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tv   Bloomberg Markets Americas  Bloomberg  June 14, 2019 1:30pm-2:00pm EDT

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the shift in the region will not be closed. he told fox news, iran did it and you know they did it. boat was seenrol removing an exploded mind from one of the tankers, after another detonated and damaged the ship. the republican-led senate appropriations committee is scrutinizing first-class travel by government officials. specifically, the panel has requested details on the non-coach travel practices of the treasury department and secretary steven mnuchin. it is also eyeing spending habits of other federal agencies in advance of setting agency spending levels for fiscal year 2020. president trump says he has not yet decided who will replace sarah huckabee sanders as white house press secretary, but it will not be former communications director anthony scaramucci. the founder held the post for several days in 2017 before
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being fired. anthony scaramucci has remained a vocal supporter of the administration. enbridge this -- and british business leaders are angry at the effect of brexit on their bottom line. chiefs of the five main corporate lobby groups have been interviewed over the past eight weeks. all of them say companies are suffering over the cost of continued stockpiling, contingency planning, and lost customers, and they say --estment drying up has left investment is drying up as lingering uncertainty delays key global decisions. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. to, this is --p gupta, this is bloomberg. shery: live from bloomberg world
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headquarters in new york, i'm vonnie quinn. live in toronto, i'm amanda lang. we are joined by our bloomberg -- audiences. here are the stories we are following from around the world. the u.s. accusing iran of attacks. american officials release video they say shows iran was involved in attacks on oil tankers in the gulf of oman. that adds tensions to the middle east -- for oil. nd sounding the alarm's that trade wars are affecting their bottom line. billboard on how to play -- bill bordeaux on how to address key tensions at the upcoming summits. an interesting session out there, because we have some positive or benign u.s. economic data that seems to be upsetting stocks today. we do have tech leading the
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decline, energy weak on the day, and the chipmakers standout today. broadcom down 6% in the session as it cuts its four-year sales outlook. part of the reason for this mix of emotion on the markets is this. retail sales in may were stronger-than-expected, .5% was the gain, and that shows the economy is not slowing as many had feared in the second quarter, but it changed some of the betting the fed will do on its rate cuts. an interesting contradiction on a relatively good piece of economic data. vonnie: and also offsetting some of the negative chip news was the gold miners. they help keep the stock market a little bit buoyed, even if it is still negative. gold has gone beyond the 30, 50, and another voice to the idea that gold is a good trade.
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we had peter dylan yesterday saying exactly the same thing. we spent most of the session above 30 and 50, and we have now dropped off pretty -- 13 and 15, at and now we have dropped off pretty substantially at 1339. amanda: u.s. officials release images that they say shows iran was to blame. the owner of the ship refuted the u.s. version of events. the u.s. deputy energy secretary spoke yesterday with bloomberg and said the administration was less concerned with their actions. >> whether iran is going to continue its maligned behavior is for them to decide, but from an oil market perspective, we are less concerned about those activities than we were today 20 years ago. amanda: let's check in with the president of middle east institute from washington. paul, you have sketched out a number of scenarios that could
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emerge from this. what is the best case scenario of what happens now, given that we do not even have agreement on what has gone on here? we are indeed in a situation of conflict between the u.s. and iran, which started with the u.s. putting crippling economic sanctions on iran, and iran promising to inflict pain for pain. it did say it would make american partners in the region pay a price, and we have seen attacks there. they also said if we cannot export our oil, we will not let others export it either. the regardless of the attack, that has been a position of theirs. the scenario could be quite dyer, with a rapid escalation to something quite worse, but there might be some de-escalation in which the u.s. maybe provides some wiggle room or extends some of the waivers relating to export of oil to allies like japan or south korea and taiwan. that might be enough for iran to
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hold its fire for now, but we will be in a rough situation between the u.s. and iran. i think until the presidential election in the u.s. next november. is denying any involvement. does that mean we can take it that iran does not want to be flamed because it does not want anything to escalate? know whoo not perpetrated this attack. we are following the different reports. on one hand, iranian officials have come out and that, including the department of foreign ministry, that we will inflict pain for pain and try to prevent others in the region from exporting their oil also. that is not inconsistent with nine actual attack, because they do not want to be held accountable. it is a violation of international law, but they consider the u.s. economic sanctions on them as an act of war from the u.s., and they are trying to respond in kind,
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trying to put pressure on president trump, who they know does not want a war, does not want escalation, and does not want a minor rise in oil prices, which might occur. amanda: in terms of a possible de-escalation then, where would you rank the probability of the loosening of sanctions? 's president trump willing to walk back at all on sanctions against iran? it is athink possibility. president trump was in japan and talked with prime minister shinzo abe. discussion, their the prime minister went to iran with an intent to talk. what spoiled the deal is after the trip to japan, the u.s. imposed fresh sanctions on a very big sector in iran, the petrochemical sector. iran and the supreme leader said that president trump told abr he that he wants to
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talk and then imposes new sanctions. i think president trump wants to keep the main sanctions, but would not be opposed to a little bit of de-escalation so that he can approach is election campaign without having escalations in the gulf or rising oil prices. say thats it safe to tankers get attacked pretty frequently? while it is not desirable, it is something that happens in the market? itl: no, i do not think happens in the gulf. the gulf is a very closely monitored area. there are only two players two maine u.s. navy -- players, the u.s. navy and its allies and the iran revolutionary guard naval forces. it is unusual for attacks like this to take place. the last time it happened was in the context of the iran-iraq war, where the u.s. had to provide military naval escort for ships trying to leave the gulf.
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that might be what president trump proposes, because the u.s. is likely to have to do something that is not cheap or easy to do, nor is it foolproof. technologies of mining and torpedoing have advanced tremendously and the u.s. does not have infinite assets in the gulf. vonnie: paul, thank you for the context. paul salem, president of the middle east institute. coming up, trade war woes weigh on broadcom. other sectors that are being impacted by the strained relations between china and the united states. this is bloomberg. ♪
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amanda: this is bloomberg markets. i'm amanda lang in toronto. vonnie: and i'm vonnie quinn in new york. broadcom tumbling today after
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the semiconductor manufacturers cited the impact of the boiling trade war between china and the united states. for more, let's welcome michael mckee. that orderso say are already suffering, michael? michael: we have seen it for a while, over the past year business lending has ratcheted back, even in light of the tax cut that companies got. the only thing people can attribute it to is uncertainty what isture policy, and driving uncertainty for most companies is the impact of the trade wars. amanda: we are getting some specifics here. broadcom, one of the things that is rattling the markets is they are saying it is not just huawei , other customers are slowing down on their orders. at what point do we start to extrapolate rum that beyond chips? this might be the canary in the coal mine, but there are other businesses saying that there is no quick and insight to these trade issues. michael: at this point it does
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not look like there will be a quick end. the president has said he is ready to go on with these trade evenfor quite some time, today suggesting if you did not get a meeting with xi jinping in japan this month at the g20, it would be ok. nobody knows what the endgame is here. companies have to decide, are we going to sit this out and not invest, because everything is too uncertain? that seems to be where they are going. vonnie: we are not seeing the impact much in the u.s. economic data yet. we are only seeing it in corporate america and outlooks. are we seeing it in china data? michael: we are seeing it in chinese data. ,ndustrial production up 5% which sounds great, but the numbers are smaller, and more industrial countries, that is a bigger part of their economy. increasewest rate of in 17 years. they are feeling the pain.
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the interesting thing, the president has demanded a meeting with xi jinping, and the chinese have not responded yes. do you think there is a motivation for them as well? retail salesve the number that is reassuring on the economic front in terms of where second order growth is. less assuring on the fed outlook for those looking for a cut. what does that number say about where we might be headed? theael: it suggests that consumer is hanging in there. we have seen the incomes of rise, overtart to 3%. a little slower than it was earlier in the year, but people are you getting to feel the impact -- beginning to feel the impact of the low unemployment rate. hightock market has been and consumer confidence is high, so as long as the consumer hangs in there, things will be ok. the issue to watch is whether we see any crack's in there -- cracks in there confidence -- their confidence.
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an index that came out today suggested a drop in expectations for the future, so that is something to keep an eye on. amanda: mike mckee, always great to have you with us. coming up, canada is also in the crossfire of u.s. and china trade relations. what bill morneau will discuss about his counterparts in the g20 sonnet, -- summit, next. this is bloomberg. ♪
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as g20 leaders prepare to meet later this month in japan, i caught up with canada's finance minister for his thoughts on how he plans to make headway on trade talks. i am obviously hopeful. i am hopeful that the president of the united states and the president of china will get together and restart the dialogue that i think was making progress. cannot handicap it at this stage. i know people are working towards that outcome. amanda: we understand that the prime minister might remark to
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china asdent about well. we have canadians there. what can we do to resolve this? bill: this is a difficult issue for us, obviously. we think what is happening in china is completely unjust. they are essentially kidnapping canadians because of what we see as an appropriate way for us to deal with our laws. what we are trying to do is advocate in every place we can advocate. i am meetinghen with finance ministers, as i was last week at the g20, i am one, and hoping that they can reinforce the importance of a rules-based system. one that does not take inappropriate actions. wet is also something that are regularly talking to the u.s. about as they embark on these continued discussions with china. amanda: this idea that we might not follow through on extradition, it's not something that you think is a good idea? bill: i think we have been pretty clear that we do not see
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a situation where we are going to react to essentially kidnapping. that is not an appropriate way for us to protect citizens in the future. it is also not a way for us to be having trading relationships. that is in our minds not an appropriate response. what is appropriate is for us to keep pressuring people and for china to realize that the actions they have taken are not going to be ones that other countries are going to recognize as in accordance with any sort of trading approach, and we expect that will, over time, have an impact. amanda: that was canada's finance minister bill morneau. vonnie: let's take you to the g20 and the simmering trade tensions between the u.s. and china. president trump and chinese president xi jinping might meet at the summit this month, but economic data out of china at the time is less than positive as the factory output has slowed to the weakest pace since 2002.
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how should emerging-market investors position themselves in particular? let's ask our guest. should emerging-market debt holders be in china anymore, catherine? catherine: emerging-market debt investors should be in china, but maybe the underweight a little bit. we have been underweight because china is considered more of a low beta mark, actually. at the end of the year last year, we found really interesting opportunities in some of the high-yield market in china. we actually had a big selloff in december, if you don't recall. u.s. high-yield markets as well as emerging-market debt market were throwing off pretty extremely. we took that opportunity to add to our exposure in china, and had good valuations and we are still invested there, but we have remained underweight.
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so we do think that china's growth, while it might disappoint some, we have been expecting more at six to six and have. we are remaining there -- 6.5. we are remaining there as trade discussions continue. we are not keen on the g20 meeting. we think moving towards some sort of deal i the end of the third quarter would be important. if we don't get that, we might have to revisit to the downside. amanda: still underweight china. what do you like in the yen space? latinine: we like america, which has a lot of trade languages to china. we know that we have china risk throughout the market. very important economy and driver of what happens in emerging markets. been overweight brazil, other countries like colombia and peru, and she lay
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-- chile, they have a lot of interesting corporate that we have like dan invested in. amanda: and i see mexico as well, and the ukraine. katherine: we are global. i think the important thing is that we have all raise -- always run a very diversified approach. emerging-market debt by our benchmark is actually diversified. debt,take local currency so we have gone as far as the frontier. we have been invested in egypt for a long time locally, and had experience with some negative disappointments during the arab spring uprising. lately it has been a market that we have actually found continues to add value on an alpha basis, because it is not in the benchmarks, the local edge marks or our dollar benchmarks. -- local benchmarks or our dollar benchmarks.
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that is good news for us. but then you have you, markets you want to be underweight when disappointing news is coming forward, and you want to get involved when it is cheap. amanda: i know you like vietnam. where do you play in that market? we like it as an economy. however it has been a bit expensive from a debt basis. while we have been long-term investors there, and i have visited vietnam many years ago, we do not have a lot of corporate opportunities in the fixed income space. from a sovereign basis, it is a little expensive right now. the fomc be will talking about as it relates to emerging-market next week? obviously they say that while would nevert possibly influence a rate decision, but what will concern the fed members enough for them to talk about this? katherine: we have seen a bit of a shift and a bit more stress
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put on just local indicators, but we are still a global economy. i think global indicators do matter when you look at negative yields and the stock of negative yielding debt around the world. we are approaching levels that --saw it in 2016 overseas saw in 2016 overseas, and i think that has to factor into the equations and thinking. when you look at the expectations for five-year rates locally in the u.s., the university of michigan indicator came out today that it is something that you should see inflation expectations that 2.2%. that is extremely low. that has to feed into the long-term thinking, i think. amanda: and what is your view on the u.s. dollar? katherine: it has been on a risk. we do like local currency in eff, but we are mindful that the
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dollar is a place people go when there is risk aversion. we have not gone as high as of our highest ratings. we are at an average weight, and we think local weights are quite interesting and supported overseas. our thanks to vonnie: -- vonnie: our thanks to katherine renfrew for her analysis. the u.s., and new mexico struggled to find a trade deal, something could be forcing a deeper wedge between the nations -- the nba finals. the sixth,e six in the toronto raptors defeating the golden state warriors. this title is the first ever and be a win for canada. we had -- nba win for canada. into torontoouring from all over, to what we called jurassic park. that is how we do it in the
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north. i can tell you, if we have not won, i would not want to be chatting about this today. vonnie: and new york should get some of the credit, because we gave you jeremy lin. you may not have done it last night without him. [laughter] amanda: ok, i do not know about gave, but he did come from there. you can catch all of our reviews on your bloomberg with the function tv. from toronto and new york, this is bloomberg. ♪
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i just warming up. >> let's get the first word. later this month in miami, senators bernie sanders and kamala harris will face off against joe biden on the second night of a two-part primary
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debate. elizabeth warren and amy klobuchar will headline a second group with 10 candidates on the first night. their event may not draw as much attention without the former vice president involved. in hong kong, the government on the billade work that led to violent protests. a number of options are being considered to diffuse the situation. the paper reports some members of the executive council believe the government should still fast-track the measure. the trade war with the u.s. may be taking its toll on china's factories. industrial output growth slowed last month to the weakest pace since 2002. the slowdown may encourage china's central bank to adjust monetary policy.


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