tv Bloomberg Daybreak Australia Bloomberg July 31, 2019 6:00pm-7:00pm EDT
paul: welcome to "daybreak australia." sophie: we are counting down to asia's major market opens. paul: the top stories we are covering in the next hour, the fed says today's rate cut does not mean the start of a new easing cycle. the president says jay powell has let the country down. the move sent wall street in months.e most
and trade talks go back on hold until september. no progress in shanghai, but washington says the brief meeting was constructive. break downr, we will qualcomm earnings and the challenges it is facing with bloomberg intelligence. first, let's get you started marketsheck of how closed this wednesday session. it was a down day across the board. every sector in the red. we had that 25 basis point cut from the federal reserve, but it was taken more as a hawkish cut with chair powell's comments. we saw significant pressure there. we have seen a roller coaster ride throughout the session. the s&p 500 did rebound a little bit when fed chair powell did not completely rule out further cuts. the nasdaq was down more than 1% and we continue to seek u.s. futures under pressure. 10-year yields were pressured for a fourth consecutive
session, although two-year yields jumped. not really yielding significant progress causal -- not really yielding significant progress, also dampening market sentiment. sophie: asian markets looking at a stop start to august with all major markets tracking lower led by india and south korea, and there may be more headwind for notan stocks, but japan showing signs of removing its neighbor from the white list. we have korean cpi and trade which may add to the case to continue easing. also a string of pmi data from across asia. from australia, we'll be getting hold and trade prices. hong kong will get a check on retail sales which may add to the gloomy outlook.
it is another busy day of earnings. paul: thanks very much for that. let's check in on the first word news now. sophie: trade talks will resume after meeting talks ended with no progress. u.s. farm produce technology transfer, ip rights, and bond very a spear white house issued a short statement saying the talks were -- the talks were constructive and that washington will host the next round. the people's daily newspaper rejected the president's earlier description. companies1600 offering guidance. 40% predicting fallen earnings from a year ago, the most in 2016 in terms of firms reporting smaller profits, or a swing into
a loss. warnings come from across the output after domestic expanded at its lowest pace after a record during the second quarter. street protests, the trade war, and the slowdown in china are all blame for growth in hong kong declining in the last quarter. gdp shrank .3% through june compared to forecasts of almost 1% growth. meanwhile, taiwan group faster than even the most bullish forecasts for the period. japan says it still aims to remove south korea from a list trusting export nations, projecting u.s. efforts to calm tensions between the countries. the government said the move is necessary for national security, although no date has been set for korea's removal from the so-called white list. u.s. secretary of state mike pompeo is to meet both sides in bangkok late this week. global news 24 hours a day on
air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. paul: thanks. let's get to our top story. as expected, the federal reserve made its first rate cut since didfinancial crisis, so why markets and the president reacts so badly? kathleen hays is here with what many see as a bit of a mixed message. kathleen: the fed delivered, basis pointat 25 cut, which is basically what markets had priced in. what markets are waiting for with more dovish signals from the fed chair and the fed policy statement, that this was the beginning of something bigger. jay powell at the press --ference characterize the it as insurance against downside
risk materializing. on the other hand, he did not say it is one and done. let's listen. is not theaid was it beginning of a long series of rate cuts. i did not say it is just one or anything like that. what you think about rate cutting cycles, they go on for a long time, and the committee is not seeing that. kathleen: another thing people was the emphasis has clearly turned to global risk, not so much to domestic economy, the growth, which is still there, the inflation miss, still below target. let's listen and read together one of the key statements. in light of the implication of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower the target range for the federal .unds rate also noteworthy, two fed rank
presidents were voters this year who have questioned the need for insurance rate cuts in the past dissented. they did not want to see a rate cut today. importantly as well, the federal built up s what happens if you continue to stop buying bonds as well, and he said once they are cutting rates, they will stop the balance sheet rolloff. they will officially end the qualitative tightening, so those moves are consistent. not as big of a signal is markets wanted, but the fed has made this basically historic step. yet, we saw markets go on a roller coaster ride. there was a lot of pushback from some seasoned wall street fed watchers, too, and also -- not surprising -- president trump. yes, our fed watcher, said critic in chief tweeted out after saying earlier in the week
that he wanted a big rate cut, but the fed let us down. he said growth would be stronger if the fed were on his side doing more rate cuts, but others pushed as well but not necessarily for the same reason as donald trump. an economist years ago at the richmond fed said the action was not warranted and paulo really powelled -- howell -- really struggled to explain. he said their take is that the fed was taking a policy action that is not clearly warranted or defensible and jerome powell struggled to find a defense of the action. the fomc clearly struggling from about downside growth. the press conference provided a compelling case that make cuts will address these issues in a significant fashion. in other words, how can you were
often deal with the impact of a global trade war by cutting rates? this is a question a lot of people have raised. sides, donaldmany trump got pushback -- excuse me, jay powell got pushback today. shery: kathleen hays in tokyo sticking around as we bring in a former fed official who has been on the front lines of crafting federal reserve policy. heard kathleen talk about all of this pushback against the fed. how the uss the fed's actions, given that we have a strong domestic economic environment, but also potential global ? adwinds >> i would say the action today was pretty much as expected. they cut 25 basis points like everybody wanted. i think the only little thing that was a bit different than in june, they said
they would closely monitor the situation. today, they just said they will monitor the situation. they took away the "closely," which typically means they will do something next time. maybe that is a signal that the next rate cut may not come in september. things are good, but there are downside risks that we need to be proactive. it's not the easiest thing to understand for laypeople or investors, but i think they have three quarters of a point there. shery: they actually said they would halt the balance sheet runoff earlier than expected,
something that president trump seemed to like. does that make a big difference? >> no, it does not make any difference. first of all, the first -- the difference between ending it now and ending up section for is --t a few billion dollars and they get now and ending up in september is just a few billion dollars. i think it is completely irrelevant. i think it is logical to do that. when you are easing, you don't want to tighten, but other than that, i do not think it is a big deal at all. great space of timber, probably the trade war is not over. there might be some negotiations getting more to that point, andumably the u.s. economy jobs and spending. what will spur the next rate cut? what should people be looking
for if the trade war gets worse and the economy continues on a reasonably solid track? >> sadly, i think we will have to watch speeches by key global officials. when the fed cuts that because data are bad but because of a subjective perception of risk, observers from the outside don't have a clear guidance post as to what will drive the next move. i think the best indication if the outlook continues like it is to what the fomc members have to say. i would think the reason they closely monitoring is because it probably got a little bit of pushback. i think it will be very interesting to watch the minutes
as well for some color on what really happened today. >> a lot more discussion about how the fed probably appropriately is taking a more global approach. you have a slowdown in europe that has been going on for a long time. how do you factor this in? we know the bank of japan seemed to really have their eye on the fed when they waited to see if the fed was as a dovish as they thought it would be and it wasn't. instead policy is evolving into now a more globalized -- is fed policy evolving into a more globalized stage? >> this time, it was probably more sensitive because the u.s. economy is more open and globalized, if you want, but .lso, there is more inflation
that allows the fed to pay attention to other factors that could affect u.s. growth, for example, so, obviously, as the global economy slows, the fed is concerned that slowdown could filter back at home. i think they have more room because of low inflation to look at the rest of the world. call: pretty miserable day on equities markets. the u.s. dollar rather counterintuitively rose. did jay powell make a mess of his communication efforts? say? t can we it is not the first time that jay powell does not communicate perfectly with the markets. will not be the last one, i'm afraid, so we need to get used to that. is that he problem he would say exactly many times said
before. instead, the market took it a little bit of friendly, so he could have used a little bit different words, but i'm afraid we need to get used to this. : we talked about some of the pushback he got within the fed in terms of those dissenters. havee other side, you president trump, much as we expected, firing off treats. to be fair to president trump, there were no all caps and just butone exclamation point, still, can we expect more efforts by the president to attack and undermine jay powell? >> of course you can expect that. is the president is doing number one putting pressure on .he fed also, i think what the president is doing is simply trying to blame the fed should something
inopportune time, like, for example, right before the next election. he does not want to be blamed for that. it is convenient to blame the fed. i think he will absolutely 100% continued to do that. i think it is politics, so another thing we need to get used to. paul: indeed. thank you very much for joining us today. can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can go to dayb . it's also available on mobile and the bloomberg anywhere app. you can customize settings so news on the getting assets you care about. this is bloomberg. ♪
york. you are watching "daybreak australia." the u.k. government has allocated $2.6 billion to prepare for a no deal brexit. columnistg opinion joins us on the phone from new york. what does this tell us about how serious the prime minister is about a no deal brexit? serious.ls us he is we already had money put aside by the previous prime minister, theresa may. this adds that much more to it. if it is that he is playing chicken wanting to convince europe that he means this and hopes thereby to get a confession out of him or because he really does mean it, either way he is plainly very serious about making this a viable option. boristo what extent is johnson ready to talk? on one hand, the labour party
saying he is squandering money. liberal democrats saying it is not enough. parliament itself not sure what to do. in many ways, johnson forced onn the path of an exit october 31. >> to some extent, he is very committed already. the notion of a game of chicken's ui are like james dean, trying to be the last one to swerve driving toward the end of a cliff. he has a sickly decided he is the person who will take britain out of the eu on halloween, which is the current fixed date, come what may, do or die. that is his strategy, and at this point, he does not mind getting abuse that might be from the labour party or the left and because this is his brand. this is what he has decided to do. , andig issue he does face we have yet to see if he can
deal with this -- is exactly how if,a no deal exit could be as no seems really quite likely, it comes to that. it shows you what an irresponsible thing this is to do in my opinion. if you leave without a deal, all agreements aimed and you just have the bare bones of the. how much damage does that do to the u.k. economy in the long term? this may look fantastic for nationalist followers who are uncomfortable with the eu in the short-term, but it could be economically disastrous. shery: thank you so much for that. plenty more to come on "daybreak australia." this is bloomberg. ♪
paul: this is "bloomberg technology global link." spotify shares fell the most in almost five months after it reported slightly slower subscriber growth. the company ended the most recent quarter with 108 million subscribers to a premium service. the ceo said spotify had failed to market a special subscription plan for students but that it plans to make up for lost ground by the end of the year. apple is poised to rejoin the trillion dollar club and again take a seat alongside the world's most valuable company, microsoft. apple shares briefly topped the one trillion level of market value after the tech giant mostted market values that cheered. criticisming more over age discrimination, one of .any ongoing lawsuits the former vice president of hr said ibm had fired more than strategymployees as a
to make the company seem cooler to younger applicants. ibm said its current strategy is based on delivering value for its clients. qualcomm fell in after-hours trading after a downbeat sales forecast indicating lingering weakness while consumers wait for devices with next generation wireless technology. this was supposed to be a seasonally strong quarter. what happened? we have seen continuing lingering weakness in the smartphone market. the fact that in the u.s. particularly, people are .xtending their older phones people are not potentially excited for the new high-priced phone, and particularly ahead of 5g when there is something new around the quarter, -- around the corner, people are going to wait for that. we have seen this for quite some
time. this is not a new story. no matter what you do, you cannot run away from this, and unfortunately, qualcomm is disproportionately exposed to the smartphone market both for its chips and its royalties. china is particularly weak, and you are not going to get away from the market that is potentially a large portion of units and royalty payments. paul: let's talk about the hard numbers. what did the actual numbers look like? >> they have taken out 100 million units out of expected shipment for 2019. they talked very extensively about their 5g positioning into and that three q is low and
four q will be weak, and that you will see strength in the second half of 2020. our argument is this is a continuance of the same story of smartphones being weak, and this is particularly weak on the high-end, which is unfortunately a particularly painful thing for qualcomm because royalty payments are based on prices. or $400-plus phone is not the same as a $200 phone from a royalty impact statement. quickly, 20 seconds, qualcomm still in a licensing dispute with huawei. what is the latest? >> this dispute continues. they have made some partial payments. this is going to continue and will not be resolved any time quickly or soon.
poll: it is 8:30 a.m. here in sydney. futures currently weaker by about .4%, so u.s. equities close lower despite the fed delivering that as expected 25 basis point rate cut. in new york it is 6:30 p.m. you are watching "daybreak australia." let's get to first word news. >> president trump missed the fed rate cut tweeting that jerome powell let the country down. -- theythe president
were two dissenters on the fed .oard both spoke out against making any cuts. >> it is intended to ensure against downside risks from weak global growth. >> a private survey says u.s. hiring accelerated in july for a second month, underlining a strong job market that is driving the longest period of growth on record. data from adp suggests private payrolls increased by 156,000 after a revised 112,000 in june. a bloomberg survey forecast a viable 150,000. trump administration is turning up the heat on iran and
imposing sanctions on the foreign minister. washington says he is japan's iran's diplomat -- he is leading diplomat who acts on behalf of of ayatollah home many -- ayatollah combing a -- ayato lla khomeini. exxon mobile's u.s. refining and chemical operation faces restrictions. at least 37 people were injured, most suffering minor burns, and the city briefly ordered workers to seek shelter indoors. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. shery: let's now turn to sophie
in hong kong for what to watch in markets this morning. bali missed estimates reporting a net loss of 130 $2 million and registering nearly $1.4 billion. we're also keeping an eye on dhp. close to redeeming a likeness to restart production after halting operations back in 2015. first-half results will be closely watched or the impact of those major supply disruptions and shareholders will wait to see if real will opt to return cash to investors or buy back shares. resolute also in focus after to expand itseal west african gold production and i just want to jump into the terminal at this point. this is where the fed is holding
back further easing. a holding back at treasuries as traders do not seem to be confident the hugo investment is enough to boost the economy. paul: let's get more on what we should be watching us trading gets under way in the region. with the fed cut falling short of market expectations, we have concerns the bond rallies in asia and india and indonesia could be running up steam. tell us about that. >> that's right. we have seen a surge in demand for these markets. billion went into rupee of bonds. investors have been searching for higher returns and higher yields, and the renewed monetary policy easing has moved the
market with higher yields and also the potential for more rate cuts. course, the testimony last month is all out the window after commons of the night. even though sovereign bonds are yielding way above what treasuries are, even after those gainsongly, were seen as pricing and way too much fed easing and i guess they got a bit of confirmation about that overnight. there are also concerns they .ave to set up rate cuts maybe that is coming to an end. all those pillars of support could very well be disappearing. one asia market we are watching closely as hong kong,
under siege from protests and closing early because of a's warm. >> that's right. just when you thought things could not get worse for hong kong, we had this gdp announcement that showed the economy contracting in the second quarter. in fact, the number was well below economist estimates. as the economy got hit by this trade war, also an economy that relies heavily on consumption and with the street protests, economic confidence is being eroded. you have tourism numbers coming down, and some of the stocks that have really been the hardest hit in hong kong have been stocks related to those. we do have retail sales coming out, and they are expected to continue to paint a grim picture year on year. they probably fell for a fifth
month and that would probably only serve to confirm what chief executive carrie lam said, that the rest of the year, the hong kong economy is looking in pretty poor shape. shery: thank you so much for that. thek out her gtb charts on g tv library. credit suisse has lifted some of the gloom and european bank earnings, beating most of its wall street tears in the second quarter. >> asia is quite volatile. questions on trade negotiations are weighing on sentiment. i do see them as doing well for us, number one in asia and
number one in china for the first time. it is our 11th quarter above of $200 million in revenue. revenues were down, and those trends have continued. >> a number of your competitors have doneand germany trading cuts. does that mean there is an opportunity for credit suisse, or does it worry traders? >> we worked very hard to have platform,nt low risk which is what we have now. when we were under pressure at the end of last year, we're done with our restructuring, and we are in the right place at the right time. there is significant market
share. really again, there was concern. we have our highest in innate .ver we increased assets by $110 billion. on the core face, it is working. >> you will be able to continue to gain market share? >> it is not just us, but we have spent a lot of time with customers and improved our prime business. and we improved pricing, are also reshaping our platform, in new share, so i was york two weeks ago.
plus restructuring. central bankspite . >> they do not make life easy for us. particularly with negative interest rates. we have different answers. we're actually quite pleased because the transaction revenue is up quite strongly. i mentioned the strong reactions we took toward the end of the first quarter to make sure revenue would go up in q2. we are up in net interest income. up in transaction income after a difficult first quarter. when interest rates are negative , it drives up the real asset
, and it technically is disposed idea for us to of assets, but that is not a long-term idea for us. we're going to take some detailedwhich will be to change a little bit our pricing, but fundamentally, negative interest rates are not good for banks. suissehe ceo of credit talking to bloomberg. just want to get your cross and alert on the bloomberg terminal. the bank of korea saying it may consider more rate cuts if downside risks grow. we had some disappointing data out of korea recently. most recently, of course, yesterday, with for industrial production numbers. later today, we will have cpi and trade data. moreof korea may consider
paul: i'm paul allen in sydney. shery: i'm shery ahn in new york. you are watching "daybreak australia." u.s. trade and chinese negotiators will meet again in september. the white house says washington will host the next round and describes the shanghai talks as constructive. let's bring in our u.s. economics team leader. the last time at the g-20 with the two presidents met, there was a lot of confusion over what was really agreed, if it was relieved for quality -- for china buying more u.s.
farm products. did anything get decided? >> it is interesting you bring that up because there was even a conflicting statement on this agriculture purchase commitment. the white house said china reiterated his commitment to buy more u.s. farming goods, and china says the tea set -- the two sides did talk about the issue, but it did not explicitly say they had agreed to increase those purchases. this is just to say that even on the smallest issues, china reduced its trade deficit, getting china to buy more u.s. goods. the two sides cannot even really seem to agree on where they stand, and i think it is sort of an example of the larger picture, which is that they really are at a standstill. there are deep divisions and it's difficult for them to get over them. paul: can we see more evidence of that in the fact that they will not be meeting again until september, that nobody seems to feel a great sense of urgency to get this done? >> absolutely. if you compare that with previous rounds of talks every
few weeks, the sides were meeting. there was a very intense exchange of documents and sort of the mid-level officials meeting in between that, and it really seems to be a bit of a slow burn right now. i think that gives us a sense that there is an acute sense of urgency. that being said, the next round is in washington. donald trump the and based here, he can be the one who can sort of accelerate these talks if he decides he wants to intervene. i think september should be an interesting month for us to see where things are headed. shery: another exciting month. one analyst at morgan stanley saying the lack of progress from these talks confirms that risks toward tariff escalation. could that be the case? we have not seen anything concrete. there is a cause, but it is a very uncertain cause. , but it is a pause pause.ncertain
>> absolutely. we do not have any reason to believe trump or china would escalate. trump seems to get impatient and impose new tariffs, so one wonders how much patience he might have. that said, he might not want to newthe economy with terrorists just as he is gearing up his reelection bid, so there is a new wildcard in the mix. : u.s. economics team leader sarah mcgregor, thanks for joining us. friday, we will speak live with the u.s. secretary of state. do not miss that exclusive q&a session hosted by haslinda amin at 10:00 a.m. hong kong time, 10:00 p.m. in new york. ofpite all the ups and downs the mining business, it is still possible to hit a sweet spot. share prices more than doubled as investors piled into the good news story.
a rare earth's project as china indicates it might restrict exports. you seem to be in a real sweet spot. you have this project just north of us here in sydney. 15 rare earths, all of them so critical to tech. china restricting supply. when can we start? >> it is really interesting. from, youe volatility know, what we just heard about reallyesident trump draws him to this decision. in our case, we are looking to build a $1 billion u.s. facility. trend really going somewhere? our electric vehicles taking off? paul: we have a chart on the bloomberg that illustrates how china is controlling the rare
earths market at the moment. it has been slowing exports, so it is clearly a very strategic asset, a rare earths mine. you had a meeting with officials in february that did not get any commitments. are you surprised you are not getting more interest or indeed financing? >> to be honest, i am, yes. when we consider these supply chains, if you are looking to develop electric vehicles, it is at least a 10-year r&d program. these are 30-year lifecycles. when you are looking at strategic supply, you would ink that you would look over much, much longer time frame that is being looked at. taken in theng very short term at the moment. otherwise, i think people would have invested. japan has taken a strategic view and are the only nation to do so, the only nation who has
secured for their manufacturing facilities a rare earths supply. course, china has really aggressive pricing which makes it difficult for other players to come into the industry. what consequence is this having? you are right. they're pricing is incredibly aggressive. for companies looking to sell it is actually a lot about magnets. we have seen president trump , butg he wants to restrict what people want is really the magnets that go in. they arrived pretty much at cost or below offshore. in my view, and a lot of it is around government support for manufacturing investments in as well as companies deciding the risk of oftralizing certain parts
manufacturing, the probability is too great and therefore they are going to act. do youhow much backing realistically need in order to make the supply chain really competitive? >> it is actually around the capital that is required to get it off. in our particular case, it was a billion-dollar project. it's quite achievable. it has been done in the past to get those projects off the ground, but we are competing against chinese companies who get effectively free or very itse to zero cost debt, so is putting together offtake packages that allow that debt to be funded that is most important. pound for pound on operating and absolutely strains supplies. they can mix it up and be profitable.
paul: there are risks here. shery was alluding to them there. if we take a look at one key rare earth example, it has moved 59% year on year. it is really volatile. ,f this trade war is resolved and a time it takes to get the projects up and running at the price pulls back, where does that leave you in terms of viability? >> we're in pretty good shape. is a big difference between long-term contracts from a strategic investor and spot pricing. second to that, in our havecular project, we strategic metals that represent a large part of the pool as well. for us, a multielement producer, stabilitysome price
and can weather route income volatility in that case, but absolutely that is a risk. a lot of people saying let's concern the trends before we wise from a risk management perspective and unwise from a price management perspective. paul: as you mentioned at the start, you do have a gold mine as well. >> we do. we have taken a lot of revenue from gold. our product is one of the most advanced in the world. we are ready to execute. we have made 2080 australian dollars. it is a massive margin, a purple patch we have not seen before. absolutely investors have got happyand we are really
both with the positioning of the project and also our exploration for gold. it is a great place to be. paul: thanks very much for joining us today. you can watch us live and see our past interviews and died in two securities and bloomberg functions we talk about, plus join conversations as well by sending instant messages during our shows. this is for bloomberg subscribers only. you can check it out at tv . this is bloomberg. ♪
the senators grilled faa officials citing reports of lax jet's flightn the control software was developed and later updated after the system's first failed crash in indonesia. shery: turkish airlines is said a strugglingted in group in australia. we told the decision is an early stages and may not result in a deal. the chinese conglomerate is selling assets after racking up one of the country's biggest corporate debt loads following a global acquisition spree. sports carmaker aston martin faces questions about its future after the company experienced a loss in the first half and cut its forecast by more than 10%. this scared investors and sent shares tumbling by more than half of the past week.