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tv   Bloomberg Markets Asia  Bloomberg  October 29, 2018 10:00pm-11:00pm EDT

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rishaad: edging close to -- again, we had the weakest fix since may 2008 just about 45 minutes ago or thereabouts. does it matter? john greenwood's view -- yvonne: the guy let it go in a way because trade wars are going to be going on. they're digging their heels so perhaps that may not be the best step for china right now. measures from china according to our sources that they might be helping out some of these carmakers as well by cutting their taxes there. that is certainly going to be helping a health. we saw some carmakers jumping today. pretty mixed bag, tepid compared to the wall street session of course which was huge swings in the market and we ended with things lower on wall street. mostly lower, taking a look. hong kong stocks still out of
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favor close to 1% right now and japan nikkei stocks about 163 points but for the most part chinese stocks are under pressure here. today we saw the dollar nudge higher. i think the highest in the last two months or jumping the most in the last two months. it tends to get that status evident we see some of these trade headlines with president trump saying if the talks with president xi fail, they may be seeing another round of tariffs in the pipeline. the dollar-yen pretty much weaking. we are seeing strength in australia. we are up about 1 fifth percent which it comes to the awes can i dollar. let's focus on the chinese markets. we're seeing the eight shares down about .8%. large shares about a 3% decline. we're only down about laugh a
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a percent at lf the moment. a lot of earnings to take you through. we've been talking about the bank earnings, broke rages. oil players in the fray so things to really start watching the -- as the earnings season really kicks in. keep rishaad: absolutely. hong kong small captains down about 12.6% soft. -- her county trend for down trend for them taking place. this bear markets cycle should be rising but that's not happening at the hole. -- moment so maybe there's more pain in store. et's get thoughts on the juan. we saw it fall to the weakest to the dollar in more than a
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decade. wes joins us now. what's the score? wes: hi, good morning, everyone. we have these triffles that are being discussed and the u.s. that's not going to be intoed for the yuan. it's surprising to me that just a week ago the government was announcing all of these measures to support the markets, support the economy and they seem to be like ancient history now. nobody can remember what they were, including me. we had this number report this morning. one of the newspapers affiliated with the official news agency said it would be unlikely for the yuan to weaken to seven. it seems that the chinese are always missing that mario drag a-ba zooky moment where he said
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we'll do whatever it takes and everyone paled attention and for china to say -- again, it came through in this editorial in the number that it would be unlikely for the yuan to weak on the seven is hardly a line in the sand. it seems to leave open the possibility that it will weak on the seven and if they want to previous to -- prevent that they'll have to bring more firepower to purchase this currency for aggressively. yvonne: trying to look at where china is putting out these fires. when do you think we could see some type of selloff in china start to stop? when do we find a floor, wes? wes: i wouldn't predict that but we do hear, from time to time we hear about this national team buying, which is sort of like code word for speculation that state-backed
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funds are buying those. traders are passing on speculation that the national team is in and sometimes that helps stocks and then we say oh, this is great. stocks have responded but then they can't hold the gains so it's really a concern that stocks can't seem to hold feigns without reports of, without speculation about this national team buying and like i said, these measures that were announced -- there were a group of officials who announced a bunch of measures to help stocks last week seems to be sort of age she want history. so i think -- ancient history. so all of those are concerning signs for the stock market there. rishaad: let's go to the question to the -- of the dame. i think it is. where are the cockroaches hide something please respond if you know the answer or you think you know the answer. what do they actually mean by it?
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>> i think we're just trying to k people where the biggest inefficiencies in the market -- hat assets classes are the most priced at the moment? in my view, to offer an answer on this, i think one of the most mispriced or missed -- offtrack ideas in the market right now is that the stock selloff we're seeing is going to keep the fed from raising interest rates and recent comments from loretta master, who's one of the fed officials, she said she hasn't seen anything that would stop the idea that the feds should continue on this gradual pace of rate hikes, so the rise in treasury yields that we've seen this year i think has maybe been delayed or postponed a little bit but not put off altogether and i think the idea
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that the stock market has been inform to keep the fed from its gradual path of rate hikes is offtrack and we'll certainly see a hike this december. yvonne: yeah, that take on cockroaches obviously the buffet metaphor there. you see one, usually there are more hiding somewhere. wes, thank you so much. if you have more commentary or anything that you have -- rishaad: one other thing. don't forget. the cockroaches can survive a nuclear attack. yvonne: they can fly, too, the ones in hong kong, at least. rishaad: and they can come from anywhere. they don't have to be nearby. yvonne: engine that's what we want. you can go to g.t.o. go with questions for our guests. joining us from sydney is paul. hey, paul. paul: thanks, yvonne.
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turkish and saudi prosecutors met in is stan bull to discuss he kerr shotgun killing. turkey has leaked evidence to the media in an parent attempt to put pressure on riyadh. new home sales cooled in hong kong. yet another sign they emay be heading if or correction. the value of transactions so far in october is $1.4 billion, the lowest level for 16 months once holiday distortions are excluded. the number of deals stands at 1,130, down by almost half from september. bank of america the plans to pay special bonuses for a second straight we're after -- year after seeing profits jump on tax cuts. cash boneses of $1,000 will be
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paid to eligible staff earning less than $100,000 annually. many higher paid employees will receive a stock award early next year. jeff bezos has set a new record. his personal fortune has slumped more than $19 billion in the first -- last two trading days alone. the most ever according to the u.s. records. bezos is still worth $128 billion. global news 24 hours a day on air and attic tock on twitter. powered by more than 2,700 journalists and analysts this more than 100 countries. yvonne: a look at the potential impact on earnings later this hour. rishaad: and how the tragic
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rash of a lion aircraft puts air travel in question. yvonne: air travel is back
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in the headlines with a tragic crash of a lion airplane on monday. the almost new 737-8 came down just 15 minutes after takeoff amid signs the crew was struggling with a problem. rishaad: our next guest runs avalon, the world's number three aircraft leasing company which holds lion air amongst its customers. c.o.e. domhnal slattery. it's horrible what happened there. one of your customers. we a very new plane and can't really speculate as to what happened but definitely a
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big employee if this aircraft, which is brand-new. and the families, of course -- >> absolutely. that's the first point, and the families and obviously the people at loan air. the stress around a situation like this must be terrible but i think the facts are at the moment, the f.a.a., the u.s. ntsb have been asked by the indonesian government to southeast in the investigation into what actually happened. until we know and the black box is recovered, it is effectively speculation. you're right, the aircraft was effectively brand-new but it's a drive ty of the bog 737, which has been flying safely around the world for 40 years. almost 5,000 of these aircraft sold. liner is a very big operator. it's not appropriate to speculate until we get the facts. yvonne: and we have seen independence nearbya improve in
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terms of its credibility as a safer international type of country too -- rishaad: their safety rating has improved grately. yvonne: does that re-emerge questions about the safety? >> yes, anytime there's an incident like this it raises questions but you're right, indonesia has improved dramatically in the last five years on its safety record. but lion air is growing very, very fast. e lowest -- biggest low cost air company in indonesia. there will be questions around the procedures and i'm hopeful all of the analysis come through. rishaad: this wasn't one of your leases was it? >> no, it wasn't. rishaad: there was one a few years ago which fell short of the runway that was yours. your business has been growing.
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you have ambitions to become the number one aircraft leaser. you're still number three. how is the market evolving this a macrosense? >> aircraft leavesing at a macrolevel continues to grow and it grows typically at twice g.d.p. airlines all over the world are continuing to lease more and more aircraft. currently we're hitting 50%. half the airplanes in the sky at least. i think that's going to continue to grow because airlines are acting more like customer sales marketing industries. we're seeing it in the hotel industry and other asset-help businesses. the largest hotel operator in the world doesn't own a hill? hotel. yvonne: cost now seems to be an issue for a lot of airlines, whether it's rising fuel costs -- how does that impact you as a aircraft leasor out there?
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>> you point out fuel, f.x. volatility for sure. we lock in our lease contracts 10 years in advance so we know what our cash flows are. we lock in our finances so we're effectively a risk spread business. yvonne: have you seen any delays in payments from your customers? >> the stress points are in different points of the world and right now we're seeing more airlines suffering cash flow challenges around fume because they kind of got addicted to cheap fuel the last number of years and fume has increased dramatically and we expect to it continue to go up. rishaad: where are the weak spots and the strongest spots? >> the single -- the single biggest opportunity remains china. after, that vietnam is growing extremely, extremely well and the penetration of aircraft to
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-- per capita is still very low and, of course, india is coming through continually and we have just surred a beg market forecasts for india where we expect it to become the biggest market opportunity in the next 20 years, may even outspace pass -- outpace china. the u.s. market typically grows t one two one and a half times g.d.p. wrrs here in asia, we expect to see 8% to 10% growth because there's a lot of catch-up. a billion people between india and china are going to move up into the middle class in the next 1 years. all of them will >> are going to get on aircraft for the first time. yvonne: do you see china actually, i guess, steering closer to airbus in light of all this? >> yeah, it's obviously --
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yvonne -- rishaad: you and boeing and airbus. >> we're hedged. the issue here, and i said this earlier in the year, in this trade war really amplifies, it will make brexit look like a regional warm-up act. over the $1 in $4 next several years from boeing are expected to bo to china. and also airbus. airbus aircraft are a part of general electric and pratt and whitney engines also. it's a big, complicated issue you and this the last months, no chinese earl has ordered a hill? air, -- aircraft. rishaad: by they've taken lease agreements with you? >> i'm talking about ordering aircraft itself. so they're sending a very clear signal certainly to washington
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and boeing are not happy about this. rishaad: let's move to your business itself because we've had all these trials and tribulations with a.n.a. group, which had a huge stake and you sell 30% as well to a japanese company. has that pressure of the huge debt of h.n.a. built up and is it incumbent on your smourleds? >> we suffer indirectly. as 100% of the business warm also independently run and insulated from the got perspective but the bond market didn't like that and we're a big player in the u.s. bond markets. earlier we put in place new governance framework which basically completely insulates avolon from h.n.a. h.n.a. have made great strides
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and have started to issue bonds in the last week or two so maybe some admitter of hope there. yvonne, which domhnal slattery, thank you very much. great conversation. we want to talk you through the markets. auster man will be hitting the 6 7 level. markets, though, pretty tepid. rishaad: david marshall joining us with he's his thoughts on the banking end story as well. ell.
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yvonne: german chancellor angela merkel has confirmed she will stand down at leader and leave political office in 2021. a government weakened by infighting and coalitions being punished in recent state elections. rishaad: we have more on this. jockeyinging for seats has
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already begun. three names have been in the fray but there's nobody standing out. >> combrearks three names all kind of represent something different. so you have the liberal, the conservative wing and then a former rival of merkel so the person merkel would probably hewsst as her successor, anagrette, seen very much in the len really a we think of the c.d.u. a bit more moderate on immigration and gay marriage but if merkel were to handpick a success ore, that will be her. jens spahn, a health minister. 38 years old. comes from the conservative we think of the party. he's made jabs against merkel. she put him in the party to let him not criticize her too much from the sidelines but he does
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plan to run for the party leadership and then you have friedrich merz, a former rival, left plex, well liked by the business community. those are the three declared potential replacements right now. yvonne: you have all these issues in europe right now. you have italy and brexit. do you you think markets actually wants her to stay given the instability around the region there is this >> for europe she's kind of like the leader of europe. that's how she's viewed. she's viewed as the voice of reason in all these surface. . she kind of has the last word on many of the issues facing the effort u. now. we did see stocks rise in germ me. there's some talk that maybe if she's out, there will be a stimulus there. they'll ease up on austerity measures, so from that perspective, the markets might see some opportunity but longer term, the questions about
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italy. you see the rise of nationalist parties in various parties. the rise of right-wing populism and merkel was staunchly against this. she represents that liberal democracy holding the beacon for that in the e.u. and, you know, is seen as someone who's standing up to putin, striking the right balance between the u.s., dealing with brexit, so there are many issues facing the effort u. where she was playing an important role. she's not leaving the scene just yet. she'll be around for three more years so the idea from that -- what it looks like is that whoever becomes the leader of the party, will do more setting the domestic agenda while she really takes on that global role and is steel there to kind of stabilize they think so. rishaad: thank you so much for that. let's look at the busy headlines. a new chief business leader was
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fired on friday then replaced on sunday. speegle promoted vision o'hara but then rescrenled the offer and picked gorman instead. yvonne: china announced a shares still to shore up capital in the face of a slowing economy legenders are being urged to support. it will come into effect next year. rishaad: shares, what are they doing? they're on the way down again. third quarter earnings coming in on an uprating profit level. seeing a bit of a jump. the insurance saying it better reflects the performance to more than $12 billion in the first nine months. implying a rise of 12% to the three months to the end of september. yvonne: let's look at japan narkts as we get closer to the lunch break.
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nikkei, up about 2/3 of 1%. the top i said up. automakers certainly helping the rally here today after china is said to be cutting terrifies on cars. -- tariffs on cars. std
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>> it's 10:29 in hong kong, 1:29 in sydney. i'm paul allen. ources say it's is prepared to ap tariffs on all chinese products. the two chiefs are expected to hold talks next month and an announcement could come early in december. that would mean the effective date would be about lunar new year in early february. chinese carmakers have followed u.s. and european brands follow after beijing was said to consider a tax cut to stimulate
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the sector. the trade war with the u.s. hets the con somer spending power. our sources say china's top economic planning power is hike the rate to 5%. we're told a protest may happy -- happen on thursday and would see wokers leave their desk attempt. they're said to have compiled a list of requests for the company, aimed at helple anyone affected by sexual harassment or power dynamics at work. data from the lion aircraft says the plane hit the sea at hundreds of miles per hour. it plunged from 1,500 meters in just 21 seconds. it was carrying 1 9 people, all feared dead. shortly after leaving jakarta,
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one of the pilots requested permission to return to the airport. global -- global news 24 hours a day on air and attic top -- ticktock on twitter. i'm paul allen, this is bloomberg. rishaad: economists expect the bank of japan to maintain its policy settings. its two-day meeting wraps up wednesday. the question, what are investigationors looking for and watching if? clooth lean is in tokyo for us. vonne: a couple of weeks ago when you interviewed himming he told you about the bond market. >> very challenging for the bank of japan because they philadelphia it clear in july that they're going to maintain this extraordinary stimulus. the governor in his interview said it was taking us longer to get to the target then we
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thought. that seems obvious. he said that before. nevertheless, the longer they guy buy and the more bonds they contortions may appear. one of the things he's concerned about is a lack of liquid bey in the -- liquidity. he said it's almost like their controlling -- following his instructions a little too closely. let's listen to what he said. > markets took their -- 10 basis points. [indiscernible] sometimes there are buyers but -- so this kind of market function is not good. >> the july tweet when the bank of japan raised the top of its
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rget radiole for the j.d.b., racing its trading range ceiling is about increasing still laws. making sure they can -- still lulls. making sure they can maintain this for a long. . bloomberg news the last few days found out there are self-members of the b.o.j. who are in favor of raising it more, programs 2.5%. it means something. asahi news also reporting that the b.o.j. is nulling over some changes that would help make trading more active again, etc. i think that's something people are going to watch very close my but this question for the bond market is a pretty significant one. rishaad: what about this inflation target the b.o.j. has?
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if they don't hit that 2% target anytime soon, it seems like we could be waiting for -- >> we could. i like that. let's understand that yes, the b.o.j. is maintaining its forecast. its inflation target, 2%. it's going to be reached. maybe not for a couple of years but they're going to get there. in this interview, he said rising wages are critical to achieve this is inflation target and we happened to get some encouraging numbers when the japanese jobless rates fell, the labor market getting even -- and the job to applicant ratio getting higher, 1. 4. 1 4 jobs for every 100 workers. i have a bloomberg chart to put this into perspective. this take a look. you have that unemployment rate
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coming down on the top panel. on the bottom panel, that yellow line is jagged but the trend is still on average higher. that blue line is the morgan stanley wage indicator. if you look at it that way you could say yes, there is some problem. the bank of japan likely to not change anything but their report at the end of january, we'll see what they say then. yvonne: kathleen, thank you. let's check on the chinese bank stocks. it is a big week when it comes to earnings. bank of china falling the most in two years. morgan stanley actually cutting their fargets twice. off .6%. pretty mixed bag here. seeing kind of more negativity when it comes to the sector over all, given concerns about
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trade wars, china clowe slowing down. let's bring in asia bank's senior analyst david marshall joining us from singapore with the latest. david, wie heard some bear eshe calls given some of theserings reports we've seen, whether it's bank of china or whatnot. how do you see things at the moment? >> clearly the outlook is dark engine in some ways but the banks are actually doing quite well. there's a bit of noise in the quarl movements and profits but generally speaking we're seeing rises in big products for the big banks. provision is up but still the banks are able to report rising net profits. the clampdown on shadow banking and the fees they can generate but the net interest revenue is
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rising and that may help the join joint stock banks. any easing measures in china, maybe will have slightly some more positive impact on that. overall profits improving. basic liquidity looks stable. it seems to me that the big banks in particular tend to look at the bottom-line number of net broadcast they'd like to report and then say what can we do to achieve that? and i think that in some past years, the chinese banks have under provided to avoid reporting lower profits but i don't think that's the case now. looking at the big banks, yeah, provision is higher in many cases but they are writing all -- off their performing loans. and at the same time they're building up low loss reserves.
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butter in setting aside more reserves for their proverbial rainy day. yvonne: bank of china, ag bank also boosting capital. do you think that will be enough? they're still dealing with the shift of these shadow banking assets on their own books. >> yeah, the schad tow banking, coming back onto the balance sheets of the banks. of course it's positive for china. instead of having this big gray area. that's definitely a big challenge for the mid tier and joint stock banks, both in terms of liquidity and funding and margins and capital. basically the joint banks are just meeting the minimal
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capital requirements. the big four are more comfortably placed whereas the others are only just slightly above that. it's going to be really difficult for any chinese to left that ban. a little more wary of the joint stock banks because of those challenges i mentioned but we like to look at the equity markets to see what they're saying and if they agree with us. it's interesting. maybe even 506 or four may have been trading well below value. it's a difficulties time for them to raise capital. trent: david, you mentioned those levels that are un believable we have bank of china's earnings. good capital tier one ratios. they're unloved though, aren't they? why?
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>> i think there are many fundamental factors. one is the transparency people worry about in china. but to be honest, there's a more fundamental one and it relates to ownership. virtually all the chinese banks. spectacular the majority of them, these are government-controlled banks whose role ultimately is to support chinese economic growth and development. no. maximize shareholder rrnls. at times the interests of the two overlap and since the financial crisis, i think people have recognized that the quid pro quo of that very strong state support, particularly for the big banks is that the banks have to be to achieve the effectivest.
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yvonne: david, thank you. david marshall, asian banks senior analyst from singapore. our exclusive interview with the c.e.o. jean sebastian jacques next. note. ♪
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yvonne: the heads of top mining firms have been speaking to bloomberg at the international conference in melbourne. rishaad: even amid slowing rowth and the ongoing -- haidi ? haidi: it comes as no surprise to anybody but the fist question on anyone's les as we speak to some mining c.e.o.'s and business leader, what
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impact, if any, the burgeoning trade war between the u.s. and china is having on their expectations and forecasts and so far all of the people we've spoken to are optimistic when it comes to prospects in china. including the rio tinto c.e.o. speaking to us exclusive. the higher grade continuing as we get into the northern winter there. he also spoke about a greater desire to look for opportunities for more partnerships within china which is a fairly bullish indication and also one of the themes of this year, which is we're starting to see the upstart of the cycle. and investors willing to invest. take a listen to what some of our investors had to say.
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>> i was with rio tinto. we spent some time in china and met with any suppliers and partners. the model was pretty good. lots of talk about trade wars but if you look on the ground. ook in terms of aluminum, iron ore and copper, they are full. so the chinese machine is still working very well. what is absolutely clear and it's no real surprise, the chinese government is putting more money into the system, providing infrastructure. we didn't expect it but they're utting more money into the pro individuals rble sector. china has the highest demand for steel. and looking forward, which is more important is we have no doubt that china will lead the y in terms of electrical
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vehicle evolutions. which means additional aluminum and copper and several of the minerals related to that. so we see significant sealed and -- upside and other things that will jean rate more demands for our products. we are a capital business. we take the long-term deal. are we overly concerned about the trade war? no. >> you look at doing deals with partners and competitors. is that something you'd be open to in china? >> absolutely. remember, we signed a partnership on -- in order to team up forces to see if we can find some ways to meet market demand in the long term. yes, we are open and the partnership we signed recently with -- and with apple.
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break through technology on aluminum willle make it an absolutely green puck with no emissions so yes we are open. >> are you looking at more divestment over the next 12 months? >> you know, i've answered the same question. >> i'm sorry to bore you. >> that's fine. i know the answer. not all assets are worthless. we will continue to try values for some of the assets which we regard at neutral. at the same time we have the best bond sheets across the industry. so yes,, however, there will be no fire sale whatsoever. we will do it only if we can extract value. haidi: they're in an upbeat immediate -- mood in morning. the trade war always at the top of mind but it seems the
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broader commodity picture is in a pretty sweet spot at the moment. rishaad: thank, hide -- haidi. headlines from donald trump. he's been telling fox news and people that a deal with china has to be great boise because china has drained the u.s. and he's predicting a great deal with chone ask that's permitted a bit of a turnaround from what we're seeing currently. yvonne: let's look at the boards right now. this weakness seems to be erased right now. a-shares, large caps turning positive on some of these comments from the president. also in tandem, a separate statement coming from the csrc, the securities regulator in china. in ha statement responding to market concerns, we've heard them talk about new share buyback programs. they're easing the trading resistance now and they are
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encouraging listed companies to move forward when it comes to m.m.a. and restructuring. so more verbal support from the chinese authorities once again. rishaad: the indian session is an hour away, thereabouts. joining us ince from mumbai. whoa how's the day shaping up? >> good morning, let me start off with the futures, which have opened lower by about a father percent. two sectors in focus today. the power sector, from what we understand, the indian supreme court has directed the freshman electric city regulator to come up and make a decision on higher data within eight weeks and they're considering the increase in coal costs. this is likely to have a positive bearing on companies second power and the
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one is the indian reality space. which is -- this is where we're starting to see some effect of the shadow bank which has been seized by the government will show up when it comes to oblems in the -- considering the fact a lot of home financers are finding it difficult to disburse loans. we're watching out for power stocks and today's rates. reports that a weakness looks to be over right now. is that the general consensus you're get something >> yes, and india is getting out a lot of measures to counter this significant weakness we've seen over the previous few weeks. one of them, of course, is also the facts that it's considering
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allowing some of the imports from china to be settled in yuan. of course, as you already mentioned, that has been -- there has been considerable weakness and this is likely to counter some of that. trading to so allow be settled in rupees. as of yesterday, we saw the rupees close flat at around 0.34. rishaad: thank you, agan. coming up, global policy editor facing off. it is that time of the day, battle of the charts. ♪
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yvonne time for the battle of the charts. we have two big contenders here today. fwarfield reynolds and our global economic and policies editor kathleen hays will put their best charts against each other. viewers can access those by going to the function at the bottom of your screen. you're judging today. rishaad: thank you so much. yvonne you're: you're welcome. rishaad: garfield, it's another opportunity for you to shine. >> thanks, rish.
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i tend to be a bit bearish and my chart is certainly bear eshe. no secret it's been a horror month for equities and want to look at what might be driving that and if we might see a turnaround anytime soon. i took the bloomberg financial conditions gauges, which you youing find on the terminal at fcon and looked at not just the u.s. but also europe and asia has been terrible for a long time so i blended those three gauges into a custom index. that's the red and the green lines there with red independence indicating restrictive conditions and verlaid that with the mscr all-world country index which has been breaking down and you can see from that that unless there's a major turn oonled in financial conditions, stocks are not going anywhere good in the near future. and even a trump-xi trailed
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accord might not be enough to fix that because there's so much else that's going wrong in the global economy. rishaad: ok. well, from sydney over toe tokyo and kathleen? kathleen: well, i have to say -- i love garfield's chart. i loved it when i first saw it yesterday but i think it's important to put perspective around this. people see that big drop this stocks ask say boy, oh, boy, can the fed erase rates in december? i want to bring up a chart that puts this in perspective. it's a really simple charlotte. the top line is a 10-year fracturery yield, currently at 3:10. the 10-year yield in blue under that at 2. 3 and the yellow line is the fed rate. the top range is .25% rate hike expected in december, and yes, the odds aren't quite as
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high as they were, they're still leaning solidly in that direction. we do see a little bit of a pullback in yields but compare that to purple line, the big plunge in the s&p 500. that's a much bigger realaska. the bond market hasn't budged i think in terms of expectations. not quite as big as they were be you the bond market follows it so closely and i don't think they've jumped on the big bull ak bandwagon just yet. rishaad: kathleen, good stuff. i'm going to give it to garfield, however. his has a more prohibitive quality to it. have a look at those charts and save them as well. note ♪
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