Skip to main content

tv   Bloomberg Markets Asia  Bloomberg  February 6, 2018 8:00pm-11:00pm EST

8:00 pm
♪ david: when you look at what is been happening in sydney, the asx 200 snapping its two-day , almost $90k billion in market cap. a lot of this started on wall street, this recovery. equities swinging wildly before ending the session up. i'm david ingles in hong kong. i'm haidi lun in sydney.
8:01 pm
commodities largely oily -- largely avoiding the rout. the latest from goldman sachs. this is "bloomberg markets: asia ." ♪ haidi: as you mentioned, it wasn't smooth sailing. it was quite a stomach churning roller coaster. buckling and go along for the ride. opening the dow with that lunch, and we had a 25 minute period with a swing of more than 900 points before we had major u.s. stocks finish in the positive. the question is, is this the new normal? his volatility back with a vengeance? let's take a look at how things are tracking when it comes to the asian session. we are seeing this recovery mode
8:02 pm
playing out when it comes to japanese equities. some of the hardest hit yesterday in the selloff. the topix rising about 3% at the open, the nikkei 225 also up by 3%. this is being driven by tronics best buy electronics -- by electronics and auto. david: finally we can focus on the data coming out. there, and the words of bon jovi, because that has almost been the anthem across markets. really living on a prayer as we extended that rally into january. as the dust continues to settle, very interesting because we are starting to see signs -- and we have a chart that shows use this -- that we should have seen this coming. if you go by risk for the aussie and sterling, it did
8:03 pm
already start to either rollover or inch backup days before we saw the symptom. just something to watch in the days ahead because we are not out of the woods just yet. inwe head into the open china about 25 minutes from now, we get singapore, taiwan, and malaysia coming online right now . citing bon jovi come i am going to cite jay-z, wiping that dust off our shoulder. we saw the biggest forefront outflows in separate 2014. issingapore the sti index holding a three-day decline. investors perhaps better to digest a plan for a new stock exchange link between singapore and malaysia. we are seeingr
8:04 pm
the msci bumped. yvonne is on -- earlier spoke to the ceo of malaysia's second-biggest pension fund, saying it offers a treaty opportunity. we are waiting on trade figures from malaysia, as well as taiwan. also of note today, the early -- earnings roll call from mazda. we have softbank also on deck, japanese stocks rising ahead of those numbers. mazda halting a two-day drop in toyota climbing. japanese tobacco is the worst performer on the nikkei 225. thank you for that.
8:05 pm
let's get you the first word news with ramy inocencio in new york. ramy: first, the u.s. house of representatives has passed a stopgap spending bill to fund the government until march 23, the president trump says he would welcome another government shutdown if the democrats keep refusing his demand for an immigration overhaul. the president spoke as he met law enforcement officials to discuss gang membership and undocumented immigrant. he says current regulations of loopholes. pres. trump: if we don't change the legislation, if we don't get rid of these loopholes were killers are allowed to come into our country and continue to kill, gang members -- and we are -- ifalking about ms 13 we don't change it, let's have a shutdown. we will do a shutdown, and it is worth it for our country. i would love to see a shutdown if we don't get this stuff taken care of. ramy: german chancellor and all merkel is warning of "painful
8:06 pm
consequences on both sides" as talks have already gone past the weekend deadline set by the parties. all sides of stress they do aim to reach agreement this time. potential penalties for money-laundering and rate rating have ended a week of record profits at australia's largest lender, setting aside if the 4 million u.s. dollars for -- 54 million u.s. dollars for a fine. their profit missed the average of $4.1e million. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ramy inocencio. this is bloomberg. haidi: thanks for that. equitys like the asian markets are set to follow the u.s., seeing recovery from the losses of yesterday's global rout.
8:07 pm
let's get more from bloomberg lives market strategist from singapore. there seems to be two camps. is this a bounce? reporter: i would say the risks of the former are pretty high. wrote about the risks of these markets going up temporarily and then just reversing back lower again. it is not an unusual thing to happen after you had a very severe fall. a lot of liquidity is washed out of the market. you do see these short-term bounces. typically they don't mean a great deal. you have to look at those and see what else is going on. a lot of damage has been done psychologically to investors over the past couple of days. if you look at japan, for example, trading in the nikkei leveraged etf aimed mostly at retail investor, it hit the highest volume yesterday, but since the presidential election in the united states. that is probably a sign that a
8:08 pm
lot of retail people are throwing up their hands and saying i just want to be out of the market. that is not a good sign. it will take quite a few weeks probably for people to get back into the market and be reassured that things are ok. inmay see markets tick up the short-term, but it is not necessarily a sign that the worst is over. david: it kind of reminds me about "jaws," would you get back in the water down the shark is still out there? obviously a lot of this was triggered because we had this rise in future inflation. do we now start to put that aside, or she would be factoring in more of a return of inflation ahead? reporter: it was only last friday that we had data from the united states showing that wage inflation is actually starting to pick up, and it could be a worry. we have seen that for a long time, central banks -- especially from the u.s. and europe -- have been saying it is
8:09 pm
nothing to worry about, but that may not be the case. if inflation picks up in america it could easily spread to the rest of the world. that is what a lot of people would like to hear from the new fed chairman, jerome powell. what he has to say on the outlook for inflation could be very important for the direction of markets in the next few months. if he sticks to the fed line that inflation is under control and will stay within it rains, it could reassure markets. but if he says he is starting to get worried, it could be a whole different ballgame and we could be in another time of volatility. haidi: what are you watching for? a similar situations what we are seeing on wall street, people hoping there will be a bit of a bounce in markets start to look a little better. the mainland china market seems to be more correlated with global markets than it used to be. there was a period a couple
8:10 pm
years ago when they seems to be the odd man out, but they seemed to have gotten closer, especially the csi 300, with global trends. it is a similar situation, if the markets look good today it might not last. we got lunar new year coming up at the end of next week on a major holiday, and people probably don't want to get too aggressive before such a major event in china. david: mark, thank you for all of that, joining us live from singapore. you can follow all of his work and commentary on his blog on your bloomberg. when you look at the vix, the bets against markets were crumbling. victims of that credit, moving swiftly to liquidate the loss of the --
8:11 pm
you can see, really just collapsing there, more than 90% over the last 48 hours or so. the question right now, is that trade over? should we forget about short? pr some of the common as we've heard so far on bloomberg tv -- here are some of the comments we've heard so far on bloomberg tv. everybody felt uncomfortable with the continuous grind upward. a reset every once in a while is a good thing, provided the markets react rationally to the reset. >> the size of the wipeout was so large yesterday that there was no positioning left to drive market today, and after he saw some of the initial moves in the markets, that was pretty clear. the position that had been up
8:12 pm
over the period a year to yesterday's selloff has been cleaned up such a large degree that volatility products aren't going to be what drives stock prices going forward. >> i think there is probably a sigh of relief. the market is now finding out, you know what? stocks cannot only go up. we just a limited a significant amount of the shortselling commodes was essentially also picking up yields, also a reflective of interest rates being low for quite some time. david: joining us now is catherine young, and the director at fidelity international. thank you so much for joining us. we just heard some of the views on this. if that trade is over, what is the implication on equities? a lot of what has happened in equities was because people were sold out. guest: it was in hibernation for about 15 months.
8:13 pm
it always became just the situation where you could almost argue investors were becoming complacent with the market grinding higher and higher each day. when we look at what has happened from friday, monday and tuesday, it is just a bit of a healthy cause. i don't expect these investors to go away, it is just that they will always have a position the market. we do have two or number that the selloff was premeira liga triggered by that group of investors. bess was primarily triggered by the urban investors -- was primarily triggered by that group of investors. know you guys have been saying some time that we are sort of lowballing inflation forecasts moving forward. seeing how the bond markets have sort of repriced that some of you think we have now found the equilibrium? guest: we are probably going to still see some more resetting of expectations. issensus regarding inflation
8:14 pm
likely to be increased, the bond market will follow suit. there are movements in the bond markets will be looking at asian bonds, really an effective what happens in equities, and we look at many big bondholders who increased their cash levels at the end of last year, we didn't see much of a for us is this in the bond market yesterday versus equities -- much of a ferocity in the bond market yesterday versus equities. haidi: we didn't see the selloff being as tolerated when it comes to -- as accelerated when it comes to greater china markets. is that an argument for the fundamentals are stronger when orcomes to yen's -- to em's, does it say that this is actually a good place to be? guest: the fundamental story for asia remains very much intact in terms of earnings growth and the broad macro environment. we have a new dynamic in the market when it comes to chinese equities, especially hong kong equities, that the southbound trade stock connect programs
8:15 pm
come up for the eminently retail. on -- thesell it first sell down, they piled back in. the second sell down, they piled back in. when you look at it on a net daily basis, we have seen inflows since about september. the money coming through is substantial, although i would like to point out it is very much skewed to a few names in a few sectors. we perhaps could see some more diversification at some point, or that money going back into shares. haidi: catherine, stay with us. catherine young, fidelity international investment director. a lot more coming up. later in the show we will be live in kuala lumpur. david: and with gold, oil, and everything else in commodities really caught up with the market swing, don't miss our exclusive interview with goldman sachs's
8:16 pm
head of commodities research. this is bloomberg. ♪
8:17 pm
8:18 pm
♪ haidi: we're looking at the new york city skyline. it hit me, or are things looking a little comb her compared to the situation yesterday? as we were talking about at the start of the show, quite far from being a calm recovery. we had those wild swings, ending the day with the biggest rally in 15 months, recovering from the most violent rout in about seven years. immediate futures looking flat when it comes to the dow jones, just a marginal downside, down about 1/10 of 1%. we are rejoined by catherine young, the fidelity international investment director. we wanted to pull up this chart
8:19 pm
that goes exactly to the point ,f what you are saying southbound flows propping up and limiting, to some extent, the damage we saw when it came to the hong kong market. that huge spike when it comes to daily southbound flows from shanghai and shenzhen threw two hong kong this month, can this be continued? up about 40% from last year, still a really nice premium gap. what is the biggest risk to this trade getting the rail? guest: in a similar sense to ,hat we are seeing in the u.s. when we look at the southbound trade it is being very concentrated into a couple of names. this trend isn't going away in terms of the money coming into hong kong. it is approved by the government
8:20 pm
capital outflows. that direction can change very quickly. there is no real catalyst for that change. it is one of the biggest risks in terms of that flow. david: that is a very good point to bring up. let's take my bloomberg terminal . on southboundlick top 10. those are your names right there. the top is tencent. the rest of the list very familiar names. we know hong kong has its best and worst days as a fox and the flows from china. the you think we've got to a point where we need to be careful because we know where china goes? guest: they cast our minds back to the asia rally and in the big correction, and the government really encouraging investors to look at equities as a long-term asset class.
8:21 pm
it is skewed towards property, so they want diversification. if china opens up their capital markets, they needed more institutional component in terms of the makeup of the investors. we could see this focus on the total return. at the moment we are seeing these chinese mainland investors buying well-known names. as one should. rune are some very well companies they like investing income of a perhaps we should see diversification at some point. what we find fascinating, you would never think of china as a place for income. the market is like 1.8% of the dividend yield. we for see it going to about 3% .n around a years time payouts are only about
8:22 pm
4.1% in china. focus, of this change in you're going to change the dynamics of the market. for the last couple of days, does it remind us that in ares like this, volatility --reat -- but solidity volatility is a greater catalyst? guest: investors have to take into consideration -- i remember years ago seeing the orders from cta traders, and that is not going away anytime soon. we have to factor that into our investment decisions. at the end of the day, what we are looking for is sustainable earnings growth, companies that continue to dominate the industry there in, and again, how much are you paying for it? all this has to be considered. david: catherine, thank you so much for coming on the program.
8:23 pm
you can catch all of those interviews, and gays you just missed that one with catherine, on our interactive tv function tv -- in case you missed that one with kathryn, on our interactive tv function tv . this is bloomberg. ♪
8:24 pm
8:25 pm
♪ haidi: we are counting down to the open of markets in hong kong , over in shenzhen and shanghai, of course. we been talking about the resilience and determination of mainland investors. are we expecting that to continue? david: they already came in two days ago was record amounts, and came in yesterday with a fair amount as well. i believe it was the first time above a certain level in terms of the turnover here in hong kong. i don't have the exact number. they have come back in, and as you can see we are poised for a bounce here in hong kong when
8:26 pm
the cash market opens up in a few minutes. the broader picture is when you look across the asia-pacific, we did hit a fairly important support level, and that held. let me zoom in so you can see exactly what i am talking about here. we essentially cut through the 50 day moving average like a knife through butter. we basically held at about 100 day. we are also seeing an encouraging bounce back up from the 30 above the 40 level on your rsi. quick look across sectors and names early here in hong kong, hsi index gives you a sense of broad-based recovery. -- give it a few seconds -- and there's the bounceback up above the 50 day moving average. haidi: thanks for that.
8:27 pm
r.b.i.waiting on the .olicy decisions we will see the reaction is the fed hikes three or four more times this year.
8:28 pm
8:29 pm
♪ haidi: it is 9:29 a.m. in hong kong, counting down to the open of markets in hong kong, shenzhen and shanghai. really turning around at the close. we are looking up. that is a beautiful view for our guests, for a lot of us who will never enjoy the view from the top. we are looking at markets across the asia-pacific right now on the way up. getting in from the
8:30 pm
pboc reporting slight gains over in hong kong. as we move into the open, very go, and we have the cash markets open up. here is sophie with the opening numbers. .ophie: shanghai gaining 1.25% hanghung saying -- the seng climbing, snapping a four-day drop. the selling pressure is unlikely , and warning that investors should not be lured into rebound that follows any significant correction. just a little bit of tempering of the optimism there, despite what we are seeing today.
8:31 pm
a lot of the fundamentals remaining intact. that has been the message investors have been implying when it comes to this buying the dip opportunity. when it comes to china, danske events ins to recent contrast to what happened over the past two years. let's check in on movers in hong ing, on the hang seng particular. a carmaker reported a 50% rise in january sales. tencent also gaining ground, climbing the most since august. discretionary stocks on the up, tech and property among the best rs.forme heads up, we do have win macau
8:32 pm
suspended from trading in hong kong today pending information as to why. let's check in on some early movers in hong kong. sunac and green town gaining. that is the wrong stock i pulled up on the board right there. haidi: we are watching softbank though, today, at a return to fundamentals. sophie, thank you so much for that. let's get to the first word news with ramy inocencio in new york. ramy: first up, bitcoin gain for the first time in six days, snapping a losing streak that post overall losses in digital currencies to about $500 billion. the world's most popular byptocurrency was helped
8:33 pm
regulatory oversight needed for enforcement. the funny thing about these cryptocurrencies is they only work if they are integrated -- they only work for their purported purpose if they are integrated with the financial system, and so therefore it necessarily touches on all of our regulation. ramy: china is calling for wto talks over solar panel tariffs. beijing says it has a substantial interest in the issue as an exporter, and is asking washington to join the conversation. china is home to some of the world's largest solar makers. that includes trina solar, jingo solar, and green energy. aramco is raising to fund
8:34 pm
a chemical plant in malaysia. a deal could be signed next paribas,h hsbc, bnp and lenders who have agreed to provide funds, part of a $27 billion project that is due to come on stream in 2019. spacex passed a major milestone with the successful first launch of its brand-new rocket. the falcon heavy is a reusable booster that allows spacex to handle bigger payloads such as commercial satellites and missions for u.s. national security. ceo elon musk has said the launch would be considered a success the falcon heavy did not explode after liftoff. they really went as well as one could have hoped. [indiscernible] it was probably the most exciting thing i've ever seen, literally ever.
8:35 pm
and then the center core mostly did land. ramy: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ramy inocencio. this is bloomberg. haidi: thanks for that. we are going to head back live to the world capital market symposium and kuala lumpur, anere it man -- where yvonne m is standing by with our next guest. getne: we've been trying to a take on what is going on in the markets here and how it is connected with the fundamental picture we do see him and particular here in asia, europe to southeast asia as well. oecd's deputy director at the symposium. thank you so much for joining us. tell me about the conversation
8:36 pm
you are having on the ground here in kl. we see this turmoil in markets, a little bit of a breather today , but separated from the noise, what are we seeing fundamentally here in malaysia and asia so far? guest: thank you very much. pleasure to be here. i actually find this symposium very timely because the main .opic refers to sustainability that is really the objective. the oecd is providing advice to governments and central banks and all players, basically, to promote that are policies for better lives, and better lives meaning sustainable and inclusive. we are very happy that those are-term objectives consistent with global goals. yvonne: how far is asia when it
8:37 pm
comes to this investment scheme?\ do you think there's a lot of catching up to do to the rest of the world? guest: i think the figures coming out are really very strong, and it really has the prospect of doing better. it has been performing quite well. yvonne: i wanted to get back to what we are seeing when it comes to the economic fundamentals. it seems like in terms of the markets, there has been a bit of a shift fundamentally in the narrative. before it was that tax cuts in the u.s. could lead to perhaps better growth. that is why we are seeing treasury yields moving higher. picture on of a wage friday, which led to inflation concerns as well. now it seems like things are back in reverse. kind of explain through, and your mind, what has fundamentally changed. guest: i don't think at this stage we can say anything definite about fundamental change.
8:38 pm
i think it is still early days. that doesn't mean we can be complacent, but at the same time i think we should look at the broader picture and be able to focus on the longer term structural reform. markets fluctuate, and of course they have to adjust from time to time, but on the other hand i think those movements should not derail the efforts of governments to pursue reform measures. yvonne: just focusing on tax reform in particular, there is a lot of assumptions here on what kind of growth it could lead to, whether this is just a short-term remedy were actually a sustainable long-term growth. how do you view it? how does the oecd view it? guest: it is difficult to generalize. each country has embarked on
8:39 pm
different tax reform measures. region you have countries that have been , and i thinkgst those reforms, and the longer term, would be conducive to more investment, and specifically sustainable. yvonne: given what we have seen in the u.s. with the corporate tax rate being cut, do you think the rates are at the bottom here in asia as well? ,uest: i will say i think that for the u.s. in particular, there is some justification to this reform in the corporate tax rate. again, i don't think we should be talking about the race to the bottom at this stage. i think we of course have to
8:40 pm
look at each country's strategies for achieving the forainable develop goals better tax regimes. yvonne: thank you, appreciate your time. the oecd deputy director general joining us in kuala lumpur. that is going to be man for us, yvonne there in malaysia. we had our bloomberg level economics and policy editor forking with a mission team indonesia on how resilient they are to all of this market turbulence. >> what is happening now is not really new. we've had episodes of financial
8:41 pm
turbulence in the last two years after the u.s. elections come when china changed its exchange , so this is not something that is new, and indonesia has in the past done very well in facing the challenges. reporter: the institute for international finance cut out a report in the last couple of days talking about the biggest slump report in folio flows since the 2016 presidential election. the tracking registered nearly $4 billion of outflows on jittery 30th. -- on january 30. indonesia is not one of the countries mentioned that is most itected this, but does make this risk something you are monitoring and that you expect the government to monitor as well? guest: of course it is something that needs to be monitored
8:42 pm
closely, the authorities need to remain vigilant because things can change very quickly. ,n a more structural dimension when we meet with foreign investors, and we do that frequently -- asset managers with large pension funds and other institutions -- the impression we get is that nonresident investors have discovered indonesia, especially after the global financial crisis, and they are seeking more exposure to the country. obviously this is not something that is consistent. there are episodes of volatility, but overall indonesia has become an attractive place for foreign investors, mainly to the government bond market and also to equities. -- the road can be bumpy. haidi: the imf mission chief for indonesia speaking to our global
8:43 pm
economics and policy editor. , we put questions to goldman sachs's head of global commodities research. this is bloomberg. ♪
8:44 pm
8:45 pm
♪ haidi: this is "bloomberg markets: asia." quick check now of your market a few minutes into the session in china, and meadow as well. the short of it is that we are back from the losses of yesterday's session. a lot of the markets that were really hammered yesterday are those not performing in today's session, just give you a snapshot of how goodly these guys are coming in and buying the big dipper. haidi: seems as though they are
8:46 pm
buyening to the warcry of the dip here in asia today. --'s date a little deeper big a little deeper and take you to they global banking macro conference. what is behind this bullish stance? reporter: i put that question to jeff curry, the global head of commodities research at goldman sachs. forecastupgraded your for commodities, the most bullish since the end of the super cycle in 2008. what is behind that, and how does the market in the last few days feet into that? does it change your view at all? guest: absolutely not. you saw base metals and gold trade up as the markets went down. we invented the goldman sachs
8:47 pm
commodities index, the gsci, for precisely this. you buy at a discount and role of the curve. in other words, it pays you to belong. you have no correlation across assets. we had negative correlation during the selloff in assets. the diversification argument is strong as ever. during the selloff, commodities perform just as advertised. reporter: what about inflation? if we see more rate hikes than expected, how does that play into the commodities? guest: historically when you look at commodities, they perform very well during rate hiking cycles. it is the higher commodity prices that lead to the inflation that forces the hand of the central banks, but on average the gsci is up 19% per annum during rate hiking cycles him and we expect to see more of the same. reporter: so rotate into
8:48 pm
industrial metals, that would be your call? guest: absolutely. are up on metals average 50% per annum. again, and this type of environment this is what commodities were intended to perform really well, and what we've seen so far is spot on. reporter: gold is only ticked up marginally over this market rout. has it lost its safe haven status? whyt: historically, and gold is not a great hedge, when you see rate hikes you typically see gold star to trend down. it has to do with the fact that gold is negatively correlated with real interest rates. it is a hedge against the basement. when the u.s. government press a lot of dollars as we saw in 2009, that typically puts downward pressure on rates, which puts upward pressure on gold. the in miami right now is the fed is raising rates. historic -- the environment we are in right now is the fed is
8:49 pm
raising rates. the demand out of southeast asia and emerging markets more broadly for gold is unprecedented, putting a bid into gold in an environment in which typically gold would trade down. reporter: we don't have a lot of fear in developed markets. if that was to come back, some geopolitical risk, where would that send gold? guest: we look at our new framework for dealing with gold. as you point out, it is fear and wealth. feararget is modest measured with real interest rates, but if you point out a situation geopolitically gets a lot more dangerous, it could push us into the 1400s 1500s. reporter: you are forecasting $80 a barrel within six months. how dependent on that is opec holding the line with its supply cuts? guest: the core of the forecast revision really had to do with demand growth. it is well above expectations.
8:50 pm
global gdp right now is tracking 5.1%. our forecast is roughly around 4%. consisted -- consensus is 3.7%. the other factor, opec compliance was running as high as 140%. you put that together, the oil market rebounds six months sooner than anticipated, the core of why we raised our forecast. the question does opec command -- opec come back into the market, the longer they wait, the more difficult it is for them to catch up to demand. if they miss just by a few days, it is a problem. let's say i am a refinery down in singapore. i've got two days of inventory sitting in my tanker from saudi arabia, saying it is going to be a week late. i'm five days short. i have to go to the market and bid up a stock price for oil. this market has a lot of skew to the upside. reporter: iron ore and demand for iron ore, you have been
8:51 pm
bearish on iron ore for a long time. now you are bullish. how much of that is the demand we are seeing in china? guest: supply-side reforms in china have been brilliant. reporter: they surprised you. guest: a surprise. a lot of the global growth that surprised me comes from these reforms. one of the key factors i am beginning to appreciate is the hot air -- the higher commodity prices cleanup the sheets globally. the biggest issuer of high , sods are the energy sector higher commodity prices reduce the amount of debt in the system. bankfrees up capacity on balance sheets that allows to lend more, and we get more real every taking place. specifically with iron or, there is the point that they have cut capacity. utilization rates are nearly 100% on steel mills in china.
8:52 pm
in that environment they need to have a high-grade, high-quality iron ore. there's a big differential between high-grade and low-grade right now i'm up at the world is short and the high-grade, and that is why we have a target of $85 a ton on iron ore. reporter: how closely are you looking at the growth picture in china for copper, about an uptick of 12%? if we get softness in china, how much does it squeeze that forecast? guest: it is actually ian next china where receipt -- emx china where he see most of the demand growth. if we combine it with the anti-pollution measures in china that are going to ban category seven scrap imports of copper, they import roughly 3000 tons of that kind of copper. that is the core of our $8,000 target on copper. reporter: thank you very much
8:53 pm
indeed, jeff curry, global head of commodities research for global fax -- for goldman sachs, bullish for commodities. david: let's see what happens to the global commodity index. great check the -- great chat there. , chief economist on "bloomberg markets." oppenheimer from goldman's. time, anam hong kong exclusive interview with goldman'scosio -- co-coo. lots more coming up. lots of reasons not to go away. stay with us.
8:54 pm
this is bloomberg. ♪
8:55 pm
8:56 pm
♪ looking at market signs that things have stabilized following the rout over the past few days. trading in the u.s. a little lower. don't put too much into that. the important thing is we are up 6% from levels yesterday. if things stay the way they are weh the futures come image are basically as good as it gets for equities in the asia-pacific. lots coming up. coming up over the next hour, we are joined by the former greek finance minister to talk about everything from his views on capitalism and fears of another rising crisis.
8:57 pm
that is a conversation you do not want to miss. also, continuing coverage of the recovering market story. where do we go from here? this is bloomberg. ♪
8:58 pm
8:59 pm
>> it is 1:00 here in sydney. this is bloomberg markets: asia. joins theg kong recovery in the asia-pacific. the hang seng with its biggest rise in 20 months. automakers leaving japan higher. that selloff has gone too far. says the launch was a
9:00 pm
success. he said it would be a success as long as it did not explode. very much a success by that barometer. -- u.s. stockst managed to claw back. we are seeing that trickle through to the asian session. asia, closeies in sold point. so much of the fellow story has been about volatility. takingt threat has been -- now that that threat has been taken out, emerging markets are a lot less volatile than their developed counterpart. to gauge when it comes
9:01 pm
emerging-market equities is about 25 as compared to 30. that difference was the biggest since the index was created in 2011. it does feel like this is the new normal, less volatility and more reliability in emerging markets. over to sophie with a look at how this recovery is faring so far. stocksre seeing asian recovering, halting a three-day decline. asian currencies are being led higher than the dollar by the korean won. investors have some better focus on eco-data as well as trade data from taiwan and malaysia. earnings are helping japanese sold to- after being
9:02 pm
much, bargain hunters are piling in with cheap valuations. the topics has fallen to a september -- topix has fallen to a september low. as you can see on this chart, we are seeing it bounce off a key support in intraday trade. -- investorlikes should not be lured into rebounds that tend to follow any significant correction. the sales pressure is not likely to end soon. bit of dampening that we are seeing so far to date. take a look at the bond space,
9:03 pm
looking mixed today. the commodities complex, we are seeing oil halt a three-day drop. brent on the up. again.ockpiles will fall you have gold gaining 4/10 of a percent. earlier, we had goldman sachs telling tom mackenzie that gold is being supported by rising asian wealth. he stands by his bullish commodities outlook. haidi: thank you so much for that. asian markets follow the u.s. let's get a look ahead of what we can expect. we have been talking a lot about volatility. that that is removed, are we looking at volatility as a leading or lagging indicator of
9:04 pm
where markets are going? back?olatility come it has been down for so long, most vicious enemies just died in the last round. the firstetf's was one that died. you have to wonder if that has died out. in the longer term, that could be a good thing. in the shorter term, that will keep on weighing on stocks. investors will see that and that will have them saying, we are not so confident stocks will go back to going up at this pace that they did over the previous six months. ,aidi: look at the interest looking anecdotally, a huge part
9:05 pm
of it seems to be retail investors. ofthere a question regulation? regulation, ind mean, even with the recent strong stock returns, around the globe, there has been a global search for yield has been there. volatility only makes any sort of sense -- we had a story with one of the people who set up the vix saying he does not understand. they exist because it makes sense when real yields are almost nonexistent. maybe the climb in real yields that we are seeing will help to keep people away from that
9:06 pm
space, or maybe it is an education, like you say. the other asset that has con -- that has gone up and gone back down is bitcoin. haidi: if you can make money off of it, that is why it exists, right? you can talk all you like about macro fundamentals, but volatility and liquidity drives a selloff. has inflation recalibration changed? >> what has changed is the realization of just how scared markets are that inflation will come back. to be honest, i was not all that impressed by the wage numbers. if you look at weekly wages in the u.s., that actually slowed. up toflation indicators
9:07 pm
yesterday, and half of them saw an acceleration and half of them saw a deceleration in inflation. see a global inflation -- you just took this one partial indicator to set up a bunch of chicken little's saying the sky is falling. if you can get a real indicator, the potential is there for another fit of global or local turmoil. again, that will help feed the volatility. your fear is coming back. haidi: a lot of people will be saying that is a good thing. , you canreynolds .ollow his musings
9:08 pm
you can get a market rundown in just one click. you can find out exactly what is affecting your investments -- investments right now. president trump says he will welcome another government shutdown if the democrats refuse and immigration overhaul. he says current regulations contain loopholes. >> if we don't change the legislation, we don't get rid of these loopholes when killers are allowed to come into our country, gang members, many gang members. if we do not change it, let's have a shutdown. we will do a shutdown and it is
9:09 pm
worth it for our country. i would love to see a shutdown if we do not get this stuff taken care of. says it has substantial interest in the issue next quarter and is asking. rules -- china his home to some of the world's largest solar makers. angela merkel is warning of painful compromises on both alreadye talks have exceeded the weekends deadline set by the parties with divisions remaining on labor. court hass highest overturned present sentences in the 2014 democracy protest.
9:10 pm
judges cited in the appeal -- sided for the appeal. at least two people were killed and 200 injured in a powerful earthquake in taiwan. the ground floor of the marshall hotel collapsed, causing the death of two employees. the 6.2 term or started late -- tremor started late tuesday, exactly two years after a similar quake killed people in taiwan. global news 24 hours a day powered by over 2700 journalists and analysts in more than 120 countries. bloomberg. ahead, live at the singapore airshow to speak with a commercial aviation president and ceo.
9:11 pm
this is bloomberg. ♪
9:12 pm
9:13 pm
haidi: this is bloomberg markets asia. let's get a check of your markets. the recovery spreading throughout the asia pacific. a sigh of relief after the u.s. came back after its worst selloff in seven years, posting its best rally in 15 months. this is what we are seeing in terms of the asian session. up by 2.76%. chinese investors continuing to buy even on the darkest days. china shanghai composite up 1.53%.
9:14 pm
haven, who would have thought about that? nikkei 225, japanese equities really saying a jump over 3% -- seeing a jump over 3%. those gains are being led by automakers and electronics. the benefits of the trump tax tos, a rally when it comes carmakers in tokyo. softbank out with its policy decision. over in singapore, on the news of the malaysian singapore stock tie up, we have gains of 1%. the rise of inflation could tightening.rated rising government bond yields. let's get a little bit more from
9:15 pm
what this means from policymakers. we had back to hong kong. tom mackenzie is standing by with his next guest. hopefully, we will get a little bit of enlightenment. tom: enlightenment, yes. we will be giving that, no doubt . i am joined by the chief global economist at goldman sachs talking about what the recent rally tells us about central banks. has it made you rethink your view? >> know, it hasn't. -- no, it hasn't. we think the fed will hike four times this year. that could change. what we have seen to date has not changed the picture. the basic reason is that even with the downturn in equity prices and the tightening in financial conditions, it has only brought us back to where we
9:16 pm
are -- where we were. i thought that was consistent with an expectation of good growth and tighter monetary policy, and that is where we are at the moment. tom: obviously, we are not in a bad market at the moment. there has been a correction. what if there was a radical selloff in the market again, without be something you would have to factor into your forecast? >> it certainly could. if we had a much bigger decline in equity prices, widening of credit spreads, maybe more evidence that the turmoil is spilling out of the equity markets and to other financial markets, then that would be profit tightening. it could be something like we saw in the early 2016 period. that would call for it a
9:17 pm
monetary policy response. we have not seen that to any significant degree. even with the very large and rapid decline in equity prices, we really did not see a lot of spillover in other asset classes. so far, it just not -- it just has not happened. an happened yet and if you ever see that with a reasonable lag, the economic data of relief a month later, but at the moment, there is no reason to believe. --ancial conditions in 2018 what matters is what has happened not over the last few days but over the last few quarters of the last year. financial conditions are easier
9:18 pm
than they were in early 2017. changees the wage data your expectation? >> we have moved in that direction a little bit already. the year on year numbers, you see it even more if you focus on sequential numbers, the three-month rate of inflation is 1.9%. that is not too far away and over the next few months, you will see it a little more. nothing has changed on that. friday, otherr on weight indicators -- other weight indicators were on the softer side -- other wage indicators were on the softer side. upside surprise. tom: you are forecasting tenure
9:19 pm
yields ticking up 3% -- 10 year yields taking up 3%. >> this will be a gradual increase in longer-term yields. even if it ends up being a little more over a longer period, we think that will go urs byhe threes or forc 2019. i do not really see a major negative impulse on asia. if you have episodes of more rapid increases in yields, of course, that could have a bigger impact on capital flows. that is something central banks in asia care about, the exchange rate and try to stabilize the exchange rate actively and care about their reserve levels. they will have to be on guard in this environment.
9:20 pm
we are in a monetary policy normalization environment. the u.s. is ahead in globalizing monetary -- normalizing monetary policy. it should all be manageable. tom: the bank of japan and its environment, have we ,nderestimated the ability slipping a little bit closer? isin 2018, our expectation the yield curve control is very accommodative. that is going to be with us. any change would be an issue for 2019 and even then, i would expect it to be quite gradual. japan has an interesting economy. the real economy has done quite well in the labor market has tightened quite a lot.
9:21 pm
you see that in the employment rate in under 65-year-old's. that has gone up in a straight line. the wage numbers are well below the target. tom: u.s.-china trade -- >> there are certainly skirmishes. we have seen a little tit-for-tat. interest, andy's our baseline would be a trade war is ultimately averted. etc., theariffs, forecast is more on china than north america and nafta. it is something where president trump has talked about trade for many decades and the idea that
9:22 pm
americans are having a bad deal and several of his advisers are in the same camp. it is not going to go away. we are hopeful that it will not .e an all-out trade war tom: always great to get your insights. chief global economist at goldman sachs. conferencee from a throughout the morning. tom, cannot wait for those conversations. we are getting back to the goldman sachs micro conference in the next hour taking place in hong kong. given what is going on in the markets, peter oppenheim are will be with -- peter oppenheimer will be with bloomberg markets.
9:23 pm
this is bloomberg. ♪
9:24 pm
9:25 pm
haidi: this is "bloomberg markets: asia." a quick check of the latest business headlines. a potential penalties for money laundering has ended the bank of australia's streak of record profits. the largest lender has set ofoss -- set aside billions dollars for fines. 3.8 billionfell u.s. dollars. that beats the average estimate of 4.1. that stock going way down in sydney. bob iger says the streaming $4.99e will be priced at
9:26 pm
a month. the big growth was in theme parks when the earnings jumped 21%, helping disney meet estimates. thank reports second-quarter -- bank report second-quarter earnings. at half thetrading value of its holding, which talked $180 billion and included investments and alibaba and yahoo japan. worthibaba stake alone is $138 billion. passg up, u.s. lawmakers another temporary budget, but will it be enough to prevent a government shutdown? episode,ave the latest
9:27 pm
if you will, coming up next. this is bloomberg. ♪
9:28 pm
9:29 pm
9:29 p.m. if you are watching from new york. let's get the latest from the markets, where we are seeing a recovery rally gaining traction following a turnaround in the u.s. markets. we did see u.s. markets recouping some of the losses from this past selloff. we are getting some signs that at least some of the markets across asia are off their session highs. >> that is the case. perhaps we have this eco-data pending in the region as well as earnings, investors are digesting, feeding into the
9:30 pm
market sentiment. they are still maintaining gains in the equity space. equities are back invoke, at least -- en vogue, at least for now. the hang seng, rising for the first day in a week. the pace of chinese buying has eased this wednesday. mainland buying could slow considerably as emerging economies weekend. -- emerging economies weaken. in the currency space, you have the dollar faltering for a second session. the korean won is rising for the first day and five. rebound in the peso
9:31 pm
as well as the taiwanese dollar. in the bond space, take a look at what is happening there. you have kiwi bonds following -- rising following jobs data. 10-year treasury yields, those are hovering around 2.8%. this does bear watching given the recent bond market jitters. haidi: thanks for that. gained for the first time in six days. leading cryptocurrency was held by risk appetite. told a chairman
9:32 pm
congressional hearing -- >> the funny thing about these cryptocurrencies, they only work for their purported purpose if they are integrated with the financial system. banke indian central announces wage division data. no change to the benchmark purchase rate. 5.2%.ion accelerated policymakers may focus on supporting growth. sources tell us a deal could be
9:33 pm
signed next month. lender's have agreed to provide funds. spacex passed a major milestone with a successful first launch of its new rocket. it is a reusable booster that will allow spacex to handle bigger payloads. elon musk said the launch would be considered a success if the falcon heavy did not explode upon lift up. -- upon lift off. >> as well as one could have hoped. that was epic, probably the most exciting thing i have ever seen.
9:34 pm
>> global news 24 hours a day powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: we are getting some breaking news. this stock being halted from trading. resortsent from wynn saying the resignation has been accepted for steve when to -- ceo. wynn to step down as that is taking effect immediately. it is with a collective heavy heart that the board of directors has accepted the resignation of the founder, ceo, and friend. that stock down about 20%. a lot of selling has been going
9:35 pm
sexual.s. trading amid misconduct allegations of steve wyhnn. the resignation, stepping down as ceo and chairman of the board, has been accepted. let's get to some of our top stories. washington has averted another shutdown for the time being. the house passing a stopgap bill to fund the government through march 23. congressional leaders are working on a deal that would lift cuts on domestic spending and break the cycle of these bills. is our next guest, who has been covering this for quite some time. kicking the can down the road, that remarkable words from the president. >> it looks like congressional
9:36 pm
leaders don't want a shutdown, they want to pass a spending bill. this would be the fifth short-term one. they are trying to deal with some of the broader issues, funding caps on domestic and military spending. it looks like the congressional side, they are wanting to do a deal and move forward, yet the president is bringing up immigration as a potential roadblock. he has made it clear that the democrats have to accept his immigration plan at some point. it looks like a political talking point for him but this could become more complicated down the road. haidi: what are the issues surrounding the debate over immigration? >> this is all about the dreamers, the undocumented young immigrants who were brought to the uss children. the president -- brought to the u.s. as children.
9:37 pm
the president did not like the obama era plan for dealing with the dreamers. allowesident wants not to the enhanced family immigration under the visa lottery program. he also wants border security, that wall built at a large price tag. the republicans and democrats are pretty far apart on what they want for immigration but the president has made it clear he wants it to be his plan and wants republicans to move that through congress. haidi: how bad was the last shutdown in terms of political cost? >> even though it was a short shutdown, just three days, it did not have a big effect in terms of closing much down, it did cost both sides. the public blamed both sides
9:38 pm
because republicans are in charge and they control both chambers of congress and the white house, obviously. the democrats were blamed for by the president and republicans for having brought up this immigration issue and tying it to spending. election it is an year, midterm election year, and nobody running for the house of the senate wants to be connected with a shutdown. that does not go over well with voters. haidi: thank you so much for that. jodi schneider with the latest attempts to avert another shutdown. adding $3 billion to the bottom line. david joins us. what is the company doing right at the moment?
9:39 pm
>> one of the reasons the markets are loving this result so much, it is a back to basics. just look at a couple of aspects, one of the analysts pointed out, quality assurance spending is down quite a bit. corporate japan has been in a state of a for a year or so about its quality assurance spending. the fact that that is going, it is a back to basic improvement. japanese quality is back. to move cars in north america but spending less than the competition. it is a classic good operating
9:40 pm
income, good margin result. people have been looking for it for a while from toyota. haidi: this is the start of a good cycle for the company. david: possibly, that is certainly the way the market is looking at it. the shares are up the most since november 2016. it is quite a striking reaction. it ision a little bit -- worth bearing in mind it is a full year forecast. recorded.n is already they are at standstill for the fourth quarter from 12 months ago. maybe that is a little bit of conservatism but that is something to watch out for.
9:41 pm
china is the world largest -- world's largest car market. and tokyo to was pretty much -- toyota was pretty much the number two mark in that country. they have some new models coming out. this is the world's biggest car market and the world's biggest carmaker needs to be performing better there. haidi: david, thank you so much. update on this breaking news. fromresorts suspended trade today. the target of the allegations, has stepped down in his resignation has been accepted by the board. in terms of the new leadership
9:42 pm
-- as boeing spreads its wings in brazil, we speak to the about theand ceo joint venture talks heating up between the two companies. ♪
9:43 pm
9:44 pm
haidi: this is "bloomberg markets: asia." let's get you to singapore to the air show. a prototype is making its first appearance at the air show. a commercial aircraft is dubbed the profit hunter. in johns bring slattery. he is the president and ceo of embraer. i want to get straight to the progress when it comes to these
9:45 pm
talks between embraer and boeing. a straight up acquisition was rebuffed by the brazilian government. are you getting closer to a deal? morning. greetings from singapore. on december 21 to confirm that conversations are ongoing to working group. i think the best thing we can do now, given that both parties are respect thenies, is confidentiality of that process and to allow the parties to identify something that would be pushed forward. haidi: there has been a report that entity, boeing would
9:46 pm
take a 90% stake. can you comment on that? can you give us an indication of what the structure would look like? detailsnot get into the . in our materials, we did confirm that a potential output from the discussions with the working group members, a new company could be formed. beyond that, i am not prepared to comment given the confidentiality. it is important we respect the integrity of the process, given we are dealing with multiple public companies. haidi: absolutely. let me ask you this. the u.s. government reasons -- u.s. governments recent decision , does that put more time pressure on getting this deal done? reference that issue
9:47 pm
first in terms of the recent ruling. from my perspective, what is uniquely interesting to embraer, it has been proven that legal subsidies were given by both the federal and state parties in canada after that process, embraer -- that conversation is going on now at the world trade organization. embraer is supporting the brazilian government that exists with the wto. i do not see that as influencing the timing of this conversation we are having with boeing. there is no direct correlation, for my perspective. haidi: do think the brazilian government has a golden shareholder understands the strategic importance of this tie up between embraer and boeing?
9:48 pm
saidthink plenty has been in the public domain. at this stage, all the parties are focused on respecting the integrity of the confidentiality of the process. the golden shareholder has unique criteria they want to see addressed and that has been worked at the working group level. we should leave that subject there and see how it plays out. haidi: i want to ask you about the implications of this supermarket model that we are getting as a result of these tieups. is there a concern that you are of -- asget some kind a result of orders being bundled? to talk aboutture the impact on margins as a result of a transaction that may or may not transpire.
9:49 pm
abraer has not received written proposal. at this stage, the working group is focused on identifying potential structures that may all for all the parties for involved. i think it is best to let that process play out. then we can have the conversations about what the impacts would be. haidi: john, thanks for coming on. staying mum on the extent of these negotiations with the brazilian government. -- the former to with ainance minister grassroots political movement.
9:50 pm
yvonne: this man does not need any introductions. thanks for joining us here this morning. i want to start out with what we have seen in this market. it seems you could argue that this was markets pricing in. given what we are seeing with the boj, do you think the markets are a good indicator of risk at the moment? >> of course not. reflected toways the policies of central banks and not the underlying risks. if you look at the negative instance,ates, for you realize this is not a reflection of the underlying risk.
9:51 pm
-- yvonne:ek bonds what does that tell you? >> there is no such thing as greek bonds. we have not issued any bonds properly for eight years now. it is a thin market. the issue is that we are still reeling from the effects of 2008. we have excessive liquidity. it gives you an impression of underlying -- health when the underlying problem has not gone away.
9:52 pm
how does that manifest itself here in asia when you do see the disparity that comes to ?ealth >> here in southeast asia, in particular, a sweet spot compared to where we are in europe. here in malaysia, south korea, you have pretty good numbers and even though there is an increase in disparity, nevertheless, you do not have the disparities we have and the rest of the world. the crucial issue for southeast asia is whether the united states and european union will get their act together to prevent a deterioration of the circumstances in this part of the world. yvonne: can you elaborate on
9:53 pm
that? states and the european union, there is too much money in bank accounts of those who do not want to use it for investment purposes. not enough money in the bank accounts of those who would spend and invest. creating anty is inflationary environment where savings access surplus excess surplus savings, which inflates bubbles around the world. it will be detrimental to the prospects of southeast asia. getting a you are lesson from brexit, the greek crisis, perhaps southeast asia
9:54 pm
with a sensible way to integrate -- is that the sensible route? >> a very good thing that it is slow going. fantastic that you are not even thinking of the common currency in this part of the world and you are integrating through increasing trade links. significant integration that happened between germany republic., the czech where we have rushed to create a monetary unit, a revived expectation. : you really talked about
9:55 pm
the challenges, very vividly highlight the challenges with the negotiation with the eu. you are astonished the u.k. has accepted the structure of the note negotiation -- of the negotiations. these negotiations are going to fail. neither the british government nor the representatives of the european union are interested. my advice, stopped the negotiations -- stop the negotiations. they will produce a very bad economic outcome. better --uld it be
9:56 pm
>> britain has been so integrated in the structure of the european union. the hard brexit will sever those links. yvonne: we have to leave it there. the former greek finance minister. i will bring it back to you guys in the studio. haidi: thank you so much. short of an this is bloomberg. ♪ we use our phones and computers the same way these days.
9:57 pm
9:58 pm
so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get 5 lines of talk and text included at no extra cost. so all you pay for is data. choose by the gig or unlimited. and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to
9:59 pm
haidi: it is almost 11:00 in singapore and 2 p.m. in sydney. david: welcome to bloomberg markets: asia. ♪ david:david: markets in asia pac recovered some of the loss, although there are declines of the moment. the biggest jump in 15 months. on thea: volatility nikkei 225 stock average at follmann almost 20% after soaring for the previous two days. resorts rolls the
10:00 pm
dice. steve wynn stepping down. the company says it is committed to upholding the highest standards. tom: i'm tom mackenzie of the global conference in hong kong. we will speak to the president and co-ceo harvey schwartz later in the show. we will be hearing from goldman sachs chief global strategist in just a few minutes time. haslinda: looking forward to that. taking a look at the markets, a different day, a different story. green across the board. itss in china, hong kong, biggest jump since november 2016. gold rising after slumping. the asset may have taken a hit. david: we are also seeing volatility go back a little bit now. we're coming off the highs of
10:01 pm
the day when you look at the equity markets. looking at the board, u.s. futures is a good indication of how, why we are seeing these equity gains capped. we are also seeing the gains. lots to consider. haslinda: we are also taking a look at commodities like oil rebounding from the lowest in more than two weeks. industry reports showing unexpected drops in u.s. crude stockpiles. also, bitcoin continues its losing streak. digital currencies have raked losses amounting to a whopping $500 billion. we will keep tracking the markets. interesting days ahead. let's get the first word news with rosalind chin. rosalind: steve wynn has resigned as ceo and chairman of wynn resorts. in a statement, he says a recent avalanche of publicity and a
10:02 pm
judgment means he cannot be effective in his role. he has denied multiple claims of sexual harassment. judgment means he cannot be reluctantly appointing the current ceo. the indian central bank announces a rate designated with all 37 economists surveyed showing no changes. reluctantlyinflation accelerate7 month high, above the r.b.i.'s 4% target. pricing in some tight and this year, policymakers may support growth. raising $8o close toyear, billion in malaysia. a loan deal could be finalized next month. lenders who agreed to provide funds. the contact is part of a $27 billion complex the is due to
10:03 pm
come on stream raising $8 in 2019. global news 24 hours a day. i'm rosalind chin. this is bloomberg. david: thank you for that market update. let's get back to the macro conference taking place of the four seasons in hong kong. tom mackenzie is there for us. tom. tom: yes, thank you. oppenheimer, peter goldman sachs chief of global strategies. a note was put out that putting out a correction in the markets was long overdue. you called this correction. what was behind this thinking and has your view changed at all with how it has played out in the last three or four days? peter: thank you for having us here today. i would say that what we are really flagging is you have a combination of factors that meant correction was quite likely.
10:04 pm
first of all, you have seen the longest period since 1930 without a correction of 5% in the u.s. the longest period since it started in 1970 without a correction of that magnitude. we have also seen the strongest start of the year up until this correction started in any year in the last 30 years. despite the fact the bond yields were actually rising. most of the sentiment indicated we look at our index, risk appetite index. these were at record highs. we felt like there was a good chance of a direction, but i should emphasize our anticipation was there would be a correction within a structured bull market and that is the view we still have. tom: what we have seen today in terms of equities gaining a little bit, is this suggesting that indeed what we saw was a correction, we are not headed into a bear market, but we could see further directions
10:05 pm
especially as volatility comes back? peter: i think it was important for volatility to reestablish itself because the markets were getting carried away with what had been a very goldilocks environment in the last year. the global growth was accelerating. expectations were being beat in terms of growth. we had very low and stable bond yields an extremely loose financial conditions. there in mind this correction, u.s. financial corrections were any loose making going since the financial crisis. that was contributing to this with very low volatility. i think having some volatility come back into the market and having valuations going back to more appropriate level is quite a healthy thing. i think the markets are still a little bit vulnerable to a slowdown in growth momentum. you can see that in coming months.
10:06 pm
any further rise with bond markets. tom: it has presented buying opportunities. where are they? peter: in aggregate, we still like equities. our forecast for equity markets is to rise at the end of this year at a lower pace, up until we have seen this correction, and slower than last year. the best return forecast we have are outside of the u.s., predominately emerging markets. and across asia. we also like europe as well. i think we are certainly getting some very interesting value opportunity arising within all markets. i think we will see a decent recovery. what i would say is that we do expect to see the momentum of growth globally slowing a bit and some rise in interest rates. in the case of the u.s. in particular, we would expect policywhat i would say is that o expect to see the momentum of rates to still raise more than the market is pricing. that combination should slow
10:07 pm
returns but we certainly don't think this is the start of a sustained bear market, mainly because we still believe the global economic cycle will continue to be reasonably robust. this is more of a shakeout. tom: possibly repositioned out of the u.s., into europe as well. where are the opportunities in em? on a sector by sector basis. peter: generally, the sectors look attractive to us because we have this strong growth and it should certainly help that. those areas of the market. generally, all the cyclical growth is strong, it is quite difficult to find companies and new in the world that are generating sustained topline growth. technology is still an attractive area. there are some interesting opportunities reemerging. so, a combination of cyclical parts in the market and pure growth is still an attractive place to be. tom: where are you looking in
10:08 pm
europe and how concerned are you with european equities? peter: on the sector side, significantly lacks a technology sector. technology accounts for a quarter of the s&p. an even higher share of the asian indexes, 28%. in europe, technology accounts for 5% of the index. that is one of the reasons it has lagged behind in the strong bull market we have seen the last year or year-and-a-half. technology was a real dominant sector. but europe does have interesting value. it's got a highway in things like financials, oil resources. these are sectors that have lagged behind because they have faced major structural problems in the last several years, cutting dividends for example. we are at an inflection point where the sectors are still relatively cheap, high dividend
10:09 pm
yields and seeing dividend growth. that is an interesting area to look at in europe. tom: how much of a potential drag is expected for credit? goldman forecasting 4% this year, 4.5 exterior. how much is that a drag on the corporate's? peter: let's look at the overall market. sustainhe markets can that pace of rate increasing. tightening cycle was 2004 to 2007 in the u.s. there were 17 consecutive rate rising, going from 1% to over 5%. equities did reasonably well. in europe, they were up about 35%. we are not particularly worried about leverage in the protector because it is still relatively low. i think a bit of awe are not ref credit risk and credit at the cost of capital will moderate
10:10 pm
returns, but i don't think it will cause a major problem. tom: do you see opportunities in japan? if yen has a potential strength. peter: this is one market that actually was not driven by multiple expansion in the last couple of years. we've seen a very strong rise in japanese equities. we have seen a doubling of profits. the valuations are quite interesting and we are seeing a fundamental improvement in margins and return on capital. we think there's a pretty good domestic demand story, a recovery in japan which should support the market. we have an optimistic view. i think a stronger yen would be a bit of a headwind as a stronger europe in europe's case would be too. but i am feeling that the yen will be relatively weak against most currencies and that will help in local currency terms with the returns. tom: there was a lot of discussion focused on hong kong
10:11 pm
stocks in the lead up to this correction, talking about the high valuations we were seeing. presumably, you see this and potentially healthy correction in hong kong as well. are there opportunities here? is a largely focused on the tech sector or a broader opportunity in hong kong? peter: i think it is a broader opportunity. the region has been quite dynamic, the recent growth. we like china as a market for a long time. it is not that expensive and we have a decent mix of higher growing parts of the market which are driving profits. that will help. the close coming from china to hong kong will probably be continued and supportive for the market. i think it is important to emphasize that emerging markets overall is supported by the strong global growth environment by lose financial conditions, and relatively weak u.s. dollar. those conditions are likely to continue.
10:12 pm
you don't have the imbalances in emerging markets that you had some years ago. generally speaking, you got more growth areas coming through in emerging markets, including china which we think are quite attractive. tom: what about when it comes to volatility? it is back now and it seems like from the people we have been speaking to, it will be part of the play now for 2018. is that a positive for banks like goldman sachs, the financial sector? do you view volatility as a key mix for 2018? peter: yes, i did think volatility did get too low. there were good fundamental reasons why. if you look at macro volatility. the five-year rolling volatility in gdp and unemployment, inflation. that is almost record lows if you go back a century or more. that is keeping financial volatility low, but it reached too low of a level and repricing
10:13 pm
of volatility really reflects the repricing risk and i think that is healthy if we are to see this bull market sustained, albeit at a lower pace moving forward. i think we will see higher volatility. i don't see that really as being a bad thing. i think it is quite a healthy thing as long as it does not stay at a short of verily high levels as we have seen in the last few days. been an environment that is better positioned for stock makers, those investors looking at individual companies rather than what we have seen in terms of inflows when it comes to etf's for example and passive funds -- will that start to play out in how money is positioned? getr: typically, when you into volatility, correlation increases. if the spike in volatility we have seen is somewhat temporary
10:14 pm
and we go back to a low volatility level, not as low as we have seen before the correction, think you will see more opportunities at the stock level. as you see more, factors really play into returns. that is something we do expect to see. within sectors as well. companies with strong balance sheets doing better. those with dominant business models, and those that are able to sustain decent profit growth. within the markets will pay more for those individual stock factors that has been the case particularly in an environment in recent years which has been so dominated bycompanies with se macro. tom: what are some of the stocks you may be cautious about going forward? you painted a relatively bullish picture and giving off ideas of sectors and regions. are. there areas that you think potentially more at risk? peter: sticking with sectors here and themes, one of the
10:15 pm
things that has been very well over a long period of time are defensive sectors which are benefited usually by a sustained amount of falling bond yields. you can see food, beverages, tobacco companies and so on. fundamentally, this group overall is seeing a slowdown in but you have seen quite high valuations and they are quite sensitive to changes in bond yields. if this but you have seen quite high growth cycle continus as we expect, and as we see more priced into bond markets -- yields continuing to gradually rise -- we expect those to generally underperform. particularly so in europe where they are large part of the market and a dominant part of what is driven the relative returns in recent years. tom: dollar weakness was a big
10:16 pm
part of the conversation, specifically around davos. the treasure coming up making comments. is the potential of a currency spat or war, as some people frame it, should that be something we should be cautious about? peter: i think having rapidly changing currencies can always be -- it can cause economies to absolve. it would be a worry if we got a rapid acceleration of protectionism or currency wars coming through. i don't think that is likely. we do see the dollar staying relatively weak against most currencies in an environment where you have fiscal expansion and growing deficits and other areas of the world with growing services. even went in an environment where interest rate differentials are rising in favor of the u.s., you may see the dollar remaining relatively eweak. that will help keep the
10:17 pm
relatively supportive environment for financial conditions which is consistent with this economic cycle continuing, albeit at a slower pace with positive but lower returns and financial markets like equities. tom: thank you so much for your time. peter oppenheimer, goldman sachs chief strategist. he is bullish with the opportunities in the markets with some caveats. we will be back in hong kong speaking exclusively to the president and co-ceo later in the hour. david: thank you so much. something happen across the chinese markets just to update our viewers. property stocks crashing through the floor. have a look at the bloomberg terminal. we are looking at the index of that group of stocks. that is about 4% drop. just about every single stock within that space, 29 names.
10:18 pm
sense of whatou a the names look like and the losses. do we know what is happening? a lot of times we don't but that is the damage so far. the dragon the shanghai composite, there we go. coming up the lows as well. when you look at the technicals of this one, it does not look good. we are building some momentum to the down. we arewhen you look at the techs of headed towards that level at the moment. we will get you an update when we get more information. coming up, steve wynn stepping down amid the allegations of sexual harassment. we have the very latest coming up next. this is bloomberg. ♪
10:19 pm
10:20 pm
haslinda: this is bloomberg markets: asia. david: the founder of wynn resorts has stepped down as ceo and chairman amid allegations of
10:21 pm
sexual harassment. the board says it appointed the te interim president to the role of ceo and says it remains committed to upholding the highest standards. we are joined by lisa has this breaking story for us. thank you for coming on. help us understand the events leading up to this moment. sexuales, so the misconduct allegations of steve wynn have been the headlines the last few weeks and investors are watching very closely. the major catalyst for this was a washington journal report that was published late last month alleging that steve wynn had engaged in a series of harassment of female employees and paid out a multimillion dollar settlement to a former employee to settle sexual harassment claims. since that happened, regulators have various areas of that wynn resorts operates have said they
10:22 pm
looked into the issue. shares of the wynn resorts stock has been hit. since allegations have surfaced, the stock is down about 19%. david: as you mentioned, one of the big locations is nearby in hong kong in macau. we are waiting on an update on that group to tell us -- an update on their side that will get the stock up and running in hong kong. what is the latest you have heard on the macau investigation? regulators have voiced their concern about the issue. they have also reached out to wynn when macau's executives and key directors to speak with them sure they are fit for their roles still. i think the investigation there continues. of course, wynn, sure they are r macau macau is a
10:23 pm
very important market for them. it is also announcing macau is a very important market for them. it is also announcing big expansion plans. i'm sure beginning regulators are watching this closely as well. haslinda: i guess the question also is whether the company is trying to limit the fallout of these allegations? think the biggest step they have taken now is announcing that steve wynn, the founder, will be stepping down. at think that will be one of the biggest steps they have taken to limit the fallout. additionally in statements, the company continues to say they are cooperating with investigators in various regions and continuing to work with them. haslinda: all right, lisa du. we thank you for your insight. in other news, second-quarter earnings later wednesday with stepping down, stepping up assets to close the down between valuations.
10:24 pm
valuations. softbank is trading about half the value of its holdings which top $180 billion. bloomberg's managing editor for asian technology is here. what is the latest? peter: softbank will report bell here inr the what is the tokyo. he ends up on the headlines because he makes big investments in companies, but what investors want to see when he reports earnings is how the telecom business is doing. bell here in these are the cash cows that generates the moneys he uses to invest. their want to understand sprint, the domestic telecom business. sprint reported earnings overnight, better than expected. they also want to new how the japanese business has been doing which has been steady in the past. they have been able to generate cash to use to make investments elsewhere. they want to see how healthy that is, especially how the
10:25 pm
e-commerce player in japan has been talking about getting into the market and bringing more competition into the wireless market. haslinda: it is about the discount. what is the discount of softbank's stock that is so frustrating for son? peter: we have talked with sources inside the company. the frustration for them is they have these assets including a stack in alibaba, yahoo! japan, sprint. if you have them together and pay off the debt, those assets are worth twice as much as the market value of softbank. they see it as a sign that investors don't believe in this vision that they have been investing in these startups. to reach other hits like alibaba in the future. they want to talk about the discount, explain more about how they see this big division fund contributed to the future of the country. they probably need to disclose a few more financial details about that vision fund also.
10:26 pm
david: what are the prospects for the ipo of the mobilephone unit? peter: sources have been telling us they have been debating this. this would be an opportunity for them this was between the telecom business and what he says is the future of the business, making investments in startups like uber, and a hundred other deals around the world. it would also give him some capital that he would be able to use for a variety of investments. he always has dozens of deals he wants to strike and the has needs for that capital. it will help him distinguish a little bit between those. david: peter, our managing editor for tech in tokyo. let's take a look at the mainland markets now. we are a few minutes before the lunch break. an update, property shares are
10:27 pm
getting there. 4.2% down, pulling everything lower. we will get to the updates next as well as the reopened in tokyo next. this is bloomberg. ♪
10:28 pm
10:29 pm
♪ >> it is almost 11:30 a.m. here in hong kong, the last hour of morning trade. we are hopefully entering this last day of this cold spell in hong kong. we were down 5% yesterday. to erase all losses, but we will take the gain. in singapore, gains for the sgi. singapore airlines bucking the trend. at mackenzie is standing by the goldman sachs global macro conference with harvey schwartz
10:30 pm
in a couple of minutes. i am haslinda amin in singapore. >> you are watching bloomberg markets: asia. let's check your first word headlines. latestedes-benz is the to apologize to china for comments related to the dalai lama. other airlines have issued recent apologies for messages to china. heavy's successful launch of the falcon heavy will allow it to handle bigger payloads. elon musk has said the lunch will be considered a success if the falcon heavy does not explode after liftoff.
10:31 pm
went as well as one could have hoped with the exception of the core. that was epic. i think that was the most exciting thing i have ever seen, ever. core obviously did not land on the drone ship. resigned asn has chairman of wynn resorts. the chairman says an avalanche of publicity and rush to judgment means he cannot remain in his current role. the company says it accepted the resignation reluctantly and appointed the current president as ceo. shares were suspended ahead of the announcement. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am rosalind chin. >> thank you.
10:32 pm
china is the largest fastest-growing economy in the world, and thanks like goldman sachs are chasing the opportunities in that market. let's head back to the global macro conference in hong kong. tom mackenzie is there for us. yes, thank you. we will be talking about china and goldman sachs's plans to expand its footprint on the mainland and the market volatility over the last few days. exclusively by the president and co-coo. what are your clients and investors saying to you about the last few days? >> in hong kong, this is our ninth macro conference. we have 1500 clients in the room i just left. when you think about the events of the last several days, we are
10:33 pm
breaking it down into what happened last week, and what happened at the beginning of this week because they are different things. last week was a market response to a concern that wage inflation might be creeping into the u.s., gdp growth around the world might be moving ahead of result wens, and as might see interest rates moving up more quickly than expected, and as a result markets selloff. what we saw on monday was much more about a systematic liquidation. fromyou see the vix move 17 to 35, the single biggest move in a day, that is forced liquidation. that is about position adjustment, a classic example of a market they got too crowded, and when it moved, market
10:34 pm
participants were forced out. happy toveryone was see the markets rebounded on tuesday. that is what we are telling our clients about it. >> do you sense an opportunity at this stage? >> clients all around the world have struggled with the fact they have lots of liquidity and felt valuations were stretched. up 20% 500 last year was and dividends, so there were people looking for buying opportunities. when you see a spike in volatility like that, may be they are looking for a second order or third order effect come a but certainly people are looking at this as a buying opportunity. >> we should see more money put into play at this stage from clients? >> i think it is possible. you might not see a rush, at the mood at the conference as high because the real economy in the
10:35 pm
world is moving at a pace -- remember we talked about synchronize gdp -- synchronize to gdp is good for companies, good for wages, and so if that translates into earnings, yes, people will feel confident and the will be buying opportunities. >> the number one question is policy rate normalization, where the fed stands. in terms of your caution, have you become more cautious, paying a little bit more attention, as to the way this place out? >> we have been focused on this for a long time. the world has been focused on this. what i will say about qe is that when qe was launched, the world was apprehensive, then the world started to like it, and some would say they like it too much. has we adjust to a normalized rate environment, as long as that environment is associated
10:36 pm
with the gdp around the world improving and the rate of interest meant is not too fast, it is a healthy thing. thatnot sure it is great some portion of the world's bonds trade with negative interest rates. of that, as out long as the pace is moderate enough come it is quite healthy. volatilityickup in likely to translate into client activity and a pickup in revenues? >> it is a question of what kind of volatility. we would not described monday's volatility as healthy volatility. certainly in terms of the business in a world of zero interest rates is challenging, which is leasing the industry lose half of its topline revenues. normalized interest rates is it better environment for clients in fixed income and for us.
10:37 pm
>> it has been a strong start to the year with mergers and acquisition. how do you see flows and the question of valuations if they come off a little bit. does that provide an opportunity for mergers, or is it the question of more expensive credit? forll the factors in place in place.ill there is actively opened financing markets, so capital is available. we have had tax reform in the united states, which was a big question now answered, so that is a catalyst for m&a. the question of whether the volatility over the last couple of days, how will that impact m&a activity? generally volatile markets are not constructive for m&a. it could be the case that we
10:38 pm
look back and this is just a market correction, this could be a catalyst for m&a. >> this is your third time in china in nine months. opportunities? how are you looking to reshape your business there? >> i was presenting to our clients before i came up here. i asked, how many think 15-20 years, china will be the largest economy in the world? the vast majority of hands went up. a consensuserally and believe that china will be the largest economy in the world. it may not be a straight line from here to there. there will be challenges in any fast-growing economy, but for goldman sachs if you think about what we do around the world, we advise on growth come work to provide efficient capital markets and the application of
10:39 pm
capital, and we help people manage wealth, both individuals and institutions. ,hether it is 10-15 years goldman's should be strategically important to china and china should be strategically important to goldman sachs. >> do you want equities trading to be a focus their? >> getting back your question on reforms, the leadership in china is where that as they grow -- aware that as they grow they will need the most efficient capital markets to support the growth, but it will happen at a pace that china sees that it makes sense. >> you will be adding to headcount? >> we added to headcount last year. you can hear my enthusiasm about china. we are fully committed. >> you have been moving into the consumer sector. his a going to start to impact financial results and would you look to take it beyond the u.s.?
10:40 pm
about the wayink consumers are participating online, consumers shop online today because it is simple, transparent, and easier. markets are all about doing that in the united states. youe are no fees when borrow on the markets. you don't pay an origination fee, late fee, and you can design your own loan. it is set that are offering and more cost-effective. for goldman sachs, you would not have seen this in a consumer business if we needed a big capital commitment. i don't know if we'd be a good competitor for the big universal banks, but because consumers are doing things online, there's no reason why the trend in retail
10:41 pm
not go over many years and occur in financial services, so for us it is important. internationally, we are open to it, but for us this is walk before we run. >> that could include china? >> we would be open to any area of world where week could provide value to the consumer. because leader in m&a we provide the best advice in the world to ceos and boards. again, for now, it is a u.s.-based strategy. >> on cryptocurrencies, anything you have seen that has changed your view? >> no conversation would be complete without a conversation about cryptocurrencies. it is a good opportunity to clear some confusion. bitcoin from blockchain, as it relates to bitcoin, so if an exchange will act as a clearer
10:42 pm
and they go through all the rules, it is no different than any other contract like energy futures or equity futures. that we have been doing. it has been small volume. we have not been trading over-the-counter. ofhave received a lot inquiries from our clients and will continue to study doubt. more importantly is blockchain. we are spending with a lot of people in the marketplace time on blockchain. i do think blockchain offers the potential for redefining certain aspects of financial services, ayman systems, logistics -- payment services, logistics. we don't know how long that will play out. your time.u for exclusively here at the goldman sachs global macro conference in hong kong, harvey schwartz, president and co-coo of goldman sachs. haslinda: thank you. coming up, why the market
10:43 pm
volatility could be ammunition for india's central bank to hold lower for longer. we are back with open in mumbai next. this is bloomberg. ♪
10:44 pm
10:45 pm
haslinda: this is "bloomberg markets: asia." i am haslinda amin. david: let's check the open in india. here is sophie. sophie: taking a look at the sensex, the benchmark recovering come up .9%, as his the nifty. thestors bracing for what r.b.i. might say about the recent selloff and the central banks view on inflation. r.b.i. will leave interest rates low to ensure prime minister modi can bridge the widening fiscal deficit.
10:46 pm
haslinda: asian stocks are set to snap a three date drop, but the mood in chinese markets, what is happening there? the rebound in china if operating has developers are sliding and the shanghai property index lower 4%. banks have raised mortgage rates in several cities, dampening the mood for real estate stocks. let's check in on some of those real estate stocks. fun cut grandefell, but ever rising. some inch marks at the break,
10:47 pm
the shenzhen looking little changed. the chinext swung to gains. chinese large cap gauge under pressure over 1%. david: still on the way out. we are off the highs for the day. sophie: the hang seng that higher, but off the high of the day. this as tencent recovers from the biggest loss in 2011. japanese stocks rising as investors focus on earnings. after yesterday's drop, that has made some nervous. the kospi lower, extending losses for the for the day. the euro thatnshore yuan eyeing 6.25 handle, and the kiwi losing ground against the dollar despite the robust jobs data out
10:48 pm
of new zealand. the key we might need the central bank to turn hawkish at its policy meeting thursday. we are waiting for trade data from malaysia at noon and taiwan later today. david: the r.b.i. in the mix. thank you so much. the indian market just under 1% in the opening minutes. let's get more from our next guest. he joins us live on the line from mumbai. it is a busy day for you. you are at your trading desk. you guys are shifting out of risk mitigation. what are you looking to buy today? >> good morning. yes, indeed, a busy day. india got stuck in the global isatility, but the situation more fundamental in the sense that earnings growth is looking
10:49 pm
to recover, inflation is picking up, and the latest budget will increase inflation because of higher farm producer prices. , the r.b.i.backdrop will come out with their policy, and we expect no change in the interest rate, but we hope they don't sound hawkish come because at this point in time when needs to call nerves other than talk operates. david: when you look at the markets in india, you have the most expensive market in the asia-pacific, and hopefully this recent selloff has taken some of the fat off. do you think that will put more discipline in the frenzy we have seen in the market? market has gone up alongside the other markets, and
10:50 pm
in fact has underperformed emerging markets in the recent past. even after the correction yesterday some of the mid-caps are looking palatable, but the biggest topic is earnings growth . these stocks are looking expensive because they lack of earnings growth in the last several years, and the hope and expectation is it will start picking up in coming quarters. haslinda: we saw the indian stocks drop 5%. how do you assess the contagion risk for the indian market in particular? market basically needs to raise capital because corporate india's balance sheets are leveraged. the overall debt equity ratio is to one, which means there is the need for capital raising in primary offerings. you need conducive equity markets, so this is like a
10:51 pm
chicken and egg story. is a dampener from that perspective. david: looking at the budget quickly, what is the most compelling investment thesis that has arisen from the recent budget? has 2-3ecent budget priority areas for the government, one is infrastructure, second is financial services. they are recapitalizing banks. the third is irrigation, which will fall on consumers as well. so large infrastructure companies, state banks and financial services. ,n the irrigation space
10:52 pm
companies like this will be the focus for this government, and therefore the stock market focus for us. thank you for your insight today. plenty of central bank moves in the next couple of days. the r.b.i. rate decision will come at 2:30 p.m. mumbai time, 5:30 p.m. in hong kong. all bloomberg economists predict the benchmark rate will remain at 6%. david: tomorrow, thursday, the rbnz his meeting, also expected to hold steady, but that might not be enough to satisfy the kiwi dollar. the philippines central bank governor faces his first major test tomorrow. he will need to strike a balance between curbing inflation and
10:53 pm
calming financial markets. if you are a bloomberg subscriber, you can catch up with all our interviews with our interactive function, tv . you can also join the conversation by sending instant messages during our live shows. check it out at tv . this is bloomberg. ♪
10:54 pm
10:55 pm
haslinda: this is "bloomberg markets: asia." i am haslinda amin. david: let's get you an update of your this is flash headlines. apple has agreed to build a second tech center in inner mongolia. it will be constructed in the northern region. authorities say it will come online in 2020 and be servicing users all across the country. data center chinese
10:56 pm
is being built in southeastern china. singapore and malaysia have agreed to allow each others countries investors to trade in the stock markets. it was announced at a conference in kuala lumpur. the link will be established by the end of the year and connect than $1 trillion in value and 1600 this to companies. david: the creators of the blockbuster game of thrones have signed up for a new slate of star wars movies. lucasfilms said they will work from thew films current saga and a trilogy and development. at least seven star wars films are now in the works. the last film called in more than $1.3 billion worldwide. haslinda: let's look at the
10:57 pm
markets open in this part of the world. what a change from two days ago. green across the board. the hang seng up 1.2%. 2.2%, seting up by for its biggest increase in a long time. pretty much a turnaround from the previous session. yeah, things are stable. that is a big help coming off at the last couple of days. australia up 1%. the last 60 minutes of trade there. new zealand entering the close. look at other things we are following. yesterday,worst hit seeing the biggest bob today. -- bump today. when you look at vietnam, that
10:58 pm
got whacked the past to two days, enough to put it into technical correction. haslinda: china taking a turn for the worst. this is it. this is bloomberg. ♪
10:59 pm
11:00 pm
♪ alisa: i'm alisa parenti in washington and you are watching bloomberg technology. let's with a check of your first word news. president trump says he would welcome another government shutdown if democrats don't play ball on immigration. president trump: if we don't change the legislation and get rid of these loopholes where killers are allowed to come into our country and continue to kill. gang members. and we are just talking about ms 13. there are many gang members that we don't even mention. if we don't change it, let's have a shutdown. we will do a shutdown and it is worth it for our country. i would love to see a shutdown if we don't get this stuff taken care of. alisa: the white house chief of


info Stream Only

Uploaded by TV Archive on