tv Bloomberg Markets Asia Bloomberg July 18, 2019 10:00pm-11:00pm EDT
it is going to be a big next two days for japan. abe upping his ig game. out -- the ever decreasing part of the democratic profile in japan. earnings is a big when the next two days buffer today, it is the fed. green across the board. yvonne: risk rally coming through today. it was the number two, number three, clarida and john williams from the new york fed talking about needing to do more prevention. they said central banks should act quickly when they see signs of troubles. the new york fed had to say that is not really signaling anything. don't put too much truth into it but markets, taking off. recovering losses we saw yesterday, up 1.5%. taiwan, having a good one.
here in hong kong, we are close to 300 points up at the get-go. dollar on the back foot. we saw one of the biggest drops for the dollar after those comments from steve mnuchin when it came to the fact the u.s. may be keeping its fx policy as for now. those three words dropped the dollar, although we are paring back a little in the asian session. the japanese yen, still seeing weakness. lows approaching the 2019 when it comes to the yen. commodities, copper in focus. up 2% on fed comments. when it comes to the bond market, we are watching yields tumble lower. south korea, 30 year down close to 10 basis points. a surprise cut from the be ok yesterday. inflationown on their forecasts and we saw a moving treasuries overnight. in the u.s. 10 year after the comments from clarida and john
u.s. futures, continued gains after the turnaround on some fed comments. the euro, we are paring off a little. mnuchin.spike from 1.12 and gold rising on the fed comments. david: what else are we tracking? obviously, the fed in terms of where expectations are for the fed cuts. look at this bloomberg chart. is back in the conversation. you take the spread between the blue and the white line, about 40 basis points. you can almost look at a headline and say we are looking at that. get a cut we will hopefully as far as market expectations are concerned.
yvonne: let's look at the first word news. reports from washington suggest trade talks are moving back on track. the u.s. trade representative's office confirms officials from both sides spoke on the phone in the last few hours but offered no more details. robert lighthizer and steven mnuchin and spoke to their opposite members. steve mnuchin had said if initial phone contacts go well, the team could fly to beijing for face-to-face talks. china has strongly criticized the european parliament for tabling resolution on the political situation in hong kong. brussels is set to debate a motion that would call for complete withdrawal of hong kong 's controversial extradition bill. it denied the hong kong government axis to tell it -- technologies could violate human rights. china said they would not allow any country to interfere. disappointedply
and sternly opposed the action. we think good relations are important but it replies -- requires common efforts on both sides. we hope the eu side can honor its commitment on relations with china. relations between the u.s. and iran have been further strained by the seizure of a tanker in the gulf and the shooting down of an iranian drone. iran says the ship was halted because it was suspected of smuggling oil. it happened sunday but pictures have just been released. washington is demanding its release and said it destroyed and iranian drone threatening u.s. warship. >> the boxer took defensive action against an iranian drone which had closed into a very near distance, approximately 1000 yards. ignoring multiple calls to stand down, and was threatening the safety of the ship and the ship's crew.
the drone was immediately destroyed. south korea is bracing for the arrival of a typhoon, expected to roll straight across an island before moving onto the mainland. a recorded winds up to 90 kilometers per hour as it passed taiwan. the government has lifted its land warning as the storm passed without any major damage. global news 24 hours a day, powered by more than 2700 journalists and analysts in more .han 120 countries david: we've got to talk about the fed. market wise, it is clearly having an influence across markets. support for a rate cut is your story, appearing to keep the building at the fed's number two and number three policymakers weighing in on the forces that drive decisions in theory and in practice. to kathleens get
hays, here with remarks from new york's john williams and the fed chairman -- vice fed chairman richard clarida. let's start with williams because the speech moved markets and the whole team came out and said it is not a signal. what does it all mean? that is the question of. practice. that is the idea -- theory and practice. williams is talking about living life in the zero bound. here is what he has learned about policy. around the did say zero lower bound and at 2.5% on the key rate, not far from zero, the lesson is you have to take swift action. you cannot wait to move when it looks like things are weakening. in his speech, there is no advantage to keeping your powder dry. is anyone surprised the market paid attention to this? especially at the shorthand. the 2-year note.
seene forecast data, we've acting off of the idea maybe a rate cut, but look at this. the 2-year note was up five days ago. it has recovered a little now but what a move. did markets get ahead of themselves? i don't know. let's see what a spokesperson said after the market move. this is an academic speech on 20 years of research and was not about potential policy actions at the upcoming fomc meeting. he was not saying the fed will cut rates, not even how he would vote but making his case for swift action certainly helps set the stage for this debate some think it was sense of where john williams might be coming from. itid: richard clarida, wasn't long we were talking about the fed being patient. now perhaps being too patient might be a problem.
kathleen: when the facts change, i change my mind. what do you do, sir? in interview, he was asked about -- because the data has been stronger lately, do you need to cut rates? some market people have pushed back but he says you can't wait until the economy is stumbling to cut rates because you need to keep the economy on an even keel. wait untileed to things get so bad to have a dramatic series of rate cuts. we need to make a decision based on where we think the economy may be heading and where the rest of the economy are lined up. this is heartening to the idea that you only have so much ammo. are almost pricing in a 50 basis point cut at the july meeting. that might be too aggressive but we will know july 31. yvonne: we're watching moves in dollar after the comments of steve mnuchin, perhaps a failed
threat of currency market intervention. is there a likelihood this could happen? kathleen: people are talking about it more seriously and we will see. the question of china inflating its currency and questions about the yuan weakening. the big thing lately was when mario draghi came out and suggested they could provide more stimulus. donald trump complained about it the same day. it has put the spotlight on this now. chantilly, france, asked by supporters about a move toward currency market intervention. he said they could consider it but there is no intervention coming as of now. three little words that made it sounds like gee, it could happen later. he would not comment on the levels of the dollar. he steered third of that one but president trump is worried. goldman sachs has said they see the risk of currency intervention rising. pimco says they can't rule out a full-blown currency war.
bloomberg news reporting that people familiar with a matter in the white house say this is being looked at but a deliberately weakening the dollar strategy will only work if the federal reserve is on board and that opens another can of worms. we have to get through the july meeting before we look at that. yvonne: kathleen hays, thank you. joining us now is jpmorgan asset management global multi-asset data just -- strategist. marking the 50th anniversary of the moon landing, we will tie it to the fed. what will happen at the end of the men -- month? a small step for a giant leap like 50 basis points? >> i like what you are doing. we are in the small step camp at this point. yvonne: how so? we heard the comments from
clarida and williams, it sounded like they were willing to take a step further. >> one thing you have to realize are reassessing about how they think about their policy framework and that makes it for us in the market that much harder to predict what they are going to do themselves. you can see it doesn't always play well with the communications, as we saw overnight but i think at the moment, it is more about risk that isnt for them and clear, rather than the actual view of the economy. we've seen the u.s. economic data bouncing back in the last week or two. about managing the downside risk from trade and there is clearly a dichotomy between the u.s. economy, which seems to be in decent strength, and the rest of the world, much of em asia which seems to be
struggling more. they are looking at their own economy, worrying is this going to feed into the u.s. but actually, the run forecast don't seem bearish. david: do markets selloff if we don't get basic 50 basis points? patrik: it is a good question. i don't think so. if we don't get a cut, markets will probably have a bad reaction. cut 25 andey will probably cut another 25 maybe in september. the moment they will do much more than that. to the extent some market participants are betting on further cuts to drive assets higher. that might be starting to get tricky if people are basing their view on getting a big series of cuts. i think that is where the disappointment lies. to get that, you would need to see a much bigger deterioration
in the u.s. economy in particular and markets would like that. to get to a series of four or five cuts, i think risk assets will have to take a leg lower first. yvonne: once we get the encourag -- insurance, is there room for risk assets to outperform? what do you buy? do you buy the steepeners? patrik: that is the question to ask at the moment. seen in riskreally assets is this tug-of-war between worsening fundamentals. why, butts forecast is you are seeing earnings forecasts deteriorate again. and at the same time, people are chasing of the valuation on the view that you will get fed cuts. -- hopefully the earnings season will give us a
little more information to resolve it because make no mistake, the u.s. is now looking at two, maybe 2.5% earnings growth. that is not a whole lot. if that goes negative, it changes the conversation. david: is that a key risk, the fact you have those two dynamics? expectations of a rate cut will make stocks cheaper but then you have the earnings downgrades that should make them look expensive. where do you think valuations are at the moment and is that a key risk? -- or wehe tricky bit are skeptical, and as i have said on this program, we have been neutral and we are getting more positive on equities but given trade risks weren't willing to go all in. now as we see equities rallying on worsening fundamentals we are getting more worried. about that outlook. these interest rates, if you fully buy into the argument that low interest rates on a discounted cash flow basis makes
stocks cheap, they are cheaper interest rates. that would justify the pf 25. i actually don't think that should be the key driver and also, bearing in mind if you are worried about the downside risk to the u.s. economy, 50 basis points even, it is not going to rescue the economy if the headwinds are serious from trade and economists like to say monetary policy works with long and variable lags. even if you get a rate cut now come you might see the impact over the next year. yvonne: we have more from patrik schowitz in just a moment. policy, shinzoar abe looks set to win sunday's upper house elections hands-down. also this hour, talking
david: welcome back. stocks are rising across the region. 1.5% on the benchmark. still with us is patrik schowitz out of jpmorgan asset management. on your suggestion, a breakdown of the sbx sector. why are we looking at this? said, the i just earnings season is going to be quite pivotal to the outlook for stocks and it is less about what is happening in q2. the consensus is slightly negative. companies always beat their own forecasts so you are probably looking at slightly positive
forecast but this is not the thing that matters. what markets are pricing is a bigger acceleration in growth, q4 and into next year. really about the outlook we are getting companies and what they are saying about q2. we are already seeing a more mixed picture on company statements. it has not been uniformly negative, but we've had a lot of worried companies. the point about the breakdown charges people have to remember the stock market is not the economy. the stock market is overexposed to the parts of the economy that are in trouble at the moment. the tech war and worries about the supply chain, international trade, manufacturing. the things that are doing better are consumer and the service areas where the stock market is underweight. that is another crosscurrents. if interest rates are not going down as much as some people
would wish because the economy is ok. parts of theis the economy that are not represented in the stock market that are ok. that is an important thing. yvonne: what are you gleaning from these earnings call right now? are you looking into -- what are you looking at in terms of what could paint the picture for the second half? do i have to look at inventory, margins? how far down the earnings rules else do you have to look at it -- results do you have to look at? patrik: you have to look at what companies are telling you about activity levels and demand going forward. point is the market is pricing a rebound this year into next year. our statements are supporting that but it has been mixed so far. we are 10% key and through the earnings season so it is early to be definitive, but at this point we've had more
worried outlooks from companies the normal. maybe they want a kitchen sink. there is always that incentive. david: what is a hedge against all of this? is it a stock market that is not tilted toward cyclical? is it cash? patrik: it is two things for us. we like credits throughout all of this. the economy may not be booming but it is ok, in this environment carry and credit assets look like a safe way to take risk. thinking about markets, the one we like is the u.k. if you want something that isn't geared toward that and it is a pretty simple story. it is the one market in the world where forecasts are going up, literally the only one. it is basically a weak sterling and at the end of the
day, the ftse isn't particularly related to the u.k. economy. the ftse is 80% exports so brexit damages to the u.k. economy is a secondary concern. yvonne: great to have your thoughts today. patrik schowitz, jpmorgan asset management global multi-asset data strategist joining us in hong kong. david: plenty more ahead and we will wrap up what happened in japan next. this is bloomberg. ♪
strategic initiatives. goldman call is currently the on the stock.ll yvonne: considering asset sales after the sell listing of its asian unit in hong kong. wasbudweiser brewing offer -- and now to cut debt. acquisitions of hundred and only have left ab inbev 100 billion while global beer consumption is slowing. david: microsoft gaining in extended trade as part of the sales topping estimates. the growth is thanks to strengthen its cloud computing business. software.ce revenue jumped by more than one third and profit margins widened by 65%. shares have surged this year on optimism over that cloud
business. yvonne: we will take a look at japanese markets before the lunch break. we talked about the bad session yesterday, seemed like we have come back in a big way today, up 1.8% for the topix and nikkei gaining. japanese yen, poised for the lows of this year. yields taking lower by one basis point for your 10 year jgb. david: the other side of that is gold and because of that, there we go. bling is that. flashback friday for you carried a lot of gold from china into australia, seeing a lot more gains. 14.45 announce, back to levels of 2013. when you look at markets, it is summer and this week has been very an eventful. volumes, granted there is one day left, today. on track for a weak volume week.
12:2929 in hong kong and in sydney. these are your first word headlines. the fed is sending more signals it will cut rates this month with two top officials talking about action sooner rather than later. and fed vice chairman richard clarida said policymakers must not wait until it is too late. the fed is expected to cut rates 25 basis points at the end of the month but the opinion is divided with some calls for a 50 point reduction and others for at all. the u.k. is being warned it faces "rigorous assessment of regulation" before financial firms are allowed to do business
with the eu after brexit. the european commission will layout its view of the equivalent system which allows financial companies to operate in the bloc only if domestic regulations are deemed tough enough. the eu draft will be presented in brussels later this month. china's coal industry groups as the government is going to restrict imports in the second half, keeping shipments at similar levels to 2018. the china national coal association says the halt at mainland ports is because imports have exceeded quotas in the first six months of the year. it also says overseas orders will decline because domestic demand for coal is faltering. exports of gold from switzerland have fallen to a record low as major global buyers balk at high prices. shipments from europe's major refiners slumped to the lowest levels since two 111 due to smaller orders from india and china. has lifted local prices doing you hiding india
and the slump indicates demand is slowing after gold hit a six-year high. japan's deadliest fire in two decades has killed 33 people at an animation studio in kyoto. 36 more are being treated for injuries in a hospital. police say a man screamed as he burst into the building throwing flammable liquid and setting it alight. a man was captured by studio staff and was taken to the hospital. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. 00 journalists and analysts i'm selina wang. this is bloomberg. yvonne: japan is heading for elections this sunday and a vote seen as crucial to prime minister shinzo abe cough plans to change the nation's pacifist constitution. are up for grabs and the ruling coalition needs to have 53 of them to its current tally to secure a majority.
a sixth straight win any national election would reinforce the party's status as japan's undisputed ruling political force. it would also cement abe's legacy. longest-serving pm if he wins. david: sunday's vote, seen as a verdict on some of his policies with the opposition claiming he has failed to deliver widespread prosperity. the electrical -- electorate is fairly divided on the sales tax. has beencurity reform cited in polls as the most important issue this time around. constitutional changes among the hotly contested items. an antiwar provision has been one of abe's central policy goals. let's head to tokyo and our government reporter is with us to talk about what we should expect.
it is a crucial election, but in a lot of ways, it is also a given what will happen. we know what direction it is going to go. why does this matter? ahn: this is a referendum, national over abe, the only when in japan this year. there are key policies that will be up to the public to decide. things like the sales tax, keeping the pension fiscally sound. while there is opposition among seemsblic to these, it like the opposition parties in and of themselves haven't been able to sway the voters to show they are the proper people to push forward with these possible -- policies. abe is seen as a steady hand guiding the economy and while they may not -- the polling shows they may not have the overall support of the voters on
specific issues, when it comes to trust for guiding the economy, the ldp seems to have the majority -- support it needs to keep going forward and when this upper house election. it are he has control of the more powerful lower house. we are just going to see a consolidation of abe's power. it is a question of how much the gains will be for the ldp and abe sunday. yvonne: even ldp members themselves have admitted the lock of opposition -- lack of opposition from other parties is unhealthy. if japan is headed for a one-party rule, essentially, is that good or bad for japan? it's good to have parties stipulate each other's heels in democracies because the parties are more accountable to the people.
the ldp has been in power pretty much since it was formed in 1955. although four years. four years. when the public felt it was out of touch with reality a decade ago, the democratic party of japan came forward and addressed some things the public felt were lacking. without that accountability or he did opposition, sometimes some of these concerns don't make their way to the ruling group. democracy, it can be seen as being healthy to have two rival parties pressing to get public support for policies which will advance the agenda. so far, for the majority of japan's postwar time, it has been the ldp. david: we have a graphic on our screens of japan's demographic disaster. the reason we have this up as we uppingeen recent -- abe
his game on instagram trying to reach out to young voters. how much has it helped because that bloc of voters is an ever receding part of the population pie? jon: exactly. japan is the world's most agist society but younger voters in japan tends to skew conservative. instagram assh on a way to keep this base of young voters placated and on board with the ldp and hopefully keep ldp voters throughout the rest of their lives. chilean -- box of japan's electorate is older voters but when you have this voters whonger theort the ldp, it behooves
party to keep them placated, base.hem as part of the yvonne: thank you. our asia government reporter joining us out of tokyo. the next guest says an ldp victory is certain. cio joins us from tokyo and always great to have you. seems like this is a done deal, but does it matter for investors? why should markets pay attention this weekend? >> good morning. thanks for having me back on the show. we agreed is a done deal there is an ldp victory that will happen. it is not an unimportant election. we think you can learn a lot by the degree of victory, and what happens. what are the what happens things
investors should be thinking about? is there going to be a cabinet reshuffle? if there is not enough -- the margin for victory is not as high as the ldp would like, do we show this discussion about changes to the constitution and move on to other matters? there will be impact. the impact will not be the ldp loses control of the upper house. direction for policy will be determined by the margin of victory. david: does it concern you as an investor? event was -- yvonne was talking about a lack of opposition as to whether the policies that have been put in place are the right ones? yes, you have a bigger mandate but what is the mandate? why what happens after the election will be very important. are there changes to the cabinet?
will the composition change because the ldp doesn't have opposition but that doesn't mean that within the ldp there aren't different views on what the top three priorities once you receive or we received this mandate through an upper house election. isthe way, the positioning already who is going to be the next prime minister after abe when he is done? now more than likely, it will be the beginning of the jockeying for position and we will start to see some disclosure on who abe puts in what positions in the cabinet to potentially pave the way for his successor. yvonne: let's talk more about the markets, especially if we do see this sales tax hike in october. we have been talking about it for years now. what does that mean for markets? does that put a cap on any gains we will see?
thethat is our debate into pie. the market expects this and we expect it to be done for a long time. to 10%ectation is you go and for the next 10 years, nothing else will happen and we have moved on from that issue. businesses are prepared for the change. it will happen and so it is baked in. i think it is going to be interesting to see what happens in other policy areas. risingow, you see japan-korea conflict that is primarily political but having significant economic impact. if the situation worsens, there will be winners and losers. ultimate be the direction of the u.s.-china trade policy and how their very dramatically affects certain parts of the japanese economy. it is a given it will have an effect. what is the degree and where as an investor do you want to be
getting along or getting short? there will be losers, as well, going forward. david: japan has been a loser this year in terms of comparing how returns have been for the topix index versus regional and global peers. you also mentioned part of the policy mixes the japanese currency, 1.13 on the weekend -- weak and. is there potential comeback for japanese equities and do they need to tweak the currency policy if they can? ed: great question because it ties into interest rates and boj policy. we do not expect boj policy to be changing anytime soon, to be clear on that. what is the federal reserve going to do? i think there are going to be things impacting the u.s. dollar-yen exchange rate that
will be outside of the control of the japanese government, the japanese central bank and emily: -- i think in general, central bank cooperation is declining. it is probably more publicized how poorly governments are cooperating. the u.s. government and a variety of treaties and international organizations have been challenged in their decision-making processes recently. the banks were fairly good and coordinate it and maybe did a better job in the national but we are entering a. bank where it is more every man for himself so you will see detergents of policy goals and more potentially nationalistic, leading to a greater choppiness in the foreign exchange market. david: quickly, your top investment calls. top traits for japan right now. for japan, the hospitality
space, tourism industry. everything that impacts around that. hotels do micro calls on are certain sectors but japan is clean, safe, and open for business with tourists these days. ed rogers, cio of rogers investment joining us out of tokyo. boeing takes a hit over the ground of greece -- 737 max 8. details next. this is bloomberg. ♪
reporter. >> this money they have set aside is for their customers. it is to basically covers some of the costs that the airlines have to incur by grounding the 737 max 8's as well as substituting it with new aircraft because of the grounding. this is basically for the customers. yvonne: the company still thinks they may be able to lift the grounding of the 737 max by year end. does that change boeing's strategy going forward or do they need to take more of these charges in the near term? well, it is probably on a capable for them to have to set aside a bit more over the next given aside from this cost they have to cover for the customers, they also have legal
losses that they have to also tackle. i wouldn't be surprised to see if they do come out with more in the coming quarters. yvonne: our transport reporter, joining us out of singapore. the latest business flash headlines, one of the world's most famous casinos may be up for grabs. mgm resorts are exploring the sale and lease of some of its iconic properties including the bellagio, a favorite of frank sinatra. mgm is the largest casino operator in las vegas and we are pulled working with an advisor to was -- solicit interest from potential buyers. u.s. shares rose in extended trading on the news. let's look at morgan stanley, losing ground on wall street. the biggest stock trading shop in the united states posting a 14.14 drop. it led to the steepest his -- to -- decline and
offset an overhaul in revenue. yvonne: chinese importer of liquid petroleum is weighing an ipo of its latest its unit in singapore. oriental energy is discussing a shares fell for the unit which is based in the city state. other exchanges are being considered including in hong kong. thants have risen more four-fold since 2014, underpinned by new plans to further -- turn the fuel into building blocks for plastics. david: we are down 90 points yesterday, up 40 points right now. we have a bond auction out of india today. yesterday,ep drop taking out 100 day support? or are we above that and what does it mean today? just about hovering around the 100 day moving average. will be thelow that
big next support level for the index. -- today and day the way markets are trading, you have to expect a bounce back from those levels. can't say the same about what has been happening in the market space because that looks slightly oversold at the moment and according to most experts, while the index moved up, you could see a bigger comeback from and theder markets nifty mid-cap. if you touch 30, you will be worse off in the region. besides that, big earnings could move on the index. yesterday, a stock beaten-down 13%. can expect a slight pickups for the banks as well, today. yvonne: reliance industry, next to report earnings. what does one expect? devina: this is a big one to
watch out for. they've come out with both their numbers, as well as the telecom business. so far, it has managed to somewhat stay stable. you are not seeing many cuts over the net -- last two days but expect revenue about 4% up. the other one we will be watching out for, numbers they between the promoters, weighing down on the sentiment of the stock. lastly, acc reported a stellar set of numbers yesterday. about 18.60. volumes have picked up, realize asian's -- realizations. expecting a big positive move. david: looking forward to the open.
it is really about the dollar and this two-day chart, telling you pretty much what you needed to know ever net -- overnight and the narrative into the morning. very weak dollar. have we reversed all of this? absolutely not. .5% down over two-days. a weakeris still for dollar leading into the fed, lifting commodity prices. yvonne: especially gold. despite all this talk about how it is running out of steam, we are seeing bull young edge higher. cap 1.5% over the last two days or so. david: 2013 highs is where we are. asia is up 1.5% overall equities. for gold, miners are up three or 4% and you see why. yvonne: battle of the charts, special edition coming up. this is bloomberg. ♪
featured at the bottom of your screen. ladies,e bring the two it is a bittersweet moment for us in hong kong and in asia because vivian is heading back to the great north in toronto. let's bring crystals to start crystal tottle -- start half the battle. >> since it is her last day, i will make a tiny tribute by theing about a chart, korean entertainment agency whose share price went above its rival. we worked on the story together and we had so much fun because concerts.
yvonne: i love that she brought back a memory with a chart. that is genius. david: what does it reference? sorry, my ignorance. >> the stock is surging. yvonne: we got to give her time, so go for it. only one whoe didn't get the reference but i am very touched, crystal. thank you so much. i wanted to talk about stocks today. this chart is relevant to today. it shows the ratio of short bets had risen to a record high. here, ande and scope t usually when it hits that kind
of a level, something good always happens after and right now, you are seeing that with the topix. it is soaring today, more than 1.5% today. important tos press what is going on today. david: are you going to forget about us? >> never, never. yvonne: you'd better get those bubble jackets ready, because singapore to toronto will be a tough transition. david: congratulations and thank you for everything. crystal, next time. this is bloomberg. ♪
emily: hi. i am emily chang in san francisco, and this is "bloomberg technology." coming up in the next hour, microsoft defies gravity. the company beating expectations with a big lift from the cloud. plus, the congressman who says facebook's cryptocurrency libra "may do more to endanger america than 9/11." we will talk to california democrat brad sherman after