tv Bloomberg Markets Asia Bloomberg July 20, 2022 10:00pm-11:00pm EDT
rishaad: it is almost 10:00 in hong kong. welcome to bloomberg markets: asia. yvonne: our top stories this morning, probably sputters in asia as the dollars gained. fresh corporate earnings and geopolitical risks in europe. when major central bank positions as well. the boj says it will stick with the policy. energy markets kind down, the restart of the nord stream pipeline as putin signals europe will get limited gas supply. david: we will get an update of that. we are following the trickle in the pipeline. that is what the ecb does, they will -- the decision on that has bearing. here equity markets, we are coming off two days of rising,
not much volume. european futures a are here. currency markets, the dollar is again stronger. as far as the correlation is concerned. sovereign bond markets, consistency. one year yield in china picked up after eight days of decline. the short data trend is still lower. which goes into self keeping liquidity a wash. yvonne: you mentioned the ecb, the nord stream pipeline goes hand-in-hand with that. that is weighing on lagarde and company on the restart of the pipeline. there is this italian political crisis ensuing. the 25, 50 seems to be on the fence at the moment. -- 25 seems to be baked in, 50 seems to be on the fence of the moment.
it is jittery. bank of japan, a nonmarket story. i feel bank indonesia as well, pretty quiet. it is all about the ecb, i feel. david: i know we talked about the big meetings of the most relevant one coming up, traders are telling us it is the most relevant meeting as far as the last year is concerned. look at the price people are paying against the expectations. the red spikes you see are the day or ease before the ecb meeting. it was highest in 2020. right now, because back to -- five or six years. we are looking at traders breaking forth. a lot of movement here. you get a hike of 50, the model suggests a move of about 2% of the yield. yvonne: there's a lot of talk about, if they get that 50, is
it one and done? what could happen to italian and german spreads? the boj is not so much a big story for markets here today. we have a guest coming up, they could hike. there's still a lot of talk about what to expect, ecb officials deciding whether to deliver that 25 or basis point hike. they're also hammering out a new policy tool. cathleen, so many factors here, what do you think is driving the ecb to consider that 50 basis point hike? >> inflation is the number one reason. back on june 9, the consensus was pretty clear as of the door was open to the 25 basis point rate hike at this meeting and maybe 50 later in the year. but when inflation popped above 8.6%, like as in so many countries, that is when the pressure was on. on june 28, a speech by
christine lagarde, she clearly makes herself known, gradualism may not be appropriate if inflation is starting to accelerate. there's so much paying the european economy at once. the war it in ukraine has taken its toll. raising prices hurt the economy. and the extent there is a recession looming is also out there, all at the same time. what is happening, the european union, the ecb, this is a consistent collaboration of many countries. if the fed does something, it affects one country, the boj, same. if -- in europe, it affects several different countries, 27 if i'm not mistaken. of the past several weeks, this worry about fragmentation has arisen. it is getting worse that the bond yields are going to respond differently in different countries. in countries that are more indebted, the cost of your
finance starts rising, you're going to get hit. that is what happened to italy, portugal, spain. particularly with italy, you see how the spreads over german bonds have started to widen again. they are in crisis with mario draghi maybe having to step down is making it worse. it is almost a message from the market gods or something. number one, you can't do a stuff like this without having an impact. and beware of what you start doing it, a lot of things can hit you that are going to get in your path. david: it is almost like it is the best and worst time to raise interest rates. what is the policy offset? how is the expected to take the sting out of the side effects of raising interest rates? >> all we know is there's going to be a new plan. the ecb has powerful plans.
a long-standing bond purchase program. they added on their pandemic emergency bond purchase program. those are winding down, they have to start a new one because of the fact these individual countries are getting hit. here are some of the key questions. the size of the bond purchases, is there going to be a limit, or unlimited amount of bond. that would be a powerful statement. what about the conduct -- conventions countries have to meet? physical intention kind of apartment goes with this. it is the highly indebted countries that are getting hit. what about the ecb's balance sheet. what kind of bonds are they going to buy? we can assume they are going to buy government bonds, corporate
bonds, too? the timetable, when are you going to start? they took a while to institute. finally, triggers, what is going to trigger the ecb to come in and buy the bonds of italy, portugal, spain or others? are a good team in europe says that may remain top secret, something the ecb does not want to tell us now. this is important when we get that ecb tomorrow. david: we don't know lots of they're going to hit us with the big word, anti-fragmentation. yvonne: wow. david: the epic -- the affects scandal. as far as the euro goes, it could go both ways yeah -- both ways, right? we could get parity or the
other. >> what could they do. overnight, has -- the ball has spiked up the roof. the euro will continue to be at the mercy of market sentiment here. it has come back from the brink of parity. it surprises on the downside, it makes things worse for the euro. if italy situation -- all these things could impact the euro. i and j -- deutsche bank says 95 cannot be ruled out. pretty bearish territory, a lot hinges on ecb. yvonne: even a 50 base -- it doesn't seem like even a 50 basis point hike could save the euro at this point. that was a call from j.p. morgan. a lot of this has to do with gas in russia.
how important is that for fx markets this week? >> absolutely critical. all eyes will be on nord stream. it is set to come on today. if that doesn't turn on, we will be in a lot of pain, it is not just an ecb probe -- problem. when you read all that notes, from j.p. morgan, they go hand-in-hand. further down on the euro expected if this crisis is not averted. yvonne: thank you. we are watching out for our orders, is it going to be a 40% that summer projecting? -- that some are projecting? what to watch out for, mliv is where to go.
and -- the big question is how effective would yen intervention be? let's get to the first word news, vonnie quinn in new york. >> president biden said chinese president xi jinping within the next 10 days. he is expected to announce his decision soon on whether to ease tariffs on china imports. the military advises is not a good time -- they have said policy will lead a delegation to taipei next month. president biden, climate change, an existential threat and a new policy to fight its effects. it includes expanding power and improve -- emergency funding for infrastructure. he held back on declaring a formal climate emergency. >> let me be clear. climate change is an emergency. in the coming weeks, i'm going
to use the power i have as president to turn these words into formal, officials of government actions. [applause] >> the race to succeed uk prime minister boris johnson started to can -- two contenders. they will choose between the former chancellor of the exchequer. sue next decision to -- the winner will be announced september 5. hong kong will no longer force -- the variants are more transmissible, but not more dangerous. it is the policy change by the executive government. covid patient still need to meet certain criteria to 14 at home. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.
this is bloomberg. david. david: head, we have a look at the analysis of the oil and gas markets. wait to see how much gas will flow from russia to europe when nord stream comes back in a couple hours. yvonne: first, they/growth across asia, about why they think china is on the path to recovery. this is bloomberg. ♪
prices, fed tightening, leading to responses by cautious central banks in asia, which is dampening the recovery. 4.6%, we still feel is a pretty standing recovery. yvonne: the downgrade in terms of the growth outlook, by what the china situation is by covid zero. david: on her next guest, when you look at china and the developed markets, you're looking at a macro policy direction. during us now is christian tend to know -- christaan tuntono. diverging direction in terms of growth and outlook, but don't you also think because china is slowing down, it is converging to? >> i think over in the developed
market, you have rising global concern and resilient inflation. the policy coming from the ecb to help the economy in the developed market is relatively limited. they have to contain inflation risk. over in china, it is a different story. obviously, psychic porter was weak growth because of the covid lockdown in shanghai. what we know is going into the second half, there is a lot of powers to be deployed in infrastructure and investment. the china the private sector it represents 40% of the whole economy. we already know the government has deferred $1.2 trillion of last year local government bond proceeds to this year. 5 trillion of the -- has already been issued. then there was 800 billions
credit. reports about 500 billion -- all of these are pushing the infrastructure investment. worry about private sector demand is understandable. i think we cannot count out the support of the government over the second half of the year. yvonne: you also hear them talking about flexible growth targets. how should we look at those statements at a time when the housing crisis has spread to noxious developers, but also those paying those mortgages and livelihoods or estate? talk about the mortgage delinquent protest first. we have to put it into scale.
from our estimations, it is housing project still under construction, possibly starting in 2020. the mortgage increment during that time was about $17 trillion. 25% of our new mortgages, and from the developer. you can come to a calculation the worse exposure of mortgages could be $2.6 trillion. a number that is not small. but smaller than the frequent $4 trillion of that that already recognized by the banking system. it is less than 1.7% of the ratio. chinese banks have 200% provision based on that. the governments are working hard now to make sure the project scott completed and there's enough funding from the banks or
other resources to support that. i think the actual amount delinquent is small. the banking system is able to digest that. i don't think this will lead to a systemic problem. hopefully you are right. david: the outlook, given slowing growth, do you still think other central banks can maintain the inflation moving forward at the same rate, like the bank of korea, the philippines, others. >> very good questions. within asia, we cannot just categorize them as one bloc. within economies, there are some more effective in the energy and food inflation and economy sing much stronger pastor. let's hate for korea, that is
what you see more aggressive rate hikes from them. some economists, like in malaysia are less affected by energy inflation because their governments are using administrative measures on cpi out m's. and also the external balances, more questions because of the commodities for the sages. they have been lagging in terms of rate hike. they need to catch up. i still see the asian federal -- they will continue to do so. yvonne: despite this, these commodity exporters are pretty resilient, you think the low is peer out. you're still thinking they could hide today, why is that? >> i think delaying the rate
hike is not really sustainable. in july and probably 50 basis points or similar magnitude going into the rest of the year. i think the gap between indonesia and u.s., from here to widen. sooner or later, they still need to hike. maybe it is not today, but it will be sooner. expectations of the rate hike is still coming. david: if that is the reason, i can apply to the boj, right? >> boj is different. david: why? >> there's no obvious path through a strong secondary path or pressure. japan probably is deeply entrenched, labor productivity -- wage growth has not been
conspicuous. i think for japan, they have this deflation, you think they do not want to see it. it is not there. the domestic demand is really week, despite their pain covid, the situation that has been going on affecting energy and food prices. in a sense, i understand the reasoning for not hiking at this point. i expect them to do this today. yvonne: the strength of the secondary pass-through inflation. that is what christian says drives that. >> big board. yvonne: thank you, we've got plenty more ahead. this is bloomberg. ♪
yvonne: your latest business flash headlines. they're playing to cut as many as 8000 jobs as the automaker trust boost profits to fund its push in the 80's. some of the cuts will come from the unit producing gas fueled vehicles. the company is hampered by having too many people. they're going to cut -- microsoft is eliminating open job listings, including its cloud business and security software unit. the hiring freeze will continue the foreseeable future, it is still honoring job offers a have been made. the hiring slowdown was disclosed inmate, which mostly affected the windows, office and team scripts.
google says it will pause hiring for two weeks to allow the company to review headcount needs. lift will shut down its car-rental business and cut 60 jobs, as a prep over the labor shortage in nepal in stock price. david: the earnings story here, tesla and some suppliers across the region dragged down, more to do with overall sentiment than anything specific on the company itself. topping estimates, casino stocks and focus, have been since macau decided to shut businesses. perhaps a reopening in today's. yvonne: not seeing that much upside. if you look at why, it is the long-term prospects of macau. there rapidly changing.
you have to blame covid zero for that. if you look at where gaming revenues have been, from january to may, las vegas strip out cleaning macau, which wasn't the case, since macau was basically -- the new macau. it is the new normal been. that many of us have to contend with. david: that is where the businesses are. coming up, yvonne: the latest on energy markets. as we count down to the nord stream pipeline reopening later today. this is bloomberg. ♪
>> you are seeing a palace in tokyo. it looks hot there. speaking of the covid medical alert, tokyo raised that to the highest level according to some local markets. there was talk that they might start lifting some covid restrictions maybe that is what the boj is waiting for, too. david: anyway, one of those things we have to wait and see before we believe it. we are heading into very close with the last 10 seconds of trade. back to square one if you were looking at the price. a couple of stories that could affect japan, the euro and energy markets. yvonne: the biggest pipeline from russia to europe should be restarting today after 10 days
of maintenance. the eu is still calling on members to ration natural gas in case russia cuts lowe's. >> russia is blackmailing us. russia is using energy as a weapon and therefore, whether it is a power shortage, major cut off of russian gas, europe needs to be ready. yvonne: let's bring in the vanda insights ceo, it seems like the eu is bracing for the worst. i have to wonder what your base case is on what could happen today? >> the suspense has been building up. as the ten-day maintenance on nord stream one pipeline comes to an end in a you hours, we will know whether the flows restart. the implications in recent days have been that imports from russia will indeed resume.
we had the german regulator overnight saying they expect close to resume at 30% of capacity. a report says that orders have been placed for buyers equivalent to 40% of the capacity of the pipeline. we heard president putin say a couple days earlier that flows will resume. whatever relief comes as a result of that is likely going to be short-lived. europe is going into the peak of the demand season with very low gas storage, a very low volumes of gas supply from russia, for the past several weeks nearly 12 countries have been affected. it will be a tough winter by all accounts. david: the political will then to i wouldn't say turn back, if it flows it glows and thank you, right? but against that reality what is the situation?
does europe have any room, particularly germany, to negotiate? the other side of that is much lower growth? >> it is a very tough situation. as far as the eu economies are concerned, and the sanctions they have been placing against russian oil, gas, coal, that is due to come into effect next month as well. energy weaponization is disastrous, especially the nascent scale -- pace and scale we have seen over the last four months. being in a situation like this as you rightlyit is going to be, the fact to quote unquote punish russia. the options for the eu, and a lot of them have already been deployed, switching back to
coal, oil for power generation, cutting back consumption. yesterday we saw the eu asked countries to voluntarily cut back 15% there gas use. they are paying top dollar for lng again. all of those options have been used but the sum total of that is the patchwork of solutions are no match for russian supply. 40% of eu gas consumption depended on russian supply and it does seem like president putin is going to continue using that as leverage against europe. yvonne: we've seen the likes of china rushing to secure contracts ahead of the winter. i wonder, does china's west to secure gasket easier or harder from all this? >> one of the relief points for the energy markets and certainly
that gas markets this year has been subdued demand from china. it is sad what has been happening to the chinese economy and the rolling lockdowns. it's clear that it has provided some relief in terms of demand in oil as well as gas. but as the winter season in the northern hemisphere draws near you have china but also japan and korea also needing to buy more gas. we also have countries in south asia which have been priced out of the market, bangladesh, india, pakistan. clearly, the europe gas crisis is already rippling to the world markets. as i said, winter could be bad not just for europe but a lot of other countries especially in asia that are dependent on gas imports. david: safe to assume based on that, that energy inflation if
not remaining at current levels, moves up further? >> we could see some relief provided by the easing of prices in oil, crude refined products margins have come off significantly since the start of the month from all-time highs in june. so oil is bringing down energy inflation over all commodities inflation is coming down. a lot of metals or base metals are beginning to tumble. we could see continuing respite in terms of material costs of price feeding into inflation but gas is probably going to be an outlier and a unique force in the opposite direction as far as energy costs are concerned. the worst hit might be concentrated in europe but as i said a lot of the importing countries will pay the prices well. yvonne: speaking longer-term, do
you think this energy crisis we're seeing globally, does that force a lot of these countries to delay those energy efficiency goals? >> yes, longer-term, what does europe do in the medium to longer term? unfortunately, from what i can see, lessons are not really being taken from this crisis in terms of balancing energy security with environmental concerns. even now i feel they should be going into full crisis mode and mandating gas consumption cuts and do it on a monetary basis first. you had spain say overnight sure, we can do it. they are two steps behind at each point. they are not really coming to
grips with the situation but longer-term, i think they need to go back to the drawing board. this overdependence on renewables and energy imports, can they and should they find a way to get back to the negotiating table with russia? it is fine to give it away from russian oil, gas and what have you but you cannot do it in a hurry. you cannot make major energy policy changes in response to a war, i think that is really bad. for the time, i think they need to find breathing room first before they make changes in their energy policy. david: that is a very tall order at this point. thank you so much, let's get over to vonnie quinn with the first word news. >> italy's government is close to collapse after three key parties with group support for
prime minister draghi. it could plunge the country into tour while as -- turmoil as economic warning signs begin to flash. if the president accepts his resignation, elections could be held as early as october. my callous worst ever covid-19 outbreak is easing. -- macau's worst ever covid outbreak is easing. bars, cinemas will remain shut and state businesses will face a headwind from a lack of quarantine free travel. nancy pelosi's approval signals a likely end to eight deadlock between the house and senate on a package aimed at boosting competition against china. she says she is planning for a house vote as soon as next week. bloomberg has learned the first war crimes cases against
russians could go before the international criminal court in the hague this year. a team has been collecting evidence of crimes in ukraine. the international court is in talks to deliver at least one russian prisoner of war to the hague. sri lankan lawmakers have elected a president. he remains deeply unpopular among protesters who have called for his resignation and set fire to his residence. the acting president has imposed a state of emergency across the country. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is bloomberg. david: let's get the latest on this mortgage boycott. it is spreading too many projects in most cities.
we have visualized that for you closer to the eastern part of china and the central. yvonne: it continues to spread. this might have been a surprise for xi jinping as he embarked on the three red lines that something that was not a consequence, the social stability backer, which seems like policymakers are making a priority leading up to the party congress. this is trapping china in a market paradox, how bad could this get, matthew? >> there are limits to how bad it could get. as worrying as the really fast spread of these boycotts is getting, there is a ceiling on how many, or how much money can be affected by this.
there have been various estimates. one put it at 2 trillion yuan, the total number of mortgages tied to projects where construction has been halted. that is only about 5% of china's total outstanding mortgages. that is assuming, that puts a ceiling on it, assuming that you do not see a total loss on all of those, which of course, is not going to happen. as alarming as the phenomenon is, and you can understand why authorities are worried about it, i think there is a limit. yvonne: but it is also spreading to suppliers of those developers that are trying to get these projects constructed, too? >> it is that not on wider effects of what is happening. which is to some extent unknowable. you don't know where the next
hole in the dyke is going to spring up. how does it affect confidence more widely and trust in the system? i think that is the more intangible question here. david: it may or may not be a relevant comparison but based on the information we have now, we can gauge what the extent of the problem is. it brings back what happened during the financial crisis because the assumptions where that as long as house prices kept going up, everything would be ok. when things cracked that people were not expecting, more started to a year. >> that is not an relevant comparison. i think the contagion aspect recalls the lehman collapse and the first stages of the financial crisis. i also think there are key differences. if you look back at what was happening in the u.s. leading up
to 2007 and 2008, you had a relaxation of prudential risk management measures to the point where people with low or almost no income could borrow vast amounts of money to buy houses they really couldn't afford. that is all fine if house prices keep going up, you make money. if they go down, and you haven't put any money down and you can't afford the mortgage, it is easy to walk away. that is the key difference with china because the down payment has been 30% for quite a while and it is not easy to get around that. if you put 30% of your wealth down to buy a property, you are not going to walk away from it easily. you either have to see catastrophic price declines. of course, in the situation of
the projects where construction has been halted and people have paid money they have -- for apartments they have not received yet, this is different because people are worried they will not get what they paid for at all. if you are thinking about whether contagion can spread to the wider market where people have existing houses, that they have put money down for, you have to see something fairly catastrophic before that. david: we are not there just yet. yvonne: our opinion: this done what is happening in the china property market. we are talking more about tesla earnings. elon musk saying the company is set for a record-breaking second half. we will break down the numbers and find out what else he had to say on the earnings call. this is bloomberg. ♪
better than expanded results. there getting production back on track. they made more ev's in june than any other month in the company's history. we also learned they sold most of their bitcoin holdings. david: su keenan is with us in new york. let's start with the numbers which were quite good. >> tesla beat on profit estimates and the ceo said the quote supply chain hell that the company has been through may be coming to an end. it is musk's view that the commodity price rally is tapering off, and he is optimistic the company can achieve record volume. the stock inched up higher in extended trading, tesla posted adjusted earnings of $2.27 a share, beating the estimate handily. the bloomberg chart is showing production. tesla's progress is getting
production back on track. he said that strong june production at factories in both california and shanghai has the potential for a record-breaking second half of the year. tesla left unchanged its production forecast average annual growth over a multiyear period. one annual list -- analyst was surprised that they left that in place. he says it means tesla is doing a very good job navigating a difficult environment. yvonne: can they get out of the supply chain hell in the second half and deliver on that target? tell us about the bitcoin sale, elon musk is saying this is a sideshow but it is tied to those lockdowns in china, too? >> that is the reason he gave. it is important to note that mosque anticipated blowback from the bitcoin bulls. he was an early adopter of
bitcoin. and yet they are announcing they have sold 75% of their bitcoin holdings. >> the reason we sold a bunch of bitcoin holdings was that we were uncertain as to when the covid lockdowns in china would alleviate. we were maximizing our cash position given the uncertainty of the covid lockdowns in china. >> musk again, anticipating criticism, making clear that the move to cell bitcoin was to achieve greater liquidity in a time of uncertainty. he also said it was not quote, a verdict on bitcoin. he pointed out that tesla kept all of its go showing --dogecoin holdings. bitcoin did a raise earlier gains on the day after the sale was disclosed. tesla sat in the conference call that digital assets have shrunk
to $218 million. very optimistic for the second half of the year. david: su keenan on the way to set up tesla. bitcoin did not just fall after the announcement, session lows here, we are down about 400 bucks. the price is $22,870. yvonne: he said it is a liquidity issue, not so much verdict. don't interpret too much. this is bloomberg. ♪
yvonne: a quick check of headlines. sources say fisa intends to invest in tencent back air wallets. they will raise about $100 million to extend the latest funding round. discussions are ongoing and no agreement between visa and airwallex has been reached yet. it was previously valued at five and a half billion dollars. the top u.s. aluminum producer is weathering a downturn in sentiment. they announced a $500 million share buyback, sending the stock surging after hours. alcoa said adjusted earnings decreased in the prior quarter
due to falling prices and rising production costs. united airlines is curtailing growth plans for 2023 as it attempts to get a handle on flight disruptions. next year it expects flight capacity to be 8% higher than preprint namic levels, far short of the 23% jump it had forecast. earnings fell short of forecasts but it expect positive earnings for the full year on strong demand. official data shows that china's mobile phone shipments jumped 9.2%, led by overseas vendors like apple and samsung while domestic brands declined. apple will provide details on china shipments when it provides earnings later in july. david: earnings is one part of the equation, there is inflation which has somewhat taken a backseat. in the next eight to 10 hours it
is the ecb. this is overnight implied volatility on euro, which just update 2020 high. the highest since the exit referendum, so be braced for some pretty wild swings on this one. yvonne: there was an interesting note on the euro saying if they see 50, which there may case -- their base case is 25, you're a good move to present on the day -- euro could move 20% on the day. we also have boj and b.i. happening in asia as well. stay with us. this is bloomberg. ♪
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