tv Bloomberg Daybreak Asia Bloomberg November 7, 2018 6:00pm-8:00pm EST
amazon and netflix among the top performers. president trump calls for a new era of bipartisan politics. democrats seek agreements on health care and infrastructure. >> let's get a quick check of the markets close. we saw stocks rallying across the board. three major indices gaining more than 2% across the board. the concern over midterm elections is gone. we saw tech shares leading the gains up 2.6%. health care shares were also up as there was speculation that gridlock in congress would lead to many changes. the s&p 500 in 2.1%. now that the midterms are out of the way, we can now focus on the federal reserve. not really a change expected when it comes to benchmark interest rates.
what the fed says will be a key focus not only for investors here but also for those in asia. >> we do have asian markets set up for a risk. not as much enthusiasm as one could anticipate. awi shares are heading for third. we're getting more news from south korea that could be of note. a new finance minister may be nominated this weekend. we will watch for reactions ceor to earnings after the warned for a slowdown in macau. on the earnings agenda we have shiseido report.
figuresoctober trade are expected to have fallen in september and for the philippines third-quarter gdp numbers are due. concerns over growth as well as the record trade deficit. that sent shares tumbling in manila. have a centrale bank decision later this afternoon. thank you for that. let's get the first word news. >> opec is signaling a second potential output you turn this the cartel and its allies may resume production cuts next year. dutch prices have led to higher output. the crude futures wilting in the opec willale surge, discuss a change of force this weekend. leaders meet on sunday. output occurs are on the agenda.
president trump says the fragility of the oil market is the key reason for his decision to allow temporary waivers on iranian crude. the president says he does not want his actions to drive oil toward $100 or higher. >> the reserve bank of new zealand held rates at a record low. hebrews any reference to a possible cut and a growing economy signals after inflation. the governor left the cash rate at one and three-quarter percent reiterating he expected it to remain there through next year. of upside and downside risk to the banks of growth. >> it would be pointless to do that to remove an option. what we are saying is that we are very data-driven throughout our projections.
the risks to the downside remain. particular, and also domestic investment activity likewise the risks to the upside are evident as well. boeing is advising airlines on how to deal with false airspeed readings. a global advisory tells crews to stick to operational guidelines in the face of erroneous information. a malfunction can lead the plane to stall and dive deeply to regain enough speed. the air crash killed everyone on board. 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. >> thank you. it didn't take long for president trump to announces
first postelection cabinet shakeup. jeff sessions is out. where does that leave the mullah probe? >> the new acting attorney general will take over oversight of mueller probe. because beforeng he joined the justice department, he was a commentator and he has written critically about the pressure probe suggesting that mueller was approaching a red line by going beyond russian interference and perhaps looking into trump's finances. in an interview with cnn that and acting attorney general that is in charge of the investigation doesn't necessarily need to fire mueller but could start cutting his budget to the point where it
would grind to a halt. republicanss by after sessions departure, very few of them mentioned anything about the russia probe at all mitt romney from utah. both said that mueller's probe must be kept independent and should not be interfered with. if trump or whitaker do move on how manyit is unclear other republicans might join in that. hearinge also conciliatory words and threats from president trump regarding the new house majority. which of those is likely to prevail? >> this is a tactic the president often uses. he talked about working with who is said to
become the new house speaker. but it was also with a veiled threat that if the democrats go ahead with some of their plans to continue investigations into his administration, that he is going to be playing hardball with them. that was the message he was trying to send it to them. battle overto go to those things but is willing to work with them if they can. anything beyond that, he is ready to cut it off and go to war. >> given that the split congress that we got from election night, we are now expecting the president to be challenged when it comes to legislations. i wonder he has been pushing for middle-class tax cuts. even saying he wanted to get that done before the actual vote.
we actually see him compromising with the democrats on this issue? >> it is possible that we have seen in the past in terms of immigration and gun legislation that the president has been seemingly eager to make a deal but then pulls back at the last minute to get what it is that he wants. whether or not he is willing to pay whatever price it is that the democrats are willing to extract demanding to for tax cuts, it remains to be seen whether he will put up with that. thank you so much for that. our next bring in guest. always great to talk to you. overwhelminglly no blue wave. for bothmixed results
the republicans and the democrats. was there any cohesive narrative for the midterms? i think what we saw last night was a deepening of the parts and division in the u.s.. you saw blue areas get blower. red areas got redder. that polarization will drive the policymaking out of washington. you look at states where you have republicans doing well. these are states where president trump is quite popular. you saw where democrats did well. -- e this is the trend that was accelerated last night. did this in bold and the
president because he got to keep the majority in the senate? week in him because he lost the house? >> if you asked the president he will say it strengthens him. of reality is the house representatives is going to be a constant thorn in the president's side. they will investigate him, oppose him, opposes policies. where does he find solace? is it in the republican senate or in continuing to move forward with an agenda that can be accomplished exclusively through executive action? i think that trend will continue. judicious do the democrats need to be if they are using their majority in the congress to push for investigations? you still have to accept the president trump was elected. that heking this threat
could become more like if he is pushed into a corner. i think the democrats need to be judicious. they need to realize they have a tremendous opportunity to box president trump and the republicans into a corner. areursue policies that broadly popular with the american people instead of pursuing a pathway of exclusive resistance and potentially pursuing the impeachment of the president which would be politically unpopular and problematic going toward 2020 area they have an opportunity here. nancy pelosi has a challenge. she has to lead the democrats in the house in a very specific way toward specific measurable outcomes that will allow them to be contrast with the republicans. if they start to go overboard and begin to be the resistance on steroids, i think that will cause the problems down the road. >> we were talking about the mueller investigation.
investigation -- if it is canned what with the democrats do? i think if that investigation ended, democrats have much more solid ground to stand on potentially if they wanted to oppose the president or figure out some way to enforce a protection for the special counsel. the democrats don't come into power for two more months. now and january, there is not a whole lot they can do. once they come into power, if the president were to end the special counsel investigation, they could press rigid -- legislation to insulate the special counsel and get support from republicans in the senate. the question is if they got enough support. >> what are the chances that the new attorney general will end up firing mr. mueller? they could
simply choke the life of the investigation giving him no support. >> firing the special counsel takes things too far in a number of different ways. you could have the new attorney general begin to ask the special counsel to wind up the investigation. the special counsel, they submit their report to the department of justice. the attorney general could decide to redact large port parts of the report or render it useless. they couldany things do short of firing robert mueller that would have great impact. >> this and based in -- investigation got started in may of last year. feeling aboutans the length of this investigation? do we know when it will end? going into the election last night, it was almost a nonissue. investigation --
reveals that the majority of americans don't like the mueller investigation. they don't believe it has been handled well and robert mueller himself is seen less favorably by many americans. what does come next? underk that mueller is some pressure to wrap it up quickly there is no indication that the end is in sight. have not resolved the question of what president trump will do with his testimony. there are a number of characters in the saga that had yet to be interviewed. i have to guess, this may go on for some time. >> can we expect any of the president's policy issues to be taken to the forefront? expect to happen when it comes to policy applications here? >> i don't expect a lot of
productivity from the congress because of the division between the house and senate. there are two issues i would point to. the first is infrastructure policy. some consensus between republicans and democrats that something has to get done. the second is health care. this is counterintuitive in the sense that republicans need to get something done on health care to an oculus themselves against the attacks that were effective in the recent election cycle. also want to figure out a way to get the affordable care act working better. it would not surprise me to see a narrow deal between republicans and democrats on a health-related issue related to the insurance markets or the pharmaceutical drug pricing. change and we no saw that drugmakers and pharma were gaining in the markets. still ahead, how the midterms might impact trade talks with china.
this is daybreak asia. let's get more analysis into the moves of the u.s. market after the midterms. we dive deeper. what are you watching? >> we are watching all of this is green on the board. when gridlock happens in congress, historically that is very good for markets. the s&p 500 and the doubt hitting a four-week highs. more than 500 points added to the dow today. the nasdaq, the biggest gainer up 2.6%.
let's dive deeper into the s&p. we are looking at financials, industrials, and health care. with the financials we are expecting not so much to happen here. donald trump has his regulators in power. they are probably still going to continue on with what they are trying to do. industrials, there has been continued discussion of bipartisanship. health care, one of the biggest things up by nearly 3%. the democrats could stop donald trump's hopes to target the drug pricing. also, hop into the terminal. we will see how these sectors fit in with the s&p 500. this is the imac function area health care coming in at number two. financials coming in at number eight.
across all 11 sectors, it is green across the board. for every one stock that was down, there were nine stocks positive. what happens in the future,? we were talking to the global strategist of deutsche bank. >> starting in mid to late may, the equity markets started to price in the downside of risks to growth. whether having a democrat majority in the house is going to change the dynamic around trade and trade policy. the markets dick groat -- go back to pricing that into growth. >> come with me as we look ahead to what is out and what is in.
we are talking about gridlock the next two years. let's talk about immigration with the democrats in power. donald trump had been teasing about possible stimulus. paul ryan said it is already the law of the land. democrats are going to try to approach anything and everything that donald trump has been talking about. with the u.s. china trade war and all of the trade issues around the world, that is still going to be one of the biggest themes of the next two years. >> thank you. starts its two-day meeting. economists surveyed the midterms mean for the economy. our editor is here.
war,tax cuts to the trade >> of issues. number at this moment it is unclear. what does it mean for the economy and the head? what if democrats do back tax cuts? be against aocrats tax cut for the middle class? donald trump was asked about this. a taxd if democrats have cut idea pursuant even if it meant adjustments to current policy. he was asked about more infrastructure spending. making may be easier with democrats in control of the house. that would be a bigger deficit on both counts potentially. one more thing i want to throw in, our team points out that
u.s. voters sent china a surprising message on trade. terrorists seem to be favored in some states because people who favor them were actually reelected. analysts are saying saying baser a united front. i think there could be surprises that people have not even put into their policy mixes yet. interesting that we do not have a clear picture of the narrative on trade. no rate hike expected. there is no press conference. let's look at my rundown.
the message will be do nothing to change it. they will still see a strong economy. business investment was week. they will still characterized inflation is near 2%. talk, and maybe discuss things like the balance sheet. meeting andd the wait for the rate hike in december. byot could be in play december. >> plenty more to come. this is bloomberg. ♪
my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. here in sydney, we have had markets trading for 30 minutes now. the benchmark is at a shade under 6000 points. up 2%. for a very strong session for the three major indices ending more than 2% for the first time since october 16. i'm shery ahn in new york. i'm all allen in the. you are watching daybreak asia. >> president trump calling for a
new spirit of bipartisan politics after the democrats won control of the house. he also warned of a warlike posture if his opponents use their positions to launch new investigations into his administration. he unexpectedly reversed his antagonism toward nancy pelosi saying that she should be speaker again. >> ultimately we can all work together next year to continue delivering for the american on economicding growth, infrastructure, trade, prescription drugs. these are some things the democrats do want to work on. >> it is about what you can do. what you have done in the past 60 your credentials but it is about what you can do and i think i am the best to go negotiate.unify, to resignedessions has after months of what has
criticism. his departure focus is a spotlight on the russian investigation into his decision to step away from it. he will be temporarily succeeded by matt whitaker. he is a credit of the mueller inquiry and has the power to curb or end it. forman sachs is promoting -- fewer employees to partner this year. 69 staff are being elevated which is down from 84 in 2016. more than two thirds come from trading and investment banking. vietnam wants to join the formula one party by hosting a race in 2020. it would be staged in hanoi in april as part of efforts to boost tourism and the economy.
the race would be held around convention center with all financing coming from the private sector. for a large account percent of gdp by 2020. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's check on australia markets. >> apa group is getting a hit this morning. this after australian regulators a takeover proposal for the pipeline saying the deal was contrary to national interests. this is an interesting
development of this week marks the first development -- taking a look at other stock movers in sydney, i want to highlight james hardy. we do have after pay rising after its. it did warn that listing maybe state in the lead up to elections and australia. with's jump into the terminal. breakoute it set for a and a rising to have percent against the u.s. dollar over this month so far. contest a key to resistance level. that is the line in yellow in
this chart area that is the 100 day moving average. >> thank you so much. will be inar impact focus later with china giving an update. bloomberg's china correspondent is joining us now from beijing. onhave seen almost no impact chinese trade numbers given all of the shipments frontloading. could we finally see the effects know? the expectation is that exports are going to slow the growth to 11.7%. compare that to the numbers we saw in september 14 .5%. a number of economists thinking when they look at those numbers that that frontloading as companies try to get the orders in before the terrorists have taken hold.
the support is expected to weaken. there are a few other factors pulling in different directions. you do have the impact of those tariffs on $250 billion of chinese goods. pulling the other direction you have a fiscal support measures that it is let in place by policymakers including tax rebate. you have the weaker yuan. we are going to get a gauge of the external demand picture which some data suggests is starting to soften as well. in terms of imports we expect us to increase a smidgen to 14 and a half percent. other factors at play our policy measures infrastructure spending here in china. to what degree is that sucking in more imports. in terms of trade balance, we are expecting a surplus. taking up $35 billion.
mentioned the weaker chinese yuan. because of that we have seen some pressure on foreign exchange reserves. we will get an update on those numbers. what are we expecting? >> that pressure appears to be continuing. we have seen a third straight month of declines. still above the $3 trillion line. the impact of the stronger u.s. dollar and a tick up in capital outflows. nothing major, but we are starting to see signs of individuals and corporate strategy shift their money offshore despite that some as thes have said even one weakens they expected to weaken past seven to the end of the year, they don't expect a flood of cap outflows. because the capital control measures are some tough now in china. it is just that much more
difficult. >> the dust is now settled on the u.s. midterm elections. how is the result expected to play into the trade war? remembering that in terms of the bipartisan view from washington, china needs to be tackled and confronted. that view remains. there is one view the trump now with his domestic agenda hobbled for the next two years, that he will focus more on the international agenda. the other view is that potentially a weakened trump will be more eagle -- eager as he comes to the table. we will have to see how that will play out. there may be disappointment in beijing that some of the states
in the u.s. that have republican lawmakers, some of the states by theve been impacted china tariffs, those lawmakers did dust did not pay a heavy price in the midterm elections. there was certainly a hope by china that that would play or at least change the political calculus in washington if you saw a large number of republicans falling on their support for tariffs. we are looking to the g20 meeting between the leaders of the u.s. and china. >> thank you. let's bring in our next guest.
i want to pick up on a point tom was making. which way after the midterms do you see president trump leaning on trade? will he be emboldened or double down? or will he weaken and maybe offer some concessions? >> i see the effect of the midterm election and the split result is neutral for trump. the fact that he did really well in ever called -- agricultural states suggests that he was not rebuked for pursuing the tariff first approach. i think his trajectory of using tariffs and threats of future tariffs to extract concessions from the chinese is probably going to continue. the fact the democrats now control the house also means that has broader global trade is going to face some headwinds. when you look at the leadership of the big committees in the house, these are people who have
supported trade agreements before. i think trump will focus on his global trade agenda. try to get nafta through the which supports his china strategy. i see his china strategy and the current trade war as remaining on the current trajectory. the key watch point is going to be when trump meets with xi jinping on the margins of the g20. it is likely that both declare a cease-fire and initiate .egotiations those negotiations are going to take quite a while. >> you have had some experience in this area. mentioned that in your difficult, it is getting cooperation on the most basic issues. it doesn't seem to matter who is in charge. what was your experience?
chinese are very tough negotiators who pay attention to domestic politics in the u.s. to determine who has the relative leverage in the negotiation. interpretationre is going to be the trump was not rebuked. the fact that the republicans take up -- picked up several seats in the senate. i think it suggests the trump has some tailwind behind him to continue to pursue his current strategy with china. goinginese incentive is to be to get back to the table sooner rather than later. the clock is ticking red the current 10% tariffs on chinese exports are supposed to automatically increased to 25%.
the chinese want to stop that from happening. that will be the principal focus of this meeting with trump on the margins of the g20 in argentina. >> there was a point in time in history when the u.s. view to markets,opening up its leaning more democratic as it develops. it seems that that view has changed and that washington seems to view more china as a competitor instead of as a friend that can develop together with the u.s.. did this change happen and what does this mean for the future relationship between the two countries? what that is a very important point. u.s..s. concern about china trade, it is not a republican concern. it is a bipartisan concern. the ships in american views about china and the u.s. relationship. and as been gradual
function of the u.s. perceptions of chinese behavior. administration, the challenge with china was finding the right balance between cooperation and competition. biging with them on challenges like stopping iran and north korea's programs. putting a floor under the global financial crisis at that time. right now, i think there is a greater emphasis on competition because it appears as if china is taking -- taking a step back. from the u.s. perspective, china has become more conservative and as a result, u.s. strategy is emphasized more competition than cooperation. >> when can we see the circuit rate question what will lead to the breakthrough in this relationship right now?
it be north korea? the u.s. economy taking a hit? >> i don't think we will reach a breakthrough moment. i think we have entered into a new paradigm relationship. oft i call a new normal tensions in which the u.s. looks .t the relationship technology issues are becoming a sick of the get new arena for a petition and 10 chile ideology. speechesident pence's focused on the nature of the chinese regime and the nature of their political system as a source of differences between the u.s. and china. if this relationship becomes characterized by competition between two different political systems, i think we could be in a very different world.
>> i wonder if i can get your thoughts on something that happened today in australia. we have a group getting knocked back on its bid to buy some pipelines. also, there will be a major pivoting australia it back into the pacific. >> i see the regional mood toward china changing. that notegic reality is countries in asia want china to dominate. on the other hand, nobody wants to choose between the u.s. and china. thestrategic reality of next few decades will be in the space in between. advancedee is for democracies and market economies , they are increasingly concerned by what they see.
xi jinping putting the party back in control. that is creating concerns that andlt in resistance reluctance to accept chinese investment. i would say asia, it is more qualified. companies want to do and if it from chinese investment. countries like malaysia with the leadership being reluctant to embrace the investments. i would say we are in a. -- time of a wariness. the direction that xi jinping vague and very everyone wants to know what is china -- what does china look like over the next 10 years. >> thank you for your time. in a moment, qualcomm and a week
gained 1.8%. that is after they fell on the last session. let's get the latest breaking news on the bloomberg. for japane orders coming in for the month of september. following 18.3%. a much bigger fall than expected. the expectation was a fall of 9%. after a gain of 6.8% in the previous month. .hat fall is 18.3% you're on year also falling.
also, much bigger than expected. that is a big fall. suffice it to say that september has been a tricky month for japan. we have typos and an earthquake and machine orders a leading indicator of investment. we could see a weak third-quarter, things should pick up in the fourth quarter. a currento getting account balance coming in at 1.8 trillion. higher than the estimate for september. are these numbers from japan disappointing but expected to rebound in the fourth quarter. >> a big mess there.
fell in latees trade after a week forecast revealed the impact of the fractured relationship with apple. usinghone maker stopped qualcomm chips. the companies are locked in a sprawling legal dispute. let's assess the fallout. what does earnings tell us about the front relationship between these two companies? be a very going to messy and volatile situation between apple and qualcomm. september 2019. they have obviously -- the contention with apple with respect to the use of qualcomm's property is that the royalty rate ought to be based on the price of the chip not the price of the device. qualcomm disagrees.
there are multiple litigations being fault -- thought. qualcomm continues to in the lastt apple quarter, apple went to 0%. qualcomm up until now was using a portion of qualcomm and inc. intel. this could have been a misunderstanding of the analyst community where we did not have it in our numbers. nonetheless, we did not expect quite street -- steep drop. that is a substantial indicator of weak revenues. another portion of the miss also came in and that caused a substantial -- if you look at the tax impact that was positive. washeadline figure q1 actually better than that.
this thousand as a, it has been this way past several quarters. it will likely remain this way for the next several quarters. i think apple's royalty decision is the number one factor. apple's chipset loss is a smaller factor. offsetting this on the positive side, we had a huge buyback which would be 32 or 33% of shares outstanding. the be a huge positive effect. looked of that has to be qualcomm contends with for fiscal 2019. >> we also sought the company had strong demand for its chips in china. is that the positive in these earnings? andf you abstract yourself look at the picture for the full year, it seems a little weaker than the guidance that they before all of
this was unfolding. we think handset units are going to remain lower than what most people expect. on the flipside there is going to be a makeshift lower in handsets. the net effect is these are relatively small items. the number one thing is the royalty litigation. items. the number one thing is the royalty litigation. >> thank you so much. let's get a quick check of the latest business flash headlines. b&w slumped after saying trade tensions higher provisions and pricing pressure would persist through the end of the year. shares fell the most in two months. they are expecting a boost from clearing inventory and sales momentum in china.
bmw's return on sales nearly half last quarter missing estimates. cores plunged the most in three years after missing estimates. this after years of heavy discounting. same-store sales numbers were down more than 2%. ast is twice as much analysts were expecting. michael cores is trying to relaunch. the satellite-tv provider should 340,000 subscribers in the third quarter. customersining 26,000 at sling. this puts more pressure on the chairman. get a quick check of the asian markets that are in play. australia and new zealand are
open and gaily -- gaining. kiwi stocks are gaining ground. all of this coming after a strong lead from wall street. the result of the midterms propelling markets in this part of the world higher. we will have more on that and more of sites on the next hour of daybreak asia. towill speak to state street ask how the midterms are likely to affect fed policy as well as emerging-market assets. will have the market open next. this is bloomberg. ♪
democrats seek agreement on health care and infrastructure. shery: china in focus this morning. oniffs putting a damper shipments. data out of china, we had eco-data out of japan, orders following more than expected in september. study.z -- steady. this coming on the back of gains out of wall street. let's see how trading is going in asia. >> some tailwinds from the u.s. midterms. we are seeing u.s. futures lower. the dollar holding steady. some moves in 10 year treasury yields. taking a look at the agenda. be key data point will chinese trade figures on the impact of trade tensions. from japan, machine orders weaker than expected.
that is not denting the mood in tokyo. the nikkei 225 adding one point 6% -- 1.6%, as is the kospi. in focus today. trump downplaying concerns over mike pompeo's postpone meeting scheduled this week. i want to highlight that tumble in ap group in sydney, sinking the most since october 2008 after australian regulators blocked the $9.5 billion takeover proposal for the gas pipeline, saying it was contrary to national interest. this week does mark the first visit by a foreign minister to china. as a georgetown university out, thispointed reflects the changing dynamics for players in asia for how to
negotiate the space between the u.s. and china. >> thank you very much. let's get to first word news. >> president trump is calling for a new spirit of bipartisan politics. he also warned of "a four-like posture." war-like the president reversed his antagonism towards nancy pelosi, saying she should be speaker again. >> hopefully we can work together to deliver for the american people, including ,conomic growth, infrastructure trade, lowering the costs of prescription drugs, some of the things democrats do want to work on. u-turn,signaling a indicating the cartel and outlays may resume production cuts next year.
rising prices and attacks from president trump have led to higher output, but with futures wilting, opec will discuss a change of course this weekend. sunday, andet on potential output curbs are on the agenda. president trump says the fragility of the oil market is part of his decision to allow temporary waivers on iranian crude. eight nations will be allowed to continue buying despite sanctions, although they must show they are working to reduce orders to zero. the president says he does not want his actions to drive oil towards $100 or higher. oeing is advising airlines. tide linesstick to in the face of erroneous information's. . it can lead the plane to stall,
then dived deeply. the crash killed all 189 on board. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: thanks. stocks in asia look set for strong gains following the advance on wall street as investors look past midterm uncertainties. let's get more from garfield reynolds. markets are happier with the dividend? >> the government, i think they are happy to see the midterms in the rearview mirror. there was some uncertainty. if there was a republican sweep, it might have emboldened donald trump. if there was a democratic sweep of both houses, that would have created serious tensions, supreme court judges, cabinet
changes. holding on to the senate partly explains president trump's consolatory attitude. mostly youtoo, but look at it and we had some wobbles around the election. now we can get back to finding out how sustainable the rebound horrors the horse -- of october. shery: asia rising, the u.s. would fall. now what happens with the strong leads from wall street? we have eco-data out of asia. what is up for asian equities today? >> the economic data is likely to the put to one side, unless there are some stock drops on da points.
the japan machine order data was appalling. time it came close to this previously was october 1992. that is a bad number, but investors are likely to look past that sort of thing and say that was what was going on in september or october. we want to be looking forward now. a lot of people look forward to i meeting, saying that is what we are concerned about now. if we can get a good result there, that will remove the concerns that have plagued asian equities. area that willer be of some concern is treasury yields. they are around the highest since 2011. we have a fed meeting overnight. if we get serious treasury market pain raking out -- breaking out, that could undo
the midterm optimism in asian markets rapidly. shery: at least the expectation is for more fiscal stimulus and more debt and deficit lower now after the midterm elections. garfield, thank you so much. we have been talking about this all along, the trade or impact in focus today. china giving an update on exports for october. tom mackenzie joining us from beijing. we saw exporters benefiting from that front loading i customers. where we see that -- by customers. we will we see that support fate out? >> yes. a number of economists were taken i surprised on the extent this frontloading has helped. there is a sense that will start to fade. the tariffs on 250 billion dollars of chinese exports to , a significant
impact, ranging from 25% to 10%. the impact of the tax rebates outlined by policymakers, as to whether that will be supported for china exporters, we may get some sense of that from the october data. forecasts are they will slow to a little below 12% for october, down from 14.5% in september. it will give us a picture. 14.5% versus 14.3% in september. the infrastructure spending pushed in china may prove to be stimulus for more imports, but you have to take into a fact of the weaker yuan and the increased costs on importers and china. ofare expecting a surplus $35 billion for the month. economists expect
a significant slowdown in exports, particularly january 2019 when tariffs are expected to go up from 10% to 25% on that $200 billion tranche. also: a weaker yuan costing the government a lot. see the impact on foreign reserves this time around? >> you are right. that is why we are much more interested in fx reserves now as we look at that seven level. we saw the numbers for october, fx reserves dropping for the third straight month, falling by $34 billion. still at the $3 trillion line, but it does suggest that some fx reserves me be being used to give some support. the dollar strength is a factor.
we are getting a sense there is a pickup in demand for capital outflows for the individual and corporate level but capital controls are stringent. don'ts why some analysts expect significant capital outflows even if the yuan does cross that seven level. influence do the u.s. election results have on the trade war? the a certain sense of disappointment in beijing that the tariffs supporting agricultural states did not suffer major losses in the midterms, despite support for tariffs that have seen a and in sales for soybean other parts of the u.s., things like lobster as well. advertisements in some states to highlight what they said was that damaging impacts of the trade war. that has not come to pass. there will be some calculation
whether president trump doubles down and strengthens his aggressive demands in terms of the trade war them or whether a week and president will be keen to get a deal on the table as he looks to election prospects in 2020. the midterm elections were of some interest for business leaders and individuals, more so than they have been for a number of years. we are essentially switching to that g-20 meeting at the end of november and whether president trump and president sheesh in pink and make headway on trying to resolve these tensions. jinping makexi headway on trying to resolve these tensions. white a drugmaker says beijing's plan to buy medicines is not the right thing to do. we will have more later this hour. shery: state street's global macro strategist to talk about the midterm impact and why he
♪ is "daybreak: asia." focus.entral banks in how global economics and policy editor kathleen hays is here with what they all have in common. i think we will look at two asian central banks in focus. for them, it is the same. rbnz held its key rate at a record low, exactly what was expected. the head signaling that cash rates will stay there through 2019 into 2020.
they did make one change. that aopped this phrase change to higher rates are lower rates was in the cards. people felt it was less dovish. they do see inflation getting to 2%, the middle of their target, sometime this year. let's jump into our bloomberg library. look at how well gdp is going. , staying ina climb a healthy range. if you look at their trade balance, there is some concern over exports, another reason to sit tight. let's move on to another bank, the central bank of malaysia. the same call. they keep their key rate at 3.25%. they raised it in january because they were concerned about inflation and their currency. inflation has eased a bit, and the ringgit is stable.
here is the key policy rate. there is the rate hike in december. it has come down, down, down. given the instability in emerging markets, they probably want to keep their powder dry and not open the door to more currency speculation again. the federal reserve starts their meeting today. no rate hike expected. , there is no press conference in november because that was fed policy up until now. in december opened the door for the final rate hike of 2018. year, every federal reserve meeting will have a press conference and everyone will be considered life. isthey think the economy stronger than they thought? do they pull back? a lot of people figure it will be like the last one and the
attention will turn to the end of the year. this attention on the fact that we are done with the midterm elections. we saw this pressure on treasury yields. most people assuming because of the gridlock in congress that there will not be more spending or tax cuts. does that mean this could be good for bond prices? >> if we think we will have gridlock and there won't be more spending and the deficit won't get wider and you won't see more pressure on the fed to raise say maybee, you would we have seen the peak in yields for a while. what if democrats surprise you? the talk is they will be very busy with tons of subpoenas against president trump and the white house, but to the extent they feel the electorate wants them to get things done, there is the possibility of a middle-class tax cut, talk is that would be appealing. they may try to resend tax cuts
on the higher end. that could surprise the stock market in the bond market in the next couple of months. shery: even infrastructure. thank you for that. our next guest says it will take time to digest how congressional gridlock could impact u.s. fiscal policies and growth in is coming to been years, but positive towards emerging markets, fx. joining us now is ben luk from state street global markets. i'm not surprised you like em fx . the first immediate impact from this gridlock in congress is a weaker dollar. >> yeah, definitely. i don't think the midterm results change our overall view. we have been positive since last month, but it solidified the case that if history was any indication, a gridlock situation
tends to be an anti-dollar environment and the most important ingredient for emerging markets to rally. looking at valuations in the em fx market, it is cheap. y a lotnderweight buy b of investors. you are still getting a positive carry with these currencies. i still see value. the uncertainty remains in the trade war and trade policy, but those are better priced in. that is why we won a risk-on approach in terms of em. shery: emerging markets, such a broad region. in asia are we specifically talking about that could see some benefits in the short-term? n: the number one market is chinese equities. the obvious reason is not just because of the dollar. it is what we have seen throughout the summer, a lot of policy stimulus enacted
throughout the summer, including monetary conditions that have eased him a fiscal policies, income taxed, infrastructure investments a ramping up, and you have an important verbal support by the chinese government to boost sentiment in the local equity markets. in additions to the dollar impact, we think the chinese stimulus will feed through to the real economy in the next couple of months, and that will bode well for the local equity markets. in terms of the emerging markets space come in the first positive impact would be chinese equities come in and that will slowly filter through two asian equities, and a broad pickup in the emerging-market space. it will be concentrated first in china. equities like chinese even in the environment of what looks to be an increasingly entrenched trade war? does that change are thinking?
>> i don't think the midterm changed the trade issue. itot of the trade policies, trump through president itself -- himself. we are seeing it is better priced in in term of the markets, valuations in the fx space, the equities space come a but what you need to look at our earnings. if the numbers we are tracking are correct, eps growth is 15%. that is lower than u.s. equities at 18% tracking 2018 eps growth. when you are thinking about 18%,ngs delivering 15% to but emerging-market equities are trading at half that, the risk reward is that it is attractive to own some exposures in emerging markets. paul: in terms of risks, is
there anything you have your eye on. jamie dimon talking about a potential recession in early 2020. en: for now, it hasn't shown up yet, the u.s. inflation story. that could be a risk in 2019. escalate,de war does the first thing we will expect is the second-round tariffs the u.s. has imposed on china 10% only. in 2019, it will increase to 25%. tariff list ishe consumer products, so you will see more tariff impact filtering through to u.s. inflation. we run our own online prices. we are still tracking u.s. inflation around 2.7% annually. 3.5% comees up to 3%,
then you will see the fed possibly tighten further than what the market is expecting now. that could be a risk for emerging markets. u.s. inflation is still well capped, but that could be a risk in 2019. paul: all right, ben luk, we will leave it there. thank you for joining us this morning on "bloomberg daybreak: asia." don't forget tv . you can watch us live and dive into the securities or functions we talk about. you can become part of the conversation and send us instant messages during our shows. this is for bloomberg subscribers only. you can check it out at tv . this is bloomberg. ♪
business flash headlines. softbank seeking $18 billion from japanese investors. the ipo of its mobile phone unit. nomura will share of the largest batch of shares to retail clients and an offer that may raise $26 billion. institutional investors normally take the majority. sources say softbank may announce details of the sale as early as next week. paul: qualcomm fell in late trade after a week forecast that missed average estimates. first-quarter sales between 4.5 billion dollars, below the average forecast in data compiled by bloomberg. earnings and outlook are a window on demand. coming up next, chinese brokerages are boosting capital to protect against a market $640e that threatens
paul: it is 8:30 a.m. in hong kong. we are an hour away from the open of trading there. shery: you are watching "daybreak: asia." >> attorney general jeff sessions has resigned after ,onths of white house criticism focusing a spotlight on the russian investigation and his decision to step away from it. he would be temporarily succeeded by matt whitaker, a critic of the robert mueller inquiry and now has the power to terminate it or curb its scope. machine orders fell further than forecast in september and the latest sign of a stuttering recovery.
orders were down 18% from august, double the fault economists had predicted him and fell 7% on year against forecast of a 7% gain. machine orders are a key indicator of capital spending. the reserve bank of new zealand held great set a record low. it removed any reference to a laborle cut has a tight market and growing economy signal faster inflation. the governor left the cash rate 1.75%. he sees upside and downside ands to the bank's growth inflation forecast. >> it would be pointless to remove an option. we are data dependent, data-driven, around how our predictions unfold. the risks to the downside remain, the global risks. also, domestic investment activity.
likewise, the risks to the upside are evident as well. >> goldman sachs promoting fewer employees this year. on theolman concentrates core moneymakers. staff, some keep staff are being elevated. more than two thirds of them come from trading and investment banking, with back-office staff and asset management bearing the decline. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thanks. asian marketsw are shaping up so far this morning. here is sophie kamaruddin. >> it is looking risk on for asian equities with some uncertainty out of the equation
after the u.s. midterms are done and dusted. officials can focus on official data, regional data. we did get a steep drop in japanese machinery orders. the nikkei 2.1%. inare seeing a relief rally seoul, korea, with the kospi gaining ground. the kiwi dollar is under pressure. it is trading around a three-month high after the decision to hold on the key rate. stocks and wellington and sydney , those benchmarks gaining ground for a third straight day. one key mover in sydney is taking a hit, falling 11% as australia blocks of bid for its gas pipeline on national security grounds. analysts think this could give other bidders to enter the fray.
say they are considering raising reserves against bad debt. it has said it is not the source of reports that it will post a lost for the first half. results are due on november 14. i also want to highlight bandai namco. strong toy sales boosting profits. game sales remain strong. bloomberg intelligence sees this trend persisting through 2019. toshibaissan, reporting. shery: thank you so much. are boostingrages capital to bolster defenses against a market plunge that could threaten the value of $640 billion worth of shares pledged as collateral. tracy alloway has the story in hong kong. these shares seem to be the next big risk for financial markets
in china. no wonder authority seem to be focused on them. how much of these loans are held by brokerages? >> yeah, it is a good question. we have some estimates from hsbc saying 10% of a-shares are linked to these collateral pledges by brokerages. when you talk about risks, it is a chicken and egg situation. the share price declines, and the brokerages are tempted to liquidate. that pushes the share price down further. that is the feedback loop that authorities are trying to break here. paul: where do some of these big brokerages sit right now? are they in immediate danger? >> tricky question, paul. we have an estimate by bloomberg intelligence saying for every 10% decline in the value of
these bad stock pledges, net capital at brokerages are eroded by 8.9%, so that seem significant. that is why we have seen three brokerages announce capital raisings of some sort, but the difficulty is the response from the authorities. it is doubtful china will let one of these brokerages go. we have seen them take attempts to shore up the brokerages and the markets. they are trying to make the brokerages an instrument of liquidity in the wider financial markets. we have heard they have issued for herbal instructions to brokerages not to liquidate their collateral. they have been working on things like easing rules for companies to buy back shares. all of that is aimed at raising the price and getting the brokerages out of trouble. brokerages out of trouble, they can support the market further come a so the feedback loop works in reverse as well. paul: all right.
tracy alloway in hong kong. thank you for joining us. investors in the philippines are cautious ahead of thursday's gdp report. on wednesday, the benchmark stock exchange index sank 1.9%, following a slew of disappointing data points. joining us for more is bloomberg's chief asia economics correspondent. what is the outlook for the philippine economy? ,> like you were saying, it was still is, one of the star performers in asia, but some signs of softening now. we have seen some softening on the consumption side, car registrations showing weaknesses, remittances to the philippines, an important source of financing for growth there, has dipped despite the weak peso. the backstory in the philippines
is they have had aggressive interest rate hiking cycle, tightening the cost of money. there is a feeling that will impact activity on the ground. there is a lag effect between when interest rates are increased and activity on the ground. while the philippines is doing ok, going forward, those pressures from the higher costs of borrowing for his misses and consumers will start to bite and act as a headwind on the economy. shery: in malaysia, we get a central bank decision. we saw the move earlier this year to anchor inflation expectations. will they move again in the next few hours? >> malaysia was interesting. they were among the first central banks in asia to raise rates. they moved in january at the start of this broader, sweeping
push higher by india, the philippines, but malaysia has not moved since then. inflation has remained subdued. that has worked out in the favor of central banks. the ringgit escape the american market wobbles. there has not been that much pressure on the malaysian central bank. the other factor to remember is the higher interest rates go in malaysia, the higher the debt servicing. they have high levels of household debt. that is why the central bank is not in a rush to raise rates. when you consider the fiscal side of things, the government trying to be fiscally prudent, and the backdrop of the volatility story and the view is the malaysian central bank can sit on the sidelines for the moment. shery: thank you. next, sanofi's china
this is "daybreak: asia." let's get a check of the business flash headlines. dish network remain positive despite losing subscribers at a faster clip than forecast. the satellite-tv provider shed 340,000 subscribers, despite gaining 26,000 customers at sling. the results put more pressure on the chairman to show there is still a payoff in the licenses. sayingbmw slumped after higher provisions and pricing pressure would persist through the year. shares fell the most in two
months. they are expecting a boost from clearing inventory and sales momentum in china. were halfrn on sales estimates last quarter. or plungedael k after trimming estimates. it has been trying to recover after discounting eroded its original cachet. same-store sales numbers were down, twice as much as analysts had been expecting. michael kors is trying to relaunch is a multi-branded luxury house. shery: french drugmaker sanofi among pharma giants pushing back against china's plan to buy medicine in bulk, arguing it gives too much market share to individual phones -- firms. chairman told us he
is incurred by beijing's pledge to open markets, but the medicine policy would be a bad idea. >> i think it is a smart move from president xi jinping as we see the global trade war. president xi jinping and the government is sending a big message about openness to foreign investment. this is one of the key reasons the ciee. >> are you feeling that openness? >> yes. i know they talk, but can we walk the talk? and we do ourman own research and development. that there is openness on innovation. last one or two
been years, particularly the acceleration of the innovation. reimbursement. drugs have been reimbursed. we have some progress. what the government needs to focus on our intellectual properties. good news for us, but i think some improvement to do. >> do you see global pharma innovation shifting to china? is it still behind? >> it is too early to say. there has been massive investment. we saw some companies with a drop research and development investment. i think the companies are investing like us. we are committed in china. there are companies going very fast. are nowican companies
investing massively in china. i think it is probably a balance. as you say, there has been a lot of talk. now we hope the government will walk the talk and make sure they give favor to innovation. >> we heard reports that chinese prominence -- provinces will be bulk buying. how does that affect you? is a draft.all, it it is a proposal. iserally, what it is , give 60%oin together to 70% market share. we don't think it is the right thing to do. we spoke many times to the authorities. i think we all agree that we work together and need to work on solutions in order to create what we can come up giving
monopoly to one drug is not the right thing. why? it will lead to supply issues and quality issues. there should not be any trade-off on the quality. sorry, just to finish. so government realized that, the direction of cost containment is there. the question we need to resolve together is execution. i hope the government will come back and we will sit at the table to negotiate together. faxinge have been scandals, most recently involving schoolchildren. scandals, most recently involving schoolchildren. how has that dented confidence? >> it is difficult to comment. the vaccines,sess the quality, but also to inspect trials,s, the clinical
site inspection, manufacturing site inspection, so probably more inspection to ensure the quality. you can't really play with vaccines. that is a serious thing. one, we have a high standard of quality of vaccines in china. they have the same quality in the u.s. or europe. shery: sanofi china chairman speaking to bloomberg in shanghai. you can get a roundup of the stories you need to know in today's edition of daybreak. daybberg subscribers go to on your terminal. you can customize your settings so that you get the news on the assets and industries you care about. this is bloomberg. ♪ is bloomberg. ♪
>> i don't know. but i'mbe a key player, not sure it will be the dominant player. >> the u.s. will be extremely important economically, politically, militarily. whether not it is the, i'm not sure it is "the." 10 years from now come at the u.s. will play a meaningful role in the world. , the u.s. will play a meaningful role in the world. paul: that was our guests speaking yesterday at the bloomberg new economy forum. shery: air asia may be shifting support for the airbus and is looking to convert some orders to the larger plane as it copes with rising oil prices and robust travel demand. tony fernandes spoke exclusively to bloomberg at the new economy form in singapore. >> we are affected by oil,
weakening currencies, but demand is very robust. we are not seeing any tapering off of demand in which is the most important to me. >> are you worried about next year? >> it has not been put in yet. >> june or july next year. >> it has to be debated in parliament. i think many views will be taken into consideration. it is an idea. it doesn't mean it will come through. i think we will put our views across to others in the industry that short-term gains might not be good in the long run. >> tell me about the fleet. is it the right size? some things have to be delivered? bodies to 375 narrow come. we are now 230. we are now in discussions with airbus in terms of changing over to 321's.
that gives us more bank for our buck. we get another 50-odd seats in that aircraft am a fantastic aircraft. that is what we are looking at right now. we potentially may look at a few more orders. demand is robust. india is going well for us. japan is something i am very focused on. we have only one plane their flying them about we are hoping the regulators will get that growing. southeast asia remains ou robust, with the philippines driving growth. >> oil prices have come off a little bit. how are you hedge? \ what are you doing to mitigate -- what are you doing to mitigate price increases? >> i'm not a big fan of hedging. , so 20%, hedge
20%, then adjust our fares. i have been in oil there for a long time. eight months ago, the oil price was $50 and everyone saying there is too much oil, shale, etc. suddenly sanctions come in and oil is $100. ofdamentally, there is a lot oil and shale is there and we are moving towards the sharing economy, etc., so i think many people in the airline industry, it does not matter the oil price, it would be nice to have stability. shery: that was the air asia group ceo speaking in singapore. let's check the latest business flash headlines. the self-imposed deadline for objections to noble groups chapter 15 petition expires thursday as it seeks to protect assets and pursue a $3.5 billion restructuring. the struggling commodity trader
once a hearing on november 16, and says the rescue plan would wipe out half of the debt, but hand total control to creditors. china telecom corp. is to enter the mobile phone market in the philippines after an invitation from the president. the carrier is teaming up with chelsea logistics in a bid for a third wireless license. the entry of a big player such as china telecom could hurt local market leaders. the government says the award is provisional. shery: a japanese stock soars the most on wednesday, just before an apple supplier announced it would buy the company. , the biggest rise since may 2013, after the close. media erected with speculation about the deal. they declined to comment.
a look at what is coming up in the next few hours on bloomberg, david is here. what are you keeping your eye on? >> there are a few things. , so wefter the midterms will be joined by three guests over the next three hours to talk about whether it now matters and what do we watch next? we have chinese trade numbers, a key milestone, to try and dissect the month of october. the fed meeting as well. we have the three guests coming up here. i should mention james sullivan, indonesia, korea. the other debate is something you have been talking about, whether or not there is any bearing on the u.s. dollar when it comes to the results of the midterms. that is the direct transmission , wheremarkets in asia
that goes next year and whether it takes some of the steam off. lots of things coming up on the show. shery: we have heard a divided congress would lead to the weakening of the dollar. that is what we are seeing. let's get a check of how markets are trading across asia. the indices all gaining ground. the nikkei gaining more than 2% after a strong lead from wall street. and we are moments away from the open in these markets. all looking positive in singapore, taipei, and kuala lumpur. continues asverage we look ahead to the start of trade in hong kong, shanghai, and shenzhen. ♪ en. ♪