tv Bloomberg Daybreak Asia Bloomberg March 1, 2018 6:00pm-8:00pm EST
yvonne: it is 7 a.m. in hong kong and we are live at bloomberg's asia headquarters and what the "daybreak asia". president trump imposes global tariffs on steel and aluminum decision draws criticism abroad. and four, jumped 6% gm, and other automakers hit the brakes. yvonne and i am betty liu, and jay powell mac event and says there is no signs of overheating in the u.s. and truck sales dropping last month, a troubling
sign of what has been a lucrative segment. ♪ yvonne: let's start with breaking news out of south korea, and are still production numbers coming through, suddenly missing estimates on this easily adjust the month-to-month basis, rising 1% but we have come back in a positive territory after a down month in december. it will be interesting to see because of the makes of breakdown of this, act than we saw a bump up in output when it comes to semi conductors. the auto industry factored into production contrast, so that is a key focus. your numbers looking better up 4.6 percent, better than estimated that the auto industry and the steel industry is going to be a focus today as we saw trade tensions escalate quickly in the last 24 hours. betty: as you mentioned, the
numbers are better, but all these countries, south korea and china and asia and others are going to feel the impact of the tariffs that are being threatened by the u.s.. that is our top story today. i want to stay on this top story because president trump is moving the market and imposing tariffs on steel and aluminum imports. major escalation of his hawkish trade agenda, and europe and spurit could counterterrorist. -- counter tariffs. >> trump announced he was planning to do this next week and there are some things they can do to mitigate this. we still don't know whether
there will be exceptions to the spread there could be exceptions for a particular industry, say auto. that could be exceptions for individual countries are trading partners like the eu. none of that is not at this point. this was an announcement that was somewhat in confused fashion. certain confusion on what this is going to happen. we have heard president trump frame this as a national security issue. how is this a national security issue? joe: this is the traditional view of components and there's an economic issue -- they are security issues. trump is seeking to revive factory work in the steel
industry. economistse jobs -- -- these whether that tariffs will do this. but it is partly to punish what the ministration feels is unfair trading practices, particularly with china. china is a big target of this, even though countries such as canada are major still suppliers to the u.s. we are waiting to see what the details are, and whether these tariffs -- will be left out. blowe: this is a severe within the trump administration with treasury secretary steven mnuchin and gary cohn. does it mean the ross and his cabinet are waiting out? joe: they are, and that is partly because they are in tune
with trump. this is the sort of thing he ran in office on and it goes to his instincts about how the economy and the global economy should work. they have prevailed on this. there was understand, a tussle in the white house whether or not to go through the this and how far to go. that announcement was on last night, and they told bloomberg it would be making it. they told other people and outlets that it wouldn't happen, and we were told again this morning just before that it was not going to happen, but certainly reporters were called in to this meeting with executives from steel and aluminum firms and trump announced he was going to do it. could this force gary cohn to resign? i know there is a lot of revolving doors.
i don't know if this has an inclination of him to resign now. joe: it is hard to say. he has been speculated on for quite some time and there was quite a bit of speculation he would leave at the beginning of the year. done,ld be that taxes are that was one of his main goals, and it could be he feels his main work is done. that part of the revolving door has not sworn get -- swung yet. yvonne: joe, thank you for joining us from washington. let's bring in su keenan with market action and take us through this volatile day. reacting to the fed chair's comments, but i midday afternoon it started to rebound only to be hit again tth terrorist news --
arrif news. it became clear later in the day the stocks directly affected -- u.s. steel, century aluminum company again moving higher, and that mirrored what we are seeing in recent months as top of tarrifs increased. wereghout the day there bigger concerns about the companies that will be negatively affected, automakers for one being hit by rough sales and which has stocks lower then being hit by the reality of increased costs from steel and other metals moved them lower. anheuser-busch and other big companies who use an enormous amount of aluminum forced concerns and asked the president to reconsider. if you look at the size of stock moves on the day and the stocks that benefit from this, they were huge.
at one point, u.s. still was up a million percent at ended with a 6% gain -- neil gorsuch re-aluminum all paste gains you saw in the sector -- on the other side are longer-term concerns that the trump administration could lead to a trade war and all kinds of countermeasures from other countries and that would be another pressure on stocks as a whole. betty: what was the reaction to jay powell's testimony? commentsthough his tone down hawkish remarks, it was deja vu all over again. there were market analysts saying there is a concern about interest rate hikes with perhaps for being enough, but let us look at the market snapshot -- the focus is on the bond. hikes be enough? we have data showing the economy
is moving forward and there is momentum with this recovery. movers,at the big earnings was a big story with general motors being down not only because of weak auto sales but cusp of the tarrif action. parent company also down, and also a negative earnings report with l brands, and u.s. steel is one of the bright spots that showed there were stocks happy about the tarrif moves. but questions raised significant concerns this could be a negative going forward. one stock that might move tomorrow is wells fargo and breaking news right now that lloyd dean and henrique three of the longest serving board members are going to retire earlier than expected. it will retire at the 2018
annual meeting and wells fargo has been under scrutiny battling the fake account scandal. thatome new information their wealth management business make inappropriate sales practices, whistleblowers going to the department of justice to report these inappropriate practices. much happening at wells. tension,till a lot of since that fake account scandal. we continue to watch that, and we will take a look at how asia is faring at the end of this trading week. street,ollowing wall 50. on the nzx powell's testimony mentioned there is no evidence of the economy overheating, trading in australia getting underway as well.
1%, and yields we are seeing a bit with government bonds at 2.74. and we are seeing a rally for bluescope steel. and will continue to watch steelmakers in japan as well. and checking japanese futures, we could be contending with a stronger yen and could be seeing a pullback in equities and we see futures up at 2/10 of 1%. and the euro yen as well fell below the 200 day will be is a redas it -- which flag there. we take you to first world news. courtney: jerome powell as soon as no signs of overheating even as the growth outlook strengthens and the labor market tightens.
speaking for a second time on capitol hill coming he reiterated the fed will continue to raise rates gradually to keep unemployment and inflation and balance and his comments caused investors to bet on four rate hikes this year. atwe see most of them grow 2.5%, so nothing in that suggests to me that wage inflation is at a point of acceleration, i would expect that some continuous straightening in the market and take place without causing inflation. growth targets will pass the agenda when china opens the national people's congress and the leadership and hundreds of local officials will meet to set policy or the year in detailed plans to tackle financial risk, pollution, and access capacity. the report is also expecting the names of the new pboc governor for banking and insurance.
reason may enter cabinet spec more than two hours discussing plans for trading let's the european union. a major speech before the day it is due is a critical time with three weeks until the eu is due to give it official stance at a summit in brussels. tony blair has urged leaders to stop brexit, saying the u.k. departure benefits no one. putin used the state of the union address to deliver a stern warning to the west that russia has new high-tech nuclear weapons that he said could overcome any defenses. in the speech he for a fourth term in office, which he is certain to win. used his heart language towards the united states and set efforts to contain russia have failed. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. collins.tney this is bloomberg.
still ahead, more insight into donald trump's paris and guests will tell us how the market and the economy are to react in the medium and long-term. yvonne: up next, details from jay powell's second they of testimony to congress and will ask if there is any more clarity of the fed rate outlook. this is bloomberg. ♪
betty: this is "daybreak asia". yvonne: fed chair jerome powell on the this week on capitol hill by delivering the same message he gave on tuesday. strong growth, full employment, and inflation will rise. but not just yet. kathleen hays was watching his performance, and not a whole lot of difference between they went and a two. kathleen: i have my own theory
that people are not used to hearing jay powell speak, he is less of a trade academic economist, and he said look, the labor market is getting stronger and unemployment is low and there's momentum there and fiscal stimulus in a stronger global economy, so i see more rate hikes. three is best case, maybe for. ur. i am paraphrasing, but that is what i got from his testimony. it is important that when he looks at inflation, he gives the reasons why it is going to rise but he doesn't see wage exhilaration yet. let's listen to what jay powell said on thursday. >> most of them continue to grow at that 2.5%, so nothing in that suggests to me that wage inflation is at a point of exploration -- acceleration.
i think a strengthening market can take place without causing inflation. kathleen: he said specifically visits he signs the economy is overheating but janet yellen before him -- said we have to make sure we keep raising rates gradually to make sure inflation doesn't get out of hand. when he shows optimism about -- we have personal income and spending chest to key inflation gauges, 2% inflation target is the red line and is 1.5% int pce deflator, the last three months. and the headline number is stuck at 1.7%. there is a prediction of inflation next but we do not see it yet. will be interesting to see how the fed deals with that meeting in march of 2021. yvonne: kathleen, stay with us.
to begin managing director and strategies -- having to interpret the last two days of testimony by the fed chair? betty: where are you on interest rates and where are you on march 21? going tok march 21 is be important especially for the fact that i'm going to be looking to see what changes are coming to the economic projections. they upgraded the outlook for growth and they didn't make many dots.s to the will be paying close attention to what changes they will be making to the gdp and the trajectory dots. for 2018 and 2019, and will be looking to see what changes they will be making, if any, to the inflation outlook. certainly a lot of data points to be watching for, and i'm curious -- economists from
paolo, the theories that the u.s. economy is overheating or is taking off and the fed is behind the curve. out isnk the data coming going to support that view on the lastr as we see in few weeks, some of the data is coming in quite hot? >> i think what you are going to see in the first half is some support on the inflation front. you will see the headline of core inflation had higher in the first half because of base of facts. we sat in march and april of last year, so it should help push core inflation higher in the first half and should support rate hikes in march and june as well. the we have is we think second half -- core inflation might come under pressure, apecially as costs cool off
little bit, we might see second half inflation comes off. for is when we see concern the fed to be able to deliver more than one hike in the second half. >> people would say we saw a big shift when it comes to jay powell and the fed may now -- they have gone from full employment to concerns of overheating in the economy as well as maintaining 2% inflation target. yvonne: do you think that change in focus is premature? >> i think what we need to do is look at the trajectory of inflation -- not for the near-term but the long-term. for me, the way i look at the ed policy, i think is gradual.
the fed is going to have flexibility of being able to adjust its mantra policy. if there is signs of stress is in the economy, for instance, we saw meaningful correction in equities and credit start to widen. if there is any stress in the economy the fed is going to be very cautious and very gradual in rate hikes. i don't think it is about one data point, it is the holistic approach and looking at a variety of metrics if the pace is actually working. >> bill dudley spoke today, and he was asked a lot of questions, and one was about tariffs. let's hear what he said it means for the federal reserve. up, wouldorists g
put upwards pressure in terms of how they set policies. we know the prices are a small part of inflation on the u.s., i am wondering what you think of the potential impact, is it so much inflation or is the fed concern that if a trade were to start that it creates financial instability and that is something that could float rather than speede it up? right, andabsolutely in my opinion, when you have -- it iske tariffs hard to isolate what the impact is going to be. the repercussions could be broader. it could be intended toward certain countries, but the repercussions to be broader when you get into the realm of trade wars. it is hard to predict where or
what part of the economy is going to be the source of inflation. kindto me is a concern and of what is reflected in the market reaction today. we saw a sharp selloff in equities and certain sectors were impacted more than others. it is ultimately about financial conditions and a broader condition will start to tighten and in of tariffs america first policy, that is something the fed will pay attention to. what powellhink said today is going to ease volatility we have seen in the treasury markets? i think his message has been consistent. it is not clear if he is going to be adjusting -- he seems to be more optimistic on the trajectory of growth. after the december summary, we could see some upgrades in his
thoughts and projections for what he thinks the economy is remainder ofor the the year or beyond. i think for the most part, his comments are measured. expecting three rate hikes, potentially to rate hikes next year, and that hasn't changed meaningfully over the last two days during his testimony. you joining us live from singapore. don't forget our interactive function, tv . this is for bloomberg subscribers only. this is bloomberg. ♪
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yvonne: there is a live picture of tokyo, and the dollar here trading a bit lower and the market is going to be softer in asia. judge by what we saw in the u.s., breaking news out in japan. this is looking into the jobs market. at jobless rate coming in 2.4%. that continues to fall from what economists estimated with an estimate of 2.8%, quite a drop. the applicant ratio has held at 1.59, which has risen
from the month before, but it shows you a very tight labor market in japan, which continues to have implications for the bank of japan. no stepping off of the stimulus because we don't see wages picking up in japan. a quick check of how japan markets are likely to open with 1.5%. futures down will put 5 tight: you talk about how is markets are, a good set up with which talks happening in japan a little later on and we did see the dollar-yen strengthening and stabilizing in light of these numbers. let's bring in sophie to talk about what to look ahead to with trade tensions and the risk of a trade war. offie: we are seeing a risk
with the yen being valued at 6% this year, and when it comes to close around monastery policy easing, traders will be watching governor kuroda's statement that the boj has reaffirmed that it is not heading towards the stimulus exit door. we wereweeks back moving towards that 1.05 handle, and let's look at this futures board. fall the nikkei 225 could 3% when trading begins and we are expecting a softer open in seoul. stronger, and we are keeping a close eye on deal --cks given the global trade turning back to tokyo. technicalsring in
hinting that the route is not over for japanese stocks. the nikkei 225 has a so-called death cross with it falling below that line which is a bad signal with investors likely to sell at lower levels. trump hawkish agenda is the shadow on the market so what had of retaliation can we expect in the asia session? are awaiting rhetoric from china, and japan is a major still exporter and japanese still stocks under pressure this week given the concerns around the industry. we have been talking about the japanese steel industry chief saying this could open a pandora's box of retaliation. in the wake of trumps back-and-forth regarding tariffs.
canada has come out saying they are concerned there might be some response to that and even the institute of manufacturing in the u.s. is saying these are not great moves. there is a lot of concerns about what this might mean and china. it is the biggest steel exporter in the world but we have to also consider that china's exports to the u.s. are not as big as other countries. there are 10 other major exporters to u.s. field other than china. i want to check in stocks in sydney which is a mixed bag with --ors and gold producers bluescope steel is gaining ground and we have the ceo telling bloomberg that the tar iffs are good. now let's get to first world news. courtney: first up, the u.s.
will impose tariffs on steel and aluminum imports with an announcement expected next week metal meetings with executives, president trump said would be a long-awaited protection for the industry and the decision may provoke publication -- retaliation. the european union wells respond necessary.r >> they have been horribly treated by other countries and they have not been properly represented and more importantly because of that, workers in our country have not been properly represented. courtney: the u.s. ambassador to mexico is stepping down during a wave of senior officials delete the state under the trump administration. a 30 year veteran was appointed by president obama in 2016 and she leaves a string between
washington and mexico city over president trump's border wall and sources say morell has never neverower -- morale has been lower. the singapore government is rejecting a 9% salary increase for ministers. the next assessment could be five years away. the state has said the million-dollar salaries prevent corruption and work back in 2011 amid voter unhappiness of singapore's widening income gap. ceo robertrp. thompson has launched a broadside against social media, telling facebook to pay publishers for content. has calledpson facebook fake news and fallacious. the new york times have a great that facebook and others should share revenue from this newsfeed.
global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. yvonne: air asia is leasing aircraft in a deal worth more than a billion u.s. dollars and up onrrier will catch non-core investments to focus on main operations. joining us now is tony fernandes, thank you so much for joining us. it seemed that early on, we have been following this process and considering keeping the business at least closer to home, whether it was talking to credit banks -- but why bbm? [indiscernible]
[indiscernible] we are very happy. it affecting. 20 hang on because it is difficult to hear you, we're not sure if you are on a mobile phone but will try to fix the audio. tony fernandes, betty: and the meantime as we try to fix audio, president trump further looming trade tensions with china and that is comes as the communist party gathers for its annual parliamentary session. and tom mackenzie is joining us now from beijing. how much of an impact is is likely to have on china? china is the world's largest
aluminum,f steel and so it is going to have something of an impact, though it could be argued it will be less than in the past because exports of the chinese steel has been aluminumg and make up only 2% of the overall imports the u.s.. arguably less of an impact that there is a concern in beijing, not just about the rhetoric but the actions being taken by washington on trade. has beenern exemplified by the decision by beijing to set the top economic advisor to washington to defuse tensions. he has been meeting with the likes of gary cohn and the treasury secretary steven mnuchin to try to the escalate these tensions. china has said they are doing on u.s.investigation soybeans so potentially retaliatory measures china has up its sleeve.
but the real concern from china is the potential pickups and protectionism when it comes to technology and that is a top concern for china, they continue to need capital from outside the towards this prosperous society they are aiming to tackle. these are issues china faces, and examples of revamping committee is- the a key concern for china as well, so tensions are trying to the escalate them. have yet to hear the channel response to the latest but of course, we'll talk about is going to be the next few weeks or so, and business leaders are gathering in beijing where you are right now. what are we watching out the
most? growth target for the shakeup in growth shipped -- targets or shakeup in leadership? tom: both. will be around issues we have been talking about, that come in excess capacity. say the gdpright to target is going to be in focus. it is like a flame to the mo th. it to be setxpect at 6.5%, and if they say it is going to be six and 7% that it may indicate they are prepared to take more pain on the growth picture to tackle the deleveraging. be seen as a positive, and we may get fiscal targets, allation, money supply, things will be watching for an nominations to keep most,
particularly the pboc. and i mentioned the top economic advisor to president xi and whether or not he takes on the revamp risk oversight regulator. we expect a merger of the banking regulators and insurance regulators and something else we will watch out for and will be seeing if the former anticorruption czar will be named vice president. there is a lot to be looking for over the next weeks and days. it is going to start with the china premier reading out the work report which is an outline of the policy priorities for 2018. 8:00 in details at a the morning china time. ld there. looks co
yvonne: i think we have established our line and let's bring back tony. continued the conversation because we had trouble hearing you about what this means and the impact it would have on your earnings, the sale of your leasing unit. will this race leasing fees? overall, it will stay as is, which is replacing leasing cost and the rates are competitive right now, so no real impact. though some are saying
that when they look at a sale like this they say why are you giving up a part of the business that has been consistently offering profits to your airline? it detracted from value because it wasn't our core business, so the board thought it was best to focus on our strong airlines businesses. that attention to our digital businesses that are moving nicely. betty: you are reducing your debt load, how does this make your airline more nimble when you don't have this business? how does it make you more nimble because it is a tough business and airline world. i think there is a strong
growth area. we have our associates doing well in the philippines. the income business has been stronger, so cash generation is strong. our balance sheet will be mixed between leasing and own assets. we are as nimble as we were, perhaps more than we were before because we have dealt with financing assets already. how many more spinoffs should we expect this year? tony: there are a couple of more assets the board is looking at. orbably ready for selling joint venturing. we have strong logistics business which we think we may
look at a sale to a strategic partner. it -- andsell part of digital states might dispose of, maybe one or two. yvonne: real quickly, tony, you are for globalization and we hear from the president that a blanket of tariffs will be imposed, and what will that mean for air asia and any of that aviation industry? tony: i do believe in fair trade but i don't think trade wars are good for the overall economy. i am hoping that this can be sorted out. directly i don't see any real impact at the moment. can we talke we go,
about your entry into china? the last time you were with us you talked about different parties you were talking to in relation to going to the chinese market. what is the update? tony: there were a few options available to us and obviously china is a huge opportunity to grow so we are taking it step-by-step. it appears to be becoming a reality sooner than i thought. but there are a few different options for us, potentially. betty: we will keep up-to-date with you as well as talks continue. tony fernandes, air asia group ceo. and let's get back to the topic we talked about, the tariff thing imposed by the white house, and riverfront chief
strategist chris constantino -- former had f australian from mr. joining us, what is your impact -- what is your view on the impact of a trade war? >> i agree fear. guest that a trade war is a zero sum game. a step back, and if you look at the trump administration from the campaign thel to today, thus far, bark has been worse than the bike as it relates to protectionism. athink there is a lot to say up the administration base and the reality of what ends up happening. i think we should have perspective on this. tariffs on steel and aluminum, i concern would be long-term effect on inflation
which frack the is what of the big things the federal reserve is wrestling with. is bad business and i also think there is some folks in that administration who understand markets deeply and have a deep understanding of macroeconomics and may help overheads prevail. am thinking of gary cohn and steven mnuchin. betty: who are trying to talk trump at of this. markets of stock reaction, we saw automakers in the u.s. take a tumble and steelmakers come to selling as well. ont this have a wider affect investor sentiment in the market? >> sure, i think it could if it comes to fruition. the market is in a fragile state right now, so if it was a protectionism today there could be something else that could
trigger a response in the markets because the overall market has been damaged the short-term from early february until now, but some perspective here is useful. the public we have experienced in early february is in the overall scheme of things extremely normal. if there has been an abnormal think the last two years is the lack of volatility, so in the later stages of a bull market volatility is in keeping with you what you expect and doesn't necessarily mean the overall bull market is over. we talked about u.s. consumers who may be hit by this, are you avoiding the sectors? chris: first of all we are underweight with u.s. stocks, and there is longer-term outside of the u.s. is for risk but we are allocating more overseas both and develop an emerging markets. to u.s.lates positioning, the financials has been a place we thought were a eet spot given the rates
and overall economy and in protectionism is one place that will be hit hardest and it is the u.s. consumer. jobs,s you try to protect which is what protectionism supposedly does, the consumer is hit in the back and because of rising prices. backe: i want to bring what we saw in 2002 when tariffst bush slepapped and we saw the s&p fall and 10 year yields were cut by nearly a half and there were a lot of other factors back then, the dotcom crash. how is it different now versus then? chris: we are in a much different backdrop and you hit it on the head, if you look at the trajectory of the economy in 2010 versus today, we were
trying to exit from a severe pullback in growth and a meaningful recession, particularly the tech sector. what i see today and corporate earnings is the opposite. u.s. corporate earnings are breaking to the outside and happening to the lesser extent but happening globally as well. i think the comparison between 2002 and 2018 is somewhat misguided. betty: i mentioned earlier we spoke to the former australian prime minister and what i want to play for you the impact between the u.s. and china and other countries. happens with third countries on still, is not just china that exports united states, korea exports three times as much, and turkey does export more. american allies are going to fall within the collateral damage which was from this
particular measure. there is always going to be a chain reaction when it comes to this. what is the chain reaction in terms of affecting countries and how they are going to manage their currencies? at this is going to spark a global trade war or a global currency war? i am glad you brought up currency because if we were truly heading in the united states to a deeply protectionist phase we would see the u.s. dollar strengthening a lot. what has happened to the surprise of many people, called the last six or nine months, we have seen the dollar weakened so the message to the currency market buspar is not to get too concerned about perfectionism just yet. otherwise i would think we would see a stronger dollar. the dollar has backed up a little bit but we haven't seen
the dollar really skyrocket. rightasn't happened since before trump was elected. betty: is that a function of confidence and not seeing a trade war? or isn't that more of a situation where it is about euro strength and yen strength? chris: i think it is a combination of those things. euro in 2017 surprised people with the french elections that were a big cause for risk premiums to drop in europe which is a good thing for the euro as a currency. but it is a lot about the dollar and what is going on in the u.s., trade included. i don't think you can discount the u.s. portion of the factor that is driving some of those costs. yvonne: chris, thank you for joining us.
♪ 8:00 a.m. here in hong kong, live from bloomberg's asian headquarters. i am yvonne man. welcome to "daybreak asia." toan-pacific markets said it fall after overnight losses on wall street, investors wary of president trump's latest move. he is slapping heavy tariffs on steel and aluminum. it draws criticism from home and abroad. betty: i am betty liu. it is just after 7:00 p.m. thursday in new york. jay powell says there are no signs of overheating. china's leaders plot the course for the coming year.
growth and presidential power will top the agenda. ♪ betty: we saw the tariff news early, spooking the equity markets. the selloff for a third day in the row on the s&p. i want to pull up a chart, g #btv 5705. it shows declines we are seeing across all the equity indexes, whether it is europe, japan, the s&p. equityidends on these markets are starting to drop lower than what you get on the treasuries market. that is making bond markets much more attractive, which can be a self-fulfilling prophecy for equity markets. the lower they go, the lower they are going to go. that has implications for the
economy and the fed. yvonne: it was interesting to see the movement in treasuries against these trade tensions we did see overnight. the 10 year yield closer to 10 -- closer to 2.8%. is there a real threat of a trade war? betty: absolutely. we moved one step closer to that trade war. more with sophie kamaruddin, who has a look at the major markets opening in reaction to the tariff situation. >> as you pointed out, we did ofe bonds as absorbers shock. at that shock wave continues in asia. stocks in tokyo fall over 1.5%. 106 handle.g the returning,he kospi
sliding 1%. the korean won around the 10.81 handle. a risk of metal prices being up. that could in turn increase the cost of everything from cars to beer cans. some industries would be hit hard. mineres looking mixed -- miners looking mixed. loose go steel, that stock on the rise. did tell bloomberg tv the company would benefit from trump's tariffs. that is not the case for japan. checking out producers in tokyo. japan is feeling the impact, as they are a major steel importer. some of the top mills, like ofpon steel, get up to1/3
their revenue from steel -- get up to 1/3 of their revenue from steel. trade groups representing automakers, carts -- car suppliers in the u.s., worn it tariffs will exacerbate u.s. supplies. reporting a 13% drop in u.s. february sales on signs of that weakness. yvonne: certainly seeing the steelmakers impacted today. let's get more on the trump tariffs and market reaction, what we can expect here in asia. mark cranfield joining us from singapore. , thiss were pretty choppy tip to the scales lower. is it all about tariffs? mark: no, it is not only about that. people are digesting what jerome powell has to say and the u.s.
yield curve will change under his watch. people are getting used to the idea we might have four rate hikes this year compared to three last year. it has to do with u.s. monetary policy. it is not helping. the mood was not that good and you throw in the potential for a trade war. overall, a murky picture. one thing investors do not like is, the chance we have a policy mistake. policy mistakes are punished by financial markets. that is one thing investors mind right now. has a something gone wrong? the european union says these tariffs are not a good idea and that they might retaliate. it is looking pretty nasty. people want to take their money off the table and come back when the dust has settled. it is unsettling. doesn't exclude the u.s. from china's fast-growing consumer market? if china wants to
retaliate, they have many different ways they can do so. you look at the huge and growing size of the consumer market in china, which is so big -- american companies like apple already enjoying that. and american carmakers, as well. it would be damaging for the united states if china were to retaliate. everyone is hoping china takes a positive, time to consider their actions, like water under the bridge. the risks here are huge. american companies would not be happy if they get excluded from such a major world market as this. betty: you would imagine so. we had a conversation with an earlier guest talking about currency markets, whether this might trigger a currency war. it has been interesting to see the dollar fall. that is a sign to him perhaps
there is not a fear of a currency or trade war. what is the likely currency reaction going to be? mark: everybody is hoping for a calm reaction. on the down path we see dollar-yen heading to the 106 line. they are hoping asian currencies follow that. if the yuan, -- if the yuan follows passive dollar-yen, it is a good thing. falls sharply, that is a bad sign. it would show people china is going to use its own currency as part of the trade war. is allowed to fall quickly, it could be damaging across asset classes. we have seen how damaging it can be when the yuan is weak. it is important the yuan stays stable. betty: that it does not have the
floor fall out from under it to read we have heard president trump talk about this for years, since the campaign trail. why was this not priced more into the market? mark: a lot of people and markets these days do not react until something is right into their face. they talked about volatility would not go up, people lost money. they just wait until it is right in front of them. betty: maybe a little denial. mark cranfield in singapore, live reporter on market reactions to the impending tariffs. you can follow more on this story, all trading on the blog. you can get a market run down in one click. there is commentary and analysis from expert editors like mark, so you can see what is affecting your investments right now. let's get first word news with courtney collins. saysd chief jerome powell
he sees no signs of overheating, even as the growth outlook strengthens and the labor market tightens. speaking for a second time on capitol hill this week, he reiterated the fed will only continue to raise rates gradually. on tuesday his comments about growth caused investors to bet on four rate hikes this year. >> we see wages trending up, many growing to 2.5%. nothing in that suggests to me that wage inflation is at a point of acceleration. i would expect some continuing strengthening in the labor market could take place without causing inflation. >> growth targets will top the agenda when china opens the national people's congress next week. leadership and hundreds of local officials will meet to set policy for the year and have plans to tackle pollution and
excess capacity. we are also expecting the names of the new pboc governor and regulator for banking and insurance. rest paid aworld lawmakers will not see a pay rise in the foreseeable future. the singapore governor -- government is rejecting a 9% increase. the next assessment could be five years away. they say the million-dollar salaries prevent corruption. it was cut among voter unhappiness. theresa may and her cabinet spend more than two hours discussing plans for trading within the european union, refining a major speech just the day before it is due. it is a critical time in the brexit process, with just three weeks before the summit in brussels. leaders tourged e.u.
stop brexit, saying the u.k.'s departure benefits no one. >> britain out of europe will ultimately become a focal point of disunity. [indiscernible] itmatter how much we try, will create a competitive hold, economically and lyrically, to the detriment of all. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ yvonne: still ahead, the fallout from president trump's heavy metal tariffs. we will look at the winners and losers. china is counting down to the national people's congress where new leaders and policies will be announced. this is bloomberg. ♪
york. the communist party gathers for its annual parliamentary session starting next week. our china correspondent tom mackenzie joining us from beijing. how does this impact china, tom? tom: speaking to an analyst yesterday who has close ties to the u.s. embassy and u.s. there was a sense of the pressure from trump and his administration is being felt very much here in china. the fact he is acting on that campaign rhetoric now, whether it is the tariffs on solar panels or washing machines, stee travel they it is are concerned about when it comes to the u.s.-china trade relationship. defendinglighted by
the economic adviser to washington to try to dial back these tensions. what i have also been told is, a key concern is less about steel and aluminum, and more about technology transfers. --re is the ip investigation ip violation investigation in washington now. there is foreign innovation, foreign capital to help china tackle major issues. whether that is moving up the food chain when it comes to manufacturing, or automation to deal with demographic challenges. that is the focus from china policy makers. and they have their own list of retaliated -- retaliatory measures, such as sorghum, soybeans. even companies like apple. those are the concerns. china is trying to focus on cooling these tensions, they don't want to detract from the
major issues they have to tackle. yvonne: we want to bring in liu li-gang. about what tom was mentioning, i have a chart that highlights what he was saying, whether steel is an issue for china, g #btv 4217. from china, we have seen a spike in the past. they really have declined. they are not even in the top 10 when it comes to steel imports into the u.s. are these tariffs really targeting china, and will change how they produce and where they send it to? >> this tariff is targeting all countries, not just china. chinese exports of steel and aluminum are only a small part of u.s. trade. given china is engaging the so-called supply side economics overcapacity has in steel and aluminum the past
few years. we have seen rices rising as a prices rising as a result. that is not the core. we need to look at whether the tariffs can move to electronics and machinery and others. that is a big part of u.s.-china trade relations. that --if we do get to some say this is just the beginning we could see from the trump administration -- could china retaliate? tom: -- >> [indiscernible] iphone production, it is quite small. with such tariffs, we will probably have to rally against that trade protectionist
measures. tom: what do you expect to see from the regulatory changes out npc next week? and are investors looking to grow their footprint in those areas? >> we will see perhaps a big announcement as to how this new regulatory structure will be reorganized. there are a lot of rumors circulating that there could be or partialf merger merger. so we need to watch. regardless, the overall framework is to engage in comprehensive regulation so the can be somehow taken
shadow so in the future, banking activities and the leverage will continue. this could be a good thing for china's overall financial stability. in terms of market access, china made a lot of concessions, allowing foreign banks, foreign financial institutions, to become majority shareholders in financial institutions. we need to see how financial institutions react to this opening measure. because thereat are risks in the chinese financial system, they are less willing to get into the market. betty: i want to continue on this theme of tariffs. we talked to mark cranfield, our live editor, he was talking
about fears or concerns about currencies in asia, particularly the chinese yuan, and if the yuan could decline. the floor might even fallout from under it. do you think there is a real possibility of that, that the chinese might lose control of the currency? liu li-gang: well, we cannot exclude the possibility that the theinbi could be [indiscernible] in economic relations. a reactionary type of policy, given 46 have china as its biggest trading partner. it will spread to the rest of the world. august.hat in 2015, the other policy stance, renminbi this year will definitely end with a
volatility. that is a policy the government will want to push. a sharpsee potentially slide in the renminbi could have a major impact on global markets. yvonne: we are already hearing corporations come through. toyota saying it could raise car and truck prices in the u.s., and it adversely affects carmakers. does this change the dynamics for inflation? does it derail the synchronized growth story we have seen? liu li-gang: in the short-term we do not see that. in china, our forecast of year is 2.1% inflation on average, against 6.1% last year. if you look at february pmi data, price pressure is declining rather than increasing. 4%,inflation will stay at
given china is separate from overcapacity in many sectors. there is very little pass through from high ppi price to high ppi inflation. for china, inflation might not be a surprise. betty: i want to ask you a question about the treasury market. a lot of concerns we might see a looming debt crisis in the because market, in part governments like japan and china are not buying as much treasuries as before. do you think the next source of the debt crisis in the u.s. could come because countries like china stop buying as much treasuries? i think from the chinese point of view -- relatively positive relationship with the united states, given china runs a surplus, some of the money will continue to be allocated into the u.s. treasury.
good, relationship is not and indeed, this asset allocation could be an issue, chinese asset allocators may allocate less on the u.s. treasuries and u.s. asset. -- assets. that is a possibility. tom: how much of a challenge is the fed rate hike cycle for the pboc, particularly when it comes to that rate differential? our view is that china has already reacted to the possibility of the fed tightening. since march last year, china has engaged in a regulation overhaul, onshore interest rates have risen hardly. it remains around 300 basis points. it is a comparable differential
rate to the pboc. if they raise interest rates three or four times, our view is that the pboc will only follow maximum by two times, raising by 20 basis each. given inflation this year will be 0.5% higher than the previous year, china's real interest rate this year will be similar to 2017. this means the pboc will not tolerate spot interest rate hikes. the pboc will not follow the fed interest rate hikes. betty: thank you so much for joining us, liu li-gang, citigroup global markets chief china economist. and tom mackenzie. no shortage of chinese news. to daybg subscribers go
♪ let's do a quick check of the latest business flash headlines. credit suisse boosting bonuses for bank managers. a are told the unit is seeing 7% rise in the bonus pool from last year, compared to a gain of 3% across the rest of the banks. credit suisse is in the last stages of a restructuring plan for high net worth individuals. a deal to buy oil from libya, underscoring the nation's recovery, even as uncertainty exists. bp and shellals by
8:30 in singapore, half an hour away from the open of trading there. seeing some headwinds today when wecomes to equities, given are seeing trade war concerns hitting asia this friday's session. i am yvonne man in hong kong. betty: markets around the world taking a hit on that. i am betty liu in new york. you are watching "daybreak asia ." u.s. willp, the impose tariffs on steel and aluminum imports with an official announcement expected next week. during meetings with metal executives at the white house, president trump said it would mean a long-awaited protection for the industry. the decision may provoke retaliation. china already said it would act to protect its interests and the european union said it would
respond as necessary. have beenp: they unfairly treated by bad policy, bad trade deals by other countries, horribly treated by other countries. they have not been properly represented. more importantly, workers in our country have not been properly represented. >> the u.s. ambassador to mexico is stepping down, joining a wave of officials stepping down under the trump administration. a 30 yearcobsen is veteran appointed by president obama in 2016. she leaves amid severe strain between washington and mexico city over president trump's border wall. forces within the state department say morale has never been lower. stateent putin used his of the nation address to deliver a stern warning to the west that russia has nuclear weapons he says can overcome any defenses. in a two-hour speech he prepared the ground for a fourth term it
in office, which he is all but certain to win. he reserved his harshest language for the united states and said efforts to control russia has failed. >> russia is and remains a large nuclear state. but no one wanted to speak to us constructively. you will listen to us now. clarendon the next to be nominated as a fed house chairman. the opening has been think it since-- has been vacant stanley fischer stepped down. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ yvonne: courtney, thank you. time to see how the asian markets are shaping up. we have been talking about trade tensions.
an ugly day at the top of the trading week. >> and ugly day to and a tumultuous week. asian stocks led lower by japan. both the nikkei and topix falling 2%. the worst drop for the nikkei since february. we are seeing if it can push to the 106 handle. in korea, while we see the kospi slide, we do have the korean won gaining ground, perhaps from upbeat echo data from exports to industrial output. currencies in the and to be -- check out these currencies. the aussie perhaps taking it on the chin. the aussie has the rba to contend with next week. bears out amid
concerns of escalating trade tensions. several --have the from italy, germany as well as china. let's take a look at japanese stocks moving after trump's tariffs degree. of theirabout 1/3 revenue from u.s. stocks. that is a sliding as the carmakers says tariffs will raise car and truck prices in the united states. kogyo gainingt -- ground. saying trade minister the country is a still confirming which countries will be targeted by the u.s. tariffs, given japan is ultimately a steel allied. when it comes who might be you can get a breakdown of steel exports to the u.s., based on trading
partners. it looks like korea is surpassing india, china, japan, ticking up 10% of u.s. steel imports. japan might be bearing the brunt of the pain, given it is a major steel exporter. yvonne: and the strength we have seen in the currency, as well. thank you. we have been talking about asian metal producers. there were fears of u.s. tariffs. now they are slumping again. let's bring in our reporter from singapore. james, break it down for us. who themore about winners will be into the losers are. james: it is clear the winners will be u.s. producers of steel and aluminum. their stocks have been rising for some weeks on information of news like this. there are lots of losers around the world. let's focus on asia.
japanese stocks have been falling, and japanese steelmakers like nippon steel. hyundai steel has been declining. exposure quite a big when it comes to steel exports to the u.s.. aluminum is more specific. there are two or three big aluminum companies. we will probably see them fall when the markets open. betty: obviously wider trade reaction is important. we have been talking about global trade war. james: yes, that is the big fear. we had reactions already from europe and canada. japan is considering -- the reaction of china will be important. on aluminum it is more affected. how this will escalate -- what we don't know yet is what the
exemptions are, if there will be any. we will have details next week. there is a little uncertainty there. it is very tense as we wait for other countries to react to what trump has decreed. betty: thank you so much, james poole in singapore, on the impact of these pending tariffs. naturally it had an impact on u.s. auto stocks. auto sales numbers are out. expectations were tepid at rest, but it was worse for detroit's big three. already slowing auto industry. ramy inocencio at the wall with bloomberg chart you need to know. what type of pain are we talking about for the autos? ramy: these are coming out from ubs as well as coxe automotive. -- $400 of aluminum.
but with tariffs that would likely rise. raw materialubs, costs could rise $300 million. for gm that could rise $200 million. year on average, possibly $200 to the total price of a car. thel is up by about 1/3 course of this past year. aluminum has been up 25%. hop into the first bloomberg terminal, g #btv 2286. u.s. auto mention, sales numbers for february did come out and they were not good. they were worse. 6.96 million cars on an annualized basis. this is down a 3% year on year. this is not because folks are not buying small cars. they are not buying big cars, suvs, pickups trucks.
50% of the numbers it down for fiat chrysler's ram pickup, g.m. silverado. all the big ones car companies were relying on in order to make a profit. now buyers are saying we will not do that yet. there was one bright spot, es, up a little more than 1%. weighingis not counter the broader terms. gm, down almost 7%. we were expecting 4.5%. the it nearly 7% down, expectation was for 6%. fiat chrysler beat estimates, a contraction, down 1%. we were expecting a fall of about 11%. we are seeing this knock on effect of what has been happening, not just with auto sales numbers, but the trump tariffs.
1462.nto g #btv you can see the relative performance of fiat chrysler up 86%. but gm motors is flat and ford is down 19%. yvonne: these tariffs could not have come at a worse time when it comes to carmakers. switching to japanese carmakers we did see toyota the only one to see again. what happened there? ramy: walk with me this way and i will show you what happened. ass is the toyota camry, well as the crv. both of those are seeing surprises. those of the top two selling models for toyota. let's flip up the board. i want to show you the numbers mostly in the red. set -- a beat four-point 4%. honda, 5% down.
yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. among themembers figures to watch for the national people's congress when it kicks off next week in beijing. our china correspondent tom mackenzie reports. these of the five new faces of china's most powerful governing body. loyalist, their rise in forces -- reinforces the president's power. toward-- a tilt provincial experience. collectively, they rolled over regions both rich and poor.
one spent three decades in shanghai, one of the most prosperous cities. liaison toersonal president vladimir putin formerly ran one of china's poorest provinces. of ane sat at the head province with a high reliance on the state sector and investment in tents of growth. leadership, he diversified away from manufacturing. another is the preeminent political scholar and the only new member without provincial government experience, and an advocate for strong central leadership over democracy. he is a key supporter of xi's consolidation of power. we will have to look ahead to the next two weeks. let's look ahead to what is
coming up in the next two hours. what are you watching, there are trade tensions, the threat of a trade war. >> the timing is quite precipitous. what will china do in response? we will look at the chinese economy. we have a bloomberg view columnist who talks about the consolidation of powers you jinping has. is, if has been arguing that will in the short-term be good for the economy. but it is a serious concern what happens in the future, as well. about 40 minutes from now we have a guest from the indonesian coordinating board, the chairman. looking for direct investment into indonesia itself. and we have haslinda amin conducting that interview. yvonne: that is interesting, we had him at an event.
he mentioned it would be pretty boring in 2018. now we can ask him what he thinks now. minutes, we have a jpmorgan asset manager looking at global market strategy and how all of this trade at the , how that trade spat affects your money. yvonne: see you in a couple minutes. beijing fired another global shot at dealmaker's making deals with chinese billionaires, saying even -- not even the most well-connected tycoons are safe. one company is the latest to be questioned. days of -- when chinese corporations had connections with the government, are those days over? >> if you are a business person looking to hang out with chinese billionaires, you have to be
cautious. you don't know who will get the hook these days. that is the message. they have denied this even happened. appointed by the czech president as an economic adviser. he was very well-connected in europe, meeting with key policymakers. and then he found himself potentially under investigation. it is a warning of doing due diligence. is anybody safe, anybody protected in china? territory.n new the past year has shown that. we have seen a chairman meeting with jared kushner for property deals not long before that and now we have this case. another high-profile chinese
billionaire. there are many chinese billionaires doing just fine, jack ma, others. the question is -- it is more on the due diligence side. you don't know who is safe anymore and have to watch yourself. you so much, as the crackdown continues in china. to bloombergd over markets asia, a quick look at how markets are set to open in a few moments time. you can see at all on the board after the big declines we saw here in the u.s. angapore futures showing decline of 0.3%. taiex falling over 1%. in malaysia, looking for significant declines, as well. yvonne: not a good way to end this friday. markets in china will be a key focus. we did get the number, official numbers yesterday.
we are still seeing how things go for china, especially in light of trade tensions. the yen will be interesting. we do see a weaker yen against a weaker greenback. that could be a signal china is a trade warge potentially. hang seng down, we could be breaking below the 31,000 level today. that is it. market coverage continues. betty: this is bloomberg. ♪ mom, dad, can we talk?
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