after the term of a patent or after the expiration of the term transfer the right to technology improvements to their chinese licensee. there are a number of provisions which have existed in terms of forced technology transfer in law, but others, for example the eligibility for subsidies and fair treatment and to access government procurement, those are harder to address. they are not necessarily written , putlaw, but nevertheless constraints on the ability to do
business in china. tom: you have been operating in china for more than 20 years. you have deep contacts. what are the odds at this stage of a deal? a consequential deal on trade? lester: the odds are favorable. timeer, there are some constraints that exist. the united states president is already looking forward toward the new election. he wants a strong deal. also a lot of pressure is likely to come from democratic opponent's. that may lead to transit tents on his part. xi jinping wants to look tough. one of those things china wants to see is that there be a strong appearance of symmetry. that is to say, that china not be forced to be the only party making concessions. that means there has to be some -- inntial degree of terms of drafting any agreement and also a recognition of the
sensitivity in china that the appearance of being forced to accept concessions could prevent making a deal. tom: i spoke to the owner of a business in china. he said he is actively now looking at moving his factory from southern china to indonesia. what are you hearing from some of your clients? what practical steps should they be taking? number ofere are a businesses in southern china where there is a lot of outsourcing of manufacturing, which are doing exactly the same thing. movement of manufacturing from china to lower-cost countries which might have happened in any event, which is being accelerated. because of the concern about ip, there are companies with technology intensive production, supply chains, who are looking to move to taiwan or elsewhere in order to avoid not only the tariff question, but also
concern there may be retaliation or that there may be political problems in the united states associated with having a lot of their production in china. there is a substantial risk to china if this persists and companies reduce their investment or move their production outside of china. tom: possibly that's the more consequential part of the equation. thank you for joining us. we look forward to speaking to you in the future. lester is a partner of pauline loong -- of wilmerhale law firm. aberdeen standard investments tells us how it is playing asian equities amid what could become a long standoff between china and the u.s.. yvonne: next, a forecaster who predicted the plunge in chinese bond yields earlier this year. this is bloomberg. ♪
yvonne: let's do an fx check. 67954 against the u.s. dollar here today reflect in the overall weakness we have seen. 68662 for your offshore room nb at the moment. -- offshore renminbi at the moment. safety havens like the yen, like the swiss franc, seeing risk aversion. watch out for these core auto related currencies at all -- as well like the mexican peso and the euro-dollar. the u.s. government has until may 18 to decide whether to impose auto tariffs. that could be a big risk. tom: absolutely. you expect more volatility in the fx markets?
>> you will see already volatility is very high, as high as last year when everyone is thinking about if the dollar renminbi will break. -- will break seven. now suddenly there is a big reversal. the market wants to hedge. one thing to point out, the background of this point is very different from what happened last year. last year it was the pboc lowering the money market rate while the fed was tightening. this time, the whole market is betting the fed will cut rates even though the central bank of the u.s. does not want to cut. the market mentality is totally different. in china we see the pboc soually readjusted liquidity
that it was a little bit tighter than before. it is totally the reverse of what happened last year. this in my view limited what may happen to dollar remember the -- dollar renminbi. there was a big divergence between the u.s. rate and the china rate. china's rate was going down. this year it is the reverse. people are thinking dollar renminbi will go down. we see some reversal. it is really not the case like last year when the tray tension -- trade tension. of course the fx rate is always a little bit political. market wise we have to just look at the factor. i think the situation is more balanced than last year.
tom: we have the prospect of potentially now higher rates are higher chances of a fed rate cut as well that could leave more of a window for the pboc. given that assessment? where do you see that you and -- the yuan by the end of the year? the fx rate could be used as a way to negotiate. i do not think from the market side there will be pressure for the dollar renminbi to go beyond seven. overall,y obvious that china's exports maintain. there is already quite some stock for chinese exports to the u.s.. chinese exports to the euro and other parts of the world increase. this really indicates something quite different. there will be of course negative impacts china will see. there, as u.s. demand is
u.s. consumers have to buy something from other suppliers , allhe china producers these manufacturers want to sell their product. even though the u.s. does not really buy from china, they buy , china willroducers be billed as suppliers. i wonder if this will have a big negative impact on china, china economy, producers. about service,k but service depends on the performance of the economy. if we look at the service account last year, the growth of the deficit slowdown is because the chinese economy was under pressure. both are correlated. yvonne: i am just wondering, demande yen fall with for chinese bonds? you mentioned that spread
between chinese sovereign debt versus treasuries. that is quite wide at the moment. can that spur some buying? >> yes, for my part, we called several weeks ago that the rise of the renminbi is partially over and we expect that will be a good moment to buy. last week we reiterated its cost to buy 10 year because we think there is some potential to go down. not only because of the trade tensions, that in q2, the chinese economy performance will slow down a little bit because we already have a very good q1. also the market reaction after q1 data was over in my view. even though there is this kind of external shock, only because of the reversal or the convergence of the market sentiment to the reality, there will be a drop in the yield. my target for the 10-year is three.
yvonne: you are watching "bloomberg markets china open." china mobile is calling on the u.s. government to stop what it calls the unreasonable pressure on chinese companies, pushing back at the trump administration's decision to deny in access to american wireless. the company's international arms has the rejection of eight years of applications is, quote, without apparent reason or basis and contradicts the ongoing
trend of mobilization. tom: softbank is injecting 800 million dollars in two london-based fintech company green cell according to a person close to the deal. green sale offers alternative supply chain -- to companies. the softbank vision fund investment values it at $3.5 billion. we are told the money will facilitate their plane to enter china and india. yvonne: we are counting down to the open of markets in mainland china. hong kong is closed for the holiday. downe seeing china futures 187 points at the moment. we saw that six that was a little bit toward the weaker side here today. we are watching dollar yuan as well. exports fall 6.4%. exports did rise 7.2% in south korea.
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yvonne: you are watching bloomberg markets china open. markets once again held hostage to the latest trade headlines over the weekend. president trump giving china a month to make up some concessions or risk more tariffs . beijing also coming hard on the rhetoric, saying it was the u.s. which led to trade talks breaking down. we saw china stocks rebounding friday despite the tensions. there were sources telling us the national team was there to rescue.
we will see if they come out today. thenthat amazing dip, rally midway through the friday session after the lunch break. according to our sources, ending the day around 3%. likely to play out this way today according to the analysis we have had up until this point. it looks pretty bleak. 1.5%.0 down almost shanghai composite also down a little over 1%. we had of course the common tree editorials out of the people's daily in the global times, they seem to be hardening it stances, even as both sides say they remain open to continued negotiations but we do not have details. let's turn onto the next which shows how foreigners have been selling out in terms of a-shares. record amounts. adnoc word time for
the ms ci which is looking to add its inclusion rate. you have record selling. you see that very strongly. last week around $600 million per day. we can move on to the next chart, which shows the offshore renminbi. we saw the vix coming and putting much in line with what we saw friday but the offshore yuan has weakened on the back of trade tensions. risk reversals picking up. investors taking more bearish bets against the yuan as the size face-off over trade. yvonne: that's right. let's talk things through here. us is all with strategist from beijing.
any time we kind of start looking at this in a positive light when it came -- come to the trade front we see another tweet which changes the direction again. what can investors do at a time when any kind of market move can be overstepped, overshadowed by what president trump says? it is reallyhink difficult to predict what president trump will say and what the outcome of the trade war will be. so, we just go back to fundamentals. we just go back to how we think the earnings could be impacted and what the companies are telling us. we go back to analyzing little not analyzetry to too much because we just cannot. yvonne: it is really difficult. is there any kind of safe haven and chinese equity markets at the moment? think slightly safer would be things more linked to domestic consumption.
some of the names that we have been seeing throughout last year and this year would be things that related more to tourism, travel, consumption. continuing.e are that is a relatively safe haven compared to the ones exposed to the trade war and exports. you are staying invested in this point in a-shares, are you? >> yes we are. we are long-term. we have been long-term investors in the h-share market, and therefore should things correct we would buy option but everything goes back to the details. everything goes back to how we think the numbers will affect the long-term trajectory of the company. i think these are related to consumption, they tend to be
relatively safer because they are site -- slightly more intact. tom: we talked a little bit about the rates environment and the pboc suggested they have the tools in their arsenal to address any substantial slowdown. what do you expect the central bank to do? which policy measures will they implement now and that -- how will that impact the rates environment? >> definitely different from last year. last year we know the pboc covered its rate. this year we see the central bank is very reserved. they still want to maintain a balance in liquidity. that is one reason that the renminbi did not really get affected by the trade tensions as much as it's worth last year. i think the central bank will carry on this strategy. expect that for the overnight rates. i think the central bank wants to maintain that to a level prior to april.
i expect the seven-day rate to or maxin, around 2.65 2.8. another range below what is happening in april, 3.05. i think this will be the strategy the central bank will adopt in the near term. yvonne: there is the pboc response. what are you factoring in in terms of what we can see from the pboc in the next three to six months? and are you likely to think that the national team stepping up to buy these chinese stocks be favorable for the market? friday thateen on the national team has set up to boost the markets. we see that from time to time, every time the h-share market closes down. we saw the the pboc, rrr rate cuts getting reduced last week as well.
i think overshadowed by the trade war. i share the view that there is a fair bit of leeway for the government to stimulate the economy should they wish to. so far this year, we have seen they have been a bit more measured. arestimulus they announced trickling through the economies as well. there is some room, but again, how that will impact the market long-term will pretty much depend on the magnitude of the stimulus. so we have to watch all these things. tom: we have been talking about the msi inclusion rising from 5% to 10% by the end of the month and that ties in with record selling by foreign investors. --not prove support, do you can that prove support, do you think? >> the other side of the fact there is the confidence that foreign investors have to invest in the markets would need to
return as well. a, therefore, when it becomes position not to be positioned in the asian markets, that would meet -- need the confidence would need to increase. we have to wait and see how the market goes. over the longer term i think it is a position for foreigners not to be in this market. tom: in terms of the impact of all this on the earnings outlook for corporis here in china, what is your assessment? depend veryt will much from sector to sector. the worst sector would be the technology side and within technology if you separated into hardware and software, hardware is much more so because of intricacies of the supply chain we see across asia. a lot of that we are still going through.
therefore, we have got to see how this will impact the quickness of the recovery people have been talking about and the second half. my guess is this sentiment goes on. slightlyess would be slower than most people anticipated because confidence is not there to continue investing. if you look at the software side where it is much more domestic, we think that that growth should be pretty much intact. while there is some backdrop of slower economy, deflation is not as difficult as a direct impact on the tariffs. yvonne: going back to your forecast for the chinese 10 year government bond yields, 3.15 is where you are seeing it. what about inflation? we have seen oil prices elevated. we also have tariff impact potentially. on debt too?igh
>> for the cpi, chinese government, especially the central bank may not react to that. influenced is more by real factors compared to the monetary issues. i think as long as generally the core cpi, the core price still stable -- actually i do not think the central bank will tighten monetary policy. going on supply to chinese markets may increase because of this issue. so actually this will bring down deflation pressure rather than inflation pressure. overall i think for the price side, pressure for the central banks is quite balanced. only inflation pressure. for other factors, i think due sentimentsnversion and what happened in the stock markets today, there is still good interest for investors to buy the chinese government bonds. tom: thank you very much.
now let's get the first word news with su keenan. su: we start with president trump, who is warning china to be wise and act now on a trade deal, saying quote, far worse could be in the cards after his potential second term in office in 2020. he is saying it is a matter of when, not if he is reelected. he tweeted china is being badly beaten in trade talks and maybe it is worth waiting for the next election. he added we are right where we want to be with china and repeated his claim that china broker-deal. the iranian government has rebuffed president trump's suggestion that ministers called him to try and diffuse tensions. several senior iranian lawmakers said the deployment of a u.s. ship to the middle east is
nothing short of a stock and that war is not -- short of a stunt and war is not on the horizon. to u.s.mited exceptions sanctions on the use of iranian oil. the north korean cargo ship seized by the u.s. is finally arrived in american samoa. after a arrived 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 that the north has resumed test launches of short range missiles. hasndia's mammoth election reached its penultimate round 543 483 of the parliamentary seats now decided. the congress leader is contesting two seats in an
attempt to project and all-india image. might haveboth you to drop one of the seats. the final 50 constituencies vote next sunday, with the final results announced on may 23. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. yvonne: coming up, back in the black. how jd.com returned to profit in the first quarter. that is next. this is bloomberg. ♪ ♪
report telus and will they talk more about the trade war? three these are the big companies of china technologies. people want insights into how their businesses are going but how the trade war is affecting their businesses at this point. give youourse different slices of the chinese come -- economy. alibaba's core business is still e-commerce. that will give you insight into how the chinese consumer is doing. tencent depends very much on their games and they went through this difficult period last year where the chinese government was not approving new games. what investors want to know from tencent is whether that games approval process is smoothing out and they are getting new games into the process so they can cash in in the future. all three of these companies will give us insights into how the chinese economy is doing as it is slowing down a little bit, our business is still holding up. tom: there is a lot for investors to look at.
what else do you think investors will be looking for? peter: there are a couple other things. for alibaba and tencent in particular they are trying to move into new areas of business to get beyond -- beyond e-commerce and games. they want to find out how cloud computing is doing, how the online finance is doing, entertainment. they hope these companies will be able to diversify beyond those core businesses. and add to the growth rates by expanding into other areas which have been profitable for other companies. amazon for example has demonstrated cloud computing can be tremendously profitable. alibaba and tencent are beginning to go down that path but they have not shown the financial results you've seen elsewhere. tom: thank you very much, peter. back our --
she holds tencent in her portfolio, which reports earnings later this week. what are your views? you are bullish on technology in asia. you hold tencent. let's focus on tencent first. what do you expect to see in terms of their earnings? have they gotten over this headwind in terms of regulatory environment in china? >> yes. if we were to look at last year -- there has been difficulty with getting games approved. that has been one of the core drivers of earnings for tencent in the short to medium-term. we are going to see games approval has started to resume. we saw last week that one of the shooting games for tencent is a modified version which has come onto the market. what we have seen so far is
still early days but the app ranking is coming out. sites seems tong have hit an inflection point and tencent is not going to be hurt from the gaming side of things as we have seen last year. on the advertising side, which peter talked about, they are moving away from games. we continue to see traction. that depends on the backdrop of the economy, they still expect a level of growth coming. tom: tencent has been a major investor in the tech sector in china and further afield. when do those investments start to pay off and start to touch on the bottom line for them? at theink if you look disclosure that tencent made i thinkr to investors, it shows that as a whole, some are proving to be pretty good.
earlier investments, which is sort of a competitor, is catching the trend of down trading in chinese consumption really nicely and is coming through in some of the results. from that point of view i think we are seeing some of their investment starting to contribute to the numbers. but when you look at the overall of tencent, the key drivers continue to be games, the growth of advertising business, and perhaps longer term as they strengthen their finance business, that should come to a slow. somee: take a look at other top holdings beside tencent. watching samsung, taiwan semi conductor also among your topics. we just saw south korea chip exports limits again, falling from 30%-something in the first 10 days of may. everyone is betting on this rebound when it comes to the chip cycle. are we putting down to into
whether that will really happen in the second half? >> i think it depends on the developments of the trade war that is coming through at the moment. as of last week, what we are understanding is that the second quarter will continue to be tough. tsmc will be ad period of adjustment when things recover. -- backdrop perhaps of that might still mean second-half recovery might be a little bit delayed. wait slower have to recovery. if you extended your time period from the next six months from nine to 12 months, i think the rewards are stacking up quite nicely. we have to be mindful of short-term movements in the market. yvonne: what i still focus on
hardware at the moment, for his software looking safer these days? -- or is software looking safer these days? >> software is slightly safer. people realize the industry is safer. you might not get the same buying opportunity as hardware. it goes back to risk and reward. how much you would want to pay. the global leaders and what they do, they will be structurally strong over the long-term. it would be a good time for you to pick up stocks if you can ride through the volatility. on the software side, fundamentals short-term are looking relatively safer. thank you. asian equities investment director from singapore. aresoutlook for uber sh
yvonne: trade turmoil in the markets did not help uber in his first day as it lifted -- listed stock. 7% below the listed price on friday which means plenty of people will be seeing what is in store for day to on monday. ceo spoke to bloomberg technology at the new york stock exchange as shares began trading. >> you cannot pick the timing in which you go public. today is a tough day for the markets. with all the china uncertainty, no one knows exactly where that is going. you cannot pick when you go iflic but you can control you are building a great service and are you bringing in happy consumers all over the world. we are going to focus on what we
can control. we raised a lot of capital to invest for many years. that is what we are focused on now. >> the president something markets on fire this morning with his tweets. and there is a lot of red on the board. how much does this have to do with that and how much does this have to do with uber, which to be fair is still losing billions of dollars a year? >> it is. but we have a road to improve path -- profitability. it is an amalgamation of a lot of things. there are external and internal issues. i do not spend too much time worrying about what is affecting what. i think the team is focused on building a great service. that, wef you focus on will build value for long-term shareholders. >> you were on the road and the price dropped and dropped to the lower end of the range, lower than what your bankers had
floated at least a couple months ago. what were investors responding to? what were they telling you? >> there were a group of investors that absolutely loved the story, the platform story, our transportation service as a platform market play. i think that how hard it is to execute on that, how expensive it is, how capital-intensive it is, those are all challenges. the good news about the road is we found a set of investors who are long-term oriented who believe in our vision and that we have to execute to make sure the bet they made on us is a great bet. tom: and that was the ceo of uber speaking to emily chang. we will check on the mainland markets, read across the board. you see 1% off the csi 300. he saw friday gains on the back of the national team. the offshore and offshore yuan weaker. question marks over how china will retaliate.
yvonne: almost 10:00 a.m. here in hong kong. china to trump warns act now and strike a deal, saying worse action could be on the way if he is reelected next year. rishaad: automakers could be the next to feel the tariffs sting. saying they also bear responsibility for the u.s. trade deficit. yvonne: after friday's bruising uber debut we hear from the ceo.
it is all really about the trade once again. we saw a little of that rhetoric angle up over again from the weekend from beijing and the u.s. markets still under pressure today. rishaad: and of course blaming each other. when do they start talking again? they were invited to beijing. we will see what happens. let's look at things which will be market sensitive and we look at what is going on. retail sales this week. should be something to watch closely. it is all red. see what is happening equity-wise. hong kong closed after the birthday. singapore down by 1%. coming on about an hour ago. the australian market is down with equities. looking at what happens next. this will be the question. looking on foreign exchanges, just seeing at the moment the
offshore renminbi 687. exactly the same virtually there as well. i just wanted to bring up this chart just to show. we have retail sales coming up this week. china is a different beast than what it was 10 years ago. this is really what it is all about. the rate of growth you can see is going down. but actually retail sales have more than tripled in actual terms during the last 10 years. this is now looking more inwardly than a decade ago. as a result there is perhaps less pressure on them to broker an international deal. they do not have the trading benefits as much as they did before. it is about the goal of making this domestic economy. currently the session, the past 10 years we have a look at what is a down day equity-wise. that is the situation right now. yvonne: the big question is who
broke the deal. on twitter we heard from president trump again lehman china, sayinging the u.s. is right where it wants to be. reinforcing his message that beijing should act to secure a deal before next year's presidential election. advisors on each side say higher tariffs will hurt both economies. >> we want to be as sure as we can be. we do not think the chinese have come far enough. we will wait and see. talks will continue and i will say this, there is a g20 meeting in japan towards the end of june next month. the chances president trump and president xi will get together at that meeting are pretty good. >> i do not think the negotiation had broken down. on the contrary. i think it is a small setback and it talks between the countries is inevitable. we are still cautiously optimistic for the future. rishaad: let's get straight to
derek in singapore. what is everybody making of this? thequestion is what are next steps because that is what investors are looking. derek: i think that there is this little bit of a slight pause that you have because there is about a month timeline between when these tariffs really take effect for most of the goods because it was levied on things based on their shipping dates. if you needed to fly something to the u.s. there are tariffs on that already. if you have a vote in the water the tariffs do not hit until that boat lands. there is a little bit of wiggle room but at the same time the u.s. has directed for another round of possible tariffs hitting the rest of everything that beijing exports to the united states. it could get much worse. that is a really
horrible-sounding news to deliver at the start of a market week, it could get much worse, but it really could. there has not been a total breakdown. they do say they will continue talking. i am really watching the chinese reaction, because we are now a couple hours into trading across most markets in asia. do you know what the chinese responses? because i did not and neither does anyone. there has been a lot of moderation from the chinese side. i think that is a critical thing to watch right now. yvonne: yeah. they say they have been forced to retaliate we do not know yet what they might do. the president was tweeting about if china delays this any 2020er, this risks the election and his prospects. is the president still viewing this deal through the prism of what is to come next year with the election? derek: yes. i think that is certainly a factor weighing on the president's mind, probably heavily.
i have been on that train a long time. i think a lot of market watchers have connected that to the idea that the president really wants a good run and equity markets. this is the 401(k) president. see how your stock portfolio is doing and then get back to me on how the economy is doing. that has been the guest for a while. trade is good for the economy, et cetera. the president now is taking a different tactic. it is important to look at that and race signals here. i willis saying, look, be tougher on china than my democratic opponent. has the president made a new calculation about what is good for him electorally? i think people should watch the tenor of his tweets going forward and see where his calculation is related to the 2020 election because this is a guy who is very focused on november 2020 coming up, who his democratic opponent might be and what he needs to do to get back into the oval office. rishaad: as ever, thank you
derek. thinking that a trade deal might be eventually reached between the countries, the risk of a complete breakdown has certainly increased. chief aipac economist in singapore. thank you for joining us. we are in quite a mess at the moment it would seem. it would seem both sides are not talking at the moment. that does not necessarily mean they will not in the near future. the thing is if they do not, what happens next? steve: it is quite a mess. it seems to be raising just a level of uncertainty across the globe in terms of what will happen with trade policy. the optimist in me tells me that, yeah, maybe this 30 to 40 day period in which it takes to getting good chip from china to the u.s. creates that next opportunity to reach a deal. but again, the signals are not
clear whether that will happen. if it did we would be in good shape. it would not hurt the economy much to have another month of this uncertainty. if you were to extend through the end of the year, if the idea were to get an agreement closer to the election, then i think actually there would be some hit to the global economy. particularly because there would be a lot of postponement of business investment spending until there is a little uncertainty in terms of where supply chains may end up forming. yvonne: right. you have been kind of looking at these models and the impact in the worst case scenario. i am just wondering, what would the world economy look like? paint the picture for us. will china likely have to pump up even further, pump up more credit? where do you see this going? what would the world look like, essentially? steve: in a worst-case scenario it really is a game changer. if we can define a worst-case
scenario and that the u.s. puts tariffs on all trade between china and the u.s., china retaliates in terms of tariffs on all trade coming in from the u.s., plus other administrative actions. then i think increasingly it seems like a part of this worst-case scenario would be tariffs on auto imports coming in from all over the world into the u.s. think, then there is a good chance we would have a recession in the u.s., given the slowdown in investment spending, rising costs, business uncertainty. if we had a recession in the u.s., given the weakness in the european economy, europe would suffer as well. all of that would reverberate through the global economy and it would be a tough, tough year. rishaad: what are we talking about in terms of how much gdp goes down? have you done some modeling on that here, steve? steve: we have.
we werehe -- if, say, to reach an agreement by the end of the year. six months of uncertainty, six months of the 25% tariffs on 200 billion dollars worth of goods and such. we would probably see half a percentage point mood from gdp growth both in the u.s. and in china. that would take the u.s. down growth,% growth to 2%, which at least is enough to keep the unemployment rate stable in the u.s. china if it's growth rate fell by .5%, growth would fall below 6%. likely than chinese policymakers would add more stimulus to try and get that number back up to at least that 6%, which is the bottom range of the current target. indeed we reach this worst-case scenario with tariffs on all trade with tariffs on the auto industry, then we would see
something much worse. we would see something close to zero growth in the u.s. and something much slower that would at least feel like a recession in china. yvonne: does the worst-case scenario put the fed back in play? with a have to be more in line to cut rates, which is what a lot of market participants are factoring in now? steve: again, i think it depends on the scenario that plays out. for the near term i think the fled holds -- the fed holds steady. unemployment rate is still very low, looks like it will stay studied depending on where we are. but if we do get to that worst-case scenario, then the fed probably takes more of a risk management approach and may point cuto a 25 basis down the road. i do not think this is in the near term, but if we reach that worst-case scenario, then we
will have the fed working on the short end of the yield curve. then we may actually have the long end of the yield curve coming out as well. probably be some kind of flight to safe haven currencies or demand for dollars. that would probably bring down the long end of the yield curve a bit as well. rishaad: could china cushion the blow somewhat for both sides in some ways by depreciating currency? many people are now look at seven being the handle for the renminbi. very quickly. steve: it is a possibility. china has to be very careful. if they allow the r&b to depreciate too much there is a good chance of capital outflows out of china, they do not want to see that happen. the dollar has strengthened slightly over the last week and that trend may continue. i think china would pretty cautious in terms of allowing the r&b to fall on a much faster pace. yvonne: and we are watching the offshore renminbi as well.
moment, the highest we have seen since december last year. steve, thank you. joining us from singapore. let's get the first word news now with su keenan in new york. su: we start with the latest on brexit. u.k. prime minister theresa may resumes brexit talks this week amid increasing pressures to abandon the strategy and resign. senior members from both sides expressed concern that further talks might go nowhere. may is also really from opinion polls that show brexit party leader nigel for roche likely to win the most seats at next week's eu elections. presidentca's meanwhile is vowing to clean up his party of what he calls deviant behavior after his ruling anc party clung to power in elections.
despite a convincing win it was the worst-ever showing in an election for the party, with its majority falling below 60% for the first time. the anc has ruled south africa since the end of apartheid some 25 years ago. to india now, the mammoth election there reached its penultimate round with 482 of t he 543 parliamentary seats now officially decided. the congress leader is contesting two seats in new delhi and in the south in an attempt to project an all-india image. he will have to drop one of the seats if he wins both. the final constituencies vote one week from now with the final result announced may 23. prime minister scott has launched his liberal national coalitions election campaign in australia, appealing to the country's so-called have ago nature of the voters. he says his aim is to offer a
chance for those who want to realize their dreams. opinion polls suggest the opposition labor party is setting for victory, with the leader now pledging to address climate change and australia's greenhouse gas emissions. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. keenan. this is blumberg. ahead, telling us to why they are ignoring the trade talks between china and the u.s. rishaad: and what is at stake for the motor industry as u.s. carmakers are braced for backlash from beijing. ♪
straight monthly decline which piles on more pressure for automakers already struggling with the trade war, a slowing economy, and changing consumer trends. rishaad: wilbur ross says autos share equal blame. joining us is michael dunn, ceo of those all go and former president of general motors indonesia. it is not looking good for the motor industry at the moment. definitely tariffs are front and center. >> largest market in the world, china, for many years running. what is different for the first time we see decline. that is really hitting the bottom line of every automaker. in particular we are seeing the detroit three come under pressure. yvonne: what does the ceo of a foreign carmaker do now? michael: to set the table a little bit, the detroit three sold about 5 million cars last
year in china. , almost one of two of every sale was in china. 95% of those cars are already built in china. we are not talking about a tariff threat as much of a threat of the chinese government saying, chinese consumer, you could buy chinese brands instead of american brands, that would be a good idea. this could have a direct impact on detroit three sales and we have seen precedent for this in the past. when the chinese had geopolitical differences with koreans and japanese, they are sales died in those cases. is not ashe choice binary is all that. we have a situation where five, six years ago, u.s. and foreign carmakers ruled the roost. the quality of chinese cars was frankly, not up to it. but they have really up to their game, haven't they? michael: they really have.
the leading chinese private carmaker last year sold twice as many cars as ford and fiat chrysler combined. they have come up a lot not just in terms of volume, but quality. it is really drawing the attention of chinese consumers. yvonne: we have heard beijing say they are forced to retaliate now. should we expect china to hike import tariffs on u.s.-built cars? michael: probably not because imports account for less than 5% of what the detroit three or four automakers selling china. everybody selling and china's building in china already. what we might see instead is for them to say, hey, why not support chinese brands instead of foreign brands. it is the trend. look for that kind of suggestion via state media rather than tariffs, which would not have much impact at all, including
the likes of tesla which plans to build in china too. we are talking about an inside china sort of affect. rishaad: reading your research you are suggesting that tariffs are almost a red herring here and a real objective is technology. technology and the motor industry has also morphed into one. michael: they really have. auto and chinas has ambitions to lead an autonomous vehicles. already number one in ridesharing globally by far. the challenge for foreign automakers is that is no longer good enough to manufacture and sell cars and trucks. they have to be leaders in technology. this is where china is currently enjoying a real acceleration in their own capabilities which poses a threat for foreign automakers who to continue to service chinese consumers. yvonne: and michael, the 18sident, he has until may
essentially to decide on whether there is national security risks when it comes to the auto industry. are we missing the big picture here? we are fixated on the u.s.-china trade tensions, what is the u.s. likely to ramp up tensions with europe now? michael: almost by accident that is a consequence of the current direction. the germans do export a huge number, tens of thousands of cars to the u.s. every month. as to the japanese. so, as the u.s. says we need to protect our own industries as well and chinese will throw up a protectionist wall, not only chinese automakers but also japanese and german automakers will come under pressure as they will not have free access to the u.s. market as they have had for the last 50 years. yvonne: michael, thank you. joining us from l.a. we will have more auto news later this hour. uber had a debut to forget. we will hear from the ceo. this is bloomberg.
rishaad: you are back with bloomberg markets as we check in with the latest headlines. china mobile calling on the american government to stop what it calls the unreasonable pressure on chinese companies, pushing back at the trump administration's decision to restrict access to wireless. ofsays the sec's rejection contradictsof -- it the ongoing trend of globalization. the wall street journal says chinese costly shipping would consider buying. part ofently required the container manufacturing business. the operators are not informal m&a talks. they denied any interests in
selling its shipping business. one of the world's biggest pharmaceutical companies says china has passed the u.s. and europe in the race to attract top scientists. the chief executive says they have been offered for top talent is virtually the same in china as in the west. competition for skilled workers is rising. china is becoming a leading innovation center, a place to lure next-generation scientific leaders. let's quickly check in with what is going on market wise. no trading in hong kong. this is a public holiday. pretty much heading in one direction only. yen at the moment also strengthening a tad. topics and nikkei under pressure. we are heading into the much break with the nikkei off by over .5%. let's look at what is driving
this market. 85 stocks are up. 137 down. of those going up, dna, 17.5% u p, the biggest winner on the nikkei. i was reliably informed it is also the biggest winner out of the asian markets as well. that is currently the position. dna coming out saying is fourth quarter profit was ¥4.9 billion. it is also buying back 26% of its shares for ¥50 billion. it will also launch a mov -- a new pokemon smartphone game. what else is going on, the forecast looking ahead was not not as bad as people feared. forecasts of operating profit at ¥330 billion instead of y363 billion. yvonne: also following moves in the renminbi, continuing to see this bleeding and people selling the currency. offshore renminbi at 688.
♪ >> it is 10:29 a.m. in hong kong, 10:29 p.m. in new york. i'm sydney with the first word headlines. president trump's warning china to be wise and act now on a trade deal saying that "far worse could be in the cards" after his potential second term in office in 2020. feels it has been badly -- he feels that beijing has been badly beaten and is waiting for the next u.s. election that beijing has been badly beaten and is waiting for the next u.s. election. the white house, meanwhile, is considering judy shelton for one of the two
vacancies on the fed board of governors that president trump has been struggling to fill. as an informal adviser to trump and holds a phd in business administration. trump has named four people so far for the open seats on the board, but none of them has made it through the selection process. the government in tehran has rebuffed suggestions that administers call him to defuse tensions. several senior iranian lawmakers have been reported the u.s. battle group to the middle east is nothing more than a stunt, and that war is not on the horizon. antagonism worsened this month dfter trump eliminate exceptions to u.s. sanctions for using iranian oil. and a north korean cargo ship seized by the u.s. has finally arrived in american samoa. the ship, which is called wise amish, arrive after a three-week
voyage to indonesia, where it had been detained since april of last year. washington claims it was used to deliver north korean coal to china and other buyers. news of the seizure came amid reports that the north has resumed tests of short-range missiles. 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. ♪ market equities are seeing their worst road since october 2018, while currencies extend a four-week losing streak. of course that is between beijing and d.c.. >> you can see the russian to these safety havens as investors sought haven assets, with divisions too wide to be bridged in a month. let's discuss all that with mary nicola, who joins us from singapore.
thank you for joining us. just have a chart for our viewers to see, the question we've been asking everyone. ethics volatility looking more sanguine than what we are seeing inequities. why do you think we are seeing this divergence at the moment? it is hardright now to read through the headlines. if you look just a few weeks or months ago when we started the year, if the focus wasn't on the fact that the trade talks would completely dissolve -- that was our view as well, that the headlines were supportive for continued risk on environment. especially after the fed, when they came out, supportive of the fact that they weren't going to hike and we saw volatility become a lot more subdued. the headlines are not as supportive as we had previously and it's hard to review the headlines for what investors are forced to trade.
thing, and that is i guess what they had no choice in doing. as long as there's uncertainty remaining, it is probably going to engender more of the same. it does seem as though not having anything on the table is something to worry about more than having something. now, in ouright view, they have come a long way on these trade talks and it is hard to see them completely dissolve at this point in time. to findtill trying headlines focusing on what is important, on the fundamentals that are behind all the markets. but at the same time, we have to hedge it. we still find value in u.s. equities, we will still have to hedge it, because obviously we
will get a about of volatility, long u.s. dollar or long yen, which is a good cushion for that. >> right. i was going to ask you too about which are the best safety havens. we have seen more buying into the yen, the swiss franc, the dollar. how much conviction is behind these trades now? us, we have always had a high conviction in u.s. dollar. if you look on the basis of the fact that yield differentials against g10 are favorable for the u.s. dollar. been biasedys toward long u.s. dollar, especially against the euro and across the g10 space. for yen, it is going to be key. we like euro-yen. we think short euro-yen is good and a risk off environment.
i think now it is just a little bit harder to be long emerging markets foreign-exchange, because they are going to be dealing with a lot of the volatility. we see that across asia, for example. things like the indonesian rupiah, which we do like, are obviously going to experience a certain selloff just because of the fact of what's happening across asia and china. >> does it worry you that the world has leveraged it to as much as it is, particularly in dollar terms? that as we see dollar strengthening, that could bode very badly for these countries? think the key thing here is the fact that we have -- the fed has been supportive and the fed has been biased toward being dovish, and i think that's key. if you have an emergence of a plus a risinged
dollar environment, then that would add fuel to the fire because our view is the fed is on hold, and the environment should be relatively benign. you wouldn't get a risk off environment as we did last year. were talking about how the u.s. government has a couple more days before they decide whether to impose these auto tariffs. the ecb has talked about the impact to the economy. it could be mild, not as concerning, but could we see further downside when it comes to euro-dollar? >> i think the key is the message it is sending. the fact that the u.s. is going after its allies in terms of tariffs, i think that is key. that would not only be negative for the risk environment but also for the euro and obviously
the u.s. dollar would get on the back of that. it is more about the message it is sending rather than the implications on the economy. -- when it more comes to high-yield you are still seeing more appetite when it comes to asian and u.s. high-yield. we have seen in some of the options markets that you want exposure to the downside -- it is cheaper in junk bonds then u.s. equities. do you think high-yield could be at risk? >> i think of the back of these headlines most asset classes will suffer to some degree, but i think the fundamental story is behind asian or u.s. high-yield's is still there. the fact that we do have a supportive fed, the fact that we have a fed that is on hold for the foreseeable future, i think that is key and crucial for these markets. a lot of these markets will likely suffer on the back of these headlines,
where there is increased uncertainty, which we didn't have three or four months ago. >> mary, are you worried? hard -- again,'s it's hard to trade on the back of headlines. there could be a very strong possibility that things get worse before they get better. but the fact is nobody really knows. >> that's the deal, isn't it? thank you, mary. that's mary nicola, e spring investments. it is a day of declines. we are looking at what's going on with trade, more on washington. this is bloomberg. ♪
it has been a bumper weekend for bitcoin, surging by more than $1000 to its highest level since august. all major cryptocurrencies have been extending this rebound from a slump last month. virtual currencies were suffering amid a new york attorney general investigation into allegations of an $850 million cover-up involving the cryptocurrency tether, and a virtual exchange. >> reports from the u.k. says that sports carmaker is looking to hire 200 engineers to facilitate its turnaround plan, bankrolled by china. they aimed to triple production to 5000 cars per year and opened a new engineering and design center. they took a controlling stake in lotus two years ago in a 100 million pound deal. >> softbank injecting $800 million into a london-based fintech company. supplyfer alternative chains to companies and annual
growth more than doubled since 2015. the softbank vision fund investment value was $3.5 billion, which will accelerate their plans into china in india. >> china's e-commerce giant alibaba, all reporting earnings this week while the rival jd.com records a record profit in sales beat. the options market has been pretty interesting, increasing earnings volatility when it comes to tencent, both pointing to greater than average moves. they imply a one-day move below the 5.7% average. take a look at this terminal chart. about what telling investors are expecting when it comes to revenue growth. they still think alibaba can do well despite the weakness in retail sales. online sales have petered out, but tencent was down to the regulatory risks we saw earlier. >> that's the other thing about alibaba.
you look at the retail sales, at the beginning of the show, in absolute terms we have seen retail sales more than tripling in china. it is how much you can direct to the online platform, backing cliques with bricks as well. company,k about one trade tour moyle not helping uber, shares more than 7% below the share price friday, which means plenty of people will be watching when the markets resume. >> the uber ceo spoke to "uber technology" at the stock exchange. >> you can't pick the timing in which you go public, in today's a tough day for the market, and with all the china uncertainty no one knows exactly where it's going. you can't pick when you go public, you can control how you execute as a company.
are you bringing in happy consumers all over the world? we are going to focus on what we can control. toraised a lot of capital invest into growth for many years. that is what we will focus on now. >> the president is swaying the market with tweets, trade talk on iraq, and there's a lot of red on the board. how much do you think this has to do with that, and with uber, which to be fair is still losing billions per year? >> it is, but we do have a road to improved profitability. markets arenow, the an amalgamation of lots of things. there are external and internal issues. i don't spend too much time about that -- the key is and ifg a great service, you are focused on that we will build value. >> you were on the road and the
price dropped to the lower end of the range, lower than what your bankers had floated a couple months ago. what were investors responding to? what were they telling you? >> there was a group of investors that absolutely loved the platform story, transportation as a service platform. but i think how hard it is to execute on that, how expensive it is, how capital-intensive it is, those are all challenges. the good news is we have found a set of investors who are long-term oriented, who believe in our vision, and now we have to execute to make sure the bet they made on his good. >> you have compared the company to amazon. you have some investors who think it might be more like ebay. there are questions about how big the ride-hailing market can be. how do you deliver? >> we have to execute. and when you think about what amazon did, they went beyond
bookseller to other categories, and we are doing the same thing. rides are to us what books were to amazon, and we are expanding. and as we expand each category we expand our audience all around the world. long-termho bet on us are going to be happy. ceo at the new york stock exchange with emily chang. >> and we are coming down to the opening of the session in india, less than an hour away. we are standing by in mumbai. we are seeing continued weakness when it comes to risk assets. what is in store for indian equities today? >> most likely it will be another down day. seen almost $35 million of foreign money moving out of the indian equity markets.
last week, the index alone lost 3.8%. the dollar market space have a lot of selling pressure. we are approaching the result of the elections, and you can see a bottom formation as we have some amount of bounds. friday's session -- they took a big hit in trade and there was some amount of pressure building onto the currency. aside from that, you are going to be watching what has been happening in the consumption space, because across the board there has been some volume weakness, and that is what is causing some of these steeply valued stocks to start coming off. >> hdf see, itc, both out with earnings. how do they figure in the holy equation? what is the earnings season like and what are they expected to say?
>> the earnings season so far has been a tad bit disappointing. not many have managed to make up expectations. but there are two big numbers coming out today, both index heavyweights -- a private lender -- they are adopting a new reporting standard but nonetheless net interest is down about 5.7%, while profit is expected to fall about 5%. this weekend was particularly bad, because the chairman passed away. he was 72 and was the head for the last two decades. it is the crux of their business, expected to be about seven per and 5% -- 7.5%. >> thank you. joining us with the latest out of mumbai.
this could get interesting. >> you can access these charts on the bloomberg terminal with that function at the bottom of your screen. i think, joanna, we will let you have the honor first. >> all right, sounds good. i am looking at volatility today swings in the vix index, the fear gauge. this was the highest last week since october, it was actually ye less than the december meltdown. was it really all that crazy? well, actually, it might not be. credit suisse is looking at the volume of s&p versus -- it looks options have more volume relative to this. what that might mean is that
investors do actually have some dry powder, that they can put it to work in the vix in a way they couldn't do in december. theyso likely means that are still looking for upside, because a lot of people are still under invested in that market. they missed that early rally and don't want to give up their stock positions. it's a predictive in terms of volume, but how much is it predictive in terms of direction? >> well, if you have the upside there is a pretty decent potential that things can at least hold better than they might have in december when people really had to get out of position, and you could have some upside potential from their. >> all right, chris. how do you up that? bring your a game. [laughter] i'm actually relying on
yet another cross asset contribution. cormac pulled together this chart, which illustrates something that morgan stanley have put in their midyear markets outlook. that is one of the major valuation gaps that are concerning them at this point. if you look this year, the top line valuations have come up significantly, obviously came down a little bit last week because of the trade war. but you look at earnings expectations and they really haven't been going in the same direction. if anything, earnings expectations may be a little too optimistic at this point, after the u.s. slapped those sanctions on chinese imports. earningsd to see
meeting the big run-up in valuations that we have seen. this is morgan stanley's concern. in particular they are saying you should be very wary of u.s. stocks where valuations are out of whack with where earnings are likely to come in, particularly given the tariff increases. >> so the predictive quality of emptor, you are likely to see the path of least resistance to the downside. >> exactly. >> all right. i think i'm going to go with chris. >> sorry, joanna. >> i'm happy to lose to my boss. [laughter] >> it wasn't even chris, it was cormac. he needs to come down. you can check out all those charts on the bloomberg.
you can also catch up on the key analysis and save those charts for future reference. board.s read across the and in all this we have equity futures in the u.s. adding pressure. if that transpires into weakness it would be the worst we've seen , the worst weekly drop of 2019. >> it could be a pretty bad session. but what we are seeing is perhaps continued uncertainty when it comes to the trade front. the rhetoric that keeps getting amplified over the weekend, whether it's from the u.s. are china, they are both muscling. despite the fact that they are continuing to discuss where things go next. still, we are expecting the tariffs to be hiked. we will see how beijing retaliates.
take a look at the renminbi, continuing to get hammered. we are inching closer to the 6.88 handle. 7 is say 6.90 is doable, also perhaps feasible. we are watching the trade with the korean won getting hit. the export numbers we got for the first 10 days are pretty ugly. >> and what happened this weekend? cryptocurrency having a fantastic week. -- our crypto currencies seen as a haven, a place to hide from this trade deadlock? that is what we saw. this is bloomberg. ♪
♪ >> tough way through the trading day here in the lion city, 8:30 a.m. in mumbai. i'm haslinda amin. >> i'm rishaad salamat. the last hour and a half of the session in mainland china. hong kong is closed for public holiday. we have a look at the top stories. on thenctions could be way if donald trump is reelected next year. grounding isx 8 now into the third month, with the new series that beijing may play a crucial role in the planes future. in the end is in sight for
india's election, discussing the political and economic landscape life in mumbai. this is "bloomberg markets." ♪ >> it is a sea of red in asia as toestors go from the up beat mulling over what china may do in retaliation. some say china could impose tariffs on auto imports from the u.s. it could also devalue the yuan. some say it could take a level or even lower than that to counter the impact of the traditional tariffs on chinese goods. chinas point in time the
csi is down a further 1%. singapore, taiwan, south korea down 1%. we have the south korean won down .7%. these are the carry trade's you may want to check out, australia down .3%. let's take a look at where we are when it comes to chinese assets. we are seeing selling of chinese red,s and the yuan in the implying how traders are seeing the chinese assets right now. this comes on the back of a record amount of outflows we saw in april, at a time with the msci is considering increasing china's weightage. not a great time for the msci to be increasing, when china is doing so poorly. >> indeed, including all these
extra companies that seem to have little appetite for chinese equity. .3% down, indian rupee isn't going to round down. oute got inflation data later on today and that could free up the reserve bank of india to have another 25 basis andts of the interest rate, that's the optimism which is feeding through for some. that is why we are seeing weakness for the rupee. that's the situation currently but let's get now over to sydney, who has the first word news. ♪ >> thanks. u.k. prime minister theresa may resumes brexit talks with the labour party this week amid increasing in party pressure to abandon the strategy and resign.
senior members from both sides expressed concern that further talks might amount to nothing. may is also really from opinion polls that put the brexit party leader on course to win the most seats of next week's eu elections. we voted to leave. we didn't vote for a deal. we voted to leave once and the year after that, both parties promised us in their manifestoes they would honor the results of the referendum, and here we are, three years on, brexit not delivered and given this parliament there is no prospect of these parties delivering a clean break brexit. morrisonminister scott has launched his liberal national coalition campaign in australia, appealing to the have ago nature of australian voters. he aims to offer a chance to voters who want to realize their dreams. opinion polls suggest the opposition leader party is heading to victory for
addressing climate change and australia's greenhouse gas emissions. the white house is considering conservative economist judy shelton for one of the two vacancies on the fed 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 have made it through the selection process. 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 paul allen. this is bloomberg. ♪ deal? did break the chinese state media is saying the u.s. did it, president trump saying it was beijing. he was saying the u.s. is right where it wants to be with respect to the trade talks and could take massive tariffs from china. investors on both sides think
they will hurt both countries and that talks will continue. >> we want to be as sure as we can be. we don't think the chinese have come far enough. we will wait and see if the talks will continue, and with his g20 meeting in japan toward the end of june, the chances of president trump and xi getting together are pretty good. >> i don't think the negotiations had broken down. contrary, i think it is just a small setback in the talks between the two countries, which is inevitable. we are still cautiously optimistic for the future. >> meantime, the u.s. is awaiting retaliation from china of tariffs. the first recourse could be to raise tariffs on u.s. imports. nontariff measures could be of different times, varying from export controls to more punitive measures. finally, chinese policymakers could devalue the yuan. let's bring in our chief macro
strategist for asia from deutsche bank. that's the question, whether china will devalue the yuan. condemned if you do, damped if you don't. >> there is no doubt that there has been a change in the direction of travel. -- theans it gets to be countermeasures become very significant. the lowest hanging fruit will be increasing on the list of goods. then it quickly moves into running out of runway. it goes into nontariff issues and then the key question for markets is do they encourage a depreciation, do they accommodate? we have seen in the past that they have been resistant. just the tariffs in themselves ultimatelyurate, but -- >> but china has to draw the line somewhere, or they will
keep pushing china, wanting more from china. at what yuan level would be enough to compensate for the damage they've done? >> taking this simple math to the amount of currency to offset the impact of tariffs, yes. -- they are are likely weaker. the question of course is does the cost benefit for the chinese policymaking offset the currency weakening? you also need to consider the fact that typically expectations around currency end up being figures.round seven china is encouraging a lot of foreign capital. how does investor sentiment change? there are issues on both sides. the world was looking as though we were just about
getting out of shaky ground -- is this enough to push the global economy back down off a cliff, though that might be too vehement? cliff, youll probably are closer to the cliff. itself, these recent tariffs -- the economic impact is still relatively limited. theres more important is is a possible shift in direction of travel, but to the extent that it opens up, they might start as soon as today in terms of thinking about the final untaxed bucket of chinese goods. that has a disproportionately bigger impact on global growth,
and that is a probability which markets will start to price in. more than anything else it heralds an uncertain time ahead. >> we keep on banging on about it, but we have already seen signs of investment paralysis. are we likely to see the paralysis get worse? >> yes, absolutely. for a lot of people who are making decisions month to month, it becomes very hard to do that what it is still unclear status issues will ultimately end up being there. >> they care what the market thinks. keeping that in mind, how would you play ease? markets need to get bad enough for there to be a change. i think it becomes harder in emerging markets, you have to be
paying a negative carry. on isou need to focus places which are high-growth, or ones which are heavily positioned, like korea or indonesia, where a bigger part of the stress will be. >> you sticking around. still ahead, china complicates the 737 max 8 return to the skies. we have more on that later. >> next, midterm elections underway in the philippines. why dutere may end up more powerful despite not running in the vote. this is bloomberg. ♪
win a majority in both houses of congress. we are joined now on the line from manila. what's the deal? what's the latest? it could be a big philip for the incumbent. >> yes, that's true. about 61 million filipinos are registered to vote and exit surveys are already seeing his allies reaping the polls. the polls open at 6:00 a.m. until 6:00 in the evening. already we are seeing reports of trouble across the country. been reports of glitches in computer systems. the former vice president couldn't even get his vote counted because the machine had a paper jam. tonight --results results for the house of representatives should be in.
what is at stake for president duterte? >> for the president, elections will really be about getting the numbers in congress to pass key legislation for the last half of his term. among the biggest ones are a proposed shift to federalism, taxes, andncome reintroducing the death penalty and lowering the minimum age of criminal responsibility. a split senate previously stood in the way of those laws. this election is also set to be referendum on his leadership, which he looks set to pass in flying colors, despite a deadly drug war. polls show him sweeping all 12 slots. by the look of it, only one opposition member will get in, and that is the first time this will happen since the 1960's. i hope someone fixes the paper jam for the vp.
thank you so much for the insight. let's bring back our deutsche bank chief macro strategist for asia. this election -- on the one side, his popularity was above 80, i don't think any world leader has that high a popularity count. but it also comes at a time when growth is the slowest in four years. how concerned should we be? it is slower, but it is relative to all the other countries. >> it is slower, and there is a little bit of negative outward capital but it is relatively good compared to elsewhere. i think one of the best questions will be better to give enough of a mandate for corporate tax reforms -- is it fiscally neutral or not? line, it goes down that
think the central banks made it fairly clear that they are willing to hold the monetary policy it requires. >> the issue with the philippines is investment growth. we saw that 10.3% a year ago, now it is just above 6%. can that be boosted? >> there is a curtailment on some of the fiscal push is to investment, given that the budget was delayed and we have these elections coming up. but we will see that infrastructure push come back in. in market perspective, the investment push could have a negative trade balance. we think a lot of the easing up ahead -- they could compress that, inflation is well in check, a very comfortable range.
offshore reduction in balance is being well-funded. investment is, as he said, key to this whole picture. how has the philippines done under dutere, nearly three years since june, for how long he has been in power? how has the country been faring? >> the philippines has been one of the few countries which has versused relatively well the financial crises. i think it has shown a push toward greater investment and infrastructure, much-needed in a lot of places. there has been all these places -- i think overall the philippines has done constructive levels, which i
think was without some of the key policy measures. now that that is normalizing. i think overall there is updated policy capacity and it looks like they can support growth. >> the policies you have in place -- you certainly have a man to carry them through, but are they the right ones? >> as he moves on to corporate tax reform, i think the tax issues do need to be changed, and i think he's the right person. >> good stuff. breaking, we've been the tbs news agency making a formal merger proposal to nissan. this is something which had been reported by various media outlets, this one coming out of tbs. motors has said members of the alliance are claiming they were not involved
♪ markets." "bloomberg i'm rishaad salamat in hong kong. >> i'm haslinda amin in singapore. a quick check of the latest business flash headlines. japanese broadcaster tbs says its offer topward nissan for a merger proposal. mergerve so far reposted but pressure is mounting on the , who also serves as the
nissan director. nissan is set to announce its lowest operating profit in a decade, raising the possibility of a dividend cut. journal"all street says costco is considering buying singapore's international lines. costco recently acquired the container manufacturing business, going on to say they are not informal m&a talks. they have denied any interest in selling the shipping business. injecting $700 million into a london-based fintech company. offer alternative supply chain funding to companies, and brokers have more than doubled since 2017. hassoftbank vision fund $3.5 billion, and we are told the money will accelerate their plans into china and india.
pakistan has secured yet another imf loan to help revert an economic crisis as the fundry's 13th bailout comes in worth $15 billion. the prime minister opposed to the loan after taking off last year, and initially sought help from the uae and china. let's get to our managing editor with more. is this really enough to revive it? it did get money from some of those other countries as well. >> that's right. it did get money. if you look at pakistan's foreign exchange reserves, it's about $9 billion. so clearly it may not be enough and it has been getting loans from china. investors, the key question
is how does pakistan reform the economy to assuage all the concerns that investors have all over the world? to give you an example, last time it got alone, it did well in changing things around, in changing the tax laws, and that helped revive the economy. but then with rising oil prices and corruption allegations for the premier, how did everything go south? on thely depends pakistan leadership, implying to turn around the economy. what helped pakistan in the imf finally reach this agreement? we have been discussing this since august last year. th financeke to then
minister they said they would get it started, that obviously we are in may and they have just concluded the deal. what happened was that the prime -- every big financial minister, even the central bank, and that kind of held the process of getting this loan. nothing was moving for the past few months, and then this happened, and finally we got this loan down. finding the key thing, and getting a new set up to negotiate with the imf. i think one of the stumbling blocks for getting this imf loan is one which doubled the size. the thing was they wanted to have more transparency in terms
of the terms and conditions of what they've been receiving for china as they build out that pakistan economic corridor. that was a concern that the u.s. had raised as well. the u.s. didn't want to be seen funding the imf which would then go to repay the chinese loans that have been given. it will be translated to where the money is coming from, one of the reasons it delayed the whole process. if pakistan really wanted to get that as soon as possible, given the shape it is in -- the rupee has depreciated noticeably over the past few months, and as soon as the markets open, we will see what kind of reaction investors have to this loan. >> thank you very much. us to go through
♪ >> we are looking at live pictures out of the lion city. almost 11:30 a.m. in singapore in the middle of the trading day. the sei is down by more than 1%, one of the biggest laggards is a beverage company that has jumped almost 7%. when you look at how it has done over the past few weeks, it is down by 9%, not too bad when you compare it to the msci asia-pacific and the, down about 11%. for now let's get the first word headlines with paul allen in sydney. >> thanks. president trump's warning china to be wise and act now on a trade deal, saying that "far
worse" could be in the cards after his potential second term in office. he tweeted that beijing feels it has been badly beaten in the current round of trade talks and that the government may feel it is worth waiting for the next election. repeated his claim that they broke the deal. present, the two countries have reached consensus in many aspects, but frankly speaking, differences still exist. i think all the matters are crucial ones regarding our principles, so every country has its principles and we will make no concessions on matters of principle. >> both sides will suffer on this. the chinese will suffer gdp loss and so forth with respect to a diminishing export market. lipton says british workers are starting to see benefits from the u.k. being less attracted to eu workers. analysis across the bloc shows
since the start of 2016 migration of eu professionals to the u.k. has fallen by 30%. another survey of 600 u.k. recruiters found more than half companies are now prioritizing british applicants and offering increased salaries to retain existing staff. south africa's president is vowing to clean up what he calls deviant tendencies after his ruling party got power in the election. win,te a fairly convincing it was the worst ever election showing for the party, with the majority falling below 60% for the first time. the anc has ruled the end of the apartheid system 25 years ago. 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 paul allen. this is bloomberg. markets, japanhe is coming back up to speed. nikkeitill down .4%, the
looking to sway the markets lower, singapore suffering the most. let's have a look at the news coming out of nissan. renewal making a former offered to merge with its long time partner, according to the japanese broadcaster tbs, apparently proposing that the companies merge under a holding company structure. where thet elaborate proposal was made. shares down 1.2. let's move things along and have a look at the session in mumbai. indian markets suggesting we will have a little bit of a fallback at the start of the trading day. we do also have a rupee which has been weakening, and we look forward to inflation data out of china.
environmentlation is perhaps something which people are taking heart from as they perceive the reserve bank of india coming out and cutting interest rates. .3%, whichup by turned out on this tbs report. that's the position at the moment. talking of india. >> that's right. in sight for india's marathon national election, which reached its penultimate phase on sunday. one more vote is set for six days from now. let's take stock with our new delhi bureau chief. how has the voting been so far? what are the issues dominating the polls nationwide? it has been a long, drawnout relation.
the voting percentage has hovered between 55% and 60%. in some pockets we have seen heavy voting, in the 80's. but on average, it has been middling turnout. 900 million eligible voters in the country, almost 150 million new voters have come in. issues include nationalism, the recent episode of airstrikes in pakistan after the deadly terror attack. --has largely been dominated nationalism, pakistan relations. that has been the narrative so far. how big is the economy and
all this? the factory output numbers where the lowest level since june, 2017 if i'm not mistaken. that's the tricky part of this election. in terms of the economic numbers, india hasn't had a smooth ride into the election, but largely those issues have been overtaken by what happened in the terror attack and the subsequent airstrikes. those are the issues that have dominated the election. prime minister narendra modi has even though issues, they have appeared in his speeches, it hasn't dominated. if you look at factory output it tos, we are expecting
inch up higher. crude oil has been inching up globally. these are the issues that are so and itng pushed aside, is largely nationalism and how they have taken on pakistan. prime minister modi's rally last stated joining capital of new delhi. there was a 40 minute speech about how india had managed to become a big player in geopolitics, how india is taken seriously by the big powers. those are the issues that he had raised. india is the world's fastest-growing economy, but that took up five minutes of a 40 minute long speech. >> thank you very much. our next guest is based in
mumbai, a veteran hedge fund manager who has been loading up on bearish wagers. he is now advising caution. he is the head of liquid alternative investments. thank you so much for joining us. how would you characterize the investment landscape in india currently? i would say it is fraught with risk. currently we have equity and significant downside risks to our name. if you look across the earnings seasons that we've had currently, what we see is a persistent and pervasive downturn across the consumer sector. the auto industry, the fuel it is having as,
knock on effect on growth. we are currently advising caution to our investors, either way you look at it, it is close to an all-time high, both on an in the u.s.is close to an 85% premier to emerging markets. markets, andd india has returned equities as a discount to emerging markets. anyway you look at valuations and earnings growth, i think the arms are stacked against the market. >> if you take a look at with the r.b.i. has done, it will boost to the economy. percolated through the
economy? what assumptions are you making? i think the r.b.i. is on the right track. we have serious monetary transmission issues in india. the old commercial banks and , slippagetor banks has started to fall. forget our shadow financing -- it grew in leaps and bounds over the year and has taken over finance. things like loan against property, loan against share. result the sustained after the crisis we had last year, which some analysts referred to as the mini lehman moment. they are unable to finance their borrowings, there are huge
matches and -- lending is coming off. >> if we take a look at unilever, it came out with revenues up 7%, but the ceo came they areaid, well, recession resistant but not recession proof. this is a feeling that with valuations where they are, as you are alluding to, we are looking at the precipice of the path of least resistance being very much to the downside, and if so, by how much? >> that's a very tough question to answer. if you take a look at stable valuations in india, i've never understood it.
what we have is a bit of a safety trade going on. you've had a handful of stops leaving the industry and these handful of stocks are under , mid to hight single digit levels. well valuations are between 50 and 60 times earnings. the rural economy is under a lot we have hadd into bankle rate cuts accounts after the election. so spending might pick up. aboutss bothered earnings falling off a cliff -- >> talking about spending, the
consumption story in india, it is kind of sputtering. do you play it? well, we are short. book, look at our short we are short cyclical and short staples. it has spread to consumer staples, and the slowdown has become pervasive. we see considerable risk devaluation on the downside. >> all right. the head of liquid alternative investment at idf see, thank you for your insight. come, how china could complicate the boeing 737 max 8 return to the skies.more on that next . this is bloomberg. ♪
>> you are looking at shots over india. today we are expecting the april consumer price data. we are also looking at the contracts could be adding to indications that economic slowdowns may be persisting. where we to mumbai, can go through what to expect from today's session. how are things shaping up? mentioned that there is some sort of weakness indicated by the industrial production data that has come out, and because of that, we are looking at markets, both the nifty in the sensex are trading downward by over .25%. this is the ninth straight session that should be closed in the red with weakness through the nifty banking index. it's also down by nearly .4%.
tothe indian rupee continues show weakness against the u.s. tolar, so we are going continue to track some of these movements for they have for indian markets, but for now indian markets are not looking very good. itc andnk we have india's biggest nonbanking financial -- what are we looking out for? we are keeping an eye on the earnings and we are expecting steady earnings for both these companies. while we are expecting some green, for now it is limited, declining by as much as .5%. we are going to keep an eye on itc, considering that it could .how up
>> thanks very much. right, let's get a look at the business flash headlines. china mobile calling on the u.s. to stop unreasonable pressure on chinese companies, pushing back on the trump administration decision to access american wireless. rejected eight years of application. that all contradicts the ongoing trend of globalization. leadingf the world's pharma companies says china has put in a race to attract top scientists. one ceo says salaries are being offered for top talent in the same, and competition is rising. china is becoming a leading innovation center, well placed
for the next generation scientific leaders. sayeports from the u.k. lotus is looking to hire 200 engineers in an accelerated turnaround plan. production to triple to 5000 vehicles per year, with an engineering and design center in the midlands. geely took a controlling stake in lotus two years ago. we are going to take to the skies, or perhaps not. boeing 737 max 8 grounding is month, andird there's a new theory emerging that china could complicate the return to the skies. beijing was the first government after thee flights ethiopian airlines crashed in march. angus whitley joins us now to explain more. tell us -- it is more than a conspiracy theory. it is based on reporting. but what happened?
>> certainly more than a conspiracy theory. you need to go back to 2017 to know the background, and according to people familiar with the matter that bloomberg spoke to, just as the max was about to end service in 2017, chinese officials talking to u.s. trade officials raised prospects of clearing the max to fly in chinese airspace, in return for potential favorable treatment for chinese jets that were still under development. the idea is if we let this plane you couldina approve chinese jets in u.s. airspace. we know that the u.s. aviation regulators think this is a strict legal and technical process, and we are not going to expedite it. china went on to clear the max anyway. but this is important because china now holds a big chunk of
the future of the max. towas the first regulator ground the max and it is important that it is allowed to fly again in chinese airspace. chinese regulators are in control of that process, and it really highlights the political leverage that aviation regulators have around the world, and perhaps these negotiations may come back to haunt u.s. regulators and the max again. that, whataving said does it all mean for chinese playmakers? >> that's a good question. we know that china is keen to become a global airplane manufacturer. 21, a regional jet flying mostly in should non-and a couple countries in africa, but it has yet to break onto the global scene with a credible
challenger to boeing and airbus. that is what it wants to do in the future. it is going to be the world's largest travel market in the early part of the next decade. if it wants to fulfill that dream, it is key being able to fly in the u.s. and europe. it is years off from that, really, until european and u.s. regulators fly off on those aircraft, one of which is a clear challenger to the max. it is going to remain a domestic player for the most part. >> it is a complex relationship. you have to wonder how this will play off in the trade talks. our asia transport editor in sydney, thank you. still to come, bitcoin battles back above the $7,000 mark. our analysis is next. this is bloomberg. ♪
♪ you are watching "bloomberg markets: asia." i'm haslinda amin in singapore. >> in hong kong, i'm rishaad salamat. we have further pressure put on to equities. we have equity futures in the u.s. extending the worst equity rout, the worst week, for equities in the u.s.. japan, the nikkei down by about .5%, a bit of weakness on the lunch break. 1.3% down. we have hong kong on a public holiday. we are talking crypto, are we not? >> we are. bitcoin, believe it or not, surging to its highest level since september, rising above
$7,000 as cryptocurrencies extend their rebound from last month's slump. some of you have to wonder -- has bitcoin become a haven play? know, the timing is very aligned with the big selloff and i'm not really convinced. i know there's a lot of uncertainty with the trade war in china but it began in late february and lasted throughout march and april. at that time, the u.s. trade negotiations were going pretty well. it is a stretch to call it a haven play. it has always been considered that. i'm not convinced that just because the china trade talks are not going well it will shoot to 10,000. >> it seems so totally counterintuitive that it would be seen as a haven.
what makes this different from the bull market we saw a couple years ago? is 100%n, bitcoin driven by circulation, by sentiment, there are no fundamentals involved. anyone who tells you otherwise is kind of lying or delusional. but here's the thing, because it is all about sentiment, right now we are in the bull phase. we don't change that quickly, so right now it really doesn't matter what the reason is. we've had a lot of bad news come out, we had that hack in that very critical exchange. bitcoin just brushed it off. so right now we are in a bullish rally. is oned to 2017, there big structural change, and it is that we don't have any ico's in the market. 2017 what drove that
rally was that people started buying ico's, and first he needed to buy bitcoin. that was the big structural driver for demand, which propelled the bull rally. today the ico's are nowhere to be seen. first quarter we had $100 million raised, compared to a year ago at $7 billion. this year we are literally falling off a cliff. that structural buying is not there, which makes the whole market even more speculative than before. it's all about sentiment. >> thank you very much indeed. eugene kimura. let's have a look at the key economic events coming your way this week and when they will be getting inflation data. we are going to be getting a current account balance tuesday out of japan. wednesday, industrial
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