tv Daybreak Asia Bloomberg June 26, 2016 7:00pm-9:01pm EDT
♪ tokyois 8:00 a.m. in as a survey asked the fallout of brexit. this is "daybreak asia" ♪ ." ♪ emergency talks in tokyo, the government and boj meeting to discuss the strengthening yen and the implications of brexit. europe tells the u.k. to invoke article 50 by tuesday amid speculation leaders never had a plan.
gold has seen a two-year high, the referendum results announced. meet tobankers to discuss this outcome. there is concern that the fragile recovery has been damaged. >> coming to you live, i am yvonne man. in newi am betty liu york. we are watching this emergency meeting by the bank of japan. i saw the yen just come off slightly from the highs, where broke through that 100 level. really raising these questions as to how the japanese will deal with a stronger yen. thate: market stability, is the topic of this emergency meeting. we are also hearing that south korea could be addressing some market stabilization as
well and see if measures will be needed. out of trillion wiped global stocks on friday. it looks like we could see some more bleeding post-brexit vote. let's look at new zealand. we are seeing the kiwi falling for a second day, and stocks tumbling for a second time. in australia, futures looking to open slightly higher. a bit ofa place for opportunity, but futures now back down and retracing. let's look at japan. this is the one to watch. 8% on friday,ing yen and goal jumping again. the yen touched 99 against the dollar, and seen testing 95. i don't think anyone imagined it could get this bad so quickly. the brexit affect hitting asia as markets open for the full day post-vote.
we areit looks like going lower, at least as indicated by the futures market. what we saw on friday, of course, it was a stomach churning session on friday, the dow closing at its low, down 610 points. the s&p futures right now calling for a fall to the start of trade on monday, just down slightly, about .5% for the s&p futures, which seems small considering what we saw on friday. also, we start this , brexit,ith the news the uk's exits strategy from the eu uncertain amid a deepening leadership crisis. david cameron will address parliament today for the first time since he announced his
resignation. in londonen covering all of this. what might we expect later today with david cameron's speech? you say, david cameron will address lawmakers. it comes at a time when there is a political crisis in britain. we had the prime minister, david cameron, step down. no successor as yet. the favorite at the moment is boris johnson, who campaign for the leaves side in this referendum, but you also have the opposition in crisis with calls for jeremy corbyn to step down with 11 shadow members resigning, one being fired. the reason it matters is that
they will have to be at that table deciding how britain will deal with these negotiations with the eu. only theind that it is u.k. that can trigger article 50 in order to start two years of negotiations with the eu on how exit is going to happen. at the moment, we don't know who, nevermind how. what has been the response so far in terms of outside the u.k.? response, as you can imagine. i want to start with christine lagarde. we heard her speaking earlier if you aresterday, in the u.k., as we have just gone past midnight here. let's hear what she had to say about the way that markets really did not price in this result. the markets had
vastly underestimated the outcome. what i hear all the time for my team, which is essentially andets get it pretty right anticipate reasonably well. on this particular occasion, whether it was a bookmaker or the markets, that was not anticipated very much. that is going to be one of the big questions going forward, why was it that markets were not prepared for this to happen and why we have seen the fallout since? the other comments christine lagarde made, she said the risks depend on certainty or uncertainty, policy makers are holding that level of uncertainty in their hands, and she says it hinges on the next move. as i have been saying, nobody knows what that next move is going to be in terms of reaction from the eu. on saturday, we were getting a hard-line stance with the other
eu countries calling for britain to exits as quickly as possible, but that has softened a little bit since with the german chancellor and/or merkel chief of staff saying that the u.k. needs time to assess this, so we need a timeout on this. all the eu leaders will be meeting on tuesday in brussels, angola merkel will meet on monday ahead of that, but the question is when is article 50 going to be triggered, and that is the big question, then scotland as well. up plans for another independence referendum for scotland. you.ank hopefully we will get more clarity when david cameron speaks today. joining us live from london. let's go back to asia, where markets are on intervention watch after the yen crossed 100 during friday's volatile session. we have a look at the action so
far this morning. it looks like it is risk off once again. we have seen the yen coming down a little bit. it is worth pointing out that the emergency meeting going on in tokyo, some lines on that abeh prime minister saying that they will be doing what it takes to avoid any massive negative downward pressure when it comes to the economy. the yenimagine that would be top of mind in these conversations. at one point in the friday's session, the dollar-yen touching 99. we heard from him and el-erian -- it is a total nightmare for japanese policymakers. you have to wonder what 100 to
the dollar means. yen of within six unwinding all of the benefits that we had in three years of abenomics, massive stimulus measures that have taken place. it is bad for japanese inflation, far from its target, makes exports less competitive, and will weigh on demand. we will be watching those closely. an emergency markets meeting underway rht now in tokyo. betty: the likelihood of intervention is quite high? what is interesting is that the news of this meeting taking place comes after we had a report from the nikkei newspaper saying that policymakers are studying the possibility of putting through some form of intervention that could take the place in the form of unilateral intervention. some sort of coordinated response with its g7 partners is
preferred. you would assume the most effective response as well as opposed to japanese going on its own. we have a revised down consensus when it comes to dollar-yen. the consensus is 112. the end of the year, and a number of analysts saying we will get to that within a few weeks, 95 to the dollar. incredible. haidi lun there. the gold rally is set to continue. betty: ramy, you're looking pretty smart as a gold ball. right now, gold is up 1.5% in futures trading in chicago. it just opened in the past hour.
that is the initial reaction there. let's take a look at what has been happening since friday when brexit first hit. i want to show you spot gold. let's bring that up. show you what has been happening there in terms of the share price of that. it is now up 6% in the past two days. leg up see this little higher in futures trading in chicago. play is not any surprise to anyone, pushing higher, friday spot gold had rallied as much as a percent. this was the biggest jump since 2008, and futures trading at that time was double the average. bloomberg spoke to many analysts. one set the volume he's all that time was unmatched by anything, the phones ringing off the hook, and he was planning to work over the weekend.
i want to show you what is happening in terms of old as well as the pound sterling. it is really interesting -- in terms of gold as well as the pound sterling. the pound sterling is represented in the green. you can see the inflection point happening last friday. as gold rose 8%, the pound sterling fell 8% in just this whene window of time brexit was happening and everything was coming to the realization that this was really going to happen. betty: that this is going to become a reality. what about other commodities, in particular oil? right now in futures trading, it is down by half a percent or so. let's take a look at what is happening in terms of the past two days, adding on friday, summer to what i did with gold. 5.7%he past two days, down
, friday falling 5%, the biggest plunge in for and a half months. in part, i have to point out that because of the rally in the dollar, rising 1.8% , one commodity strategist we spoke to said it is risk istiment, and this fall exacerbated on top of what is happening with falling inventories in the u.s.. 14 of the past 15 weeks have been falling. yvonne: some other stories making headlines. election, although not an overall majority. the conservative people's party will take 135 seats in the 350 strong chamber. it came after uk's decision to abandon the european union. the stock index in madrid
plunged 12%, the most in 30 years, following the brexit vote. betty: brexit has been the hot topic, shaking markets on friday and dominating the news over the ceo says he'sber not expecting major disruptions. >> i don't think it will change how many people are going on the tube every day and how it will change the people's needs to get around that city, so we will be there to get around the city's. -- cities. we serve the cities all the same , so it is hard to see how this changes the local business city by city for us. >> more later in the show. groupsjoined by manpower greater china ceo. >> what investors should be watching at what should be the
there is anow, meeting underway among japanese government officials and the bank of japan. some headlines coming out, marketsor calm as the open in tokyo, saying that international cooperation is necessary and governor kuroda called him last night to ensure that there is sufficient funding for japanese companies and that with the g7orking to ensure sufficient liquidity. what everlosses or games possibly in the markets today, the important thing is that things are orderly in the market. assurance to be the that the japanese prime minister
is giving the markets in these remarks right now. lack of clarity remains in markets, according to the prime minister of japan. our conversation with investors bracing for uncertainty with volatility expected to remain high. joining us now is michael spencer. to have you. we just heard from christine lagarde saying that you can't jump to conclusions yet on brexit. we see quite a bit of panic when it comes to the political front. youomically speaking, do see this as a crisis or overblown? michael: it is genuinely fundamental uncertain with the u.k. economy going forward. key underpinning may change. we don't know when, presumably over the next 2-3 years, but the mayitutions of the eu
change as a consequence of negotiations. we simply don't know. we have genuine fundamental uncertainty that is negative for growth for the next year or so. it does not necessarily mean the long-term implications is terribly negative, but there is a real economic consequence to changing the institutions in which you operate. betty: it seems like there will be a negative hit to the u.k. economy, but speaking on a , is this something we will have to worry about for the global economy? or will it easy in the next few weeks if we don't get more surprises? we look at other countries around the world, the spillover from the u.k. -- we u.k. grow them by a percentage point in the year ahead, but for the rest of the world, that probably translates into 0.1 or maybe
0.2% off other economies growth, so in some respects -- look, you can look at the u.s. equity market and say this has been an overreaction. to u.s. of revenues companies is probably in the neighborhood of 2% and the market has fallen by 5%. economically outside the u.k., this is not a hugely important change. a lot of trade that has gone will getu.k. redirected, likewise investment, so there is a real cost to the u.k. economy during this transition, but for the rest of the world, this is not as important as markets seem to be saying it is. yvonne: when you look at the central bank response, there is a lot of pressure to react now. groute have a lot to the out when it comes to the path of least resistance when it comes to the pound. the boj dealing with the yen.
outlook is in tatters, some say. michael: the first order of business is to make sure markets are liquid and remain to function. the truth is that it has been a very orderly adjustment, even in the pound market. this was not panic. markets continue to function and are liquid. ofyou look at from the bank england's perspective, there is a negative hit to growth and the currency has adjusted in the right direction, so they probably don't need to be thinking about cutting rates immediately. with the weaker pound, there will be more inflation over the next few weeks and months. probably the bank of england will be more focused on what this might mean for growth over the next 12-18 months, and we think we will get a rate cut in august. for the bank of japan, this is been a problem, the flight to safety and the yen is moving in the wrong direction for japan,
but it is not clear anything the bank of japan can do can turn this currency around. negative rates have had the wrong impact on the currency in have beenseems to counterproductive, so maybe for the japanese authorities, are you can think about is fx intervention, scaring the markets into selling again for a while. if we are right and this is not a huge impact on the u.s. economy, then i think in the coming months that the fed will try to get back on track to talking rates up. yvonne: thank you so much for joining us from deutsche bank. betty: we will check in on the first meeting of the asian infrastructure investment bank and here from the bank president. that is next. ♪
in new york.u .vonne: i am yvonne man betty: the asian infrastructure investment bank held its first meeting. , saidesident, jin liqun people need to understand the stakes involved. jin: with regard to the european economy and global economy, the immediate reaction was certainly very worrisome. i think it depends on, first of all, the u.k. to handle this in a very prudent way. i think the british people should understand fully the in maintaininge the stability of the economy, to minimize the negative impact. essentially i would assert that
otherwise, u.k. will have to work with eu countries, and the u.k. will certainly have to work with other countries across this world. maybe this kind of relationship will be changed a little bit. i think both side should understand that they should work together. >> personally how do you feel about the british people's decision to leave the eu? which is is something think every citizen of a country should look at from a broader perspective rather than from their individual, very narrow perspective. athink it is important for well educated nation to look at these kinds of international issues in a more rational way. >> you see a tightening of financial conditions in asia,
especially in major markets? immediately impact would probably point to that direction , but i hope this is going to quiet down and the market overreaction will be corrected. run, i think this theoing to be easier for , becauseket to handle essentially the asian market is very strong on its own with no prejudice against the importance of the relationship between european and asian countries, but this also indicates how important it is for our bank to push for infrastructure, development, which eventually will be helpful for european countries. betty: that was our exclusive interview with jin liqun.
♪ julie: it is 7:30 p.m. urine new york. -- here in new york. you can see over the empire state building, but it is 7:30 a.m. monday in hong kong. the monday is well underway. we are 33 minutes away from the open of trade in japan, south korea, and australia. there is a shot of hong kong. i am betty liu in new york. yvonne: i am in new york. you are watching daybreak asia. julie: the jeff -- japanese prime
minister has asked for international cooperation to do with the follow from brexit. he is looking with senior government ministers in the bank of japan. he is calling for calm at the open just a half hour from now. sayse: christine lagarde policy action in the next few days will determine the short-term impact of brexit. the imf director says there is no president for decision. to focus on reducing uncertainty, but there is no panic in the markets. betty: the leaders of the brexit campaign may not be in any rush, and parliament president says martin schulz says they must an act article 50 and leave the block by tuesday. anything else would threaten the jobs and economy. the british media morning that they have no plans. -- warning that they have no plans. boris johnson is leading that. britain has to outline what kind of relationship it wants to have with the european union in the future, and then
leave the 27 member states. we have to decide to what extent we can correspond to their vision and what our own interest are. yvonne: another rally for gold, already adding a two-year high. prices could jump a further 7% to talk $1417 an ounce by the end of the year. a delayed fed rate hike may also help the rally. icking a look at w.a.r. p -- taking a look at wpi, we will see a rate hike this year. betty: incredible, we were at 50% probability to see a rate hike in december, that is around 15% now. if anything what has changed economically. it is all about sentiment. yvonne: and the boe now instead of preparing for a rate hike, a lot of economists say they could
be doing a rate cut, which is remarkable as well. we saw friday, what a roller coaster it was for the markets. let's see what monday is going to bring. here is david. are, wearly indications are looking at these early signals, today will be a risk day. that is clear at the moment. talk about these indicators in just a moment. let's take a step back very quickly and look at where we are. have a look at this graphic. just to show you and underscore how much of an outlier friday was in the strictest, purest tense of the word. we are looking at three standard deviations in all of those things you see on your screen, over $2 trillion was wiped out across global equity markets. that is the biggest daily loss ever, going back to the crisis, going back to black monday in 1987, the biggest loss ever in dollar terms.
i was suddenly not there anymore by the close on friday. adding from this, going back, i went to show the viewers the two dollar. pushing towards $2.47. spot prices on the way up. we are pushing towards the two-year prizes on the spot your. -- lot price. the aussie dollar is weaker. it is a strong u.s. dollar story. dollar-yen, this is ongoing meetings in japan. watch out online when it comes to these swap prices. stress,hese periods of that is when these are expected, not that they necessarily would do it. they will come out of liquidity. euro-dollar, 1.143, and pound sterling still continuing to fall at the moment. not as much as the session on friday, but we are at 1.35 at
the moment. just fromar end, not bloomberg. this is several people have come up so far this morning. very quickly, have a look at the one market that is open so far across the asia-pacific, about 1% down. answering the futures, can we show the viewers were yard as far as the open in japan? this is a two day chart. 15,000.135. friday, it could be mixed. a lot indeed, depends on what we hear from the japanese government officials. in the meantime, we would hear from central bankers as well. they are bracing for the followth in japan, the already happening today. emergency meetings in called for the government and the bank of japan. kathy hayes is here now for a closer look. what exactly do you think is
happening inside this room here between the finance minister, the prime minister, and the deputy doj governor? >> they are probably wondering how the geo seven -- the g7 conjoin them there this is so damaging for the boj, but they have been trying to do for the last three years, stimulate the economy by helping exporters. we have a wonderful chart from the bloomberg stories that looks good on the terminal right now. you can see as the yen is going to 99 on friday, got nearly down to there. if you take yen away from where it was three years ago where governor kuroda started this big move in japan to weaken the yen, the question is now, if it continues, what does it mean for the japanese economy? the hsbc putting out they see the yen at 95 by the end of the year, they were looking or 116.
-- they were looking for 116. so far, the rest of g7 has not been signaling they are ready to get together. most people say, unilateral event, intervention, not as effective. so what are other central bankers like the bank of england and mark carney? the u.k. treasury, as you were just saying, you have been talking already about perhaps another rate cut. that is what they are talking about. we could see -- brexit, of course, according to bank of america, merrill lynch, 2.5 percentage points over the s&p on five months. cutbank of england will their rate by 50 basis points by july 14 and do more quantitative easing, interesting that nigel farage from the ukip, one of the leading parties calling for the
brexit is saying that mark in dire straits. an issue for him. this mean fores the fed now? they did press the pods button, but now it is a done deal, will they raise rates? kathleen: how things have changed since friday. when think about the fed and brexit, it is not the u.s. economy that is at risk because of the uk's low. less than 5% of u.s. exports go to the united kingdom. let's look at things at a global rest, i stronger dollar today. that hurts u.s. exports and manufacturing. thein commodity prices, price of oil falls again, that will be a big problem for the u.s. economy. the bloomberg intelligence team here in the u.s. said it is more of a risk of financial contingents, not the economy, and we are looking at the
recession, that would not help either. , this is so interesting in the last day or so. have markets, the fed funds futures markets, price out the possibility of a hike. the probability of a cat, not what economist are looking for, it is one in 10 for the july meeting. betty: that is incredible. yvonne: it was zero for so long. kathleen: now the fed has to think about cutting rates. this is very interesting. finally, what people are wondering is, are central banks unable to do much about this? the fed already has a balance sheet. bank of japan already has negative interest rates. if they cut, they don't have much more to go in the u.k. yvonne: negative rates? kathleen: janet yellen is saying
-- you know there is no more than a trillion dollars worth of bonds with negative yield around the world, and it will be harder according to the bloomberg news stories for the ecb to do the bond buying it has to do, because it is running out of purchasing with positive rates. betty: fascinating. an idea of a sticky situation. kathleen hays. yvnonne? yvonne: here is haidi. haidi: the nations are now looking to set up a new agency to break up the dominance of the developed nation firms. this is high because of the assessment of the s&p, and others. russia, brazil, india, and others want a different fee structure three china is imposing new restrictions on internet search engines summit requiring them to ban content posted on any website.
this would be breaking the law if they were to provide banister -- they information also have to verify the tight of searches, paid search results, and clearly distinguish that. china is raining in on the coal production as they try to cut pollution. the national development expects upwards of a million times this year. china is also looking for a zombie company to cut this troubling industry and the push to restructure the economy. to shareholders are calling for an extraordinary general meeting removing 10 directors, including the chairman and the president. people are opposed to the $6.9 billion sell with the shenzhen train operator. ofy say direct interest
♪ yvonne: it is 7:44 in hong kong. these are the latest first word headlines. rex it is making headlines in the campaign. hillary clinton is attacking donald trump, saying a falling pound would benefit his workers in scotland. truck hits back saying clinton is disgraceful, accusing her of trying to wash away the bad as mccaul on brexit with her ad. -- that judgment call on brexit. after strengthening his bid with the party, on friday, the
council expelled opponents of his leadership. a former deputy pm and the son arehe former minister appearing with opposition leaders, trying to force him from office. -- has defeated his brother for control of the south korean conglomerate. they have a proposal to remove seven directors from the board. they are dealing with an official investigation into bribery and embezzlement. global news 24 hours a day, powered by more than 2600 journalists and analysts and analysts in more than 120 countries. this is bloomberg. , the: china's slow down re-economy is rebalancing. jobsurvey by manpower shows numbers are stabilizing. worldn engle is at the
economic forum mention shenzhen. how is china handling this transition to services and consumption from manufacturing? hello to you. abouteme here is talking the fourth industrial revolution. there are bunch of robots upstairs talking about how china will leverage on the innovative economy here in china, the next wave of innovation as china rebalance is its economy. but you know what? with the brexit vote and referendum next week -- last week, that is the elephant everyone is talking about, and that is what we will put initially to our first guest. he is the greater china head of manpower group. thank you for joining us this morning. so the latest employment survey shows civilization, but there is a weakness in hiring, and there is weakness in the private sector, investment.
how does the referendum and the subsequent market chaos that happened at the end of last weekend, probably will continue today, how will that affect china's transformation voter topicoticed quite a hard talking about the brexit. the discussion here. the key point is actually china inomes the largest supporter the eu operations and labor and those of commercial. and british is one of the key areas for the china export. our president also have so many directions here. you can also do this in the past few years. alsothe euro and china and especially we talking about the british u.k., whatever dorking with each other -- what are we working with each other. it is big news. it has not changed, it is uncertainty. stephen: it will always be
uncertainty. how does this affect china's hiring plans? china right now is pretty tepid, and part of the reform process has been the outbound investment. when there is this kind of shock to the global financial system, hiring managers go, we are going to have to pause right now. said,rect, but like you china has a passion for growth. we are already booming in consumption in two years with local service. so recently, the survey of the manpower employment, how it looks. a lot of employer have direction for the local consumption, local growth, so it stabilizes the higher need in the q3 outlook. .nly two are 2% this is the lowest in the past of seven years. thehen: i looking at hiring, it is at the lowest levels since the financial crisis. and the brexit
uncertainty that is out there beyond china's shores worse in that scenario? danny: that is what i am talking about, uncertainty. china, it will force direction, domestic consumption. outlook, chinare needs to fuel majority. that is what we look at in china, the service sectors seeing the highest. is quite low, we are talking about auto bots. reallyrt has been stabilizing in the past few years. thinking about these kind of uncertainty. so let's look at it. my unskilled politics -- stephen: with the domestic hiring still kind of week, does that put foe reform on the back burner? hiring the zombie companies that
have a lot of people but productivity is low voter danny: you are talking about productivity. including the government, this transforming quantity into quality. production is very important. you compare these closing their own companies, compared to the 1980's, the first time. private sectors are hiring, but now, the private sectors is the majority of the employer. it is a staggering number, but at the same time, a lot of the unemployment in china and the rising numbers of unemployment are from new graduates. there is a lot of uncertainty. so that tells me the private sector and innovative companies are doing most of the hiring, but most of the young recent graduates are not finding work. that tells me the education system is not keeping up and training the people properly for the new economy. danny: it is what we are talking about, the industrial revolution
4.0. it is a progressive, so the education cannot catch up quickly. try is the reason we must -- everyonee new should be in this lifecycle. ceohen: yesterday the uber was here. the chinese entrepreneurial system could equal silicon valley in five years, that was staggering to me. do you agree? danny: certainly. the young graduates are quite impressive. people are impressed with themselves, changing their abilities and developing skills. we are helping young individuals develop lifelong workforce capability. stephen: think you so much. betty, with every crisis, there are opportunities. that is what we are looking for here the world economic forum. betty: looking forward to that.
>> it could be in italy, it could be in south america. >> the british people voted for brexit, which it could be for a year, the brexit vote would lead to a downgrade in the uk's sovereign rating, which is currently aaa. be veryhere, it has to clear leadership in order to understand how this implementation is taking. >> it seems to me that with this
vote, this is a permanent downgrade, a permanent lowering of the pound. it depends on how far. >> i don't believe this will end up as a long-term drama. all of the market disciplines will be able to cope with the short-term volatility, and we go back to a more considered reaction after a few days. yvonne: some views on brexit from the world of business. we continue to see the pound fall today. there is no panic in the markets, but we are seeing some pain still. betty: that is exactly right. we are still saying some pain when it comes to the currency markets. repercussions of the brexit result, felt all over the world, not least here in the u.s., not just in currencies. we will bring back ramy inocencio, who has picked out his top chart this hour. tell us what you got. ramy: it is interesting that
puts it in perspective basically how bad the fall was in terms of the s&p 500 in response to brexit. we know that in global markets, we lost $2 trillion, not something to sneeze at. lost $710 billion on friday, that is are presented right here. reaction down 6.3%. the interesting thing here is it has happened no less than 51 times, the fall of 3.6%, no less than 51 times over the past three decades since 1986. interestingly, take a look at what happened that has been worse, taking a look at last year, we saw the august 2015 s&p 500 correction, on the order of 9%, no, 7% or so. september 2001, that was even higher. we go all the way down to the biggest orange bart chart, this is -20%, if you are around
trading, that was black monday back in 1987. historically speaking, the seven or 10 billion -- the $7 billion or $10 billion was mind blowing to people. the $710 billion was mind blowing to people. betty: fantasy i have lived through all of that. here in new york, we are looking at trading in asia and europe for the guidance on monday. things youks like get even more ugly. we are seeing futures in japan and south korea. we will see more of a selloff, the pound continuing to fall today. gold up the most in three years. we will continue to see it risk on today. we are moments away from the asia trading session, the first ball trading session -- first full trading session since the u.k. left. we will see what the reaction
♪ callsrgency action, abe for global cooperation. the yen trades around 102. asian-pacific markets about to open after friday brought they worst loss for global equities, gold up the most in three years. europe tells the u.k. to hurry up and leave. the brexit leaders never had a plan. welcome to "daybreak asia"
live in hong kong. i am yvonne man. let's go to david now. it looks like it will be risk off. most early signals are pointing to that. let's keep in mind that it is very early. moment, japan a little higher, 1.4%. keep in mind that on friday we had an 8% sellout. not a single stock was higher in the nikkei 225. we will track that. i get you an update on the nikkei 225 and other markets. kospi down, australia seeing a flat open. session lows at the moment. we are looking at u.s. futures on the way down, down 3%.
u.s. crude pushing towards $47, and gold pushing towards a two-year high. it is a bit mixed. risk appetite still remaining quite weak. whether we go to the extreme moves on friday, maybe not. chances are that the direction of markets at the moment pointing down. this could all change minute by minute. how will policymakers respond? so far what we have heard from central banks is that they will ensure liquidity. swap lines, that sort of thing. with a intervene? we have not heard anything yet. in about one hour and 15 minutes , we get the fixing out of china that could swing sentiment both ways.
a lot of people looking at china to provide that sign of stability if we do see them weaken the fixing, which they might well do. that we can substantially, that could trigger another round of program selling, something to keep in mind. let's have a look at where we , 13425,pound sterling not quite at the lows we hit back on friday. we were closer to 1.32. these are the lowest levels going back to 1984, 1985. go,ie dollar, there we 7432. let me show you my asx 200 chart here. have a look at where we are. 5100. a few brokerages have our cut their year in forecast for the asx 200.
there'suisse cutting 250 500 by year end. morgan stanley cutting there's irs to 4800. just a reminder to our viewers of what friday look like. it was very volatile. ways, it was an outlier in the purest sense of the word. statistics, extreme moves we saw, can we get our graphic up so our viewers can see this? when you talk statistics, we are talking standard deviations, anything above three is something you don't normally see. three standard deviation moves and everything you see on your screens, over $2 trillion of market cap was wiped out.
at the moment, we are continuing to see pressure across risk assets. just a reminder to our viewers that $2.1 trillion was the biggest daily loss ever, ever, toipsing 2008 and going back 1987. value was created, will investors swoop in? brokerages are advising not to. it is a bit too early. yvonne: thank you so much. on intervention watch after the yen crossed 100 during friday's volatile session. look at the action so far this morning. the boj and the government trying to calm markets right now. looking for hints of intervention, but some market participants say that intervention will happen at 100.
as it is, the yen touched 99. 124ave renewed forecasts, at the start of the year. that has come down to 112. you have the likes of hsbc calling for yen at 95 by the end of the year. other analysts saying we could get to 95 over the next few weeks. r sessionely calme compared to friday. taking a look at the bigger picture, this really shows that we came within six yen of wiping out all the progress made on the yen since governor kuroda launched stimulus three years ago. so i guess the question is, what's next? the stronger yen will be bad for exports and imports costs.
it will put the bank of japan's 2% inflation forecast further out of reach. yvonne: local reports saying there might be a call for unilateral intervention. how likely is that? haidi: this rhetoric isn't new and it's hard to work out whether they are trying to jawbone the currency. we had reports from the nikkei saying that they will take appropriate measures if necessary. there was a suggestion that they , so ideallyterally to have a coordinated action between g7 members on the currency, but that report seemed just adjust that if that fails, japan could go it alone. the meeting we had this morning in tokyo suggesting that they thewaiting and seeing impacts, trying to talk it down, talking about international cooperation being the foremost issue. saying that governor kuroda
had called him and they had a discussion on what to do. going forward, the question is what more can they do? brexit the latest volatility, they were struggling as it is to get more and more out of the stimulus they were putting through, so i guess they can cut rates even further, more etf's. i guess that's not more likely giving the events of the past couple of days. thank you so much. strategy is further plagued with uncertainty amid a deepening political crisis. prime minister david cameron will address parliament today since resigning on friday, while opposition cabinet members quit in an attempted coup against jeremy corbyn. this is chaos.
is absolute chaos. you have a prime minister who step down. no clear path for the successor. labourosition party in turmoil, with calls for jeremy corbyn to resign, and a firing as well. going to be at the table deciding how the u.k. is going to take his negotiations with the eu ford once they are triggered -- forward once they are triggered. u.k. invokeshe article 50, which would start the negotiations with the eu, so this is before any negotiations have begun. it is not clear how the eu will negotiate with the u.k., and with whom. betty: the leave camp was not quite prepared for a brexit result. has the response been like
so far outside the united kingdom? i want to start first with scotland. it is still in the u.k., but what this leave result has triggered is scotland gearing up for perhaps another referendum on independence, but then outside the u.k., we have christine lagarde of the imf speaking yesterday, and here is what she had to say about the markets. the markets had vastly underestimated the outcome, and contrary to what i hear all the time for my teams, which is simply markets usually get it ready right and anticipate pretty well, on this particular occasion, whether it was a bookmaker or the markets, that was not anticipated very much. another thing that christine lagarde said is that briggs its impact will hinge on policy makers next moves. impact will hinge on
policy makers next moves. we will have eu leaders actually meeting on tuesday, angela merkel meeting with france and italy before that. partycameron will not be to all those talks, but the reaction from the eu initially was hard line, saying the u.k. as quickly as possible. 's chief of staff saying the u.k. needs to assess the implication. the timing of when this article 50 is triggered, this week, when we get a successor to cameron, that timing could be crucial in how strong a position the u.k. will be to actually negotiate something. at the moment, this is all very unclear. we heard the reaction from the eu, but that timing is going to be crucial. we will also have central bankers meeting in portugal as well, so a lot of meetings
happening. will we get more clarity though, that is the question. yvonne: central banks settling in asia. south korea talking about market stabilization measures. we will continue to watch those. thank you so much. topic,has been the hot dominating the news over the uber's ceo is not expecting major disruption. >> i'm not sure brexit will change how many people go on the two every day and how people get around the city. we will be there to help them get around those cities, and whether it is london or anywhere it is hard to, see how this changes the local business, city by city, for us. yvonne: caretaker prime minister
looks like he will be winning the most seats in the spanish election, although not an overall majority. his conservative people's party will take 135 seats in the 350 strong chamber. the election came after the uk's decision to abandon the european union. the benchmark stock index plunged 12 present image rid, the most in almost 30 years. up next, the boj and prime minister abe assess the impact of brexit. we will discuss that with laura fitzsimmons next on "daybreak asia". ♪
ramy, tell us more about this. correct, wey are could see a $100 pop in the price of gold by the into the today, but 8% from initial reaction to post-brexit, commodities, spot gold is up by 1.2%. 1.5%, butn higher by $1331 a troy and's, as high as $10 in futures since they opened. friday, nok to surprise this safe haven was in play, gold rising on friday as --h as 8%, its biggest chump jump since 2008 financial crisis. futures were trading at 200% the normal volumes.
one analyst in london was saying the boy him last night was unmatched by anything. he said they were planning to work through the weekend. let's switch over to another safe haven, the u.s. 10 year yield. treasuries falling into favor in this very risk off environment. traders piled into the 10 year bond, pushing the yield down 18 basis points, but from thursday to friday, look at that, down 24 basis points. this is its lowest yield since september 2012. if you see that drop right at the bottom of your screen, the yield had dropped to 1.4% at one point, the lowest since july 2012. that may not be the worst of it. , rising, andld yields may fall over the course of this year. , thank ramy inocencio you so much.
let's get more analysis from laura fitzsimmons. she joins us now from sydney. really great to have you. we are seeing historic swings on friday. we don't have experience on what happens next. has all this been big in? is the worst over? is toowe believe it early to calling the worst to be over. certainly friday's moves were extreme and records were broken and amazing volume, but there is still probably a second wave of the slower hands to move in the market now. friday was interesting because we saw a lot of activity from hedge funds. the same time, you would have had asset managers and other central banks spending more time trying to think through the implications of what has happened. there is still so much uncertainty regarding the u.k. political situation, that
timing, and as we all know, markets don't like uncertainty. it will still be a rocky few days when positions need to be altered and liquidated in some cases, but you would be hoping that by the end of the week we would have found some stability. yvonne: it looks like we are all hoping central banks to come to the rescue once again. laura, what would you be watching the most? we will see declines in asian markets short-term, but is irrelevant in the long term? in the short-term, yes, certainly more declines to calm, but we feel that at this stage when we look back over the positioning levels we saw in other crises, particularly when we look back to the most recent, the european debt crisis, equity markets would probably have to fall another 10% before your starting to reach levels where positioning will move back to those extreme lows, so at this stage we feel that european and u.k. equities look vulnerable,
positioning has still not cleaned out there, but certainly emerging markets have had a turbulent year up until now and last year as well, so we think the positioning is not as extreme as it was there a four and people are a little bit more prepared for what has happened. too early to still start jumping in? do you see any opportunities right now, laura? there arethink in fx opportunities in euro-sterling. there is still some downside there. will start to benefit as we approach the u.s. election. we think the euro will trade better heading into that, 86-88 area on sterling. i think currency investors are still shaken from friday's events, so it will take some
time before we go back to that level. yvonne: we are continuing to watch central banks in europe as well as asia start to meet, but there is that question of whether they are out of ammunition. rba could see a possible cut the summer, but what else can they do to calm markets right now? what are you expecting? the swap linesy are important in terms of functioning of the money markets , so comments regarding those on friday are welcome. the fact that they are ready to an act of those again is certainly helpful to markets in the short-term. we will have to see what comes. we think that potential you get something from the boj meeting. we expect they might be easing in the july meeting anyhow, but we cannot rule out the meetings happening in tokyo this morning, that something might not be coming out in the next few days from there.
the ecb and the bank of laying england willk of make cuts, but that will also depend on what the currency does in the interim. certainly the rba is in play. another cut ind august, and we think that will be delivered. this adds support to continued easing, and we expect that next year as well. yvonne: laura fitzsimmons, thank you so much. jin liqun gives us his view of how china should react to brexit. he is next. ♪
bloomberg. jin: the key is to provide sufficient liquidity without creating future inflationary pressures. that is the central role of the central bank. have latitude to deal with this kind of difficult issues. the outsideis that world has seemed to overreacted to the slowdown in china's economy. i said on numerous occasions that when an economy slows down , what is the5% worry? one percentage point of growth is not the same thing as the growth 10-20 years ago. ,he economy sizes much bigger
and certainly the increase in our growth rate would be very much different. you simply cannot look at the or two percentage points, that is not the same thing, and if you look at the quality of growth you see the different structures of today's economy compared to the economy 20 years ago. >> there has been great volatility in the currency market, and all eyes tracking the chinese yuan, people wondering if it will be strengthened in line with the dollar or will be weekend. what are your thoughts on that? where do you see the yuan headed? jin: market volatility is inevitable. when something happens in the world, markets often react too much, so i think what is important is for the central bank and government to be more
tolerable of volatility. as long as you are more tolerable, the market would be stabilizing, but if you try to intervene too much, i think the volatility would be getting should be a little more patient, allowing the market to correct itself rather ton taking drastic measures keep the market down, which often backfires. fair value?an jin: more or less. is that as long as there is no excessive intervention in the market, the value of the currency would give you more or less i think the correct exchange rate in the market. it might be overvalued or undervalued a little bit, but
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x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. yvonne: good morning. it is 8:30 a.m. in singapore. you're watching "daybreak asia". afterse stocks jumped shinzo abe called for market calm and international cooperation to manage brexit. senior held talks with ministers and the bank of japan. theyen is steady at 102 to dollar. political crisis in the u.k. triggered by brexit, leadership turmoil in both parties, while
scottish independence is back on the agenda. brexit leaders say there is no rush to leave europe, but the eu parliament president is demanding they invoke article 50 and leave the block by tuesday. the brexit vote could mean another rally for gold, which is at a two-year high. analysts say prices could jump a further 7% to top $1420 an ounce by the end of the year. fedctations of the delayed rate hike may also help the rally. news 24 hours a day powered by 2600 journalist and analyst in 120 countries. this is bloomberg. australia, and south korea have been open for about half an hour. let's get an update on what is happening. david: looking better. we are not out of the woods yet. we were talking about gold.
$1330 an ounce, 1.2%. the spot rate is a little higher. asian stocks off session lows. early, but we have improvement in the last 15 minutes so. the kospi down. , 5100 roughly speaking, getting a lift from these mining stocks, especially gold. is providing some sort of tailwind for australia. .apan seeing a decent bit today , friday was a hectic session, 220 five stocks on this index and not a single one was up on friday. that is providing a bit of a lift. perhaps a function here of dollar-yen pushing towards
session highs. above 102 at the moment. have a look at some of these futures. can we get the ftse futures? at one point.y 4% 3.9%. s&p futures, look at that, pushing towards 2000. some of these key sterling crosses. sterling continuing to get sold off here. lip the boards and let's look at how were doing as far as asian currencies. very much weaker's on the day. , chinaut for the fix could swing sentiment both ways extremely. yvonne: thank you. top japanese lawmakers and the boj held an emergency meeting to discuss the brexit decision. let's go to our tokyo bureau chief, joining us now.
tell us what was discussed at this meeting and what were the biggest concerns. yes, clearly there was a sense of panic in the market on friday, which saw the yen surged past 100 and the nikkei falling 8%, so the meeting was basically called to calm the market ahead of the open today. that japanese companies be provided with liquidity. governor kuroda basically said that he is in contact with other central banks following brexit. obviously that is not anything earth shattering. seems to have sue the markets somewhat with the yen stabilizing around 102 this morning and the nikkei rebounding at open. they couldseems like
be working so far, but still early on in the japan session. what can japan do? they have been talking about this unilateral intervention. is that a realistic option? unilateral intervention is an option, but whether it is realistic or it will be affective, there are doubts over that. everybody in the market understands that what is happening in the global market is an international phenomenon, and for the bank of japan to take on the markets alone in the currency market will be extremely difficult. that asjapan realizes well, and so far we have had very little signal that they were contemplating a unilateral intervention and that multilateral action would only be effective. the bank of japan, which held rates steady in the last meeting likely tois month, is
ease policy at its next meeting, according to what the market has been predicting. i think that brexit has only increased the odds of that, but whether that will help the currency market is a big question. the yen has been strengthening even as the boj has been easing policy so far this year. what can japan do? it is very limited. i think the finance ministers expression at a press briefing held as the yen -- immediately after the yen fell -- rose above 100, his expression was very tense. he looked extremely uncomfortable and basically avoided any questions around intervention, so that reflects where the japanese government is. yvonne: thank you so much. joining us live from tokyo, our
bureau chief there. a look at how asian markets have been affected by brexit, joining us from melbourne. great to have you. a little bit of ease in the markets on monday, but we continue to see the pound falling, the yen with a little bit of weakness today, but not he raising gains that we saw on friday. what is the circuit breaker then? it is very tough to say. we are seeing a situation where a couple of central banks have talked about swap lines and liquidy provided there, and that is appeasing some people. i think people want to see the u.k. political situation clear up. the tory party needs to find a new leader and an act article 50, and that will be a lengthy process.
so perhaps some sort of political ramifications which won't calm for a while, but i suspect it has to come from a central bank situation. on february 11, we saw this , aket shanghai accords collective response from central banks, and that's what we need to see here. yvonne: all right, well, people it is about the velocity of the moves we did see on friday, so expect more choppy days, know about -- doubt. some say could be like japan dig but2011 earthquake, markets did rebound. wet is the timeline where could see the outcome of this brexit vote? think thel, i question everyone is asking is haveer this is what we
been seeing from financial assets is a shock to the system or a genuine start of a crisis. i think that is really where we will be seeing things through. i think the chinese fix could be interesting given that the dollar had its biggest gain since 2008. thezable weakening of renminbi could set tongues wagging. we saw a big move and credit default swaps a well against the subordinated debt. that is something we will have to watch out as well. inflows, what a happens to emerging markets, a lot of the things we talked about in january are back on people's radar again. whether or not they continue to , the seat has probably
been sown and we will probably have to keep an i on that. that will give us the impact on the pound, equity markets, and credits as well, so there are a in investment concerns back the market. we will have to see how they grow. yvonne: joining us live from melbourne and ig markets. a look at what we are following on the bloomberg this morning. nations are looking to set up a new credit company. they claim their borrowing costs are excessively high thanks to the assessment of s&p, moody's, and fitch. they aim to create a competitive fee structure. to shareholders have called for an extraordinary general meeting aimed at removing 10 directors, including the chairman and president.
some are opposed to the stock sale. they say it will dilute the interests of existing shareholders. china is trying to curb pollution. the national development and reform commission expects out put to fall by 280 million tons, 7.5% of last year's production. china is looking to eliminate some big companies in the struggling industry in its push to restructure the economy. china is imposing new restrictions on internet search engines, requiring them to report band comment -- content on any website. they will also have to verify advertisers, specify the ratio of paid search results, and clearly distinguish english ads. yvonne: we are live.
>> these are the latest first word headlines. brexit making headlines, hillary clinton rushed out a tv ad attacking donald trump. donald trump hit back with a tweet calling clinton her ofeful and accuse trying to wash away her bad call with ads. the malaysian prime minister will announce a cabinet adjustment today after strengthening his grip on the ruling party. expelled tocouncil opponents of his leadership. they were sanctioned for appearing with opposition leaders while trying to force
him from office. group chairman has defeated at challenge for control of the conglomerate. proposalers rejected a to remove seven directors from the board. has been dealing with an official investigation into bribery and embezzlement. news 24 hours a day powered by more than 2600 journalists and analyst in more than 120 countries. this is bloomberg. china's appetite for overseas acquisitions is on the rise as deal hungry buyers chase real estate, chemicals, and high in technology. let's return to our coverage of the world economic forum. we are standing by with the head of ubs china. what is driving the surge of outbound mergers and acquisitions? the theme of this year is the
fourth industrial revolution, but the subhead could be brexit in the global market turmoil we have been seeing. let's get to our next guest and talk about that. chen the ubse china head. your clients are concerned by what happened in the u.k.. if you had to write a note to clients right now, what would you tell them? would tell the clients not to forget about the , butterm 70 -- strategy the market is overreacting to some extent to this black swan event. given the continued uncertainty we anticipate in the capital -- havingt is wise
said that, the long-term strategy of many of our clients is such that they will continue to go out. industrial revolution, 4.0, made in china 2025 strategy, so a lot of our clients are looking to develop markets such as the u.k. and the eu for those opportunities. >> so much of china's outbound investment was to the u.k., the president visiting london in october. they talked about a new golden era in relations. china saw the u.k. as an advocate for china within the eu. that all changes now. does that change the investment flows? eugene: it won't happen that soon. the u.k. is still the fifth largest economy in the world. u.k. is still the voice of some authority on the un security council or other strategic and political matters. companiesly, a lot of
see the u.k. as a market with a lot of potential to collaborate with chinese companies, the consumer brand, the domestic market, as well as the english language and financial center in london and all that. i think the chinese companies will have a slowdown a little bit. a couple of years of uncertainty as to how the uk's position in the eu will pan out as the result of negotiations. >> where do you see alternate areas of investment for the chinese if the u.k. is so uncertain right now? domestic, thek. berastructure, others, will liked and looked at closely by chinese companies to the extent that there are certain u.k. services which will act as a bridge into europe. chinese companies and the chinese government has never put
all eggs into one basket. looked atmpanies have germany, france, other european economies as for next ups of future collaboration. as a result, china will continue to pursue a more balanced strategy to get closer economic ties with developed countries. talked about this being a black swan event. a lot of us got this wrong and were caught offguard. does this affect strategies within china? does this affect the ipo market, wealth management strategies? how do you see it? eugene: not yet. you can see the chinese overreaction was less dramatic as part of the global meltdown on black friday. china is still largely insulated.
pursues as china internationalization or opens up its own capital markets to outside investors, china will feel more and more these global events. is thing china should and moving ahead on is its own restructuring with its own financial system opening. timetime, china will have to adapt to global events and keep the economy going. ght safevestors sou the fact that the fed is more likely to pause if not cut, does that not also help china in the sense of stemming outflows in stemming the weakening of its currency? eugene: it could indirectly help china. has announced that it will
follow the situation very the chinese central bank will work closely in line with other global leading economies, fiscal or monetary policymaking. i think china is trying to make will be athe renminbi stability factor rather than the stability. >> anything change between now and the last time we talked. ? has this event changed your perspective? single event would change our long-term strategy for china, and since the beginning of the year, we have seen the overall global market softening, and china is not immune to that softening, so we had seen some challenges ahead of us for the remainder of the year. however, we remain committed to china. we see the medium to long-term
with promising prospects in local domestic allotment, but also capital markets development. >> thank you so much. i will send it back to you. turmoilre is crisis and in global markets, it is interesting that we are talking about the stabilization of the chinese economy. interesting times indeed. back to you. yvonne: up next, brexit could herald a golden era for gold. this is bloomberg. . ♪
yvonne: welcome back. you are watching "daybreak asia" . increasinglys are at risk from the problems of emerging economies due to their glow ring -- growing influence. aboutng economies make up 80% of growth in global trade. the report says that while financial crises start in advanced nations, the chances of a reverse happening arising. sees only a modest improvement in u.s. capitol spending after a week first half. the brexit aftershock is a new drag. of 1.7% in the second half, historically week. it still improvement on the first six months. also, low potential u.s. growth
remains a challenge for business investment. the brexit vote could mean a bigger rally for gold. analysts surveyed said prices could top 1420 dollars announced by the end of the year, a 7% jump. expectations of a delayed fed rate hike may also contribute to the rally. traders are pricing in a 2% chance of a higher interest rate by november. underway inlks tokyo as the government and bank of japan assess the impact from the uk's rejection of the european union. the boj is under pressure as the currency surged on the decision. it makes the 2% inflation target more difficult to achieve. arkets in play, tokyo seeing breather today after that massive selloff on friday on the up one pointhares
5%. we did hear from the boj and government officials, they are having an emergency meeting this morning. we are still waiting for more headlines. the prime minister saying they will ensure that there is ample liquidity in the market, and the yen weakening this morning. let's go to sydney real quick, flat, commodity slip, as the pound extends the selloff, stocks slipping with commodities, with the exception of japan. we also heard from south korea officials about how they are forg to tackle and aim market stabilization, but we are seeing stocks continuing to extend losses, down 1% and south korea right now. singapore starts trading in 15 minutes, futures pointing to a lower open. that is it for us on "daybreak asia". what is coming up for the next
two hours? rishaad: it is that ripple effect from thursday's vote to leave the european union. this is what we have at the moment. some currencies under pressure. we will have a look at what it means for britain doing business in china. we will be looking at what the continental european view is with the luxembourg financial minister. bric nations setting up their own ratings agency. "trending business" next. ♪
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