tv Bloomberg Daybreak Asia Bloomberg July 15, 2019 7:00pm-9:00pm EDT
wsohy didn't we do this earlier? life line screening. the power of prevention. call now to learn more. paul: good morning. i am saikawa in sydney. we are under one hour away from the market open in australia, japan, and korea. shery: good evening. i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." paul: our top stories this tuesday, asian talks looks at for a mixed -- looks at for a mixed -- look set for a mixed start. banks begin reporting results.
investors and say it is a low-quality success. talking trade again. to u.s. team may have beijing for new face-to-face negotiations if talks go well this week. shery: let's get you started with a quick check up on how markets closed on mondays session in the u.s. ending slightly higher at record highs. we had a tech rally in the nasdaq gained .2%. energy sector and financial sector weighing on the s&p 500, but aboved unchanged the 3000 level. we had citigroup of course reporting earnings. they're treating revenue -- their trading revenue missing estimates. every member was under pressure in the session. japan returning from a long weekend. what is the setup? sophie: nikkei futures in whileo trading flat
contracts are falling in sydney and seoul. gains, withresuming the nzx 50 attempting to breach the level again. the kiwi dollar is holding steady, holding onto the overnight gain as the inflation report reinforces the case for the rbnz to cut rates. on the central bank front, the rba polished minutes -- rba's minutes are due. i'mick check now commodities. iron ore and copper futures are extending gains on positive activity indicators from china. iron ore was the big winner from that data dump which saw record steel output on the mainland. that has stoked demand concerns over oil which is extending losses with wti below $60 a barrel after posting the biggest drop in almost two weeks while gold is adding ground as the drop in treasury yields is seen supporting demand. paul: think very much.
let's check in on a first word news now with ritika gupta. the divorce looms ever closer for brexit. officials say a meeting was one of the most difficult at any time in the past three years with the british team seemingly trying to bully its way into new concessions. the e.u. is bracing for the expected appointment of boris johnson as prime minister. he threatened to quit the e.u. in october with or without a deal. its nuclearise program back to the state is reached before the 20 14th your was signed. tehran said it may cap with from obligations in the agreement -- 2014 deal was signed. tehran said it may -- the e.u. says there is still time to save the deal. >> we would see how we can, together with all the member
states, and with the rest of our international partners, preserve the nuclear deal with iran and put in place on the measures is so iran can go back to compliance as it has been so a few weeks ago. ritika: the e.u. is bracing for billions of dollars of u.s. tariffs. a dispute over aircraft boil.ies comes to a brussels expects the wto to give washington the green light to impose measures of up to $7 billion. duties may be announced in the coming weeks and food products may also be targeted. the move would add to u.s. tariffs already imposed on e.u. steel exports. u.s. treasury secretary steven mnuchin says the administration has "very serious concerns about facebook's proposed cryptocurrency." have for the row -- libre gotten criticism. he says it is a national security issue and they will not
allow digital asset providers to operate from outside the regulations. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. shery: thank you. big bank earnings season is kicking off with citigroup eating estimates, reporting profit and revenue gains despite a 5% loss in trading revenue. citi finished slightly lower on the day. let's look at the numbers. there was a bit of a mixed picture for citi. if you take away the one-time gains, not so great. a mixed bag is what the markets were trying to grapple with today. they went up and then ended back a little bit down flat-ish. and the downbeat tone from trading has set the tone for this week. able to capitalize
on the changing interest rate expectations across the broader market from what they flag. investor sentiment was poor. stickors were trying to on the sidelines because everyone is cautious about the trade war and the rate environment. people were not active in markets this quarter. shery: lots of challenges for banks. let's talk about the positives. the consumer division was a standout. >> it had its best second quarter since 2013, and the boring side of the bank, as we like to call it, the retail side, did really well. that includes the digital side of the bank which made some progress this time around, so we are looking at a mixed bag where wholesale institutional markets did not do as well, but the of the bank did do well. is jpmorgant, it and goldman sachs reporting tomorrow. what can we expect there?
lananh: it is critical to look at the trading conditions at this time around. citigroup did not do as well in treating. we have had guidance from other banks that they are not going to do very well so it is interesting to see whether the macro environment has played out poorly for the rest of the banks as well, paul. on top of that, we have jpmorgan reporting tomorrow. a consumernitely has side of the bank so we will see if the consumer division can really save the date for the rest of the bank. goldman sachs does not have that big of a -- revenue driver. we will see if goldman has been able to be better than its peers in terms of that power has reputation it has got. paul: lananh nguyen, they very much for joining us. still to come, fresh rio tinto reports and fresh output figures. we will go to melbourne for reaction. to latest market moves as u.s. stocks hit fresh eyes at the start of a busy week for earnings.
shery: this is "daybreak asia." i am shery ahn in new york. inl: and i am paul allen sydney. another day of fresh records for major indexes as gains and tech outweighed losses in energy and financials. su keenan joins us now with more. what was the highlight of today's session? su: the close. we got these fresh records. it was somewhat of a lackluster session as we saw stocks fluctuate throughout the day. not any major moves, but a positive is we are continuing to see new highs. we also saw a lot of strength in tech. notice the chip stocks coming on strong. let's go right to the bloomberg. at leastositive, or for amazon shareholders. amazon approaching the trillion
dollar mark. they briefly popped above it. there was a lot of optimism about their prime day. there was a little touch of that this time around but they had some major celebrities talking theiroduct -- hawking products and it was considered a positive day for all. one of the standout stories was a merger agreement that appears to have gone sour. haltedc, broadcom, have discussion trade proposed merger as the two sides could not agree on a price. that is according to people close to the matter. discussions hit an impasse. acquirer,a willing getting hurt bad. they are basing the kind of gains we are seeing in chip stocks which continue to run higher even though many analysts are warning they are starting to see them a bit overvalued. shery: we saw the oil break below the $60 per barrel.
demand concerns. chinese gdp did not look too great. su: that stoked concerns. they have the second-largest economy reporting weakness and that adds to concerns about global weakness. let's take a look at the five-day chart of oil. gulfajor storm in the moving out. major shutdowns for oil still, but in many ways, you are seeing investors move past the short-term issues and bigger picture, take a look at bigger picture. oil will come down off the $60 psychological thing. interesting that it -- psychological mark. investors are at a six-year low. there is or bullish, indicating aboutre somewhat uncaring oil in their portfolios at the moment. quickly to gold, which continues to move higher. we are near a six-year high, and that is having to do with the fact that as the economy weakens a bit, gold may have a continuing run. shery: su keenan, think is a much for that. joining us now is the cofounder
and coo of -- joining us here with the latest on the market moves. of course, su was telling us about oil. when it comes to industrial commodities, can anything you done about demand when you do not have china in the equation or china is that weak? >> on the demand side, industrial commodities or other imports, those are going to really going to be anchored by it what is going on in global industrial growth, which is not limited to china. when we look at our cycle research globally for 22 economies, this is the one true global cycle. there is so much interconnectedness in the production process. as you were just kind of intimating, it is a bit soft, suspiciously soft. totally makes sense in the industrialthe global downturn, which has been going on for quite some while.
the leading indicators of global industrial growth actually turned down in late 2017 be lower -- before the pmi's. jay powell talking about what is going on with growth, said, look, i am paraphrasing -- it is more than just trade. he was a little bit being used about it -- bemused about it. it is about a cyclical downturn in industrial growth, including china. it is not over in china. that doctrine is continuing. shery: you mentioned -- that is continuing. shery: what does that mean for the u.s. economy? you are seeing pmi holding above the 50 level. the line in yellow. are we headed towards a recession? lakshman: for the u.s. economy, i do not think that has been indicated yet. it is not imminent. literally anytime you start a cyclical slowdown, by definition, you are walking construction,
especially when growth is relatively low. we very much are on recession watch, slow walking toward one in the sense that there is no upturn. no revival in growth. i know the market is kind of, you know, bipolar, manic-depressive. i don't mean to pick on anyone. it was a recession in december, and then all of a sudden, towel to this, -- or towel to the -- it or we get to a second-half recovery. it is not showing up in the leading indicators. paul: i just want to get that to your point about industrial metals for a moment. can we make an exception for iron ore perhaps? we some a record steel production out of china. the prices still hovering around $120 per ton. can you hang all of that on the outages? is this something else going on? lakshman: i would not want to pick on one metal on its own,
but as a group, these are still decelerating in terms of demand growth. in china, there is something quite interesting. although it back to the beginning of the year, there was about the big chinese stimulus. they were spending more than $1 trillion and china trying to economy, -- goose the economy and get some kind of rebound going. the stimulus went into the chinese rust belt, the north-northeast provinces, which are all about coal and iron ore and other kinds of production. what was happening i think is that part of the global industrial lowdown, demand was really collapsing and they plugged the hole with the stimulus which may be kept things from falling off a cliff. an unintended consequence is that down the line, there is overcapacity sitting there as a result. and this inflation is going to keep washing around the world.
i would not get too excited about iron ore prices holding up just in the moment. disinflation, of i know you will see that g7 inflation cycle continuing to be in a downturn, but are we there already? do you see it getting worse? lakshman: the leading indicators show that the deceleration is not over. it is not so much about a level. i think people get tripped up about this. you might have your favorite inflation measure running here or there. direction ofhe inflation. and whatever your measure, they .re decelerating the rate of inflation is decelerating, particularly in the developed markets. particularly in japan and the united states, notwithstanding any reason one-offs in some of the data. the forward-looking data says this inflation cycle downturn is not over and some of these
structural issues like a supply continuing to be held up in are only going to exacerbate that. those are just kind of one-off. if you dig down into it, basically, tradable goods that were hit by terrorists had a one-off top. so you can kind of change that. but the directional move in a overall inflation is still to the downside, notwithstanding any of this. i think a lot of people have made -- i heard some people say the economy is fine and maybe g up.tion is tickin the economy is decelerating and the inflation cycle downturn is not over yet, though that is a completely different view. shery: let's talk about india. we have their trade deficit narrowing in june. not a great sign about the economy. lakshman: there is a lot of
concern about the indian economy. it slowed down. it had some banking issues. the r.b.i. has cut a few times. some of these changes in the rate of growth, they have lit up to the upside. there is a very clean, very clean, cyclical upturn in growth in india that his insight. -- that is in sight. i would look at that coming into the fall. , thankakshman achuthan you very much for joining us. and you can get around up of the stories you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers can go to dayb on their terminals and it's also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get the news on industries and assets you care about. this is bloomberg. ♪
shery: this is "daybreak asia." i am shery ahn in new york. paul: i am paul allen in sydney. let's get a quick check now of the latest business flash headlines. giant may be about to deliver the biggest ipo of the year. $2 billion byise selling a 10% stake on the shenzhen stock exchange. it gets more than half of its total revenue from the unit. it plans to use the proceeds to finance new projects in china, including soybeans and flour mills. shery: it is getting more expensive to hail a ride in new york. the number of trips with 8% down. lyft faced a slowdown. it comes six months after new york passed the first u.s. minimum wage rules for ridehailing drivers, pushing
upstairs as a result. shares in both companies gained in trade but trailed their ipo prices. paul: think set -- spacex says a leaky valve needs a re-dying, making it much harder than planned to fly astronauts this year. spacex had a contract to fly nasa astronauts to and from the international space asian, but an explosion -- space station, but an explosion destroyed one of the caps off and was a humank to sending astronauts into order. shery: they say crimes do not pay, but investing in crime-fighting works. techfocus on upcoming u.s. stocks that are doing just that. 's cybersecurity fun has returned 37% this year, beating almost all its peers, as shares surged. a data track is cybersecurity market will grow 80% by 2023.
president trump -- on his attacks on four minority female congress women. he stood his ground at an event at the white house. if you're not happy here, you can leave, and that is what i say all the time. that is what i read in a tweet which i guess some people think is controversial. a lot of people love it, by the way. in theyou are not happy u.s., if you are complaining all the time, very simply, you can leave. you can leave right now. come back if you want. do not come back. it's ok, too. shery: caitlin webber joins us from washington. president trump not back in down. what do we know about some of the measures he is taking as we are expecting some eyes raised over the weekend as well. >>'s reaction really was one of defiance.
no signs of regret or retreat. if anything, he is going on the offense, even in the face of all the controversy that erupted over his tweets over the weekend. he doubled down today, saying progressive lawmakers are anti-american, anti-israel, anti-semitic, and in favor of al qaeda. so he really turned up the volume here. no sign of an apology at this point from trump, and that is really in keeping with his playbook. shery: we are talking about four female minority lawmakers. president trump was targeting them. three of them born within the united states. they held a news conference. what did they say? caitlin: earlier this afternoon, they held a press conference where they issued somewhat of a mixed message. on one hand, they had that the president is trying to distract us from our important policy work. we want to make progress on
health care, on countering gun violence, on education. we want to make progress on all these important policy fronts. hand, they issued in charge to their leadership where they said that house democrats who hold control of the house should really open up impeachment proceedings at this point over trump's behavior with this incident. so that is one dynamic to watch. house leadership, house speaker nancy pelosi has really been reluctant to do that so far. it will be interesting to see if that changes at all after this weekend. has the reaction than from capitol hill more broadly? democrats have been really unified in their response to this, really condemning it across the board, and that is remarkable since democrats had been somewhat, you know, divided
over the last couple of weeks over a number of measures including their response to the border crisis and their response to this anti-russia probe. republicans, for their part, more and more as time goes on, we hear more republicans coming out and condemning these comments, but immediately, in the immediate afterwards, the response was quite separate from fromlicans, and -- tepid republicans. we had only a handful coming out. the response has become water. paul: bloomberg editor caitlin whether in washington. things very for joining us. we are about 30 minutes from the opening -- thanks very much for joining us. we are about 30 minutes from the open. has also given up some of its early gains, now higher by about .1%. a little earlier, we had cpi
ritika: this is "daybreak asia." i'm with a good grip the with the first -- ritika gupta with the first word headlines. -- hitting a two-year low against the dollar. seasonal -- suggest it could weaken further with consistent falls against the dollar and euro in recent years. weaken as they choose a new leader. new york manufacturing has improved, indicating factory activity may be stabilizing a low.omething to the empire state index has risen
to 4.3, jumping from a german reading of minus eight point, the lowest -- 8.6, the lowest in years. orders are lower this month. the measure of unemployment is at its weakest since january 2016. the two top banks working on the failed budweiser is ipo in hong kong are said to have missed out on up to $170 million in fees. jpmorgan and morgan stanley were to split the cash had the share sale not been canned at the last minute. get asked say -- critics blamed the banks for the cancellation. china says it will imposed sanctions against american companies involved in potential u.s. arms sales to taiwan. the deal could be worth $2 billion and include air defense weapons. the sale of additional all fighter jets is still under -- additional fighter jets is still
underway. a are concerned about the possible deal and urged the u.s. to call it off. aalian police have displayed missile siege in a crackdown on a neofascist political party. police found a huge stash of automatic weapons and nazi memorabilia. it is linked to an investigation of italians who took part in the russian backed insurgency in the ukraine. five men have been arrested, including one man who ran for a far right party in 2001. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. shery: thank you. japanese stock markets reopened in half an hour after a long holiday weekend. sophie, what are you watching? sophie: in tokyo, we will be slowly gearing up to the busy
part of the japanese earnings season. investors will get a first chance to result on some of the results that came out on friday. we have yamato in view. the company will post a second straight quarterly loss given the challenges of hiring drivers. we are watching steel.- noppon it will finance its acquisition of india's essar steel. theyonic on watch after lower the credit outlook to negative, reflecting the view that meaningful recovery is a possibility and catch iteration will be slow given the weakening demand in the appliance and housing related business as well as rising up for investment in a car battery business. i want to highlight this from seoul. mulling a capital gains tax. this after lowering criteria for shareholders that will subject to tax. keep an eye on brokers in korea. paul: thanks.
bitcoin slumped briefly below $10,000 after president trump criticized digital coins on the heels of this year's rally. treasury secretary stephen mnuchin is taking aim at facebook and its proposed cryptocurrency. >> the treasury department has expressed very serious concerns that libra could be misused by money launderers and terrorist financiers. paul: bloomberg global markets editor adam haigh is here. what is the essence of mnuchin's argument? ,dam: he highlighted libra which is facebook's proposed coin. has entered into the cryptocurrency and the national security issues are what is worrying the white house and trump administration more broadly. thursday,elf tweeted
last week, that he is not a fan of cryptocurrencies. all of this really just as for the pressure from some of the mainstream in the u.s. -- adds to the pressure from some in the mainstream in the u.s. there is pullback we have seen in the last few days. monday morning, we were waking up to a 15% decline over the weekend. there are still big moves in the cryptocurrency space, but what the words of commentary, what they do, it has put a bit of a risk to sentiment in the cryptocurrency space so there is no doubt that the adoption rate is still there. there's more institutional money seemingly waiting to invest in this affect, but these words of warnings from such high senior officials in the u.s. just dampens sentiment a bit. like that.y feels people wanting to dial back a little bit here. shery: are you thinking this
could be a short-term blip or when you look at the broader context of things -- the bitcoin prices up 200% year-to-date -- could we see them continue to rally or will we retest of those we saw last year? -- the lows we saw last year? for athat is a question lot of people who invest in this space but also for wall street are generally, as banks and financial services companies, whether they be start up or existing incumbents, try to enter the space with a view to how this technology will play out over subsequent years. clearly, no one is sure of the extent of how the technology can be useful, but people are willing to bet at least that it can be very secure digital coins long-termoffer storage of value. and of course that is one reason why bitcoin is back around the 10,000 mark. the long-term picture is clearly
more difficult to assess. there's been a number of stages and a number of things that have happened here, including from the likes of fidelity, that institution is wanting to enter the space as soon as they sort out some of the custodial aspects. i think what this sentiment dampener does from the u.s. authorities and the trump administration is just refocuses again on some of these price gains that for many people have just blown away some of the expectations of where the value really should be in these coins over the short term. bitcoin sitting around 10,000. we had some of the prices pullback in some of the other coins as well, so looking for more of the mainstream long-term institutional adoption to push prices on from here. shery: adam haigh, thank you so much with the latest on cryptocurrencies.
the rio tinto says the underground expansion of its mine inpper and gold mongolia could cost an additional $1.9 billion. guidance its full-year unchanged after shipping more iron ore than expected in the second quarter. let's cross to melbourne and our senior energy and commodities reporter, david stringer, joins us now. what extent of the cost blowout and delays? absolutely. it is quite a serious setback for rio tinto. is mine in mongolia really the key option they had to expand production in copper. a really key commodity. the focus for growth for a lot of minors right now. the underground expansion project has been difficult. they found the ground conditions have been kind of list a more anticipated, and that is causing problems with the plans for the
mine and also the location for equipment. what rio has said today is the delays extend between 16 months and 30 months from what they previously said, and the cost quitet could the significant. what was originally intended to be a 2.5 billion dollar expansion could now cost between $6.5 billion and $7.2 billion. thatserious revision to project, and these are only preliminary findings. what rio said is they will not until theull extent end of next year. coulds maybef the is preliminary. when will they have a better handle on how bad these problems are in mongolia and whether there are any other potential down address? david: that is a real question that investors and analysts are already grappling with. how bad could this get?
is saying there are more studies to do and that will take at least another 12 months really to get a handle on the extent of both time delays and cost overruns. an additional problem may 's a flag is is -- they will need to renew the carrying value of this asset. for ais potential write-down when the company reports half-year earnings at the start of next month. shery: we have seen rio this irondowngrade forecast for ore shipments. is that unit looking a little better? david: as you said, two downgrades and iron ore. iron ore is the company's top earning commodity, the thing that absolutely powers profits for rio tinto. although that a better news this morning. they saw shipments rebound in the three months to the end of june. they rebounded on the use
corner. and they have held their forecast of shipments pretty steady. so no additional downgrade there. ,o things look back on track and certainly, that will be better used given what we have heard about the outlook for copper. paul: thank you. senior energy and commodities reporter, david stringer, in melbourne. andng up next, the u.s. china are talking again after two weeks of silence on the trade front. why he thinks things will get worse before they get better. this is bloomberg. ♪
we have seen some strength in the japanese yen, holding at around 107 after the biggest jump in three weeks we saw on friday. this is "daybreak asia." i am shery ahn in new york. inl: and i am paul allen sydney. treasury secretary steven mnuchin says he may be heading back to beijing for more trade talks if initial talks on the phone go well. there is no concrete timeframe to reach a deal, so what might be different this time around? let's bring in graham allison, professor of government at the harvard kennedy school. he joins us from cambridge, massachusetts. also joining us from beijing, selina wang. thank you very much for joining us today. this u.s.-china trade dispute, as you have written, is about so much more than trade, but let's deal with trade first. do you see some sort of limited face-saving agreement being reached in the near term? what would that look like? graham: i am still betting that
it is only 51-49. over the next couple of months, we will see lighthizer and mnuchin reach an agreement with with the -- representative which will have further tariff increases and probably includes some reduction in the current tariffs. that will be good enough for xi in trump to declare victory for the time being, but it will be in thetemporary victory larger hostile relationship that i think is destined to get worse before it gets worse. shery: let's talk about the hostile relationship. what does it say about the rationale behind the relationship between the u.s. and china, if you go from what you thought would become a strategic partner to a strategic adversary? where are we headed now and how do you break the impasse? graham: a very good question.
basically, i have written about this as a dynamic. china is a meteoric rise in power. the u.s. is a colossal ruling power. when a rising power threatens to displace the ruling power, for the past 2500 years, alarm bells should sound. generally, it does not turn out well. in the entire relationship, which previously had been thought to be a strategic partnership, each are coming to lye the other more hostil as a strategic rival or a strategic competitor or a strategic adversary. trade is one part of that, but supply chains, critical elements, investments, military, every dimension in the relationship is now being reformulated and reshaped through the lens of this
dynamic. >> professor alison, you give a number of recommendations for how the two countries can avoid a complete rollout, and reading avoiding the passive -- fallout, including pursuing their own national interests. how would you characterize the nature of diplomacy between the u.s. and china right now? how does that impede the way to a lasting deal here? graham: unfortunately, just as you said in the previous question, the relationship has now regarded, especially from washington, it is regarded through a lens of more and more relationship. is the consequence of that that people are neglecting the reasons why the u.s. and china are linked together in ways that will be impossible to decouple. both parties have robust nuclear
arsenals. if they should be dragged into a war by a third party, and nobody can survive. so clearly, that is a vital national interest. on a small glowed. anyone admitting greenhouse gases emitted them into the same -- emit them into the same biosphere. we think about the financial crisis of 2008. both u.s. and china recognized they had a shared interest in preventing this becoming another great depression. so i think the relationship needs to get balanced by an appreciation of the reasons why the two countries have to cooperate. at the same time, there are many reasons why they are going to find themselves competing and being rivals.
selina: he points out in your book that the chinese are strategically patient am completely comfortable waiting a period of time to solve the problem. how do youdispute -- think they view this dispute? graham: very good point. the chinese can think long-term. for the u.s., friday is long-term. asymmetry thatan is significant here. as far as i can read facing at this point, they are hoping that trump is an anomaly. but as they watch the whole washington political class, democrats as well as republicans, now seeing china as a strategic adversary, they worry. they are still hoping trump will be a single term president. and if that can happen, they think maybe things will get back on track, but they haven't going through a pretty substantial strategic reassessment lately, thinking that this way lasts for some time. on the other had, the
china dream of making -- on the other hand, the china dream of making china's great again -- one year, two years, they can way that ia think americans are unwilling to do. shery: talk little bit and zoom out of what is happening between the u.s. and china. it seems the trump administration is not only having trade issues with china but even with france, we are expecting potentially tariffs because of these airbus and boeing issues that have been going on for years. we have the trump administration talking about the usmca the all alltical -- being political. the united states, when it comes to its relationship to the world and trade and protectionism. graham: there is something charming about this, because at
2017, after the u.s. trashed the wto, withdrawn from tpp, walked away from paris, she's in being was celebrated -- xi jinping was celebrated as the paragon of the liberal economic order. he was as surprised as anybody. in fact, i talked to one of the people worked on his future davos -- speech for davos, and bey said they could hardly from smiling when he had these various lines. because the u.s. and trump administration has decided basically to have tariff , chinats with everybody has been able, actually, to say they are the responsible member of the wto, and the u.s. is the rogue. there is something charming about it from a chinese
perspective and stupid from an american perspective. paul: i wanted it your thoughts on some comments caps off from the chinese foreign minister this week. he was morning the united states "playing with fire when it comes to selling arms to taiwan." what does this mean for the relationship more broadly? graham: i think the big risk, i in thehat the impulses trump administration and even more in some parts of congress to play with taiwan is playing with fire. in my list of ways in which the u.s. and china could actually get dragged into a real war, a war, bloody, shooting taiwan is right at the top of that list. and if, in the current campaign for president in taiwan, which is currently going on. the election is in january.
if a candidate who is making a move towards greater independence should win, i believe the chinese will not live with that. and if they do not live with it, especially if they were to react as they did in 1996, the u.s. will be left in a pretty tough spot. if it support taiwan significantly, it will risk a war with china. if it does not, it will be shown to have been bluffing. i think this is very dangerous. allison, right, graham professor of government at the harvard kennedy school in massachusetts. and selina wang in beijing. thank you. we will have another big guest on the bloomberg later on. we will speak exclusively to the active managing director of the imf, david lipton, at 5:00 p.m. hong kong time. shery: we have breaking news. we are hearing -- will buy industrial property trust for
$3.99 billion in cash. it is a real estate investment company, and bloomberg is hearing that it is discussing a deal to buy industrial property trust from black creek. it would pay $4 billion for the warehouse owner. ipt industrial property trust is a nontreated real estate investment trust. representatives did not immediately respond to the request for comment. portfolio has an average age of 20 years, and is 96% leased, and has a total of 6 million square feet. industrialted to buy property talked to $3.99 billion -- trust for $3.99 billion. this is bloomberg. ♪
i am paul allen in sydney. ahn in new shery york. we get the market opens in japan, south korea, and australia at the top of the hour. let's preview that. sophie: we are seeing red across the board in seoul, sydney, and tokyo. bykei futures in osaka lower .1%. we are keeping an eye on aussie on air -- asean airlines. speculation that ask a group bid.-- sk group will from shareholders for the acquisition with a transaction expected to be completed on july 22. belysts expect the group may forced to raise capital to fund the change it requires in his wealth management business. we are keeping an on rio tinto.
morning paul:. i'm paul allen in sydney. asia's major markets are about to open. shery: good evening. i am shery ahn in new york. sophie:sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak: asia. go -- asia." ♪ paul: our top stories this tuesday. asian stocks look for a mixed start as investors await fed comments and earnings. trade talks look back on track. the u.s. team may do face-to-face negotiations.
shery: from zero to hero, the philippines stockmarket was a poor performer last year, but now it is in a bull run. what changed? have japan and south korea and australia coming online. japanese stockmarkets back in the game. the nikkei to do five opening lower at .2%. the yen is looking steady. pay -- bereally playing catch-up with the trade battle with south korea. fitch warning on monday that japanese firms may have collateral damage. higher.ening the government will meet to discuss the impact for japan's export curve. watching brokers that a capital gains tax is being considered for investors. samsung under pressure this morning.
there will be some jitters around the supply chain. 200,ood in sydney, the asx opening is flat. andre watching rio tinto their guidance. ,icked up 1.2% in singapore moving toward $120. aussie dollar holding steady. bond yields are slipping. the 10 year by five basis points. new zealand, bond yields are under pressure. as for the kiwi dollar, we are break gains, watching to the 2750 level again. paul: let's check in on the first word news. >> brexit talks are becoming
more hostile. aficials in brussels say meeting last week was one of the most difficult at any time in the past three years. the british team was seemingly trying to bully its way to concessions. the eu is bracing for the expect appointment of boris johnson as prime minister. he threatened to quit the eu in october with or without a deal. iran is warning that it may revive its nuclear program to before 2014. tehran said they may back away. the iranian atomic energy organization so the return to the conditions of for years ago would "create a balance. the you -- the eu says there's time to make a deal. the nuclear deal with iran, i
think we can do it with our partners and put in place the measures so iran can go back to compliance. >> the eu is bracing for billions of dollars of u.s. over -- is a dispute over airplane subsidies come to a boil. expect to give washington the green light to impose measures of $7 billion. food products made also be targeted. to u.s. move -- add tariffs already imposed on exports. improvedfacturing has indicating manufacturing may be stabilizing after slumping to a three year low. index has risen to 4.3. the most in almost three years. more state factories say more orders are needed as
unemployment is at its weakest since january 2016. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more this is countries. bloomberg. ♪ paul: thank you very much. let's look at bonds. yields are tumbling. mike crane field us from singapore. what does this mean for asia central banks? >> good news. there are a few asian central banks who would like to have lower interest rates. a couple of already done so. india and malaysia. we have more coming up. bank of indonesia will meet this week. we are trying to stabilize inflows.
they are in a good position for lower rates. people expect him to do so this week. they are moving into a scene that they would like to use. have got a lot of information the last couple of days suggesting the president will be proactive to get inflows from foreigners. he will lower corporate taxes and other measures to make the country more attractive. indonesia will be one of the first people we will see moving in line with the rest of the world. with singapore, after the poor gdp last week, maybe another country that wants to ease policy. it's a trend asia would like to jump onto. we have seen the bond market yields go down. it suits the region right now. paul: this environment of negative interest rates is
leading the asx to trial a few new systems. what about that? >> they say you don't want to get caught up by technology. it's a smart move. if you look at what is happened in europe and japan, have had shorter interest rates for some time. if you look at how the futures , so many trade derivatives are priced from the futures. haveeed to be able to those contracts and the options related to them. you have to be able to deal with transactions priced below zero. it takes a while to test it and get it right. the rba hast short-term rates down to 1%, they may go lower than that. europe and japan have negative yields. it's not think about that even
australia will need to go that way. it doesn't need to be held up because your computer systems can't deal with it. it's a good move to do it early. testing will go on for a while. if things go smoothly, australia will be a country to deal with that. it's a good move and something we can expect to see with the pricing of derivatives. that something to look forward to. shery: take another look at the data out of china. the narrative continues about the slowing economy. is bad news for the economy good news for the equity markets? it puts more pressure on the central bank. they have held back from an official rate cut. we have seen the reserve ratio being tweaked. some of the targeting measures they do.
more countries, preferential rates as to where they have been for the people. they also make sure there is plenty of liquidity. far, they haven't done an official rate cut. in july and that may give the pboc the cover it needs to go for an official cut. it is a politically charged decision as well. a rate cut is probably coming. but it may help to wait until later in the year. when you look at the quality coming out of china, there were the one-off factors that made the data this week look better. as long as there is no resolution on the major tariff issues, it will be difficult for the chinese economy to make a rebound so the pressure will
build on the pboc to be more accommodating. shery: bank of america merrill lynch was saying they were expecting to rate cuts in china. let's turn to sophie for a check of what is moving in seo. -- so. somee: i want to highlight stocks, one rising to a 12 week i. this is on the back that they are securing domestically made faceies for those that changes for the japanese restrictions. falling one point 2% earlier after we digested later update. maintenance of its iron ore shipment guidance. we do see concerns around the country flagging that still has $1.9 billion.
growth on record, which president trump says his tariffs are having their intended impact. schneider is in hong kong. it's not just the taunting tweets. not quite as close now. what can we realistically expect from these phone conversations? >> president trump likes to talk about his friendship with xi jinping. this would only be the second time they've had talks since g20. ande is some optimism treasury secretary mnuchin and lighthizer say they could be going to beijing to have face to face talks if this call goes well. talks,e talking about but they are making progress. be the u.s.'s to
desire for china to buy more agricultural goods from the u.s.. that something president trump said they had agreed to. it looks like they are making progress. question is how much and will it be enough? no timetable put on making a deal china wants this to move forward. at the numbers about slowing growth. for presidentive trump. his reelection campaign is heating up. to be able to say he made a deal with china would give him something significant to run on area -- on. paul: let's talk about another trade dispute. president moon said japan's move
against korea could backfire. >> there is this increasing japann between korea and over what japan is intending to do with export controls that could hit the semiconductor industry. prime minister abe says this is not about ongoing tensions. it's an economic mention -- measure to make sure south korea does not feel its technology and competitiveness. president moon says it is about more than that. he said it could backfire and hurt them. paul: asian stocks are off to a mixed start. investors look for the next
catalyst. let's go to sarah lien., eastspring investment client portfolio manager. thanks for joining us. and i you like em and asian equities. that analyst expectations in asia are tailing to the expectations for the u.s., the blue line. asia, slightlyis less encouraging. emuess when you say you like and asian equities, you are being selective. that's right. we are very selective in what we own. the asian markets have done well this year. they have not done as well as the u.s. markets. the u.s. markets, the estimates have been higher and earnings have met expectations, more so in the u.s. than the asian and em equity markets.
if you look at factors, the market has been led by factors such as quality and growth and we havetility, yield, seen tremendous upside in many ways and many of these areas. if the sentiment improves and there is an agreement on trade. we think the underlying businesses are strong and sustainable. paul: we will take a look at another chart here. this is the philippines. stocks reentering a bull market. how much criticism would you put at the door of the central government there or are there other factors at play driving this? sarah: we are underweight in the
our asian equity and low volatility strategy. we prefer other markets like singapore, thailand, we also like china. we are very selective. indiae gone overweight in from being underweight. the philippines is a small market. we invest across 13 different markets. liquidity and market cap, we are focusing elsewhere. shery: we have other seen markets in asia around record highs. are there any records you -- any you have started to take profits from? sarah: in australia has been the primary market where we have rotated out of the names that i been well down there. the australian market is one of the best-performing markets in the region. likewise, thailand has done
well. we will take some profit in singapore. we have been active in singapore. the banks in singapore, we have put more money into the banks, because they have sold off on issues of trade and they are active in trade finance. when you thing about manufacturing shifting from china and other parts of southeast asia, who is best clients isank those in singapore. we are looking at opportunities like that and maybe there are some pockets being overlooked by the market where we can find good ideas and dividend yield. shery: can you still find value in china that has already entered a bull market and we are seeing this economic slowdown taking shape. sarah: if you look at the consumer segment, these are
domestically driven names. if you look at the auto sector, that has been week. we have seen opportunities there. gaining, the macau stocks. there are packed -- pockets. we were overweight on chinese banks. they are big liquid names and very important. we have been actively changing our positioning there. we still think there is good upside in the chinese banks. they are trading below value. growth is slowing. the economy is growing at 6%. there are opportunities. you have to be very selective. what are your thoughts on the china tech board starting next week? the planetary alignment in terms of the trade wars and tech wars does not look encouraging. expecting?u sarah: it's really exciting, the
star board. among retail investors, these 25 stocks were 2500 times oversubscribed by individuals and 300 times oversubscribed from institutions. plenty of interest there. we tend to be more conservative, not into the raciest ideas out there. we like things to bed down and have a track record. it's not something where we are jumping in right away. it is something very exciting and something to watch. any opening up of the chinese economy is welcome. shery: good to talk to you. sarah lien, eastspring investment client portfolio manager. plenty more to come on "daybreak: asia. this is bloomberg. ♪
paul: let's get a quick check of the night's business flash headlines. holdings unit in new york will pay back $25 million after the failed to supervise traders who were negotiating sales at mortgage securities. they say they misled investors about the prophets the traders would receive. fine worthlso pay a $1.5 million. citigroup says they will continue to focus on cost cutting, despite managing to save more money than analysts expected in the first half, beating consensus of fixed-income trading and earnings-per-share. it was not all easy. by 10%. fell all that's big competitors report their earnings later this week. shery: rio tinto says the underground expansion of its giant copper and gold mine in
mongolia could cost an additional $1.9 billion. that comes as the world's number two iron ore miner kept it's for your guidance unchanged after shipping more iron ore than expected in a second quarter. let's go to david stringer. give us a picture of the cost and delays here. what we have heard this morning is more detail around some of the problems they have been experiencing. a real keith -- key growth project in copper. a huge mine in mongolia as you said. 80 --y go to expand this, under the mine is where 80% of the wealth is located. they found more difficult ground conditions when they got there. what they told us this morning is that that -- they will be higher costs.
to $7.2 billion. this project will be delayed. we could be looking at a 30 month delay. that means that first production from this underground expansion would not come online until the middle of 2023. paul:paul: when is the picture going to clarify for them on how bad the problems are? one other potential downside risks might be lurking? -- what other potential downside risks might be lurking? david: that's the key question. it looks like there is potential. heard were preliminary estimates. a lot of studies and things to do. estimate have a firm by the end of next year. david stringer in melbourne.
australia. oil production numbers for the second quarter. production up 6.9 million barrels of oil. that is up 28% year on year. to $777lf revenue is up million. they say they are working closely on lng expansion. second-quarter revenue was doing at $78 million. that is down 5% on quarter. oil search shares are leaker by
-- weaker by 9%. -- .9%. let's get our first word news. >> the british pound is at its weakest ever july level. it's hitting a two-year low against the dollar. it could weaken further with consistent falls against the dollar and euro in august in recent years. weaken aswill also the u.k. conservative party chooses a new leader with a no deal brexit still a possibility. steven mnuchin says his administration has "very serious about facebook's cryptocurrency. it is already faced criticism. he says it is a national security issue. the two top been working on the
failed budweiser asia ipo are said to have missed out on millions of dollars in seed. they said morgan stanley would have split the cash if it had not been banned at the lot -- canned at the last moment. china says it will impose sanctions against american companies involved in potential u.s. arms sales to taiwan. the deal could be worth $2 billion and include abrams tanks and air defense weapons. china says it is deeply concerned about the possible deal and has urged the u.s. to call it off. have found ae missile seized from a neo-nazi party. they found a huge stash of automatic weapons and nazi memorabilia. an investigation
of italians who took part in a russian backed insurgency in the ukraine. 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. this is bloomberg. ♪ paul: let's check in on how the markets are doing with for cameras. sophie: asian stocks are trading. it's looking steady this morning. japanese stocks are on the retreat. for -- .4%.25 is the kospi is seeing gains. samsung had to gains. flirting with is
the 1180 handle. you have the kiwi dollar continuing to be an upper former , up .2%. kiwi bondsising -- rising. let's look at stock movers in tokyo. i want to highlight an tg, aning 12.3% and falling to all-time low after they forecasted a surprise annual loss. the company has to correct its earnings reports on the finding of an accounting probe. pharma gaining ground in tokyo. it missed estimates but investors gave the stoxx a thumbs up today. shery: taking a look at the philippines from one of the world's worst markets last year. stoxx in manila have broken into a bull run, rallying 22% from a
november low. we are joined from singapore. year?as changed from last >> we are seeing a big turnaround in the stoxx market area -- stock market. the bull run is being driven by a combination of factors. one thing analysts are pointing to is the earnings outlook. they expect better earnings in a second quarter than the first quarter. cooling inflation also helps. the information has floated to the lowest in two years. that is making room for more rate cuts from the central bank. the currency has been strong. it's the fourth strongest courtesy in asia this year. that has given investors confidence, which is led to an inflow of $400 million -- has led to an inflow of $400
million. shery: what are some individual standouts? >> if you look at the top requested.r the i two of the for our real estate developers. we are talking about mega world and robinson's land. they have gained more than 30% this year. if you look at a measure that looks at the philippines property stocks, that gage has gained 24% this year, beating the broader index gain of 12%. that's because of strong demand for office space in the philippines. becoming acreasingly gaming destination. a lot of offshore gaming operators are looking for office space in the philippines. paul: how is the outlook?
can it last? according to analysts, the momentum is strong, propelled by better earnings and a potential rate cuts. is axample i will share company called sm prime holdings. it's the largest shopping mall operator in the country. it has reported earnings growth of 16% year on year. it's considered one of the bellwethers for corporate earnings in the philippines. it bodes well for the rest to follow. paul: asia stocks team leader in singapore. icbc international associate vicky wu joins us to talk about alibaba. the outlook for the tech giant
sydney. shery: the quickest flash of the business flash headlines. buyer is facing a fine of its roundup weed killer by two thirds. a san francisco jury had imposed more than $80 million in penalties after claims that roundup causes cancer. it was cut to 25 million, with the judge saying unitive damages shouldn't be more than nine times bigger than compensatory damages. the judge rejected buyer's request for new trial. paul: spacex says a leaky valve needs a redesign, making it much
harder to fly astronauts this year. they were contracted to flight nasa astronauts to and from the international space station, but an explosion during testing in april destroys one of the companies dragon capsules and was a setback to send humans into orbit without relying on russian rockets. shery: they same crime doesn't pay, but investing and fighting cybercrime does. one of the best funds in japan focus on -- focuses on upcoming u.s. tech stocks that are doing just that. mitsubishi cybersecurity fund has returned 37% this year, eating all of its competitors. the cybersecurity market will grow 80% by 2023. paul: in asian food giant may be delivering the biggest chinese ipo of the year as it looks to raise $2 billion by selling a 10% stake in its company in
china. the get more than half of its revenue from the unit. toy want to use the proceeds fund new products in china. proposed a 128 shares sale thata stock could be hong kong's largest since 2010. alibaba is a possible $10 billion listing. joining us is vicky wu, senior research analyst at icbc international research. is this alibaba ipo going to be to hong kong? the market does not have the confirmation on this. alibaba, a majority of its income comes from domestic markets.
investors chinese have little access to the u.s. capitol market. true,s listing comes alibaba can get closer to its domestic investors and they have about -- more diversified shareholder structure. believe that, we it's a good thing for the company. mainland china investors can potentially participate in this stock trading. paul: what is a reasonable fundraising target to expect for that hong kong ipo? it was reported $10 billion last month. what is your expectation? they haven't confirmed this, and there is a potential
listing on the hong kong markets, but we believe the more capital the company has, they have more flexibility in the with investment and acquisitions. a capital raising, we ,elieve a company will focus first one is couple entry to the business strategy to solidify the market for this core business and tap into new markets. the second one is the new and -- in identifying trends that makes it competitive in the long-term. seen techfar, we have listings around the world and they are now trading below their
offer prices. what are the chances that happens to alibaba in hong kong as well? vicky: i think it's a different case. if they want to list on the hong kong market, it will be a secretary -- secondary listing. the u.s. current trading stock price will set the standard for the potential listing. at this stage, we think we are optimistic for the outlook of alibaba is there one of the most comprehensive in the industry. shery:shery: it's interesting you're calling it an ecosystem, not in e-commerce giant. why do you think this is a different concept for alibaba now? e-commerce still accounts
for the majority of their income. approximately 85% of their total revenue. alibaba has invested heavily into their new initiatives. in the long-term, we expect the company will become integrated -- and integrated consumption platform for consumers and provide both material and spiritual consumption to those users. it also empowers the merchants and retailers with digital solutions and advanced technologies. evolved the company has
to a digital economy. shery: what does it say about its existing average -- active users on the platform? are we seeing stalling on those numbers as they mature, or is there potential for active consumers to grow? vicky: we still see plenty of potential of the e-commerce business. we think the most important penetrationfurther into the lower generation. there are so many users that have never used in e-commerce business before. there will be a huge market for alibaba to tap into. user of increase of the connecting the less developed areas of china, we believe
consumers in these areas would be a crucial driver to their future growth. have: how much does it alibaba to have a listing in hong kong, especially when we see these continue to trade tensions? tensions?ed trade vicky: i think the hong kong market is still a very to chineseplace companies as it has introduced therules for ipo's such as way that voting rights are structured. hopefully it attracts alibaba and listings in u.s. markets. markets still
attractive, as we still see a lot of companies in the pipeline of the ipo's to the u.s. market. shery: there was some speculation that perhaps listing in hong kong -- hong kong would be beneficial as they could draw cash away from competitors like maite juan and tencent. is that something you are considering? vicky: in the long term, if does get into the capital market, it will attract more capital into the hong kong market. it makes you think there will be a win-win situation at this stage. vicky: sarah lien, eastspring investment client portfolio manager --shery: sarah lien, eastspring investment client portfolio manager. we will speak exclusively to the acting director of the imf.
david lipton joined us at 5:00 hong kong time. if you missed any of the conversations we have throughout our shows, tv is your function. you can watch us live and catch up on past interviews. you can dive into securities and bloomberg functions. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪
becamethe retailer rugae one of japan's most recognized book of rands by selling simple, practical items. they reported a decline in upper and profits for the first time in eight years and a financial outlet below expectations. joining us is rachel chang. i am surprised to see that they are struggling. the just opened a new branch across the street from our studios here in new york. what are the problems for them? they are struggling, although it has done very well to be one of the most recognizable japanese brands. one of the things it is struggling with is in japan it is known as being a low cost, quality lifestyle option. but because of the extra taxes,
some of the things around the world are much more expensive. india,ets like china and they are prices the middle class finds at the higher end. it has lost a lot of that everyday consumer demand to lower cost variance that find it -- brands that find it easy to copy that design. i have seen some chinese brands that looks similar. however the tweaking their strategy and -- in china? been struggling in china and that is an important market for them. they haven't paid attention to trends in china. it took them 10 years to get bedsheets that fit a chinese bed. there were just selling them from japan. other competitors have come in with the same aesthetic and a fraction of the cost. facingy are pivoting to that. they opened a development optics
-- office in china for the first time. they've made an effort to push down their prices to be more competitive. shery: what do we know about their products? are they being internationalized? what's going on in their product line? >> they are shifting from a strategy of japanese designs made for japanese consumers to looking at individual markets and moving manufacturing out of japan to keep prices low. they will roll to hundred made in india products for the indian market and the similar -- a similar thing in china. it will be attracted because people do love the idea of walking in and finding wrapping -- random japanese things. this will be a balancing act they will have to do if they want to remain competitive.
thank you so much. let's get a preview of what to watch in markets later. sophie: chinese banks are on watch after the pboc urged the lenders to -- boost lengths of the educational, medical and housing sectors, especially in poverty-stricken areas. need to ramp up stimulus in the wake of the gdp data yesterday which highlighted june activity numbers that indicated signs of stabilization for the chinese economy. beijing land some technology faced scrutiny after said it was profitable in the first half. that parted morgan stanley to cut the stock to equal weight as the brokerage does see competition rising in china's
-- laser machining industry. this chinese medicine maker offered a negative profit guidance which saw the stock plunged by 10%. low.lt to a december 2014 see itc trimmed its price target . in our head, we are walking out for rba meeting minutes. a large focus for central banks. shery: thank you, sophie. we have some lines crossing in tokyo. we are hearing from their trade minister in japan speaking about the japan-south korea trade spat, saying there has been sufficient explanation given to south korea on trade, that tokyo will respond on an official level to any south korean queries.
we have seen officials from both sides speaking last week for hours. curve put oned the their exports when it comes to south korea, the beginning of the month. now that session ran for a long time. we are getting the latest from tokyo on that. let's check our markets are trading. japan's nikkei is coming back from the marine day holiday down .1%. the cost be losing .1%. doing much.and asian stocks under pressure overall. that is it from "daybreak: asia. go china open is next. hey! i'm bill slowsky jr.,
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>> it is 9:00 a.m. in beijing, shanghai, and singapore. welcome to bloomberg markets "china open." >> we are counting down to the open of trade. >> let's get your top stories. trade talks look back on track. the team may go to beijing for face-to-face negotiations if calls this week go out. >> that improvement in relations maybe derailed. china warns of sanctions if the u.s. sells weapons to taiwan. writing to the rescue. --baba's plan for listing