tv Bloomberg Daybreak Australia Bloomberg October 16, 2019 6:00pm-7:00pm EDT
softbank continues to design a plan for wework despite signs that the startup prefers jpmorgan. afterflix shares jumping investors concerns are called about a concern back home. we are seeing u.s. futures unchanged this is after u.s. stocks fell in the regular session. we had tech and energy leading the declines on the s&p 500. we also had treasury yields declining today. we have u.s. retail sales numbers that came in and contracted missing expectations. up the sentiment for potential rate cuts coming later this month from the fed. however, we did see the pressure continued to mount as we also had china saying they would retaliate if u.s. congress is up to have legislation in hong
kong. sentiment not great across markets. we saw the u.s. dollar taking a dip. let's take a look at asia. more of the same with sentiment taking a hit. take a look at how futures are setting up and asia. we are seeing a mildly positive start when it comes to trading in some parts of asia. we have japanese markets hitting their 2019 high. a little bit flatter today. still looks like we are seeing a pop after the bank of korea moved yesterday. we're watching the latest job numbers out today in sydney and a slight uptick in the employment number -- unemployment number might drive another rate cut. a softer start after a robust 1.2% rally yesterday.
let's get you to first word news. offering a trade olive branch that may survive the rising tensions over the hong kong autonomy bills on capitol hill. today president trump announced the two sides agreed to phase one of a deal. >> it is great for our country, it is great for china also. it is something that has already taken effect even though it won't be signed probably until i meet with xi jinping and chile. >> terry lamb will be questioned by lawmakers later thursday. .4 hours after her policy address was suspended by pro-democracy critics. she was forced to deliver hers speech on video. promising to tackle hong kong's property market and an economy that has fallen into recession
after months of protests. her spending plans cannot proceed without approval from the legislative council. spanish prime minister is pledging to stand firm after three days of clashes between police and protesters in catalonia. it demonstrators returned to the streets to demand the release of separatist leaders. authorities are also said to be foridering moving the venue the upcoming football match between barcelona and madrid. eu leaders gather in brussels later thursday as negotiations continue on a potential new brexit deal despite optimism, key issues may remain including the status of northern ireland and the irish border. global news 24 hours a day on air and at tictoc on twitter
powered by more than 700 journalists and analysts in more than 120 countries. this is bloomberg. >> the risk between president trump and -- the risk between president trump and congress is widening. lawmakers from both parties criticized the president while he dug in his heels. >> why are we protecting syria's land? thought is not a friend of ours. relationships a with the kurds who are no angels. who is an angel? there aren't too many around. >> that was president trump the white house today. the head of number of national security team is here with us. we heard from president trump when it came to the kurds theing in them for letting islamic state out. where does this leave u.s. foreign toward syria and turkey? >> those were surprising
comments because they came just as mike pence and mike pompeo were about to board the plane overnight to ingres to try to have meetings president erdogan and their message is expected to be a call for a cease-fire and perhaps a withdraw from turkish forces in syria. the president's comments today don't seem to help that argument. the u.s. is not being caught in the middle of a fight there and said he is happy with russia, syria and turkey fighting over what he said was a lot of sand. what was said during the call back in april and why is the get now? >> it is been a head spinning you days in u.s. turkish relations. president trump and president erdogan spoke in april and at
that point, president erdogan was asking president trump to help get a case against a major turkish bank that was being investigated in new york, trying to get that case dropped or at least make it go away. president trump told president erdogan that he was delegating the issue to his attorney general, bill barr and to steve mnuchin to handle. we know there were some subsequent phone calls with those leaders and their turkish counterparts trying to find a way to prevent this bank from being fined. that effort essentially came to an end yesterday when prosecutors in new york charged the bank in a multibillion-dollar scheme to illegally trade and money from iranianue oil. there has been a lot going on and we are starting to get a on whatore intelligence has been some of the background negotiations between turkey and the u.s..
trump hashe president been very involved in trying to field and handle some of these issues that have raised frictions with turkey. >> we are seeing the president remaining optimistic about that phase one trade deal with china. yet congress doesn't seem to be making things easier with their own legislation over hong kong. would do we go from here? >> president trump as you mentioned, he is very optimistic that they will sign an agreement one month from now at the conference in chile. lawmakers are focused on the situation in hong kong. they passed for bills and resolutions in the past day. most significant would require the secretary of state to send an annual report to congress to determine if hong kong still retains sufficient autonomy to justify its special status under u.s. law. that special status is it trade rates that don't extend to china. that would have a severe impact
if it is approved by the senate, signed by the president and carried out. we just had the house passes so far we don't have it on the calendar for the senate. expectations are it could be voted on this month. >> thank you for your time. let's get more on the latest in hong kong. more throughout the day of course. at the moment, sophie is out and about in hong kong. another set of challenges for carrie lam today. lam outlinedie policies focused on the economy is a little mention of political recourse, she faces challenges to deliver on this policy address as the legislature is mired in gridlock. legislators may attempt to disrupt or a yet again in a special session that is scheduled this morning. that is standard procedure after the chief executive policy address various we will also be
how much will these earnings make a difference when we have so much other uncertainty out there? the stories to individual stocks will be important and they will impact those stocks individually but tweeting from trump or other headline news on tariffs is what will drive the overall market. >> we have already seen analyst revising down their expectations for the earnings season. this chart showing they have continued to trim estimates. this is a number of equity analyst revisions. seen for the u.s. and globally that is less of a downgrade. what happens if you miss the already low expectations? ask if you miss, the stocks are likely to get hammered. because the bar is so low, the we startwill beat it,
with netflix. you have chances of getting a real boom in the stocks. we saw united health care yesterday and the financials as well. as we mentioned the bar is lower. can investors totally focused going back to basics, fundamentals, company earnings or is the distraction still too great? >> the distraction will continue to weigh on the market. this agreement or truce the trump has with china right now is just temporary and until there is some sort of signed i think or resolution, the market will remain skittish, nervous, and there will be pessimism. i think that's going to put a cap on any upside to the market. >> does that mean the old playbook continues for the next few months until we get some sort of significant deal written into certainty between beijing and washington? >> yes.
and the volatility is likely to continue. we are going into the time of the season where generally --aking from a technically technical standpoint the market does well. if there are no real negative headlines that come out of china with trump then we could get the fourth quarter we are looking for which to be a higher market. we saw a dramatic shift in september when it comes to value over taking growth stocks. that didn't seem to last very long. is that still a trend we could see later this year? >> parts about you will do well. a financials had a great september. in earnings season that continue so far. it has been the energy part of value that has been set back. we did have that one day when it spiked 50% then he gave it all back over the remaining three weeks and we are right back to the low 50's to where we were at the beginning of september.
there are places in value like financials that could continue to do well. >> and you bank on banks when you have the fed in an easing cycle? >> it could be and you have a flat yield curve. the trading revenue should increase. banking side was very strong. we are seeing pockets of arias in the financials that have done well and because expectations are so low the barrier to be those expectations are high. >> you say the possible falling apart of the u.s. china trade talks would be obviously another headwind in the next months. is there a risk that participants are being too pessimistic at this point? s&p close to 3000, i would think if anything the market is optimistic not pessimistic. we are up to date and while i am looking for positive returns, i think the market is skewed more
to the downside. if talks break down and we have seen that before how fast we can get back to 2000 on the dow. x >> is that just structural? have ar even if we do cease-fire to the trade war, how much would that unwind the damaged the u.s. economy or chinese economy and how long that would take? in the u.s. and around the world, we have seen slowing global growth. the u.s. seems to be doing better than most places and we are anticipating growth to be between 1.5% and 2% for the fourth quarter it i think the fed will likely lower rates again. the jobs market continues to look at and the housing market with low interest rates is another the room for the economy. >> can you go with consumption
story will we see u.s. retail sales declining? were poorail numbers however the revisions were strong and the numbers overall have been looking good. probably better than expectations when you take in aggregate over the last two months. consumer is still in good shape and that is primarily driven by the job market. if jobs are out there than the consumer will stay in good shape. >> thank you for joining us today. plenty more to come on daybreak austria. this is bloomberg. ♪
total income for the september time was $18 billion. down almost 4% a year earlier. analysts had forecast $18.2 billion and it marks the fifth consecutive quarter of shrinking sales at ibm. a --are still developing softbank is developing a rescue plan for we work. they're discussing $5 billion of financing to salvage the biggest investment. we are the funds would come from softbank itself rather than from its fund. it says it will not seek a majority holding. huawei is posting strong cell phone sales numbers. despite trump administration's curbs on u.s. tech. it global shipments of smartphones rose 26% in the first three quarters to more
than 100 85 million units. total revenue in january or september came in at just over $86 billion. those are the top global tech stories we are watching. but get back to the top earnings a story in the tech space. it netflix is surging after the bell after reporting subscriber growth in international markets better than what analysts were expecting. toever, is that enough satisfy the netflix shareholders? we're seeing a theme in this earnings season which is to manage expectations. given the bar has been so much lower than previous netflix earnings reports, was there much you are impressed with question mark >> yes i thought it was impressive. when you get past subscriber growth and you look at the numbers underline their earnings
this quarter, they were very impressive. they beat the street by a substantial amount and actual earnings and revenue growth of , this is a big company growing at an enormously fast speed. it is a great company doing well. it is time that we spent less -- on subscription growth. and a good time to look at the international expansion. >> i'm glad you mentioned that. the international expansion has been where the strength is. i want to bring up this chart that shows it looking at international subscriber additions upsetting the weakness we have seen in u.s. growth. we have the weakest growth in three years in the united states. is it saturated in that market? >> everybody in america has netflix.
to grow, from who? it's like people living under rocks. they have been enormously successful with a great margin. this is an international game and the international market by our estimates is about 2 billion people on facebook. let's say that is the total addressable market and we see netflix getting to 200 million subscribers over the next five years or sooner as this international growth else out. there is of the world, nothing to watch at all. i have a friend in thailand and it's like the military channel or netflix. it's a wonderful option for people and they are making phenomenally good foreign content. i end up watching more foreign content on netflix been domestic content. that will continue to grow for them for quite some time. >> using the fundamentals are strong but they are still posting negative free cash flow. the company says they are not
likely to see that positive anytime soon. what do you need to be -- to see to turn positive on the free cash flow? >> this is the problem i have with netflix and their basic business assumption is that they billion perg $3 year to fund future content. i get that they are from loading content to keep ahead of the satisfy theand to markets they are in but it is not a sustainable business that way. what netflix has to get to is a certain point where were going to stabilize our content and let the revenue growth become a bigger operating margin for them and ultimately be cash flow positive. they are spending way too much money. that's my criticism is that they overpay for everything and everyone and it's time for them to put some discipline and on their spending and they need to look for other services -- sources of revenue.
they need to put movies in theaters and acquiesce to the theater companies. isn'tct that the irishman going in wide release, probably one of the greatest movies they will ever make is a tragedy for filmmaking. they need to change their thinking on this and get in bed with a theater chain or by a theater chain and get these movies in theaters. otherwise, disney will either lunch. apple announced that they are going to put their movies in theaters. that's something netflix needs to think about it they're going to make this work. >> why don't they purchase a hollywood studio? >> i don't think that is wise for them. it netflix has done well with their partnership approach to hollywood. hollywood is the kind of place where you play their game or you are cut out. it's like apples problem. apple doesn't like to play the
game so they are on the house. netflix is half of hollywood now so they don't need a studio. what they need is other revenue sources like advertising or box office sales. >> with valuations looking high particularly at the assumption going forward is the competition is the new normal, will you be reducing your holdings of netflix going forward? >> we reduced our holdings over the last six to nine months because we are big disney shareholders. that's our largest position at the firm. we think the tsitsipas at is a huge winner on a global level. great business model because they have already monetized the content than they can put it on an app and monetize it again. we think netflix has a lot of competition coming. they are ahead of the competition but you have to look the valuation. a hold at our firm.
his withdrawal of u.s. forces from northern syria. without criticism that he has abandoned the kurdish allies and allowed russia to become the region's powerbroker. senator lindsey graham says the pullback is a national security disaster in the making. the president says he isn't going to fight other people's aren'td said the kurds angels. it's a sign that consumers are becoming less confident about being the main pillar of growth thepotentially bolstering argument for a third straight cut. the boeing 737 max investigation has taken a dramatic turn with indications that some potential problems may not be what it claims. crash, an one
employee gave photos. the time displayed on the cockpit computer suggests the photos were taken before the work was carried out. volvo is rolling out its latest electric car. it says there will be a new model every year from now until 2025. the new crossover leads the way convinceough battery-powered cars are the future especially in china. the ceo of volvo admits profit margins are currently on the low side but expects them to improve as demand rises. >> it will be profitable but in a very low volume -- low volume. it might be a lower profit margin initially. morenk what counts is immediate term then we believe that an electric back --
electric vehicle power will have value for the consumer. >> global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. let's get started with a quick check of our futures. we are seeing nikkei futures under pressure about 1/10 of 1%. this after the nikkei and ground for a fourth consecutive session. future still higher after the rate cut we saw yesterday. sending futures down 2/10 of 1%. seeing kiwi stocks under pressure after gaining for the last four sessions. we see caution returning to
u.s. markets. at the retail sales report took the wind out of the sails for the bulls. even in asia we are getting warnings about the macro risks ahead. >> a few things happened overnight. you had good bank of america earnings but at the same time, you did have the week sales or that few expectations of a rate cut. saying the u.s. it on ami had been growing at a modest pace. we are to the wait and see mode. here in asia, we did have the topic rise to the highest this year yesterday but sanford bernstein coming out and predicting a dull outlook for asian shares. they should stick to high defensive high-yield shares in challenging macro environments. for the market to break out of
this range that seems to be stuck in, you will need to see some sort of clear indications on what we're talking about every day for trade negotiations. we have hong kong at a flashpoint. now they are emerging for investors. yes we are back into this wait and see and investors remain cautious. >> not wait and see when it comes to adding the u.s. debt. biggest foring the an owner of u.s. treasuries. not surprising given the rising amount of negative debt around the world. >> that's right. toan's holdings increase 1.17 trillion dollars in august. that's after buying the most since august 2016 -- 2013. it overtook china as the largest
non-u.s. holder of treasuries havehat's as of countries been negotiating trade deals with the u.s.. it is worth noting that this year, japanese investors have added 135 billion worth of u.s. debt. u.s. treasuries are still offering some of the highest rates in the development market as the stockpile of negative yielding bonds around the world's wealth. >> thank you so much. on the find her charts gtv library on the bloomberg. eu leaders meet in brussels thursday as negotiations continue on the potential new brexit deal. there has been some optimism and keyccord may be reached but issues remain including the irish border and the status of northern ireland after the split. sterling tell from a five-month
high as officials lay down the prospects of a last-minute deal. the headlines for the last 24 hours. >> there were a lot of tech and forth headlines today. it felt like the pound traded on every single one. we reached the five-month high earlier today and there was optimism that the eu might finally agreed to the brexit deal the boris johnson is tried to push through. we have since fallen from that and that is following reports issue isirish border still a sticking point. a euphoria has come out of the price but sterling is still up on the week. >> with so much noise when it comes to the brexit talks and rumors and unsubstantiated reports and expectations, what are traders watching in the days to come? >> anything from the irish government could affect this.
saturday is when boris johnson is when the u.k. would return to -- when boris just would return to the u.k. parliament. theresa may was able to find an agreement with the eu but she could not get parliament support and that is where you are seeing traders it up short volatility to grab some protection for the days ahead. >> the bank of england has been blamed by some of being complacent. do we know at this point if he will need to act? >> the bank of england rate cut odds have been falling all week. we are currently pricing in one cut for 2020. you know they're being blamed for inaction but it is really hard to even trade around this issue. we did hear someone say in september that a no deal brexit would see the central bank cut interest rates. as we get further away from the worst-case scenario, it makes
sense that you are seeing the rate cuts this year. >> inc. you so much for that. softbank is continuing discussions on providing we work with $5 billion of financing. in effort to salvage one of its largest investments. the movie is one of two rescue plans that the startup is pursuing as a cash crunch looms react let's get to our venture capital reporter with the latest. what is the latest with these restructuring efforts? >> it seems like the board is up for a week of discussions trying to make this a pretty essential decision for the future of we work. they have to figure out how to get cash. as reported before, they could run out of money as soon as next month. theseock is ticking and two options are the main options on the table. one is a $5 billion that
package. the other is a $5 billion rescue package from softbank. softbank would likely take a larger stake in the company that already has. >> softbank has its own issues don't they? what does this mean for this giant as it navigates the world of startups and new ventures? >> i think this will end up pivotal -- being a investment for softbank. mentioned, they have already invested more than $10 billion and we work. with this extra investment, it could grow to one of their biggest investments. something they are really sticking the reputation on. as a goes forward, i am much of there might be critics saying this is throwing good money after bad trying to salvage an investment that may not be salvageable. they certainly seem to think that if they take more control of the company, they might be able to turn around, get into a
place of profitability and turned we work into a liable business. going ahead, what are the key events and progress that we're looking for? >> the clock has stopped on the ipo. think many do not think we work is likely to have an ipo anytime soon. they have withdrawn their s-1. currently they are within a state of play where in the next week or so they need to have discussions about trying to come up with a solution for cash. we will be closely watching to see developments day by day as to whether they end up leaning more toward jpmorgan plan or the something planned. once that is in place, we expect they will continue with cuts to some of the expenses the company has. that includes plans to have potentially thousands of layoffs among the workforce which currently numbers around 12,000.
they will continue to keep cutting, continue to selloff side businesses, trying to stop the bleeding of money to the company has been known for for the last few years. >> thank you for your time. we're continuing to follow the wework,. if you are away from a screen, you can always find in-depth analysis and the big newsmakers on bloomberg radio. our broadcasting live from brand-new studio in the hong kong. this is bloomberg. ♪
our guest joins us from albany. tsmc gaining more than 40% year to date. how much of the positive news has already been baked in? >> i think there are expectations in the third-quarter earnings. is askingd apple their suppliers to increase production by an additional 10%. plus there have also been news times for tsmcad have grown out six months and more for certain products. it seems that demand is high which would make investors conclude that business and revenues and margins should be quite good. just semiconductor where we have seen the share prices skyrocket. we are showing the semiconductor -- are investors right in
the expectation that chip prices have bottomed out? the think we are past bottom of the curve cycle and tsmc spoke about that last quarter. we have seen expectations get a bit ahead of themselves riyadh asml reported this morning and the stock was off 5% because they just had in my numbers are you. multiple which is -- tsm is currently trading at is a fairly hefty multiple for one that normally trades in the teens. >> do you think the catch-up is complete because even a few weeks ago, we were looking at tsmc saying at these levels, underperforming since the beginning of the year compared to other semi's trading in taiwan. >> i still think there's room
left. logic andmance of the foundry side of the business has performed well. it is tempered by the memory portion being weaker. we have seen some stabilization of memory pricing but there is not been a leveling there. by g handsets are doing quite well. we still have the specter of trade issues and geopolitical and microeconomic issues that are hanging over but so far, they have not been impacting the stoxx. there's a little more to run but they are getting choppy right now. >> talk to me about the yield issues you're seeing is samsung that could work to tsm's advantage. >> one of the issues i have samsung hasis the been having issues with this latest generation technology which is forced some customers of samsung to switch over to
tsmc. an example of one of those may be qualcomm. problems in the latest generation of technology is samsung maybe benefiting tsm and if anything, adding to the long -- andmes and -- at leadtimes that tsmc. >> how much of an impact is that having on samsung? >> right now, the issue of the resist an edge chemicals has not impacted reduction of samsung. there is certainly concern over productionerms of there has been no impact. if anything, it has been a psychological impact where customers may be stocking up on inventory in advance of any potential problem but so far no problems have occurred. >> you mentioned of the five jeep intentionally boost in the
industry. how about the high-performance computers? sought tsmrter, we that portion of the market grew nicely. smartphones remain the number one and right now, the rollout of 5g is perhaps the biggest driver and of the driver of the leading edge for tsm which has the highest margin there seven nanometer devices. what you are seeing is customers of tsmc want to get their chips or devices manufactured as quickly as possible so they can try to grab an early share of the 5g market and establish some sort of dominance of the market. that is particularly true of some chinese customers of tsm who want to try to assert dominance or try to take dominance away from u.s. manufacturers such as qualcomm. vying to get product out of tsm and that leaves tsm and a positive situation.
on the negative side, you mentioned trade in china. interesting or unsubscribe -- unsurprising that the media deal president trump has been touting has been prizing the on morentious issue of buying u.s. federal products. do you think this will create an issue if and when these harder negotiations to do with chipmakers and other tech companies are beaten up again? >> i think china will be much more hesitant to deal with ip , with issues relating to the semiconductor industry. they have more aspirations to become self-sufficient in the semiconductor industry. unfortunately, the u.s. has been more focused on selling soybeans into china than selling semiconductor devices which in my view are more important strategically. taking thehave been
wrong path there in negotiations and may not have the positive impact we're looking for. seen intel get a boost in the past seen intel get a bot in the past quarter because of some frontloading ahead of these tariffs. what are we expecting? ask right now, the immediate fear of tariffs has been somewhat removed from the industry. we don't see as much inventory or channel surfing that may have occurred before and we think some of that channel stuffing is coming off very i don't expect there to be that much of an impact on current earning results that we will see out of tsm. if anything, women -- see some weakness in demand for some of the products because there is less concern about capacity being cut off in the market. >> take you so much. happening right now, we have the bank of england governor and a
professor on the new international order at harvard. the governors saying the bank of england -- they don't seem negative rates because part of the toolkit. they say negative rates have not hurt bank profits in europe. we have heard this thought from the governor before. he said he is ruled out going below zero for the boe noting there is something unnatural about doing so yet the u.k. economy has shrank in the second quarter contracting .2%. carney saying that negative rates are not part of the boe toolkit. we believe that there. bloomberg subscribers can condition -- continue watching on gtv . this is bloomberg. ♪
through on the bloomberg. on twitter, the chinese embassy in the u.s. is responding to the in the u.s. is responding to the restrictions imposed by the state department on chinese diplomats that requires them to give advance notice before conducting meetings with a state or municipal or provincial officials as well as educational leaders saying these restrictions are in violation of the vienna convention. so far, the china's side doesn't have similar requirements on goescans in china which against what u.s. officials have said. state department officials saying the move on their part was an effort to add some reciprocity to the way u.s. diplomats are treated in china. --s not directly relate linked to the trade war. trade talks are ongoing and tension is building. the latestou
business flash headlines. netflix jumping in late trading after earnings were better than expected. the network be forecasts signing .p six point 4 million users netflix expected to sign 7 million international customers during the current three months. a retailer is defying the trade war boasting strong third-quarter numbers. in september.rose other labels jumped as much as 35%. >> worth to a half billion where the one billion option. sources say the price of the
three-year margin is less than 100 basis points over [indiscernible] they came to the syndicated loan market in 2017. >> gm and the united auto workers every rish a tentative accord on the new contract. it potentially clears the way for union leaders on thursday on whether to extend a three-month strike. $9 billion of investment in u.s. plants, improved bonuses and pay raises. at the longest to hit gm and almost 50 years. plenty more still ahead on the next hour in daybreak asia. we will look at the surprise downturn in u.s. retail sales.
♪ i'm haiti stroud-watts in sydney, good morning, one hour for market opens in japan and south korea. shery: good evening from bloomberg global headquarters in new york. i'm shery ahn. welcome to daybreak asia. ♪ our top stories this thursday, president trump welcomes increased buying from china, but words -- but warns a trade deal is likely before the apec summit. ♪ eu leaders had to brussels as hope for