tv Bloomberg Daybreak Asia Bloomberg August 12, 2019 7:00pm-9:00pm EDT
paul: welcome to daybreak asia, i am paul allen in sydney. shery: and i am shery ahn at bloomberg's headquarters in new york. selina: i am selina wang in beijing. we are counting down to new york's's market open. >> normal hong kong pressures resume, but tension mounts hong kong is at a critical juncture. paul: the other top stories we
are following this tuesday, oil firststudy after aramco's half showed no surprises. income fell, but still the most profitable company in the world. argentinian stocks in the peso, potential to roil wider markets, too. shery: let's get a quick check of markets closed. in the market session, another down day for submarkets with the s&p 500 falling below 2900. financials and materials led the declines. the s&p 500 at 1.2%. the nasdaq also fell. risks rising in argentina. political uncertainty in hong kong. coined futures following -- falling the most since 2013 on a bearish outlook report. all that added to pressure across the market. u.s. futures up 0.1%.
let's see how we are setting up in the markets. selina? selina: after that down day in the u.s., asian futures set for a weak open. chicago nikkei futures change, but futures and seoul, sydney and new zealand down 0.8%. markets were closed yesterday in india, malaysia, thailand, japan. concerns about political unrest in argentina, hong kong, stretching into 10 weeks of protest, even though the airport is starting to resume operation, markets are rattled by the economic disruption in that important asia economy. downgraded japan on its list of most trusted trading partners. a quick check of what to see today. inflation, as well as a foxconn industrial.
switching boards again for a quick check on australia's stocks i am watching. calendar financial earnings reporting analysts expecting a net income of $400 million. energy closed up almost 3.7%. it was supposed to outperform. paul: let's check in on the first word news. technologies higher to u.s. law firm to lobby on its behalf as the trump administration pressures allies to put the telco on the blacklist. focusing on export controls, tariffs. draggeds increasingly into the trade war and currently banned from buying u.s. technologies.
the european union may impose steel tariffs on china, taiwan and indonesia. brussels are investigating if they are selling steel in the e.u. below cost. were worthnd coils about one billion u.s. dollars last year. the e.u. has eight months to decide on tariffs. removed its neighbor from a list of most trusted partners. japan will initially be the only country in the second group. seoul's move comes two weeks after japan moved south korea off its own list of countries deemed safe for export. >> for now on those countries who failed to uphold principles in the management of export controls will be included in this new group. japan will be the first country to be included in this group.
argentinian assets tense after a shocking defeat in a primary election. the peso plunged to a record low, 53 to the dollar. the s&p index sunk in dollar terms. investors had been trimming exposure to argentina ahead of the main election october 27. growing speculation the central banks will have to intervene. >> we have had a very bad day today. we are poorer today than before the peso. the dollar again continues to go up with all the consequences that brings. we know that. i have given instructions to our economic team to study all measures to look after argentina. 9 -- 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.
bloomberg. shery: diving back into the u.s. market close, major indices fell across the board as continued protests in hong kong and political uncertainty in argentina drew investors to bonds and other haven assets. we saw a luxury good makers and corn futures hit hard, both with ties to china. sue, it was all about risk off today. rally.at drove the bond a lot of strategist concerned this could signal recession down the road. take a look at the market snapshot. a big move in bonds. as they rallied, the u.s. 10 year yield fell by about 10 basis points. i noticed the future is relatively flat. as we get into the big movers, another farming equipment maker, down.
that has to do with the drop in corn futures. and negative weather reports affecting farm and commodities. let's take a look at roku, continuing its ascendancy on strong earnings and strong analyst comments. luxury goods also down in a very big way. this is directly tied to the cancellation of flights in hong kong. in addition to these major names, tiffany, movado. a lot of these luxury goods residentsnt hong kong as huge consumers. businessacting their to get goods there when the airports and airlines are shut. paul: coal futures shut the most in three weeks. collateral damage in the trade conflict. what is the story? su: two things. bearish agricultural weather hugets have come out and
acreage has been planted for corn. check out this chart, corn reversing. this is exports down below. hashe china u.s. conflict resulted in china backing away from soybeans, many farmers started planting more corn and mistakenly believed the program by trump was to plant more. there is huge exposure to these negative weather conditions. take a look at oil stabilizing for a third day, though the trend is down for the month. that is as saudi arabia moves to stabilize the price of oil. gold on fire. fueling gold.inty the latest commodity report show hedge fund raises are at a three-year high. citigroup and goldman both see
gold gains down the road, which we have trading near six year highs. paul: thanks for that. the hong kong airport says operations are back to normal after all flights were canceled monday amid a sit in by thousands of protesters. the fallout does continue. cathay pacific canceling 200 flights tuesday. stephen engle is at the airport for us. what is happening now? the airport says things are getting back to normal, but i guess there is something of a backlog. stephen: oh yeah. there is a huge backlog. a lot of flights canceled yesterday. plusy pacific alone, 210 flights canceled yesterday. it was chaos in arrival hall b. was jammed with thousands of protesters. you can see on the arrival board
many flights are still delayed. cathay pacific alone is saying they are likely not to see normal operations until tomorrow at the earliest. that would be wednesday. then thursday as well, 14th and 15th of august, as they get passengers rescheduled. scheduled to fly out at 7:00 p.m. and was rescheduled and that was canceled. she is now on an 11:00 flight out of macau. people have to re-juggle their itineraries after yesterday's huge disruption. this is the scene. estimated 10,000 protesters were here yesterday. it is now less than 100. protest leaders -- organizers i should say, are calling for protesters to show up later this afternoon to continue what would be a fifth consecutive day of
protests at the hong kong international airport. shery: those massive disruptions and concerns of the hong kong economy, could we be headed to what technical recession? stephen: already we saw the numbers come out fairly thin quarter on quarter and year-over-year. that is due largely to the trade dispute between china and the u.s. it, thison top of could push hong kong into a technical recession going into the later half of this year. keep in mind this is the busiest air cargo hub in all of the world. it is also the largest international air travel passenger hub in asia with 427, 000 flights alone last year. that is an average of 1100 a day . ifwill be interesting to see
this disrupts the airport going further. if it is just a half day or one-day closure, we have had that before with typhoons, but a lengthy process could severely dampen the hong kong economy. front, wehe political have chief executive carrie lam still hanging in there, promising a bold economic action to prop up the economy of needed. we also have the hong kong legco commission holding a special meeting at 11:00. what can we expect? something. we need something concrete. everyone is talking about this in hong kong. me, about everybody tells where are the solutions? they have been saying we need to bridge differences, reach out and better connect with hong
kong's youth, but what are the initiatives, steps taking to achieve that goal? carrie lam will be addressing the media later this morning. will she have something concrete or stay steadfast to the hard-line approach so far? north asia correspondent, stephen engle in hong kong, thank you for joining us. still to come, details from saudi aramco's first ever earnings call. revenue down, but still the most profitable company in the world. shery: the argentinian peso became after president poor second in a primary election. the wider implications. this is bloomberg. ♪
see strength in the japanese yen. level.ding at the 105 after strengthening for four sessions, we see risk off sentiment after the holiday. this is daybreak asia. i am shery ahn in new york. paul: i am paul allen in sydney. a surprise outcome in argentinians primary vote has roiled and could have implications further afield. to discuss that with other risks, from alpine macro, chief global strategist chen zhao joins us. let's start with argentina. a very surprising result in that primary. october,ion still in but what is the likely impact on the economy going to be? we have seen profound market reactions. in -- we have been in this emerging-market crisis
many times in history. many times these crises have temporary contagion on the major markets, the impact. this will be no different. do not forget argentina has a very small economy. we are talking about gdp the billion.lmost $515 slightly better than half a trillion. outcome of that economic implosion on the rest of the world will be very small. audience to your keep your composure. it is not a big deal at all, even though there could be defaults. the argentine foreign 270rency debt is about $ billion with the economy contracting at 5% a year, there is no way they can service foreign debts in the next year
or so. they may default on foreign currency debts. there could be implications for some banks, but by and large the impact will be muted on the western world. we will take it in isolation. argentina is small, the damage could be rather contained, but if we look at the broader picture, we are looking at the wall of worry, a growing pile of risks and we have not added argentina to it yet. we have brexit, earnings recession, issues in italy, protests in hong kong. if you look at the wall of worry, is the biggest shadow cast on the u.s. starting a trade were right now? chen: there was the old cliche, the stock market climbs on a wall of worry. i get it, but such a long list of problems and potential risks. the question you have to ask in thef is, is the u.s.
liquidity trap? is china in the liquidity trap? if the answer is no, policy reaction will work. my bet is six months out the policy rate in the u.s. will be lower than today. chinese fiscal and monetary stimulus will work and turn that economy around. it is the process that is problematic. how will we go from here to that point? that is problematic. you have to manage the risk while we are going through that process. we are at this spot where we want to be careful in terms of risk, but i do not think you want to be [indiscernible] shery: as you mentioned the process in the meantime, we see a slowdown in economic data, especially when it comes to manufacturing numbers. the chart on the bloomberg shows it has slowed for four straight
months. the global manufacturing pmi is showing contraction. if we continue to see the fed cutting but at the same time frustrating the markets with what investors think is a hawkish cut, could we see liquidity not be able to shore up the market and economy, and continue to see this downward trend? think about 1998, same story. we had a global manufacturing recession driven out of asia's crisis.at the time the u.s. manufacturing business was also in trouble. the end point is that a big decline in global bond yields helped american consumers, helped american credit creation, helped economic growth in the end. we have a similarity here today.
if you think about the manufacturing business, it is about 10% of u.s. gdp. is tiny in terms of overall job creation. if you think about bond yields, they have just melted. it is stimulating mortgage yields. they are stimulating mortgage refinancing. you can see yields beginning to on thepositive impact consumer sector going forward. you can make a bullish case just by observing the magnitude of declining bond yields. it also because american consumers perhaps will not feel the impact of the tariffs on chinese goods until further out, how will that be offset if you continue to see trade tenses -- tensions with
china? chen: the bond market has passed the judgment. trade time ago we feared protectionism would be stagflationary. the bond market is saying that is wrong. deflate --, our deflationary. all thee to absorb costs they shrinking their profits. that is a bond market just -- judgment. tell thehy i always fed to cut interest rates very to smoothly in order out the process. is, the fedine still has ammo. the chinese economy is very domestic-oriented.
they do have a lot of ammo. if they cannot use it on time, if they can use it aggressively as necessary, we have to get over this problem in terms of growth. that is why i still feel reasonably optimistic about the risk assets six months down the road. shery: thank you so much for your views. great to have you with us, alpine macro chief strategist chen zhao. get around above stories you need to know to get your day going in today's edition of blake -- daybreak. also available on mobile in the bloomberg anywhere app. customize settings to get news on industries and assets you care about. this is bloomberg. ♪ this is bloomberg. ♪
let's get a quick check of the business flash headlines. samsung music plunged after hours despite reporting that beat expectations. revenue in the three months through june came in at$835 835 billion.at $ they appeared to like the sound of tencent music. shery: i chinese insurer may be about to clinch the hotels in the u.s. searching toitter arrange financing. the 15 hotels expected to raise more than the $5.5 billion that anbang paid before. won aamerican airlines court order to block a work slowdown it said had a
devastating effect on flights on the busy summer schedule. a judge in texas directed a workers union to stop encouraging staff to delay aircraft repairs and to reject over time and out-of-town assignments. shery: let's get a quick check of how asian markets are trading. we are seeing kiwi stocks falling 0.6%. they have been under pressure the entire week. it is risk off for markets around the world. we saw u.s. stocks dropping and treating more than 1% overnight. sydney futures down 0.8%. gain for the the past 10 sessions. nikkei futures unchanged. this coming after the japanese yen strength in the past four sessions. we continue to see relative strength at 105, the level against the u.s. dollar. kospi futures down 0.8%.
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>> this is daybreak asia. i have the first word hair -- headlines. protests forced the cancellation of all flights monday in hong kong. hong kong is at a critical juncture and there are growing signs of terrorism. companiesate owned ordered staff at cathay pacific -- more than 200 flights canceled tuesday. days they have been using dangerous tools to impact police, serious violent crimes.
they have shown signs of terrorism. formerident trump's communications director anthony scaramucci suggests the republican party consider a different nominee. he lasted only 11 days in his role. he is undecided on who to back, but it will not be a democrat. his break with trump came after he criticized scaramucci on twitter over the weekend. barr said the jail where epstein died had irregularities. he is looking to see what led up to the former financer's death as he died in an apparent suicide in lower manhattan. he was facing accusations of sex trafficking and molesting teenaged girls. 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.
we are half an hour away from the open in tokyo, sydney and seoul. tokyo coming back from a holiday. selena, what are you watching? selina: as we examine the fallout from the hong kong protest, i want to take a quick look at north american and europe stocks that have been battered, which includes the luxury goods space. there were flight cancellations, impact on travel. hong kong is a major market for these high-end goods. take a look at the shares of tiffany's, estee lauder, louis vuitton. in addition to luxury, the overall retail business, travel and gaming industries have been hurt in hong kong. switching boards to take a look at a bloomberg index of north american luxury goods. it has been falling dramatically since the protest started in april. tough decliners include fossil, tapestry.
bloomberg economics says hong kong's economy is ill placed to absorb the blow. in addition to the luxury goods sector, the trade dampening, the u.s. china trade war, is a rough picture for them. this is china's credit growth. in july it fell to the second lowest level this year. 1.0.gate financing was this is really reflecting weak loan demand and credit conditions in china. they say it foreshadows sharper deceleration in the economy and could mean further monetary easing in china. thanks very much. saudi aramco is still the world's most profitable company despite the falling price of oil . profit came in at $47 billion in the first half a drop of 12%. -- the cfo outlined plans to
stay at the top. >> [indiscernible] we want to maintain our position as the leading crude oil producers. downstream we will further divide our operations and increase production. energy reporter james joins us. has there been much reaction to the aramco resolve in the oil market? james: it has been reasonably supportive, the oil market coming up with sharp losses last week read we have seen stabilization last couple days. aramco played a part in that. profits down 12%, a result of slightly weaker oil prices. reductions in capital spending over six months. that has been seen as a sign
there might be further tightening in the months to come. there has been anything in the aramco result that took the market by surprise or was new information. it was probably mildly positive. they are pressing ahead with an ipo into will be interesting to see how that progresses in the months ahead. markets fell sharply last month. are we seeing stabilization? james: that is true, we are. last couple days more upbeat on the market. i would say sentiment remains fragile. those images of hong kong airport being brought to a standstill by protesters is not good for risk sentiment more broadly. as long as those worries linger in the background and trade tensions between the u.s. and china, as long as those are in the back of investors minds, probably limited scope for a there isl rally unless
a change in trade tensions and , if it was positive news on that front. it is still uncertain. chinese factory data later in the week. that will be informative as to how well the chinese economy is withstanding these trade tensions. and u.s. data always a big focus for the market. we saw inventories rise last week. signs of supplies are growing is another potential negative for the market. shery: thank you so much for that. argentinianfeat of president mauricio macri is the latest flashpoint in global markets. plunged afterds fernandez beat macri by a margin three times wider than expected. >> we have had a very bad day
today. we are poorer today than before the peso. this has impacted us greatly. the dollar goes up with all the consequences that brings. i have given instructions to our economic team to study and prepare all necessary measures to look after argentina. our latin's bring in america managing editor. it is not that argentinian polls are that reliable, but the margin of defeat is huge. is that why the markets seem so panicked today? pablo: nobody expected this. they will say macri would be ,osing by three to six points wider margin.much it is unlikely macri can recover from this.
a pole. having -- election is happening october 27. got 47.rto fernandez is theif they think he next president of argentina, do they know what they should be expecting? the markete take reaction today, they do not like what they are seeing. the correction may have been historic rate i never saw a currency falling 25%. gap. is a credibility what happens in the next 2.5 months of the big questions.
it seems like they are comfortable in this situation where may be a little bit of chaos can help them. that is a dangerous game. .e could be in a full on crisis of chaos.ttle bit superlatives abounds. the benchmark seven-day rate in isentina now 74.7% astonishing. the result if fernandez becomes president? pablo: that is another great .uestion in the past fernandez said he would -- remember this is a record bailout argentina received under macri last year. $56 billion that needs to be
unexpected consequences. predecessor in the wto. i.t.s. global director, alan oxley. fallve seen corn futures the most since 2013. the impact on commodities market has been huge from the trade markets. the top five export markets for u.s. farm goods has been mexico, canada, japan, south korea. them, every all of single one, having these trade issues with the u.s. and even the usmca has not been able to be ratified here in the u.s. our farmers in the u.s. the ones that will suffer the most if the u.s.-china trade stalemate
continues? a very good question, one we wondered about for some time. we saw a u.s. pole on the attitude of farmers toward trump policies. they are strongly backing trump. their expectation is any time they lose in a particular area there will be subsidies paid to them to compensate. that may work in the short-term, but in the long term, has serious impacts. shery: what are you expecting? president trump has threatened perhaps the talks in september might get canceled. we are not seeing fundamental negotiations on key issues the u.s. wants when it comes to changing the chinese economy. have seen it stalled. on both sides they have stepped away. by friendsyears ago tradeou can never expect
to be discussed at the end of a rule by aod of leader. he is gearing to run for the second period. he is not going to make much progress. the question is will he do the things he says. china says they are not going to receive any u.s. agricultural products. are opportunities for people in other markets. howoes raise the issue president trump can keep the farm votes. it is a good question. paul: it is curious politically. better, ader what is resolution and rebounding equities market having been made villain in the form of china. how much of a political calculation is this now? it is interesting. one factor overlooked is the
amount of shares of trade conducted by the u.s. outside the u.s. market is smaller than china. trump is in a position where he thinks he can exert more pressure on the chinese. they have made a decision to stall on this. i suspect they are waiting until the end of the next electoral peirod. -- period. i think it is basically because what is most important for him now in the next couple years will be the next presidential elections. stalled.s has there is even a question mark over these talks planned for september. whatneeds to kick started, concessions are needed from each side? acceptach side has to the proposals made by the other side.
the chinese have made significant concessions. one of the problems with the trump approach to trade is that unless he gets surplus, it is not working properly. by taking that line he is running against the trend of how trade actually operates. he cares greatly about whether or not he will succeed. there was a chinese announcement they would cease restrictions on the i.t. front. the chinese put that on hold as well. you have a stymied position between the pair of them. there might not be a change until the next presidential election in the u.s. would it make sense for the chinese to wait that out if a democratic president could win? the democrats have not been not open to trade and have been more strict when it comes to those
trade relations and deals. alan: that is correct, they have been. the situation with increased democrat representation in the house of representatives does mean they have a bigger say. historically the pattern has been like this which is why usually he tries -- getting a trade agreement through congress is not leading into the second term. the interesting thing is the extent to which he has pegged the farm community. one of the surprises is that forms may be unhappy what is done. politically they remain committed to him and the administration has stepped up a lot of money as compensation. there willies down, be serious work for the farm community to rebuild itself. so far they seem happy to go along with president trump. shery: to your earlier point
that china is more dependent on trade, we have seen them take actions on other measures like not supporting the chinese yuan, letting it break the seven level. does china have more ammunition against the u.s., perhaps not tariffs, but dumping u.s. treasuries? we saw the yuan against the dollar was a redline. what stops them from dumping u.s. treasuries? i noticed a debate about how far the chinese have moved. some are saying it is not as dramatic as it is represented. i think we need to wait and see on that one. paul: want to get your thoughts on brexit and the comments that have been made by john bolton in terms of potentially doing a swift sector by sector deal once they are out of the e.u. is it realistic or rhetoric? he said he needed to explain why the nhs would not be on the
table and the irish backstop is not, so is it realistic? alan: i would not think john bolton was the right person to negotiate a trade agreement between the u.s. and the u.k. president trump has made visits and has been very friendly to the brits, but at the end of the day, action needs to be taken to extricate themselves from the e.u. position tobe in a make any free trade agreements with others until they have that in place. if you have been following the news, it has become a tense state of affairs. they lost one majority vote in the british parliament. johnson is mounting a petty campaign. we need to see how that runs. there are imponderables. they are the things that will dominate discussion before we get to what we do after that has
been settled and what type of trade agreements we can have. i think the discussion is premature. shery: hold your thought for a second. we have breaking news out of japan. we are getting the producer price index year on year coming in at a contraction of 0.6%, which is larger than the one expected. it is a larger contraction than the previous month of june. month-to-month it is a miss against estimates, flat for the month of july. the estimate was for growth of 0.1%, though it still is an acceleration from the previous month when the ppi contracted 0.5%. we have to keep in mind this comes on a pickup in commodity prices. 0.6%on year contracting for the month of july. paul: thanks.
i want to get back to some of the points you are making on brexit. you are in a unique position to advise because you had been engaged to advise the pro brexit camp. what advice were you providing in terms of a potential no deal brexit? alan: i was not alone. there were three other colleagues who had also been , amer wto ambassadors canadian and new zealander. what was most stunning when we had the discussions was how little knowledge existed inside the british system. if you havew tracked -- had tracked what prime minister may had done. there was a lot of work into producing a report on how to proceed. the trade minister was exempted from that exercise. when the document was presented to the cabinet, he resigned immediately. the document, 100 pages, was
quite a shocker. there has been no significant improvement among the may group on how to proceed. a colleague said the most maynishing thing is the group have not done much. one thing overlooked about dealing with the community, is there are so many members. it is difficult to shift ground. it always seemed the community was not going to be able to accommodate with the british thought they would have wanted. is thes now happened only option they have got is to follow the johnson line. he will likely withdraw. we seem to have to see how that will run. thing, it has been astonishingly poor. paul: and the count goes down to
paul: this is daybreak asia. i am paul allen in sydney. shery: i am shery on in new york. let's check the business flash headlines. a gold-mining giant may be open to selling their australian open pit mine. the ceo said it had no shortage of interest. they are even considering buying itself.s share they had a rise in second-quarter revenue and is
targeting $25 billion of assets dear. chain is still hot. kong.nce listing in hong analysts say there are more gains to come. the chinese economy is slowing, the food industry remains [indiscernible] a target price of 33 hong kong dollars, 6% of its current level. markets kick off in tokyo, sydney and seoul. selena, what are you watching? selina: it is a risk off sentiment across the board. japanese futures pointing lower. shares down about 1.5%. we have seen the rally and haven assets with the yen rallying quite a bit. south korea downgrading japan on its list of most trusted trading
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gold and the yen remain in demand. companies -- we will assess the situation. paul: i want to get you across breaking news out of singapore. forave final gdp numbers the second quarter coming in a bit weaker than expected, 1/10 of 1% growth is still keeping singapore out of immediate danger of a recession. of trade announced gdp forecast for 2019 have been downgraded to zero. expected -- 0% to 1% growth expected, so this is a downgrade. the economy growing marginally in the second quarter, but has
moderated from the previous quarter. a lot of factors are weighing on singapore. softening house price growth slowing, credit card advances slowing and retail sales contraction deepening. and easing in the singapore dollar on the release of the numbers. growth final numbers, 4% of the second quarter, weaker than expected at 1/10 of 1%. let's get to the market action. selena: traders returned from the holiday in japan to a very rocky global mood. fragile across the board. a rocky start to august. the nikkei is down around 1.2%. yen is rallying. we could see this crash through the 105 level. data, economists
are forecasting it could reflect deeper annual inflation. south korea has downgraded japan on list of most trusted trading partners. the kospi is down 6/10 of 1%. this comes two weeks after japan removed south korea from the enough totions save export strategic materials to. tensions are escalating with china trade relations. australia is expected to get an update on business sentiment today. there has been pressure on the aussie, new zealand dollar, gold is lowering their forecast for the currencies. given the trade tensions and softer growth of the regions. the asx 200 is down 1/10 of 1%. in new zealand, down 4/10 of 1%. let's get the first word news. technologies has hired
a u.s. form to lobby on their behalf as the trump administration pressures allies to put them on the blacklist. chicago started worth -- work last month on national security related topics. theei is being dragged into trade war and is banned from buying u.s. technology. hong kong airport is resuming operations after protests forced cancellation of all flights on monday. chinese agency that oversees this says hong kong is at a critical juncture and they are are growing signs of terrorism. chinese data companies have ordered to boycott -- ordered a stop to the boycott of chinese pacific. more than 200 flights were canceled on tuesday. recently, there have been
serious violent crimes. tariffsu might impose on china, indonesia. group says the eu imports stainless steel sheet worth one billion u.s. dollars last year. european commission has eight months to decide on tariffs. argentinian assets and the peso --ked after the president the peso plunged 15% to a record low. tanked 14%ile index in dollar terms. investors had already been trimming exposure to argentina ahead of the main election in october and there is growth speculation the central bank will have to intervene. >> we have had a very bad day today.
this has impacted us greatly. the dollar continues to go up and it brings consequences. i have given instructions to our economic team to prepare measures to look after argentines. global news to date on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ downgradedapore has their gdp forecast for the year --to 0% to 1%. daniel moss has more on the outlook for asian economies. let's start with singapore. given how open the economy is, how surprising is it as we
continue to see trade tensions around the world? disappointing. not necessarily surprising. the reason i say that is, if you look at the final second-quarter gdp numbers published at the same time is that forecast, they do not differ greatly from the original estimate, which was released last month. granted, the original estimate was great. is a small buts open economy. the rhythmsd in to of international trade. so it is not that surprising. serious, yes. surprising, not sure about that. shery: right. and we have the monitory authority of singapore
announcing that monetary policy stands unchanged at the moment. we continue to see the race to the bottom for other asian economies. daniel: yes. ands a race to the bottom, the bottom, depending on how you define it, is not very far away. the quartet of interest rates cuts we saw at the end of last week across asia, the things which really stood out was the preparedness of authorities in australia and new zealand to acknowledge that, yes, unconventional measures, we might have to go there. that is actually a profound shift from the narrative these two countries have pushed for the last couple decades, particularly since the turn-of-the-century when it was like, we have it figured out, we have the china boom, almost negative interest rates. this is all northern hemisphere
stuff, we want have to do it. this is now changed and out the window. it is part of the discussion, and that is huge. --l: let's turn to channel china. credit is set to the second lowest amount this year adding pressure in the pboc to step up. daniel: it is adding pressure. the question is, when does the pressure become such that you are at a tipping point? as you know, we have had forecasts from some pretty big banks, going back before the chinese new year in february, predicting and imminent interest rate cut in china. here we are, mid august, and that has not happened yet. you have to wonder what it is going to take. people keep predicting it and it keeps not happening. daniel moss, thank you
very much for joining us. in the race to the bottom, asian-pacific central banks have moved to cut rates by more than expected. let's cross to singapore and bring in the bank of america merrill lynch cohead of rates strategy. thank you for joining us. numbersart with the gdp , a little worse than expected. the authority of singapore saying that policy has not likes tout the asx reach for the rates. the odds of seeing increasing action? >> absolutely. and i would say the forecast was more than expected. we thought it would be reversed down to 0.5. so it is a surprise. this is the second estimate, so you do not expect big surprises but that is a very weak number.
i think the odds of action are increasing and it is consistent with the fact that the odds of action by other central banks in the region are increasing as they move to act more aggressively. paul: i am wondering to what extent that affects the thinking at the mas, as easing is becoming fashionable and central banks at the moment. are you seeing a race to the bottom in the asian-pacific? >> yes. obviously, more central banks in the region have cut at this point. i think people realize given the dynamics are so negative, it is hard to just sit back and be seen as doing nothing. like in australia, saying we need more from the fiscal side and structural reform and regulatory reform, but central banks cannot be seen as sitting back. asia, centraln --
banks are cutting, even if they feel the transmission mechanism might not be as effective as it was prior to the financial crisis. shery: in order to boost the , do you need that paying in orderto get -- bang to get effects early on? effects can be delayed when it comes to monetary policy. >> this is along the lines of face -- a speech given by the head of the new york fed. when you have limited ammunition, it makes sense -- makes no sense to save bullets for later. it is better to be aggressive. comments were similar saying we have limited boom but we want to be preemptive and surprise markets. i think the narrative will shift
in that direction. limited bullets, what is the point of saving them for later? if you save them for later, the bullets will be less effective. the fed has tried to signal that. the rbn signaled that. increasingly the narrative will start shifting in central banks in this dovish direction. shery: in japan for these surprises earlier today, disappointing, the japanese yen continues to strengthen. what bullets do the boj have left? >> i have no idea. [laughter] more.an do a little it is a tough situation for them. and they have a tax hike coming up that will be hard to reverse. a lot of headwinds for japan and i think the yen will be a bigger problem for them. 105 is a significant level. there is a good chance we get to that level, in which case the
depreciation of the yen could be disorganized and the yen has to do with this view that if all the central banks around the world, the boj is the most limited in terms of capacity to ease monetary policy further. but i am not sure what the next step will be for them. will bectiveness questioned by markets. proved to dontry something about currency is china. fix, we have been watching it closer than usual. the u.s. to -- the u.s. has accused china of being a but the manipulator onshore fix is stronger than the offshore market. his china keeping the yuan stronger than it should be? >> yes. that is the irony. china is the currency
manipulator, but only when they stop manipulating the currency. keeping the fixing stronger than they would be based on the model that includes -- from china's bank,ctive, any central it's never a great idea. threat --terror threat.ts -- tariff basis, they are coming out a bit below based on modeling. i think that will remain the case going into september 1. we have to see what happens with the terrorists -- tariffs. shery: thank you so much for
it is enough. in fact, you're talking about rate cuts earlier. we are one of the banks forecasting lending rate cuts later this year. there is a deep reluctance on the part of the pboc to ease monetary policy at this point. but we think if the trade war situation escalates, and global growth remains weak, it will be pushed to ease monetary policy along the currency weakness they generated. so far, it is not enough to support the economy. shery: the speculation now is that china allowed the currency to weaken this much given the ongoing trade war against the u.s. when you compare this against tarrif s, which of these tools is more powerful? obviouslyview, currency devaluation is a risky
game. it can be associated with capital outflows and leads to the transfer of income away from your country. great but better than devaluing your currency. haveina's case, they limited room to retaliate against the u.s. so the next best option is to allow the currency to depreciate to offset the impact of the tariffs. that is what they have done so far. , that do the math probably puts the dollar closer to 7.30, which is our forecast for the end of the year. watching soe closely because of how it affects other currencies. the chart shows how closely correlated the offshore yuan is with emerging markets. when you look at the historical perspective of the yuan weakness, who are the winners here?
>> it is interesting. if you look, it has changed over time. but for asian currency the sensitivity a 0.5. we looked at price action over the past week and found most currencies have moved in line with what you expect but some have lot -- some have been laggards. they have not depreciated as much as you expect given the sensitivity to the renminbi over the past three months. so standout as laggards. but the obvious ones like korean moved in line with what you expect. paul: i have another laggard for you. the aussie dollar. and thet 5% this month
rba likely to ease some more. where do you see this heading for the rest of the year? >> the aussie is working as it should from that perspective, it is depreciating as risks rise and the global economy slows down in providing a buffer. but it is not as much a buffer as expected given how much the rb has eased monetary policy. one reason is in terms of trade, even after the recent decline on oil prices, it is still very high for australia and australia is still running a record trade surplus. if you put that together, the , alle is being resilient things considered. a lot depends on rba. a move to cut twice more this some that will put
pressure on the australian dollar, but the fed will probably cut twice. so for the next three or four months, i see them as being below 70 not a lot lower or higher. if you get a make or break moment on trade tensions on september 1, it could be a trigger for a big move. if tariffs go up, ozzie will move lower. aussie could go back toward 70. paul: the kiwi is sliding, as well. but the aussie tv crosses -- kiwi intrigues me because it is historically high. what you make of that? aussierbn cut 50 and kiwi is a little higher, around 104. part of this has to do with the
effectiveness of rate cuts as they approach the zero bond. there cut was a surprise but the currency impact at a time where the rba might cut as , the impact is limited. that is the problem for the kiwi were right now. the aussie kiwi has not moved that much. thanks very much for joining us. plenty more to come on daybreak asia. this is bloomberg. ♪
outperforming and beating expectations. at $835 million, below forecasts and shares plunged more than 11% one point. currently 12 buyers and no sellers. shery: a chinese insurer might be able to clinch a buyer from luxury hotels of u.s.. a financial group is emerging as a leading bidder and arranging financing. the package of 15 hotels is expected to raise more than $5.5 locationsd includes in new york, san francisco, and jackson hole. paul: american airlines has won . court order a judge in texas ordered a workers union to stop
>> singapore is revising down there growth forecast almost zero as the global downturn deepens and the trade war goes on. the ministry of trade and industry sees the economy expanding between nothing to 1% down from previous projections 220.127.116.11 to the u.s. and china are sparring over trade. and the spat between japan and korea is widening. trade andry of industry says korea will split
the fast-track category into and japan will initially be the only country in the second group. this news comes two weeks after tokyo forced korea off the road own list, a country deemed safe enough for export. on, those countries who failed to uphold principles in the management of export control will be included in this new group. japan will be the first country to be included in this group. formerident trump medications director anthony he suggests the republican party consider a different nominee. he lasted 11 days in the white house. he says he is not decided on who to back, but it will not be a democrat. barr says the federal jail where jeffrey ebsen died had mysterious irregularities.
he is calling for a full investigation of what happens to the leader. epstein died in a apparent suicide while in jail. he was facing charges of sex trafficking and molesting teenage girls. a day on air and on tictoc on twitter, powered by more than 20 700 journalists and analysts in more than 120 countries. this is bloomberg. across asia under pressure now. let's go to salina for a check of the markets. salina: asia markets are off to a weak open. the nikkei is down almost 1.4%. the yen has been rallying overall as the rush to haven assets continues. analysts expect they could crack to the 105 level. in japan, we expected a later today.
the kospi seeing pressure from continuing trade dispute with japan, less than two weeks after japan removed south korea from a list of nations safe enough to export material. they have aimed back at japan. also seeing pressure on the aussie new zealand dollar. goldman put out a report put -- expecting it to reach .0 -- .70 for the 12 month outlook. the fallout from the singapore government data, revising down the forecast for economic growth to almost zero. watch, nagytocks to -- softbankd trading down about 2.8%. to buy a stake in
their telecom basis. challenger up 7%. investors are excited. let's get some more on the markets with garfield reynolds. it is a poor day for risk asset. up the japan coming back mountain after holiday and yields sinking and the yen stronger than ever. mondays pain was doubled when they came back on tuesday. not a lot of help out there. they just got factory price data which shows deepening deflation. factory prices, what china reported, overall, a grim picture. been says the nikkei has
struggling to hold at the 20,000 level and it looks like this might be the break for the downside. lookinghe index not great, especially with hong kong protest is continuing. garfield: yes. hong kong has often been a bellwether for risk appetite and even if there were not protest going on, you would expect series declines, given what we are talking about, especially that china credit data that indicates that pboc cannot really do much in the way of stimulus for china stocks and the economy, hong kong is tightly tied obviously to the china economy. then add in the protests. they have sustained for so long and are getting more intense, but it has now shifted to the airport. that is a really direct hit to role as an international business and financial center. you cannot keep being that if people cannot get in and out of the airport because a
protesting. at the back of everyone's minds has to be what sort of resolution might come out of this. either way, it seems like there has to be a change in the way hong kong fits into the chinese economy and political sphere, and that has raised all sorts of uncertainties about what goes on with hong kong economy and what goes on with what has been one of the linchpins for the asian financial complex. shery: garfield reynolds, thank you so much. let's stay on hong kong. the city's airport says operations are back to normal after all flights were canceled monday i made a sit in -- amid a sit in. stephen engle is at the airport. and david ficklin joins us in singapore. david, let me start with you. many businesses are caught in the crossfire. cathay pacific seems to be one
of them. how difficult is their position? david: very awkward. if you think about what cafe represents, for a lot of hong kong nurse, it is an emblem of , it isry -- hong kongers an emblem of territory. ofs is not just the 7% traffic that flies directly to china, they will have to make therehe starts on the -- is a great wall of china in the air. cathay flights have to fly over chinese airspace and regulations said they want list of who is flying, which cabin crew were flying on the flight to make sure they have not been involved. that is damaging. we can see how is it has been
damaging. catahy --der of suffered from an embargo. if anything like that happened, it would be devastating. so they have little choice but to knuckle down to beijing over this. paul: steve, i want to get to you with the airport where things seem to be returning to normal. cathay is trying to clear the overwhelming backlog. steve: absolutely. more than 210 flights were canceled and they have to reschedule lots of passengers. this is the main airline of hong kong. and to pick up on what david was saying, this is a big cargo hub for cathay pacific.
one quarter of their revenue comes from cargo and hong kong is the world's largest cargo hub by volumes. big load to cathay pacific and one big risk for them is to be labeled, the ties, labeled with the ties to the british colonial rule in hong kong when cathay pacific was set up. airline is saying, this is distinctly tied to mainland china. if you add dragon air in addition to cathay pacific flights, there is a sizable presence in mainland china, 1/5 of the flights. half of the revenue is one of the projections i saw coming out of hong kong and the china market. so this is critical for cathay pacific. but they have to kowtow a little bit.
the chairman of swire pacific met with the civil aviation authority of china yesterday in beijing. no word on what they talked about. shery: and cathay pacific is not the only company caught in the crossfire. we have heard from other hong kong business leaders about the tensions. what are they saying? steve: yes. we are heading toward the 11th straight week. about time, right? another week of unrest being called for next weekend. from theve not heard main property tycoon's. tycoons. -- we have an op-ed from the former chairman of a company who said protesters are purposely stirring up trouble by using techarguments within detailed to question the ending of the anti-extradition bill.
why do they want to make hong kong pay a high price? shop words from peter wu. -- sharp words from peter wu. but where is gordon from henderson land and other tycoons? what other positions now that we head into the 11 weeks of trouble? tol: david, i want to return point you made about cathay pacific earlier. even if they do beijing's bidding, they will not come out unscathed. david: and stevens point about meeting with chinese authorities in, let's remember, descendents of the swire family that made during an era in china. this is often described as a flag carrier. and look how much flags have been a symbol in the last few weeks in the harbor of hong
kong. very potent symbols and this is a potent business. something we need to bear in mind is 30% of the shareholding of cathay pacific is air china and state owned companies. 45% is swire pacific. they are persistently being questioned about if air china would try to move to control this. we saw this a few years ago. if that was to happen, we have seen beijing is prepared to play cards very hard during this. if they made an offer that swire cathay pacific is 15% of the revenue and you can see further things happening with this. paul: steve, back to you briefly. economican ongoing impact from this. carrie lam has called for bold
action to prop up economic growth. there was a meeting today and hong kong. can we expect anything significant come out of it? steve: i do not know if we can expect something significant. a lot of hong kong people are hoping for a display of leadership instead of just running down a litany of various crimes they say have been committed by protesters. people have spoken to say they want to hear concrete measures. i have been here for many years and have seen hong kong go through many crises, including the umbrella movement and sars. there has been resolute responses to various crises. with sars, they hired a public relations firm that came up with a slow -- a slogan. they did harbor fast. i am not sure -- i am not
suggesting they have harbor concert to put on a band-aid, but they need something. you need to give the hong kong people an indication that they are doing something instead of just saying the hard-line approach they have taken so far. shery: stephen engle, thank you so much. to david for cling -- fickling. tech agency has had to move fast to stay ahead. have companies done enough? this is bloomberg. ♪
-- supply chain. jerry, great to have you. given the ongoing tensions between the u.s. and china and between japan and south korea, does this mean we could continue to see more homegrown supplier ecosystems come out of this? jerry: the question. stages are seeing is the of development for supply chains in the broader industry spectrum. the blockchain tends to get shorter and companies try to bring suppliers closer to the markets where they are producing in order to make them more resilient and flexible. also, with the trade dispute, into 2021y to prolong , also backed by a survey we did in july, having sorter -- having shorter supply chains and
upgrading them to the board making willcision be very important. so that is starting to happen in many industries, including technology. shery: does this mean the long-term this could be a net positive, given supply chains will become more resilient to risk, or does it mean the eco systems will become more isolated from each other and could actually end up costing the company's more? -- the companies more? long-term, it will help with global innovation. even if physically it is more fragmented and placed in different parts of the world, we will see a virtual ecosystem of supply chains when it comes to sharing knowledge and future
product. that collaboration will not go away. so we will see a shift of physical supply chains becoming .horter the leverage and benefits from scaling collaboration is not going away. today set up in terms of virtual networks within suppliers and customers, these are important to maintain the cost of supply chain lower, as well. so we do not think it will be a major isolation in the planning and sharing of information. paul: i wonder if another fact you might see is -- another effect you might see is a return to warehousing. will there be more as companies try to insulate against risks? gerry: great question.
warehouses are having a major upgrade in the way they are operating. we are shifting away from a place tojust being put inventory. they are becoming more automated and manufacturers are looking how to utilize warehouses for final assembly of product. customer needs are becoming more specific than ever. a lot are looking for differentiation and specific tailor-made products. a could see warehouses take more valuable process in supply chain. upgraded rather than just an in and out warehouse for inventory. you: and i am wondering if expect to see on shoring becoming more of a trend.
divorcing -- diversifying locations are putting more in the u.s.. do expect to see more of this and would it increase cost if you're basing yourself in an environment where wages are higher? see from oure perspective is in the long-term, we will not see another part of the world the way china did 20 years ago. shorter.ains will get we could see a certain degree of on shoring. but if even labor costs are higher, the degree of automation will increase and is already increasing. it takes away the labor cost that would originally exist. so when you have that decision leaders have to take is if i bring my supply chain closer and
have more automated manufacturing, it alleviates the ofor cost and benefit producing. i see that happening more in the long term, five plus years from now. as it takes time to invest in automation. we're at a place where there is a plethora of applications of digital and users supply chains have to be careful how to select the right digital application for them. so long-term, potentially on shoring but investments have to be made carefully. paul:
i am paul allen in sydney. shery: i am shery ahn in new york. gold-mining goliath barrick might be open to selling their australian pit mine. the ceo says they have had no shortage of interest and said they reported more than 20% in central florida revenue and is targeting to sell $1.5 billion of assets at the end of next year. nameddavid gibbs has been ceo from january 1 of yum! brands. division.s the global created, whoed , who willnue -- creed continue to ensure a smooth
position. seng index has slipped and analysts say there are more gains to come. the food industry remains insulated. the 12 month consensus is a target price of 33 hong kong dollars. another down day for stockmarkets across asia. let's get a preview of what to watch later. selena: ahead is the market open. i am looking at the china tenure government bond yields coasting in on yields of less than 3% for the first time since november 2016 i made trade tensions u.s. -- u.s. -- amanda trade tensions -- amid u.s. trade tensions.
but it is still a standout for investors you're searching for yields. we have been talking about cathay pacific all morning and i want to emphasize they are reaching the lowest level in a decade. , 9.8lost 4.9% to hong kong dollars monday, the lowest close since june 2009. let's get some live pictures from hong kong. we are waiting for a possible statement from the chief executive, carrie lam. if that happens, we will bring it to you live at the top of the hour. that is it from daybreak asia. this is bloomberg. ♪ from the couldn't be prouders
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>> it is 9:00 a.m. in beijing. welcome to bloomberg markets china open. down toe are counting the open of trade in hong kong. let's get you our top stories this morning. operations resume at the airport in hong kong the pressure is still rising. more flights are canceled. markets fallific again as the unrest adds to long-standing trade concerns. traders now await today's yuan fix from the pboc. david: bad data as pressure from a decline long slowed acros
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