tv Bloomberg Daybreak Australia Bloomberg March 21, 2019 6:00pm-7:00pm EDT
welcome to "daybreak australia." sophie: we are counting down to asia's major market open. paul: here are the top stories we are covering in the next hour -- wall street closed higher. wall street welcomed the dovish look at the fed. sterling had its worst day in two months as a no deal brexit looms. theresa may facing growing anger as she meets eu leaders.
the follow-up from the boeing weighing argan rating move. >> stocks surged in a broad-based rally. the dow was up .8%. it almost felt like a delayed reaction from the fed's dovish stance yesterday. the s&p 500 the highest level in five months. every sector in the green except for financials, which have really been hammered this year since that fed dovish turn. theave seen that bump since presidential elections two years ago. all of those games have been wiped out. levelsdaq at the highest since october. s&p futures right now pressured a little bit. let's see how we are setting up for asia, though. >> futures are looking mixed. as you pointed out, tech also
focused on asian assets. tencent's profit slump unveiled today. in japan, we are watching resource players. we're keeping an eye on , particularlywell biogen's japanese partner after a failed alzheimer's trial wiping out more than a quarter of the company's value. we have that's rising, money --kets indicating a rate cut we have bets rising. >> the grounding of the 737 max ripple through u.s. economic indicators from
international trade to durable goods. jpmorgan says there's little chance of a short-term impact, but further ahead, the disruption may affect the makeup ,f gdp through rising inventory less investment, and fewer exports. boeing continues to build the plane but says it will slow production next week. brazilian markets slumped after the former president was arrested as part of the sweeping market correction investment. it has expanded to track a swing of executives. has delivered an election boost to benjamin netanyahu, saying it's time for the u.s. to recognize israel's sovereignty over the occupied golan heights. held the golan since
capturing the area in the 1960 76-day wars. and energy houses bracingrn australia are for destructive wind as cyclone veronica approaches. people are flying out of northern australia. it is also expected to strengthen the category for when across the coast on saturday. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 100 20 countries, i'm selina wang. this is bloomberg. >> jumping back into the u.s. market close, stocks rose to a five-month high as the dollar rebounded and bonds stabilized. this as investors digested the surprise move i the fed yesterday to hold off on raising rates this year. su keenan has more on this and given the rally today, some
strategists think the fed did not need to be that aggressive going from two rate hikes to none. >> yesterday, it looked like the market was a bit spooked the dramatic move, but after the second day digesting everything, it appears many believe the market got it right and that said maybe perhaps was too aggressive in their original assessment. au see the dollar snapping four-day slide to rise. bonds stabilizing. semi conductor index was the star of the show. it almost hit a record intraday, fell just shy at the close. this pauseelebrating on the right height action. check out the big movers and they were big indeed. apple of in a big way as analysts say the momentum is back. a lot of positive comments for sales for apple. -- micronmacron
interestingly saying a lot of the bleeding is over. you did see a lot of the chip sector been a buying -- benefiting. jumping, showing investors are willing to jump into a brand name and this sets off a very strong jumpstart in the ipo market, which has been lackluster to this point. biogen, another big story. take a look at the two-day chart and you see how it just fell off the chart, down almost 30%. analysts were concerned the company could lose 1/3 of its value. major hedge funds are exposed because biogen had become a sort of darling as a high risk/high return gamble. in this case, the risk is playing out. let's take a look also at the bloomberg. we can see that chips put in a
record high year as the sector moves into overbought territory. we are seeing a better than 30% rebound, 35% rebound with chip stocks as a group from their year low just a couple of months ago. finally, we can look after hours, nike really grabbing headlines. in china, but9% disappointing sales in north america where they tried to launch a rebound is what is dragging the stock down after hours. that is at least the headline. behind the headline is a lot of positive results in many units including their performance in china. >> let's look at commodities. .e saw a stronger dollar what is the story? >> we are still seeing a .elatively decent rally
notice that the rally, pretty much holding strong and the price again post is 60. if we go into gold, we also see a similar action for gold under pressure with the stronger dollar. you can see it really got a bump up in the past 24 hours and then look at copper, which had been going gangbusters. that also sagging amid the dollar gains. >> thanks very much for that update. bloomberg has been told european leaders are considering giving theresa more time to get u.k. lawmakers to support the brexit deal. let's get over to maria at the summit in brussels. we understand the eu will be granting an unconditional extension now. >> that is correct. we are not just looking at an unconditional extension until april 12, and that is because it
is the final day for the u.k. to decide if it wants to run in the european parliamentary elections, so we also have potentially two more deadlines. one would be in may if the deal goes through the u.k. parliament. another when that is still being considered is a longer one if there is a no deal scenario, no deal approved in the u.k. parliament and things do not look as clear as european leaders would like to see, but the bottom line, given that we are looking at a number of deadlines, is european leaders have moved back from an eminent no deal, so the u.k. next friday thed not crash out if document we have seen is confirmed by european leaders tonight. what does it mean for eu unity? we have seen some conflicting words, from president macron saying of parliament rejects that deal again, then it is no deal. we hearing from french officials
that they are aiming to ensure no no deal brexit next week. of the eu alls seeing eye to eye? >> well, they will have to. any concession taken tonight will have to be approved the 27usly by the eu 27, countries that make up the european union. that it is clear that when you look at the tone, there are different camps. the french will tell you they need clarity from the u.k., we need to move away from brexit. we have many other things we need to worry about and we have to make a decision now. delaying it has not solved anything over the past three years, but you look at other countries who will tell you if we can avoid a no deal and get to a deal that prevents economic repercussions for everyone, then we should try until the very answerinutes, but it to your question, any decision made today will have to show eu unity
because it has to be approved by everyone in the eu. an eye onfor keeping that ever evolving story in brussels. 's car wash, brazil corruption investigation sees the arrest of the former president. we will be live in brasilia. tonext, we talk international investments advisory about the red flags it is seeing in the global equity rally. this is bloomberg. ♪
u.s. stocks closed at a five-month high as investors continue to welcome the dovish mood at the fed. let's look at the applications 's newfoundll patience. with this started equity rally. it seems like a delayed reaction to what the fed said and did yesterday. has anything fundamentally changed across economies in the markets other than the fed's more dovish turn? >> not at all, but i think markets were happy to see that the fed is reacting the way we would expect when we start to slowing growth. >> what about the inflation picture? does this give more confidence to investors that the equity rally could continue if the fed does not feel pressured to act? >> we don't see that. we don't see a lot of momentum or a lot of motivating factors to drive the equity markets a lot higher.
i think we are in a holding period. the warning signs we see could lead to it's a play out a down market and we hope that does not happen. out, a downlay market. >> do you think the fed is doing enough to avoid a japan-style deflationary situation? >> we think the fed is using the perfect recipe. we love that the fed said they are not only not lowering rates now but not for the next year. at the same token, it prevents further inflation down the road. we see what we're calling at our firm a little qualitative safety. the firm announced they were going to cut their balance sheet and do that by not continuing to purchase more bonds. >> you are giving a pretty impressive report card to the fed. i wonder what your thoughts might be of president trump. i'm sure he is happy the fed is reasons arebut the not particularly encouraging,
are they? >> know, they are not, but i'm sure president trump will spin it, as all politicians do, to they areantage -- no, not. the market has a trade show trend into it and if the of does not happen same, that will be detrimental and have negative consequences on the market. additionally, the market has priced into it there will be some sort of brexit deal that is not super favorable for the u.k. but not devastating to them or to the eu and if we continue to the this play out, i think news we had today is good, but if we do not see that, we see it start to unravel, that is also negative. korean denuclearization talks -- i don't think anybody expects with korea to give up their nukes tomorrow, but at the same time, they want to see ongoing negotiations.
they want to see if we are making progress. if we suddenly go back to saber rattling, that will rattle the markets. we see other caution flags raised. we have seen greater defaults in student loans than ever. we are seeing greater defaults in auto loans and other consumer debt. are seeing 10-year highs and consumer loans, particularly in the auto segment. these are all negatives, though. inno wonder that for example the rally today, we did not see hedge funds move that much. if you see these warning signs across markets and economies, would you trim those stock holdings and perhaps turn a little bit more towards cash? >> that is a great point. we believe now is the time to take some profits off the table, take some defensive positions, if it's put buying, or other
protective measures. certainly, we are not going to go long on the curve with the two-year having a slightly higher return than five-year. real estate that is not necessarily going to appreciate in value but continue to pay a nice dividend. >> i'm curious as to what your gold allocation might be right now. >> we are going to say at about a 10% overall gold allocation. we think gold can be a safe haven as it has in the past, though sometimes that has not proven correct, but we think in the long run, gold will hedge with inflation and be an excellent safe harbor. >> i know you are fairly confident that there's not going to be a recession, but you did list and minute ago a number of risks on the horizon. what risk in your view could be the catalyst to send things south? >> we think any combination --
obviously, the geopolitical risk think is the greatest risk. we cannot quantify if we are going to have a trade war with china. if we had a trade war with china, all bets are off. i think that would be the single greatest geopolitical risk we can see, but i say that thinking there is not actually going to be a shooting war between us and north korea. >> thank you so much for that. president and ceo of international assets advisory and we have breaking news at the moment. we're hearing theresa may has mp's want her to stand down because of her handling of brexit. we're talking about the chairman of the 1922 committee of tory mp 's. he is said to a visited the prime minister and downing street monday afternoon and made it clear to her that a growing number of tories believe she has to go.
we know prime minister may is in brussels right now hoping to get a dead -- a delay to that brexit deadline. we will bring you more updates on brexit as soon as we get perhaps the prime minister giving a speech later on. in the meantime, you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. you can customize your settings so you get the news on the industry of the assets that you care about -- so you only get the news on the industries and assets that you care about. this is bloomberg. ♪
across this growing range of services. net income fell to just over $2 billion. china's overall slowdown slowed demand for advertising. paul: seen out posted its highest annual profit in four doubling. net income petrochina is said to spend the most since 2013, answering president xi's call to raise output to bolster energy security. breaking lines out of brussels, the latest on brexit. the eu summit on brexit has
ended. the eu offered a brexit delay postponing the no-deal risk from march 29. we now hear from the european council president, saying that he will meet theresa may, the prime minister. will be meeting after the eu summit has just ended and the eu offering that brexit delay, postponing a no deal risk from march 29. we had heard before that they had put a condition on that delay, that the parliament in had to pass the prime minister's deal in that third vote next week. it seems that extension is now unconditional and it will be delayed from that brexit deadline from march 29. back maria tadeo the latest out of brussels and what is happening there. what is the latest development right now? maria: does look like we have a deal agreed by the eu 27, i
think, from a market perspective. what you need to keep in mind that may move the currency tonight is the fact that an eminent no deal scenario has been removed. the eu in principle would not crash out next week from the european union because that deadline has been moved to april 12. the u.k. should, in principle, tell the eu what its plan is, and the deadline in particular here is interesting because this is when the u.k. should tell the eu if it wants to participate in the european elections in may. as you know, this has been a sticking point in the negotiations for days now because the eu will tell you the u.k. will have to run in the election if it does not leave the bloc before then. >> we've also heard that sir graham brady has told prime 's wantr may that u.k. mp her to quit. latest on this and
what can we expect about the ? ime minister's future now >> exactly. no doubt these are very difficult hours for the prime minister. we know her deal has now twice been rejected by triple digits. again, there is no indication that if the same deal were to be put to a vote in the house of commons it would clear the vote. the primary star herself would tell you she's very still defiant on the fact that she still thinks she can deliver brexit. the plan when it comes to prime minister may really has not changed. she will tell you she wants to take thehe deal and u.k. out of the eu. the question is if her own mp's will allow this to happen. >> we're expecting to hear from donald tusk shortly. what points can we expect him to
make, considering what you just said, that a third vote in u.k. parliament might not deliver a different result? >> that's right. the head of the european council -- and i must say, this was a very long meeting. we understand there were very different opinions. some countries made it clear that there has got to be a political message sent tonight to prime minister may, but not just the prime minister, but also the u.k. that it really is decision time. it is now time to decide what kind of relationship the u.k. wants with the eu, so i think , but anywill be key sign of conditionality, how the different deadlines we are looking at may play out and any indication as to feedback from the prime minister today, because remember, she wanted a june 30 extension.
>> 9:30 a.m. here in sydney. we have markets opening up at about 30 minutes time. we standing by to hear from the eu's donald tusk on the latest of elements regarding brexit. it looks like britain will be granted an extension provided the deal theresa may is trying to get through parliament for a third time gets through parliament. what are the odds of that? watching: we're daybreak australia. let's get to first word news with selina wang.
selina: european union leaders say they are generally open to granting a delay provided theresa may can win a vote in parliament next week. president xi jinping has arrived key to lead european nations into signing up for its initiative despite warnings from the u.s. and others. >> i do think that italy leading the remaining european countries could actually entice other countries to join and maybe form, like we said, a european unified strategy regarding the development of africa, the middle east, and other countries. >> tylan votes this week in its first general election since the army seized power 25 years ago -- thailand votes this week.
he has tried to present himself with a unifying candidate with politics increasingly divided between the rural poor and urban establishment. new south wales votes this weekend. the national government plans to turn the state into an economic driver and may not be enough to save the local liberal national industrialization. regional voters feel they missed out. home prices are adding to the strain. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts and more than 120 countries -- in more than 100 tweet countries. i'm selina wang. this is bloomberg. paul: thanks very much for that. to recap the latest news out of brussels, here's a tweet from the president of the european council -- he says the eu 27 unanimously agrees on this response to the u.k.'s request.
he will meet with the prime minister. this, of course, for an provided to brexit, theresa may's deal gets through the parliament where it has already failed twice to do so. let's go to sophie kamaruddin in hong kong and get another check on the markets. sophie: we do have sterling .1%, climbingout after falling overnight. that is a look at sterling so far this morning. let's check in on how we are .etting up for a trade in asia tokyo markets reopening this day.y on japanese cpi i want to highlight australian property stocks. climbed to the highest levels in almost three years with 15 of 18
stocks in the green. the last time this happened, housing prices work rising. reason being cited for the rally is the negative correlation between bond yields, the line in orange on this chart, and the line in white with the 10-year yield having slipped to the lowest level since 2010. after this rally, their causes on the sector, seeing this as a value trap, so downgrading the property sector to a hold earlier this month due to risks seen rising in the retail space. paul: thanks very much for that. let's get more on what we should be watching us trading gets under way in asia. the bond rally peter ring out a little bit. could it be argued the slide in yields has gone too far? >> yeah, it's a tricky place for bond investors.
we had this decent rally. we had two-year yield in new zealand pushing to a record low, so clearly, there are people willing to continue big up the prices of sovereign bonds, but i think, really, what this alludes to on a global scale is that reassessment of the lack of inflationary push that you are getting in the economy. , looking atere breakeven rates and investor expectations for where inflation goes, and effectively, they are saying it is very subdued and continues to be a very subdued outlook, which is really the kind of message we were hearing from the fed late wednesday, that the growth profile, if you take it together with a subdued inflation outlook, really speaks to rates being on hold for the foreseeable future. i think what some people are toing is what that has done the bond rally, which is really pricing in cuts in australia rates, at least the
25-basis-point cut with a reserve is made to those expectations will run a little bit too far. bonds are starting to look expensive across a number of sovereign markets and you can start to maybe pick up some this and see an end to rally in the medium-term. >> it seems the prime minister has managed to postpone the but at the same moving. seems to be what are the markets telling us? >> they are continuing to tell us they are still worried about the possibility you still get a no-deal-scenario. at the implied volatility measure, a good chart here, it shows you the concern is still there. of course, we have not seen much of a reaction in sterling this morning to the latest news as we
come out of that meeting with eu leaders, but, really, it pushes, obviously, the deadline extension into april and potentially further, but the market is clearly concerned and continues to be about the expectation that you do need to have some hedges on just in case this whole thing unravels. it remains a very tricky place traders.ors -- for 20 of people i have spoken to are opting to sit out of trading sterling if they need to, but -- unless they need to, but corporate's continue to hedge their long-term reliability, so it continues to be a favorable place. you can see on the right-hand side of the chart, people continuing to bid up hedges, continuing -- given that the .ncertainty remains
paul: a little bit of news on brexit, the eu offering to delay until april 12, postponing that no deal risk by about two weeks. shery: let's get to another story making headlines -- fitch ratings warning the grounded aeing 737 max could be problem for the aviation sector. fitch says a systemic issue with the aircraft would be a concern. fitchcuss that with corporate finance managing director. great to have you. we know boeing is a huge company. they have a lot of liquidity, their credit profile become a risk if this continues the ugly >> the main thing we are watching is the timing of the grounding. in most scenarios, it really would not be that concerning to boeing for the broader aviation
sector because of a number of boeing'such as liquidity, but the timing of it if it main variable and is extended past six months, then we would start to get concerned with respect to boeing. it might affect the airline sector before then, at least some of the smaller, more financially stressed airlines, but boeing we need to last about six months or longer in our view. >> how big of an impact could it be for the aviation credit sector? >> it is a big issue. it's very serious because of the new,of life related to a significant program, and the overall risk profile has gone up, and there is a lot of debt in this sector, a lot of the secured debt. we're watching this very closely in multiple parts of our firm. that said, as you mentioned, we have not taken any rating actions just yet because we do
not know a whole lot at this point, so all we can do is play scenario analysis and in most of those scenarios, the industry would do fine. it's good to remember this is a very high risk profile sector. they are accustomed to going through periods of stress and crisis periodically. right now, what we are seeing with the 737 max is not at the same level as some of the previous periods of crisis we have seen such as the post-9/11 period for a year or two, the global credit crisis, etc. we are watching that. there are a lot of mitigating factors. 's strongoned boeing profile. we are not in a busy flying season, so that mitigates the the 737f the lack of max in fleets, and its increasing production, so he gets to be more of a serious issue as we go forward, but right now, there are only about 370 aircraft in the fleet out of
of 320,global fleet depending how you fly it. paul: making an airplane is a hugely complex undertaking. i wonder if you are considering impacts down the supply chain. >> it is something we are watching as well, but boeing has made the choice to continue producing the aircraft. in essence, boeing is investing in supporting its supply chain. boeing located price for this with a substantial amount of working capital build up on its balance sheet the longer this goes on, but the supply chain is actually being supported. they are getting paid. if boeing were to shut down production, it would be initially more of a concern, but even then, we think boeing, with its substantial liquidity, is basically the mothership in the industry along with airbus. in the past, it has stepped in, supported supply chain with favorable aim in terms, loans, equity injections, and even in
some worst-case scenarios, they have gone in and bought out suppliers. supply chain right now not a real big risk, but if it goes on longer, we would watch that along with the rest of the sector. >> thanks for joining us. that was the latest on boeing there. a little bit of breaking news from the ride-hailing sector. set to pick the new york stock exchange for an initial public offering. this story just crossing the bloomberg. the nyse, expected to publicly file for its offering in april. that would possibly value the company up to $120 billion. just some breaking news for you there on uber. the biggesty to be public offering this year. a car wash is getting murkier in brazil.
brazil president was arrested thursday in connection to the largest corruption investigation in the country's history. brazil markets sank on the news. the probe still has the potential to take down leading figures in politics and business. -- what is the ex-president accused of? leading been accused of a gang that operated over 40 years, almost his entire political life. the specific accusations today relate to a nuclear reactor near and prosecutors said the total amount of money siphoned off was in the region $500 million, but they say
there are more accusations to a handful offaces other investigations other than the one that was revealed today. >> right. thank you so much for that. we have breaking news at the moment. we are now seeing the european alongside theent european commission president. they are about to give a live press conference. let's listen in. >> mrs. mae repeated her request to extend the article 50 period -- mrs. may repeated her request. theng the discussion among eu 27, the leaders approached this request in a positive spirit. the european council decided to agreement.
as regards the extension, our -- envisagedisages two scenarios. in the first, if the plan passes by the house of commons next week, the european parliament agrees to an extension until may until may 22. the second scenario if it is not approved, the european council agrees to an extension until april 20 -- april 12. [laughter] while expecting the u.k. to indicate a way forward. practice isans in that until that date, all options will remain open and the cliff edge date will be delayed.
the u.k. government will still , a longhoice of a deal extension, or revoking article .0 april 12 is a key date in terms wille u.k. deciding if it hold european parliament elections. if it has not decided to do so by then, the option of a long extension will automatically become impossible. as you know, in a -- in accordance with the treaty, any extension must be decided by the eu 27. this is why i met prime minister tonight, totimes make sure that the u.k. exits the extension scenarios, and i am pleased to confirm that we
have reached an agreement on this. >> thank you. now the president of the european commission, jean-claude juncker. the position of the 27 members of the european commission has been united and unequivocal. tirelessly to negotiate an agreement. we have done everything we could . we asked for clarification in december. i was asked for further reassurances last monday. i have to welcome that today, the 27 leaders endorsed the legally binding clarification of assurances that prime minister .ay, and i agreed
can you describe the atmosphere in the room? if no deal becomes a scenario, where does it go? also, do you feel there is a big risk of kicking the can down the road now? >> the outlook was much better than i expected. better than, for example, in moodber because of the and, frankly speaking, our mood is not the most important thing here.
our discussion was really constructive and i can only be concerned with what i saw not only today, but it's good will determination -- its good will and determination. i know all of us are aware how objectively difficult the situation is and the fact that we were able to find -- not the final solution, of course, but a way to at least ease the process for both sides, i'm really especially that we have opened so many options. it is my personal view on this and i'm very satisfied. i think it is a good sign.
frankly speaking, i was really sad before our meeting, and now i'm much more optimistic. >> the atmosphere was good. quite what to see the limits of our patients are -- our patience are. one of the residents said a while ago there was a special place in hell for those who promoted brexit without a plan. mp's do notn p -- vote for it next week, do you think that special place in hell should be enlarged to include more members of house of commons? speech, more than 2 million people have signed a petition to support the revocation of article 50.
would you welcome this? thank you. polls, hell to our is still empty. it means there's a lot of patience. [laughter] think this is the right moment to conclude the press conference. [laughter] >> don't go to hell. paul: all right, you were hearing there from donald tusk and jean-claude juncker of the eu. two scenarios there, if the brexit deal is passed, the brexit date will be extended until may 22. if it is not passed, it will be extended until april 12. for some analysis of what we just heard, let's get to maria. jean-claude juncker saying this
closes and completes the process. is that it from the eu? maria: in the eyes of the eu, the negotiation is done and dusted. they do believe they gave concessions to prime minister may about two weeks ago. that should be enough to get this deal to the finish line. do not expect concessions from the eu. that, i think, was crystal clear. the other highlight from this rather short press conference is that april 12 becomes the new march 29. that is the next big deadline we are facing. european leaders will tell you we have avoided the cliff edge, but the big decision is still up to prime minister may and she will have to make the decision in just a little over two weeks. the big question remains very much unsolved at this point. >> there was a little bit of joking around toward the end of
that press conference, a reporter asking about tusk's about a special .lace in hell him saying hell is still empty, but there is a lot of space in it. straight.een pretty >> it has been and it was a very funny comment, which you remember he said some weeks ago, he does wonder if brexiteers will go to hell, especially those who did not have a plan, which in the eyes of the eu is many of them. the house of commons have now rejected the deal twice by triple digits. when you look at the eu and take a step back, it's very clear there is a strong sense of frustration here. they really thought it would never come down to the wire the way it has done. the u.k. needs to make a decision.
it has not done this for almost three years and it really is crunch time. delaying will not solve the problem. again, as i just said, that new deadline april 12 becomes almost d-day for prime minister may. paul: i believe it is the definition of and senator to continue to do the same thing over and over again but expect different results. considering this deal has been before the british parliament twice and rejected twice, what is the hope of it passing a 12? time before april maria, that's right, and it's a good point because there's no indication that the prime minister would be able to win the vote. we also understand one of the themes talked about behind the scenes tonight was what would happen if the deal does not go through. what is plan b? prime minister may just said,
"i'm still very much on plan a paul: -- maria: the conversation will switch no doubt to changing her red lines, maybe dropping the stiff red lines that have to do with immigration, the customs union, the single market. the prime minister may be forced into a broader coalition with opposition. it may be enough to turn the hardline brexiteers in line, make sure to get the vote then. this is a real concern when it comes to the e.u.. is almost taking a step back. they don't want to be blamed for forcing the u.k. out of the e.u. the think they consolidate deal, but it is up to prime minister may. this is a domestic u.k. political story. >> maria, we are still awaiting a press conference from prime minister may at the moment but we