tv Bloomberg Daybreak Asia Bloomberg July 22, 2018 7:00pm-9:00pm EDT
haida: welcome to "daybreak: asia." a mixed start to the week. tensions threatening the global economy. steve mnuchin sees no chance of a currency board. it is just past 7:00 p.m. on this sunday. raising the heat on china raising tariffs on imported could -- goods. shinzo abe says the u.s. should says japan is and not interested in a bilateral deal.
trade tensions, currency wars, the g20 managing to communicate with each other. trying to dial down some of the heat generated by president trump's tweet on friday about china trying to manipulate the yuan. i think everybody should remember this is not like the chinese trying to push down there currency. trade war is, i have to say the president started coming seems to be doing it all on its own. haidi: it is across the rest of the emerging markets complex. the chinese currency is not the only one trending lower in this environment. you could argue it is a strong dollar story.
the stock market held up pretty well despite what was going on at the end of the week. you can see small losses across the board. pointp 500 gained a half with nasdaq following. netflix was really the colbert there. it -- culpret there. a lot of big earnings in the u.s. this week. still only -- more of a point loss in price. higher. gold futures managed a rebound as well. haidi: i'm going to take a look
at how the opening is setting up. a new trading week in asia. taking a look at the features picture for equities. extending those losses by just over .5%. take a look at the u.k. future is. looking like a pretty flat open for japanese shares. let's take a look at currencies. the dollar-yen drives trading. we had the dollar-yen falling about 1%. 200, movingw its the average for a fifth straight .eek despite all the comments about shorter-term dollar strength.
not much movement, but we are as weg at possibly a gap get into cash trading in asia. we had a big move on that report that the boj could be considered -- considering the policy to allow the longer spectrum to rise. beginning in the early morning session. kiwi dollar trading at 6817. let's get the first word news with haslinda amin. the brexit chief says the country must prepare for a no deal brexit. he does not think such a scenario will happen, a responsible government should plan for every outcome. theu.k. will refuse to pay divorce bill if they fail to agree. the new president of mexico is calling for president trump to andace fresh nafta talks
aims at a deal that involves all three countries. the three sides should work together. a new nafta could have investment. shanghai is cleaning up. than 300 87,000 people in neighboring provinces were moved to shelters. flights are resuming after last night after hundreds were camped out. space ask has put a satellite into orbit. the falcon nine rocket blasted .ff from cape canaveral
to first stage returned earth in the atlantic ocean. 30geting roughly measurements up from a record 18 and 2017. -- in 2017. 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. a warning that trade tensions are threatening global growth and the risk to the world economy is growing. steve mnuchin tried to ease tension, saying there is no chance of a currency war. caroline joins us now on the line. did president trump dominate these discussions between central banker is and finance ministers over the weekend? >> absolutely.
global trade was the main issue addressed. highlighting that trade and geopolitical tensions are adding risk to global growth. global commerce to keep strong in the months ahead. there will be a threat to other economies moving forward. watchsing on how to keep on the domestic markets. they would have to continue dialogue to avoid that situation. we heard president trump recently accusing europe and china of currency manipulation.
play at the into g20? >> no. they were not part of the discussion this weekend. steve mnuchin was reassuring them about the u.s. long-standing commitment. we were speaking with foreign ministers. they mentioned it was not on the table. issues like the currency and sustainability. aerall, steve mnuchin made it .oint to assure investors the meeting -- meeting in canada
ended horribly. what has changed since that? over the last couple of weeks , we are hearing more talk about a potential trade war that may hamper the markets. it seems that steve mnuchin did approach to the central bankers. he is more of a globalist than a trade hawk. compromising on trade and issues that put global growth at risk.
kathleen: thank you so much. bloomberg reporter joining us from buenos aires. founder and ceo bill rhodes, also author of "banker to the world." ,ore than 50 years at citigroup he was senior vice chair of citigroup. i say that partly to establish for our viewers that you have been involved as an withnational banker negotiations come a restructuring latin american banks in the 1980's. how do they reach a communique this time? onit is always great to be with you, kathleen. i was involved in the original nafta negotiations, as well as
the korea afraid treatment -- trade agreement. -- free trade agreement. trying to come out with a common communique. i think, you have to remember that steve mnuchin is viewed as a dove on trade. globalist. i'm sure he tried very hard to put something together on this area. you cannot cover up that we are , ifeast in trade skirmishes not handled properly it could turn into a trade war. with china as well as other areas of the world, including the eu. we have to see what is going to happen with nafta, with mexico and canada. kathleen: we were waiting to see potentially billions more of tariffs to be levied. when we stop calling it trade skirmishes and trade tensions?
what makes it a full-blown trade war? when the terrorists actually start taking a fact. tariffs actually start taking effect. we have not seen a full blast yet. if two months from now, the tensions continue, we are in a trade war. kathleen: the eu and japan are on board with the u.s. at the wto a complaint against china against intellectual property. that trump could do to get that same cooperation with global trading partners, if you really wants to move china on its trading position in the world. >> i just got back from a and there were a lot of europeans there. their comment to me is, bill, if
the u.s. is really concerned about china, why don't you work with us to mark we are very -- with us? instead, you are attacking us on having ainstead of united front. this is also true with canada. once you are reaching out to the europeans and canadians are the chinese. basically, the chinese are saying the u.s. has embarked on what could be a serious trade war. they are forgetting their global roots. why don't we get together and confront the u.s.? of what normally happens and what should happen. globaldo think institutions and the global trading framework is that risk? how far this on goes. if you want to be negative, you could say the next step could be a currency war. i do not think you are going to
see that. as you know, the people's bank of china does not want to see the renminbi and you on go to yuan go too low. and 2016,s in 2015 where the people's bank of china lost reserves. people say it is falling like a rock, like president trump said the other day. it has not passed a 7-1. they are very sensitive in the people's bank of china, which i think is one of the best run central banks in the world, that they do not allow this to happen. it is a fine line from where we are at this point in time. haidi: do you see a circuit breaker coming through and being able to restart negotiations between washington and beijing? is it too much of a trust deficit? xiit possible for president
and president trump to get a win-win scenario? >> that is the big question. knowi would say is we will when china is ready to sit down when they bring in the vice president. he is not only a great negotiator, he knows the u.s. well. beijing and also the vice premier when we started underina u.s. dialogue hank paulson. he is a close friend of hank paulson. he is the closest person to president xi jinping. when he gets involved, then you know we are into serious negotiations. he is staying on with us. still ahead, a week of earnings.
haidi: this is "daybreak: asia." kathleen: i'm kathleen hays in new york. china may have run its course on yuan depreciation. at our china correspondent tom mackenzie joins us for more. was this an accident waiting to happen? this backlash from trump? tom: probably. afterave drawn his ire the depreciation of the yuan
they had the weakest reference than two years. speculation has been that they have allowed this to happen to factor -- t the x the counter view in some respect coming here from the likes saying the economic fundamentals mean that you should be seeing a weaker yuan playing out. the pboc is easing monetary policy. that the fundamentals are so much weaker. it is taking place at a rapid clip in china. the key line that we should potentially be looking for a 6.8, according to a number of fx
strategist. beyond that point, the pboc does not have the stomach. you have the risk of those capital outflows. further down the line, you get the likes of bloomberg economics. is still overvalued. at the moment we are looking at a 6.8 level. haidi: extraordinary that the economic level would see it dropping to 7.3 come if we go by the fair trade value. hyeon to the weaker currency -- beyond the weaker currency, what other talks has beijing had to have to prop up growth. tom: jpmorgan is looking at fiscal measures. from the body saying maybe it is time to look at tax cuts to support consumer growth they aretment areas
looking at policymakers, but the fiscal side as well as the monetary side. growth theerpin the tensions continue to ratchet up. us in tom mackenzie for beijing. let's bring back till roads -- rhodes, still with us. is this the point of reckoning? is this the moment that beijing is faced with? comment in theat 19th party congress was really crucial. he had a tendency to say what he thought. he was very concerned about the ofl of debt in the order 2050% of gdp. he had been calling for a reform , particularly in the shadow banking area and municipalities.
that is the problem that china has. they have to be very careful. they need to move forward on cleaning up the situation. ,he problem of inflated prices they have to be very careful about what they do with the and try tod the yuan clean up the shadow banking system. --y had to interest intervene. they have faced a number of companies who cannot pay their bonds. this is the primary goal of the financial side of china today. trade tend to look at the on its own, but you have to look at the fundamentals of the financial system in china. kathleen: i guess i will defer to haidi on this one. haidi: we talk a lot about the
impossible trinity. for a long time, you could argue that beijing had been quite successful in this balancing act. is a trade war essentially what toppled this delicate juggling or this house of cards that has been able to be maintained by a pretty stringent set of domestic policy? will force in issue. for china, they have a good group of technicians on the financial side. do not forget the vice president of china, who has the ear of the president xi jinping. to beaware of what needs done in the financial area. i am hopeful that china will continue to do what they are doing in cleaning up the financial area. i think that is key. kathleen: the media is
portraying this weakening in the chinese currency as potentially the chinese purposely weakening their currency. this might be one time where the -- they are not. ofyou see any hint deliberate moves by the banks, by the pboc, to weaken this currency? in 2015 and 2016, they lost a trillion dollars. i was in china at that time and sat down with the head of the people's bank of china. mewas made very plain to that the chinese do not want to get into a situation where they have a tremendous outflow and reduce their reserves even more. if we see the renminbi and the yuan getting below seven to the dollar, that could be a problem.
9:30 monday morning in sydney, 30 minutes out from the open of trading, asia's major markets. kathleen: 7:30 in new york where it shows major market indexes closed slightly lower. the s&p 500 losing .5% on the week. it is the nasdaq we have our eye on after disappointing growth in netflix subscribers hit the faang stocks. i am kathleen hays in new york. haidi: with all the talk of trade wars, fundamentals as you say, tech earnings going to be front and center, industrials and airlines, energy is a big week.
we have the ecb meeting as well. let's get you caught up to date with first word news. g20 finance chiefs are warning trade tensions threaten global growth and the engines of leading economies fall out of sync. they wrapped up a summit in buenos aires, risks have increased. they say global growth remains robust in many market economies. the g20 statement did not mention trade tensions. one of japan's most senior policymakers says the government will continue to resist american efforts to negotiate a bilateral free trade agreement. japan will not do anything to harm the national interest. he said japan will continue to returning to the transpacific partnership is in the best interest of both countries. a heat wave in japan has killed
at least 30 people and sent 10,000 to a hospital. blistering temperatures continue throughout the week. the forecast received 30 degrees monday and 37 tuesday and wednesday. it comes weeks after flooding in the west claimed 200 lives and raises questions about plans to stage the 2020 tokyo olympics in july and august -- and august. so much at the box office. the equalizer took the top spot in north america after the weekend of the mama mia sequel. it raked in $36 million, beating its rival to $34 million. the action hero films and animated movies have dominated the years and, opening at number one almost every weekend. 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. amin.aslinda this is bloomberg. haidi: thank you so much for that. it is monday morning. we are counting down to the major market opens for this week in the asia-pacific. let's go to sophie who is watching all of this for us. korean investors have a busy monday, earnings and exports, always kind of the canary in the coal mine when it comes to the trade futures in asia. we had the first 20 days coming in at 4.8% on the negative side, so we will see if that will be maintained this month. more warnings about trade tensions denting global growth. korea's biggest shipbuilders due to report earnings this monday. bloomberg intelligence says second-quarter earnings will serve up a reality check that
the down cycle is not over and optimism towards shipbuilders is misplaced, given the lack of pricing power. you see a loss of market share to china and with trade wars and drag on the growth. the biggest steelmaker revenue expected to grow for this year, higher steel prices in the second quarter and earnings will be a welcome relief for samsung biologics. this as the focus shifts from the recent accounting allegations, better capacity expected to have boosted revenue for samsung biologics. kathleen: create earnings and economic data ahead of thursday's growth figures. a big focus for the markets, what is expected? sophie: big focus and the bond traders, we have median forecast in the second quarter but global bond traders will look at any positive surprise to the gdp. on july 12 we saw hawkish
dissent from the bank of korea meeting fueling bond futures. on thursday, this comes after the government cut exports for the year. possibleok is seeing a impact from china's deleveraging plan but should thursday's gdp report reach forecast, bond prices could be under pressure as it would ea expectation lifted. kathleen: keeping her eye on the markets, thank you. trade and tax policies don't play out, trump may have found the perfect fall guy, jay powell. global advisor, founder and ceo bill rhodes still with us. is it isre alluding to possible donald trump may be very cleverly say i don't like what the fed is doing on rates. if the economy is slowing down, he can say it is not
trade, it is the fed raising rates. you agree? bill: i think we are fortunate to have jay powell in the seat of german of the federal reserve. i spent time with him a month ago. he is a person, not a trained economist, but he is a market person. he spent time in investment banking at dillon read he was brought in by the bush prior to this. and i think he has a good feel for the markets which i think is very important. nick brady document. he understands what is going on. my own forecast notwithstanding anything the white house might say, whether it be the president or larry kudlow, i think we will see e.g. more raises before the end of the year because inflation is starting to kick up. we will get for -- we will get growth for the second quarter i
guess in a week, somewhere in the order of four plus percent. so i think the last thing jay powell wants or people around is to see aed situation that we get behind the curve and we start to have inflation. he is also one who admires paul volcker. keep that in mind. kathleen: he may not be a trained economist, but he has had years in federal reserve - onomics. it is not like he just walked in from the trading floor. i want to raise a counterpoint. jay powell said last week that the policy path we are on now is appropriate for now. he is open to the door to rethinking. maybe because of trade or maybe because of this chart. it is a bloomberg chart that shows how the yield curve has flattened so much.
the last little bit, you can see a little re-steepening. many people are concerned about what this means, especially if it goes down and goes negative. are you sure the fed is going to toe all the reasons to go more times, especially if the trade war bites the economy if it could? bill: if we get into a full such trade war and see the flattening of the yield curve even get inverted, then all bets are off, but i think presently the path of the fed is to more increases. i would think it would take a lot to get off of that, but i learned to say a long time ago nothing is impossible. kathleen: i want to move onto a piece you wrote a month ago, beware emerging-market storm clouds. obviously the trade war is a storm cloud. is that the biggest one, and how bad could that storm get? into you have to take
account a lot of countries on the sovereign side but also by have been borrowing heavily in dollars because the cost is low. those that don't have proper economic reforms and a building . big deficits are vulnerable we have cases like argentina, turkey and i could run through a number of others who are vulnerable as the dollar stays strong and interest rates go up. i think we could see a replay of --ngs like you and kathleen we have seen over the years, people are underestimating the possibility of real problems here. as a side point but really as you mentioned, the driving theme for emerging markets and the key to their fate is what happens with the u.s. dollar. is it reasonable to expect the strong dollar narrative because
of what the fed is doing, because of rate differentials and now because of this return to base effect due to a trade war instigated by the united states as counterintuitive as that seems, all of it will lead to at least medium-term dollar strength continuing? bill: for the moment, but we have to remember we are in the ninth year, going into the 10th of this recovery. i am not saying anything will happen, but there is a limit. as you see tensions, trade war, some of the problems on the search and reach yield over the last few years, that will come home to roost eventually. economynow, this great we are seeing today in the world will not last forever. goldilocks world for the moment but it will not last forever. that is one of the problems. the u.s. stockt market, which many people think is overbought, we shall see.
haidi: where do you find protection in this market? it is unfair for these emerging markets that have since the tantrum days gotten to work and showing off potential houses. there are some in a much better state than they were back then. bill: there is no doubt they have cleaned up their banking systems and raise reserves. a number of them have installed very good people on the financial side. they have basically gone on a good reform path, but others have not. i think that is where the rubber will come here. i think it is being underestimated. where do you see the biggest pain in the em space then, and you see -- we have already seen action proactive moves being taken by some of the
central banks in asia. do you see more to that effect and we get in the downward spiral where if you try to intervene while the momentum is going against you in some of these markets, it is a catch a falling knife situation? bill: you have to watch the currency situation because anything with the yuan will have a big impact throughout asia but also throughout the world. then you cannot forget japan which is an area i know kathleen .ays covers very closely to see what the japanese do. all of this gets down into, what will happen on trade? the japanese don't want a one-on-one with the united states. they want to get the u.s. back to the tpp and signed a deal with the e.u. currency and trail comes together but we will have to watch all of it mostly because we are in goldilocks today, but as this communique of the g20
stated, whether we will be in police are -- goldilocks a year from now is another question. kathleen: you were a commercial banker for over 50 years, global first, opened citi's branches in china. what about u.s. banks and the yield curve? what about chinese banks? anything they can keep rolling money through the economy but people doubt that can work now. bill: let's start with american banks. starting in 2009, the american banks have had their problems, cleaned up their act raising capital, writing off bad loans which did not happen in europe, which is one of the reasons the u.s. banks are in a better shape in general than a number of european banks without getting into names. on the case of asia, i think there are problems with the smaller midsize banks in china, but the big state-owned banks have built up capital.
the real question there is how much in the way of shadow banking loans are on their books? this is part of the famous reform which i think is necessary and which they were concerned about. stay with us. the global advisor president and ceo stealing -- staying with us good luck more to talk about, but getting this line crossing the bloomberg concerning what we have been reporting about the china tower ipo, eight dollars hong kong -- $8.6 billion hong kong based on the share prices and -- $1.26 hong kong 43.1 billion shares. this is china tower, the state-owned wireless infrastructure operator. it has attracted a unit of alibaba group as cornerstone
investors. at that valuation we are looking at a yield that would be the biggest ipo in the world since alibaba which was four years ago. not a great time for this listing to come to the market. the hang seng is down from the highs of january and other major ipo's we have had this year, high-profile ones like xiaomi have been a disappointment. lots more to come on that story but also grace were an avalanche of earnings on wall street this week, though faang stocks looming large and industrials and energy giants, we will have a look at the week ahead. this is bloomberg. ♪ ♪
-- big oil, big tech and the financial firms all on the list. su keenan here with a preview. su: we have a lot in deed. some are calling it an avalanche. we start off with alphabet, then tuesday we have ubs from switzerland, amazon, facebook and deutsche bank on wednesday and thursday. we close out with twitter and exxon mobil. let's go to the charts because some of the leaders in the market, big oil, banking tax, all the ability to rock the market. let's go into the bloomberg. gtv is where you find them. the faang stocks are up. facebook tapping all the others in year-over-year revenue. amazon and google up as well. . the faanglet's get stocks now. su: search and trends continue to be the largest rough it, questions on the impact, the adverse e.u. ruling, likely to
be on the conference call and the cloud platform, deepening share to what extent, we will find out. amazon, is partnerships will be in focus, it was three more. let's go into the chart because it is up 55% year to date. $250 a share, revenue $230 billion, amazon stock above $1800. facebook revealing results, midweek consensus. $1.32. shares have bounced back from the big scandal over privacy. there will be a lot of questions about that. not just that. we are watching big global financial names, oil, energy. what are we watching? ugly --has gotten cut has gotten ugly. let's go look at exxon and the other big players. one analyst saying oil companies cashto report $80 billion
poured. let's see what they say about that. there are challenges ask on will tell us about. deutsche bank is a stock that toged on a preannouncement make this. they may have a bullish announcement but it is a battered bank, europe's most troubled lender. the cuts from the ceo, that will be the question. and then a report likely about the flows and u.s. taxes. typically it leads to outflows this time of year but could it be worsened by the new trump tax laws? stay tuned. haidi: i just much for that. looking at jgb, the 10 year yield gap higher as we had been expecting, given the move, the short move in futures market activity friday. we are seeing the 10 year bond yield climbing six basis points to 0.09%. we had this report or multiple reports suggesting the boj will tweak its policy when it comes to yield curve control by
letting the longer and of the rise.um rates in that and that is what we are seeing at the moment with the 10 year move in asia.rading starts lots of speculation the boj is talking about how to keep the stimulus program sustainable. we saw that slide in the futures. continuing to watch out will be one of the big themes as market trading gets underway. let's get more on what to watch. earnings season, bill rhodes, the president and ceo still with us. what a novelty it is we are looking at fundamentals and corporate earnings. bill: the earnings are very important this go around, vis-a-vis how the economy is going in the united states and europe. we had all the big banks announced, but the european banks as mentioned here are still to come. deutsche bank, ubs and others. we will see how that goes.
we have had tremendous volatility in the price of oil and gas. we will have to see how the major oil companies in that yet it sates and europe come through here. getting back to china, which is a big importer of oil and gas, the price of oil and gas is very important for china. there is some people who feel china has stockpiled quite a bit on the oil side and may actually cut back on their imports. it will be interesting to see how that goes and basically to see if they decide they will cut back on exports from the united states to china. all of this is tied in with the so-called trade war which we are looking at. the negative implications of the trade war, and i suppose you don't see that feeding through this season of earnings as you look at the commentary and uncertainty, lack of
confidence as a corporate leader, wondering if you will invest, given the policy environment, but is there a thisr this on the news -- undoes the tax reform policy? bill: without a doubt. we could see it, the impact by the end of the year. that is one of the possible downsides that is out there. i think the administration feels very strong about the momentum of the u.s. economy now. if we get a trade war, let's see how that goes for five months from now. without a doubt that is a problem. kathleen: we have the bank of japan meeting next week in tokyo. then there is these interesting stories thinking about adjusting yield conserve -- yield curve control to allow it to rise more and not anger it to zero. we see it makes so much sense. does it make sense that
governor kuroda -- i am just suggesting i will keep pedal to the metal. bill: knowing governor kuroda, he will continue to push in this some rise he's these in the inflationary rates. one of the things he has been consistent about since he took the job is that particular point. kathleen: we will see. we will talk next week and see what happened. bill: you will be there, so we will know. kathleen: global advisor, president and ceo. you can see that book, pick it up. it is fascinating. banker to the world, he is the author. take a look at the stories trending now. on bloomberg.com, the story behind google's secret offer to settle the e.u.'s android probe. they slapped the tech giant with a record fine last week. alliance is trying to revive active fund management by handing out sneakers.
haidi: we are counting down to the market open. rain here in australia and sydney, looking at a pretty mixed picture when it comes to asian trading to start off this week. we have trade wars ever present in the headlines. concerns about currency wars as well after interesting commentary from president trump late last friday. we are seeing nikkei futures looking ready negative going into the open. we are looking at a little bit of upside for the kospi, korean shares with the background of
>> it is 10:00 a.m. here in sydney. welcome to daybreak asia. your top story, asia-pacific markets ready for a mixed start to the week as trade tensions once again topped the agenda. g20 warning those tensions threaten the global economy, but steve mnuchin sees no chance of a currency war. kathleen: it is just past 8:00 p.m. in new york on this sunday. president trump threatens tariffs on all imported goods and saying beijing is manipulating the yuan. shinzo abe's top aide insists japan is not interested in a bilateral deal.
haidi: a lot for investors to contend with. not just earnings, we have banks, big tech names earnings out this week. also industrial companies, the energy sector as well. concerns about what this next missive in the trade were between china and the u.s., and the u.s. and every other trading partner. kathleen: of course right now one of the, sort of like the repository, the one thing is the chinese currency. it was hit so hard. you wonder now, has it been hit continue,at this can or does it continue on the march towards seven? i think that is the big question. the u.s. bond market held up
well under a lot of stresses and strains next week. it'll be interesting to see if it continues to do that. as you said, a lot going on. from equities, currencies, oil and more. haidi: we have had a little bit of calm so far this morning when it comes to trading, but of course watching the key yuan fixing, the biggest weakness in about two years on friday. seeing if that continues for the pboc. let's get to the markets. sophie is on the markets for us this morning. a lot for investors to contend with. a heap of earnings as well as rate decisions. you overlay the geopolitics of it on top. backdrop we that have markets on -- sydney sharess, snapping a three-day rise. in tokyo, losing 9/10 of a percent.
set for a third day of decline. trump trade tensions back in the limelight. taking a look at japanese assets, the yen getting closer to 1.11. this after trump's comments on friday as well as speculation of tweaking. that has pushed 10 year yields higher. futures are also in focus after plunging on friday. head of the july 31 meeting the earnings report card has not been too hot. 10% of companies that have released earnings, about two thirds have missed estimates. the june quarter will likely be the last earning beat of the cycle. we still have another 90% of companies to get through. kathleen: that could paint the picture differently. now it's get to the first word news.
the uk's new brexit chief says the country must compare for a no deal brexit. he told the bbc that while he does not think such a scenario will happen, the responsible government should plan for every a computer he told the sunday telegraph the u.k. will refuse to pay the $50 billion bill if they fail to agree to a deal. the new president of mexico is calling on president trump to embrace fresh nafta talks and a final deal that includes all three countries. he says the three sides should work together on trade, migration and security. coulded that a new nafta -- a heat wave in japan has killed at least 30 people and sent around 10,000 to hospitals.
blistering temperatures are said to continue throughout the week with tokyo forecast to seek 36 degrees on monday and 37 and tuesday and wednesday. it comes weeks after flooding in the west claimed more than 200 lives and also raises questions about plans to stage the 2020 tokyo olympics in july and august. after --is cleaning up 387,000 people in the city and neighboring provinces were moved to shelters. 41,000 ships returned to fort. flights resumed last night after hundreds were canceled. only light rain is forecast for the city on monday. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm haslinda amin. this is bloomberg. haidi: thanks for that.
president trump stealing the headlines again as he took aim at china and the glue for alledge lately -- allegedly manipulating their currencies. but steve mnuchin is -- by our chief agent correspondent. we have seen some of these high-ranking officials having to walk back and go into damage control. >> that is exactly it. it is a familiar pattern. making strong remarks only to use the next available for him to walk back. that is what happened on mr. trump's tweets on the dollar. by all accounts it seems mr. fears andemed to ease
assured colleagues u.s. remains a minute to a strong dollar policy. nonetheless, it is still under the spectra because all of the g -- still a pretty nervous backdrop. all the g20 nations are concerned about where china's yuan are headed. i think a lot of trade ministers around the world are hoping someone -- there will be a way out of this. leaderserned were g20 about the trade wars and the impact on global growth? >> seems they are increasingly concerned. this was easy to sign off. nonetheless, growing concerns about trade and protectionism. the economists look at it, question is where is the exit ramp in negotiations. china u.s. negotiations appears
to have stalled. you have the u.s. political cycle looming with elections in november. andsides exchanging barbs tit-for-tat threats. mr. juncker in washington this week, that may or may not progress some things. when it comes to the china u.s. story where in -- we are in for something of a long time -- long-term all. -- haul. kathleen: you have to look at the one that has beaten up is the yuan, right? china's currency is getting hit. fundamentally and technically, what kind of move is it poised for now? >> for now, the situation this year is different from 2015. tha yuan is the worst-performing currency in asia.
it is causing a lot of panic. that is because the situation this year is pretty different from 2015. was the what happened pboc value the currency and no one knew what was going on. there was a lot of concerns. this year is different. it is justified by the fundamentals. the chinese economy is slowing and the trade spat with the u.s. is worsening. that is why the market is actively pushing the currency weaker and the pboc is just allowing it. even know fixing was weakened the most in two years on friday, it was pretty much in line with market expectations. kathleen: such an important point. not currency manipulation as much as allowing china to let the currency do what it is supposed to do in the markets. a legitimate story for this week
or chinese currency based on these broad macro fundamentals. >> it appears to be the case. that is why there does not seem to be as much panic in the market. the critical question is just how far will the market want to push the yuan down, and just how far will authorities allowed to weaken. will it reach a trigger point? remember, the yuan is a key anchor of stability for emerging-market currencies around the world. interesting if authorities signal be go past that level. right here and right now all indications are the market is more comfortable, and as of now we are not seeing the kind of pressure to get money out of china we saw back in 2015, 2016. the optics of having a weaker yuan does one thing, but the pboc has good fundamental
reason why does not want sustained declines in terms of capital outflows, although they still have controls in place. what are we expecting from the pboc? we have not had interventional or even door burning for the currency. >> that is pretty difficult to predict. theyuan really depends on china u.s. trade and china fundamentals. it does make sense for the pboc to at least slowly yuan depreciation for a little bit. seven,pikes quickly to it does trigger panic. investors leading to significant outflows. shorten the yuan again. directll lead to intense intervention. that will lead to a drop in
reserves and that will be difficult for china. a key theme of our conversations this morning has actually turned out to be, well, what options does beijing have to support growth? if you look at this trade is coming at the worst possible time, they are talking about the debt crisis, it is kind of the moment of reckoning finally for beijing. what can they do without exacerbating that problem? >> i think clearly the chinese economy is slowing. most will agree on that. after that is where the disagreement comes in. how severe will be slowdown be? certainly policymakers have plenty of tools at their disposal if they need. you have seen some tweaks with the pboc encouraging banks, taking measures to make sure those companies that need liquidity get it. if they need to the have a full suite of options. there is augh,
feeling they are not quite at the stage yet where they are willing to pull a lever out right. ands more about tweaks taking steps to ensure the economy keeps ticking over, rather than neglecting their overall stance so far, which is one of trying to keep an eye on critic and region in the economy, while keeping overall growth on track. it is a delicate balancing act for them. we will see if we have a complete u-turn. but listening to economists debate this, the view is yes the economy's going down, it is just not yet clear how much of a slowdown it is and how much of a policy response will be required by beijing. kathleen: the hedge funds and traders and everyone you are talking about, are they a threat to president xi? a stable currency is so important to the chinese. the debt to gdp ratio.
corporate bonds and junk bonds. there are concerns now about what is going on. are you picking that concern up with the people you're talking to, or do they think it is a storm that is going to pass? there are definitely concerns about the currency right now but there is no panic. concerned for those depreciation's. everybody is watching the currency very closely. but i do not think there are a lot of short trades, four people who were not just trying to push the yuan weaker. a lot of hedge funds and traders have learned from 2015. they know if the pboc does not support the yuan, the pboc can just offload the dollar and stabilize pretty easily. even know there are concerns, there is not much. kathleen: thank you so much for
trade war, it is going to become a trade war. you think there is a 60% chance the tariffs that are supposed to take effect in september are going to be headed off to the sense where china will offer a deal. sean: best case scenario. we are still in a trade conflict, we are not getting to a trade war. it is in china's interest ultimately to negotiate. kathleen: i agree with you 100%. the chinese are smart and they have a lot at stake. so many people think, oh no, they have to save face. upanything, xi will step it just like trump. sean: after the first lap -- first round of tariffs, he retaliated. if you look at the rhetoric coming out of china, it is much more based on what are we going to do for the domestic economy. potential policies they are going to bring out to help. i think it is really important
for president xi, for his people, that he's because -- that he does negotiate. the one thing he has promised the stability of the currency and economy in continuation of reform. i am glad you bring up stability of the currency because it has been anything but. this is the chart that gauges how much volatility and price swings we have seen and offshore yuan and the widening get between onshore and -- widening gap. if we can bring that up. a lot more market participants say for the cross asset currencies, look to the yuan and not the dollar.
the thing to point out is when the emerging markets are under real pressure the rmb was pretty stable. now it is coming down. there's not much confidence at the moment. people are wondering why the chinese government are not stepping in. there, they seem to be quite happy with it. maybe we get to seven and they start to interfere. i think what is important is the morning -- the moment we get these tariffs and the potential for more trade tariffs, that is not good. it will still be in surplus, but it will be less and that is not good for the currency. we do not see an unruly job in the currency, as a lot of people expect. we do expect as we get more
clarity over trade in september, once we get more clarity over the august economic data, that is really key. july data comes out in august, that is key. people expected to slowdown in july. they are probably expecting more slowdown in august than i think will come through. we think it will be slightly ok in august and we will probably see some stabilization. haidi: i'm glad you made that point earlier about the turnaround, or the reversal you are seeing in the current account. should we be watching that story a lot more carefully in terms of it being a pretty fundamental shift for china? sean: i think so. if you had listened to a lot of commentators over the last few hours, a lot of it is about, well, where are the worries in emerging markets? they are in those countries that
have current account deficits. they look at the philippines, when from a surplus to deficit. look at the currency. it is absolutely important. there is something, there's two things you really have to look at in china. one is the impasse on trade and two is the pace of restructuring. both are happening at the same time. so, those we watch very, very carefully. tohleen: china, it is hard call an emerging market now, but i want to ask you about your emerging markets. line is thee emerging markets index. the white line is the bond etf from jpmorgan and yellow is emerging markets currency index. basically none of them look great. knowyou are saying even asia stocks are risky, they offer the best of site -- best
upside. who in particular? sean: we cannot select on emerging markets. we think everything is overreacted. if you look at a lot of the riskier currencies, they are fairly flat over the last month. they haven't really been affected. they are more of a dollars story and a rate story. earnings wise we do not think there has been that much impact on emerging markets. we are seeing a little bit of downgrades, which we have also in near, but we have seen a fall in emerging markets. if it stabilizes we have more upside in asia, whereas if it is downside another markets. -- in other markets. haidi: we will have to leave it there. this week is jampacked to be sure. sean taylor, pretty sanguine
look at markets at the moment. we just got some news. softbank and india are said to team up to create japanese payments for japan to take place by the end of the year. we are and expecting an announcement within days that softbank is starting mobile digital payment service in japan by the end of 2018 in collaboration with pay tm, the india digital payment startup. little make extensive use of ai and other financial services, according to people we spoke to here at bloomberg. we are hearing also dozens of paytm employee is are in tokyo working to get it up and running. moving into a very crowded field. local banks, service providers and other tech companies are staking their claim in payments. story as then that
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in buenos aires thing risks have increased. is --0's march statement one of japan's most senior policymakers says the government will continue to resist american efforts to negotiate a bilateral free trade agreement. will not don anything that could harm the national interest. he said japan will continue to to thethe u.s. returning transpacific partnership is in the best interest of both countries. the wall street journal says to his left is asking for -- says tesla is asking for cash refunds to upper become profitable. it was requesting for a meaningful amount of payments since 2016. he reportedly described the request of investment in long-term growth and essential for tesla's continued operations.
he says it is unclear how many suppliers were contacted. spacex has put a telecommunications satellite into orbit, its 13th successful launch of the year. the falcon nine rocket blasted off from cape canaveral. stagelcon's first returned safely in the atlantic ocean. targeting 30 missions this year, up from 18 in 2017. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm haslinda almond. this is bloomberg. thei: let's take a look at asian markets. sophie: asian stocks retreating. this morning japanese shares falling for a third straight day
as the yen is rising. speculation the boj will fine-tune its policy easing. we're seeing 10 year jgb yields climbing, earlier jumping as much as six basis points. let's look at some stocks trading on the back of that. japanese banking stocks rallying. seems likely the boj is reviewing something. konami, among the companies tapped to potentially benefit from japan legalizing casinos. konami has set up a committee to consider its stake in japanese casinos. we are keeping an eye on posco, the country's biggest steelmaker which is expected to see growth due to higher steel prices. fell as much as 10% after its earnings update. dry weather conditions
significantly impacted it. that's a look at some early stock movers is monday. kathleen: let's get on to the bank of japan. jgp has climbed to its highest yield after february since sliding friday on talks they could tweak policy next week. let's bring in our asian across managing editor in tokyo. what do you make of the speculation? myself, i have been winning for the point where the governor could say, look, we just have to change a little bit, but we are not moving away from stimulus. i think ithleen, would be a surprise to many if the bank of japan were next week at its policy meeting, to say, raise the yield target for 10 year government bonds, or to scale back their purchases of exchange traded funds in the stock market. it was just a few months ago in
didspring that the governor his utmost to tame down speculation that the bank of japan would be fine-tuning its policy. what several reports indicate is that doj board members are increasingly concerned about the long-term sustainability of their mega stimulus. the issue here really gets to part of the banking system. in particular it gets to the regional banks, which have run out of, essentially, good options for investing their deposits. you have got a shrinking population. you have got a still somewhat stagnant economy. so these regional banks do not have a lot of lending opportunities. -- several years ago what they
would do is pour money into the government bond market to get pretty much guaranteed decent returns. but with the bank of japan targeting yields at zero, and 20 year, 30 year bonds only a little of that, the problem -- little above that, the problem is these regional banks will be hard-pressed as times go by. andhe old bonds rolloff they invest in 0% coupon bonds, these guys are going to be in big trouble. now, the concern that has been there for some time, but what has triggered this elevated worry in the past few weeks, that is unclear to us at this point. governor kuroda, a lot of people have been saying the more bonds the bank of japan buys, the more it is owing the government bond market. this has created less liquidity, less trading, and this is a
problem. he says the lower we own the lower -- fewer we have to buy. long-term on yields rising in the u.s. is making it tougher to give the yield on the 10 year at zero. i come back to this point, isn't there a way to say, well, we are going to allow more flexibility, but we are not really going to move off of this policy of continuing stimulus. chris: yeah. one option that would be a natural one would be to abandon this line they have in the policy statement that pledges the bank of japan to continue expanding the monetary base and buying $80 trillion yen, about $800 billion a year. this is a number they are not in hitting already from the past couple years. for a while there, used to call
it stealth tapering because they were buying much less than ¥80 trillion a year. but they have kept that number in the policy statement. so one option would be just to say, look, we are no longer buying at 80 trillion yen, we not intending to buy anywhere near that. enough toto buy just keep deals around target. that would be one option. but the reports that we have had indicate that they are actively prepared to debate changing the yield targets and changing the exchange traded fund purchases. which, again, it would be surprising if they came out as soon as next week with these kinds of fine-tuning tweets -- t weaks, after governor kuroda and his deputies spent quite a bit of the spring pushing back against speculation that such a move would come this year. haidi: chris, thank you so much
for that. as we see that move when it comes to the 10 year yield there. this -- staying with japan, japan has approved gaming resorts. it is a market worth potentially $25 billion. benefiting industries across the board. our reporter has more. we start with the bases -- start with the basics of what the law actually says. lisa: so, the law that was the last friday was legislative hurdle for casinos to start being built in japan. some of the key questions operators seven wondering about. things like the tax rate, local access for japanese national residence as well as casino space size. so, those are kind of the basic
laws, but there is still a lot that needs to happen before the start building, such as the creation of a casino control commission, which will regulate the building process, as well as several bylaws the need to be written to go with the implementation bill. haidi: there is a lot of exuberance and expectation already. who stands to benefit? it islike you said, expected to be a $25 billion market, that is what some have -- estimates of said. the companies that will benefit, there are obvious names like foreign operators like mgm, las vegas sands, caesars as well. i think some are expecting this to mainly be local japanese companies, and there are lot of names in the process. they could run the gamut from gaming companies to electronic makers to banks.
so, some of the popular names analysts have thrown out include orex, which is expected to helm a casino in osaka. thatancial services firm also has some experience running hotel properties. as well as local gaming companies in japan such as sega and konami. they already supply slot machines in vegas. area casino in japan, they expected to be involved in other supplying or anchoring these projects. kathleen: what restrictions would be likely see and how could that affect revenue? i mentionedso, as before, some restrictions include the size of the casino floor speech -- space, which is 3% of the total integrated resort. that would affect how much gaming revenue would come out of it.
there is a limit for access for japanese nationals, which operators are hoping to tap for gaming revenue. is thatriction there there is a ¥6,000 fee every time they enter and their limited to entering the casino 10 times a month. du joining us from our tokyo bureau. in a moment, ubs abandoned its bullish call on the yuan and now sees it weaker by the end of the year. the bank's chief china economist joins us next. this is bloomberg. ♪
this andk about all more with -- i was looking through the bloomberg economic projections. looks like it appreciation of another 6.5%, which would take it to 7.3. where is the comfort level in terms of a reasonable steadyish weaker yuan? >> we put our forecast for the end of the year at 6.8%. we think that is a comfortable level for the pbc. it would represent a 2% depreciation of the yuan. central bank is still very much hoping for relative stability of the currency despite the pressure. 3% is probably what
they are comfortable for. is that a fundamental reflection of the slowdown we have seen in china, and does it also suggest the markets think china will be worse off coming out of these potential trade war with the u.s.? in theght be reflected optics of chinese equity markets and other assets as well. the market has the consensus that because china is more dependent on u.s. markets for its exports than the other way around, during this trade war china's economy will be affected more. market sentiments on the exchange rate has shifted very noticeably between april and especially mid june and now. so the depreciation has very much been driven by market sentiments. marketpbc lets the tickets direction, it would be more depreciated than our
forecast. but we believe the central blank -- bank will work to stabilize. they have done so verbally. i think they would probably introduce a countercyclical factor to the mix as well. to stabilize at a level that will probably not just be determined by the markets. haidi: we have been talking all morning about what policy tools remain at beijing's advantage. if currency devaluation is not something they would likely consider. i want to bring up this chart to this a bigger picture, sort of deleveraging, mountainous challenge confronted by beijing at the moment. if you take a look at this, where deleveraging was also going to be a massive challenge anyway. add to that the economic slowdown and a possibility of a trade war and a slowdown it
comes to trade volumes there. does this really create a nightmare situation for beijing? there seems to be a lot of loud voices saying we're going to see if this debt crisis will come to the fore for china. wang: i think that is probably a bit of exaggeration. i think if we are back to years earlier in 2015, 2016, i would agree with that. at that time, jon debt was rising very rapidly. debt to gdp ratio is increasing by 20 percentage points a year. in a last couple years china has made quite a bit of effort in deleveraging, combined with supply-side measures, so debt to gdp ratio stabilized, only increasing one percentage point in 2017. they have also tightened resolutions regarding shadow credit. i think at this point with the trade war threat, there is much macrooncern, or much less
and systematic risk at the moment because of that effort. you mentioned earlier the sentiment, the worries in the equity market. a lot of that so far has come from concerns about liquidity tightening, credit tightening, that is more self-inflicted rather than trade war. what can china do? at this moment i think they can ease some of the tightening, both on the regulation side and on the credit and quasi-fiscal side. drivenent slowdown has this downward pressure on the economy at the moment, so they can ease that a bit. we have seen some signs of that easing in the last few days, so that can help cushion the blow from the trade war side. kathleen: the fact of the matter is china's deleveraging has only slow the rate of growth in the debt. it is still something many people see as a towering
mountain. at the same time, there is less liquidity. there is less facility for the chinese government, for the pboc to keep flowing the money and -- in, to maintain that debt. junk bond yields are down -- are rising. if there is concerns in markets about the trade war hitting, this problem china has had for so long in a different way. the timing, is it possible in your view? you seem pretty optimistic china will write it off again, as many people do. wang: deleveraging i think cannot happen overnight. the fact that they were able to slow credit growth from 20 percentage points of gdp, to 1% last year. we think it will probably rise 2%, i think iso
a major achievement. china was rewarded with re-rating last year when this happened. at this moment bond yields were rising, credit spreads have increased, defaults of increased. that is a reflection of deleveraging efforts, because they tightened the shadow credit channels. many of the channels are closed. these pbc eases a bit, issues we see will actually improve. year going, the 10 down to 3.4%, it was 4% earlier. that is just a reflection of markets pricing in higher risks. that is how the market functions. the pbc actually still has quite a bit of leeway to inject liquidity. for example, reserve requirements and banks still dverage 15.5% between 2006 an
2008 they raised the ratio bite 10 percentage points. willot saying the pbc cut it aggressively, but we are looking for another 150 basis points cut this year. they can also use mlf liquidity. that is going a bit on the deleveraging, but i would say it is a slowing of the deleveraging pace. kathleen: that is important. they have plenty of room. thank you so much, m. don't forget our interactive tv function, tv-go. you can dive into any securities or bloomberg functions we talk about. check it out. this is bloomberg. ♪
haidi: this is daybreak asia. kathleen: now for a quick check of the latest business/headlines. china tower is said to have attracted hillhouse capital to its planned hong kong ipo. there among 10 companies that agreed to buy stock as cornerstone investors. china tower is auster and -- offering shares, with the ipo
equivalent of $8.7 billion u.s. that would be the world's biggest in nearly four years. buying aconsortium is taiwanese chemicals producer for 1.5 picks billion dollars u.s. there -- $1.56 billion u.s. pending regulatory approval. kathleen: long-standing hong kong property bears are renewing warnings that a correction may be imminent after a 13% for staff gain. citigroup last week predicted a 17% second half. possible the klein of more than twice had. they are sticking with their forecast, while bank of america sees a 20% correction by the end of the decade. haidi: let's look at what is coming up.
beyond bloomberg tv, rish is here next bloomberg ages -- asia. rishaad: let's look at what is going on. explaining why they had a 14% call. how hong kong is irreplaceable -- irrepressible. he is looking at the underdogs. risks facingme big chinese markets. the rundown we have had of late, how low can we go? that is coming up in about five or six minutes from now in bloomberg markets. kathleen: can hardly wait. a quick look at how markets are trading right now.
down more than 14%. percent.ne full asx 200 also losing nearly one full percent. haidi: starting off on a dead foot. unsurprising -- a bad foot. unsurprising considering how jampacked this week is. singapore looking to extend that winning streak to potentially a fifth straight day of gains. as we looking pretty flat had action in that market as well. rounding out some losses for emerging markets. malaysia set to open in the red. ♪ ♪