tv Bloomberg Daybreak Asia Bloomberg July 5, 2020 7:00pm-9:00pm EDT
haidi: good morning. we are counting you down to ages major market open. sophie: i'm sophie kamaruddin in hong kong. our top stories this hour. global markets continue their march into the second half in took of war between better eco-data and worries about the coronavirus. the dollar and the longest winning streak since january. president trump lauds his handling of the pandemic even as
cases continue to surge at home and abroad. the world health organization reports a one-day high for global infection. japan plans to pitch for --ancial workers under g workers uneasy about their future. let's take a look about -- a look at how markets are setting up. asian risk assets likely to see a self-starter this monday as a sections are weighed up against improving economic data. we have a calendar today with hong kong pmi and indonesian consumer confidence on cap. kiwi stocks, little change. fluctuating.p moving to a 10th of 1%. haidi: to our top global stories, one that is going to preoccupy markets in the second half. local coronavirus cases topping 11.3 million. the world health organization reports a single day record in new infections globally.
cases any the u.k., south africa, japan and the philippines continue to rise. the u.s. all the daily infection rates low. calling for more restrictions to curb the outbreak. in australia, nine public housing tower blocks with 3000 people are in hard lockdown as cases continue in melbourne. at's bring in the head of security program at the university of new south wales. always great to have you with us on bloomberg tv. showed some of these measures in australia have been taken earlier? should quarantine have seen mandatory testing? should we be doing mandatory testing across some of these hot spots? on whatnk it depends you mean by mandatory testing. i do not think we should be forcing testing on people. there are carrots and sticks that can be used to encourage
people to have a test. if they are in quarantine and they refuse a test, they have to stay longer in quarantine. those kind of measures are better. you have to focus the test on people at most risk who are the close contacts of the case or within a building or apartment block or a care facility or a hospital or in quarantine. time, you seesame global cases reach a one-day record. we continue to see an uptick in major parts of the u.s. what are we collectively doing wrong at the moment six months from when we learned about this writers? dexter's virus? -- this virus? >> we do not have a vaccine or effective drug yet. all we have is nonpharmaceutical measures.
that means finding every case and isolating them. that depends on testing. many countries have had a shortage of tests over a limited capacity to test including the united states. we need to track all of their contacts and quarantine them so they do not pass on infections. whether or not you test those people, every one is another question. thirdly, for social distancing. that ranges from keeping a distance of one to two meters between people to a full lockdown. sophie: given the ace and thematic nature of some of these can unity transmissions we are seeing, what kind of implications does that have for how authorities should better manage when they see even a hint of an infection? >> it has been a huge problem. a symptom at eight transmission
and pre-symptomatic transmission is one of the biggest issues. there has been a large denial of asymptomatic transmission by the who for a long time. many countries have taken that position including australia for some time. thele are now acknowledging transmission. until we adjust our disease control strategy to the fact that some people are infectious but have no symptoms, we will continue to have transmission. sophie: given what we know around the use of face masks as a prevention method, should there be a higher push to have it more actively recommended? of only a handful of measures we have available to us to control the disease. it makes sense to use it.
particularly as we do not have a vaccine. , [indiscernible] at country should be looking ramping up production of surgical masks. australia has done that. they have started repurposing manufacturing facilities to make masks. i think it is possible to have enough surgical mask for people to use in the community. at the moment, the u.s. is still recommending cloth masks. there is not a lot of evidence around cloth masks. just a single layer or bandana or scarf does not do much. you have to have a well-designed cloth mask. you say that masks, social distancing is a handful of measures we have at our disposal. is there a risk that this remains the case? there are a lot of experts
saying we may not get a fully effective vaccine. and, his herd immunity a false hope as well -- is herd immunity a false hope as well. ? >> them to go back to the vexing question. i do not think it is correct we will not have a vaccine. we will have many different vaccines rolling out over time. i would guess starting from next year. they may not be perfect in efficacy, but with this disease, we do not aided -- we do not need a disease that is 100% effective. 60 or 70% would do the trick. let's keep the possibility open. a methodnity is propagated by people who do not understand what it is. it is a concept derived from vaccination. not by natural infection. if it worked, we would not have needed vaccines for smallpox because it would have eradicated
itself. haidi: at what point would you become triple with international borders being open? >> when the pandemic is no longer happening. having said that, -- [indiscernible] having said that, you could do targeting for countries with similar incidents. so should there be stricter rules when it comes to opening a borders not only with other countries but within --tralia given the [indiscernible] between states? >> i think border control is the major method that has control the disease in australia. it is the single most important measure with closing the international borders. if we open them when their is a
lot of does -- when there is a lot of disease, we will see what we saw in march. now, it is travelers bringing the infection into the community. the state borders are another issue that we have to look at. confident oru optimistic about these stricter measures, the hard lockdown we have seen with these apartment buildings, the housing buildings will be effective in curtailing the amount of spread we have seen? >> any measure that stops people having contact with each other will reduce transmission. anything that we do to reduce the amount of contact people have whether it is standing two feet apart, two meters apart or standing in your apartment will reduce transmission. much to thek you so head of the secured program at
the university of new south wales. you can get more on the mounting virus cases and other stories to get your day going. on mobile available and the bloomberg app. you can customize your settings so you only get news on the industries and assets you care about. still ahead, white house is said to be considering more moves against aging is the sanctions await president trump's signature. up next, we look at the week ahead with the head of economic research for the asia-pacific. this is bloomberg. ♪
forecast for the u.s. economy this quarter but still explains a rebound in september. consumer spending may stall, but the bank says other countries have proved it is possible to resume activity post buyers. the bank says the u.s. will grow 25% in the third quarter, having previously pretty did 33%, which would see the economy slumping 4% this year. chinese -- faces a further reversal with u.k. government ready to phase it 5g networks. we are told any report says american sanctions says while i would have to use untested technology. sources say officials are drawing up plans to accelerate removal of existing components from the tech giant. the tokyornor -- governor has been reelected for a second term. in a landslide victory as the city deals with a surge in coronavirus cases and retains hope of hosting the olympics
next year. she be 21 challengers -- he beat 21 challengers. she campaigned on her handling of the virus. australia's finance ministers says he will step down in the coming months even as the country suffers the first recession for 29 years. he has been in the job since 2013 under three different prime ministers. still has to deliver australia's july economic statement as well as a budget update in december. central bank policy remains front and center amid the threat of a second wave of covid-19. while some have room to ease, others are nearing their limits. we will see decisions due out this week from the rba as well as malaysia. carlos casanova is the head of economic research.
we talk a lot about a rebound and a recovery. are we confusing the two terms? what is the best case scenario for some of these countries? is it true recovery when we get to growth that was better? pretty unlikely. carlos: good morning. that is a very good point. often times, we are seeing a pickup in activity. pmi is a great example. the best cased scenario is one where we do see a recovery of activity in the second half of the year. going into 2021, the growth figures would be much higher because there is a weak 2020. if you look at the level of gdp in 2021, we predict it will remain overall weaker than it was in 2019 despite the underlying data. it seems the recovery was very strong. we are still going to be behind
the level we were. this is assuming there was no second wave. some of the countries in the region, we have started to see an increase in the number of more or more localized, focused that have to be contained locally. it is potentially not going to happen going forward. we are going to see a much weaker second half than expected. in the best case and area, we are assuming a recovery. that will still leave an economy that was weaker than what it was last year. haidi: when you look across the region that is a panic and you apacp things -- that is and you way up things that are still available and how the public health aspect is being handled, where do you see the most optimism in terms of a robust eco--- a robust recovery? carlos: we have started to see a bit of i divergence in the
region. both in monetary and fiscal and where we see the most risk. in terms of the optimism, we do expect china will do better than some of the other economies in the region. they have been quick at controlling the outbreak. they were quick at reintroducing the measures in beijing so the second focus seems to be under control. if they manage to achieve that, they are also a big economy that can depend on the domestic market for growth. place is like hong kong and singapore are a little -- are very dependent on tourism and exports. they will have a more difficult time depending on their domestic economy. in china, that is going to support it. another market is taiwan. they are benefiting from export substitution from china, away from china as a lot of the companies are thinking about
diversifying their supply chains. reducing to one single market. from ae also benefiting lot of the supply chain shifts, especially on electronics moving out of china and into other parts of the world. in taiwan, the downside should be better. they were also quick at containing the spread of the virus. on the export of electronics, they should do a little better. the other hand -- we see india where the number of cases continues to increase. in indonesia as well. there are areas where we need to continue to monitor the risk. overall, a very divergent trend. sophie: turning to malaysia, we are seeing some improvement when it comes to economic improvement -- to economic activity. we have the downside still remaining. economic growth seems to be sluggish going into the second half. with that, malaysia is to decide
on its policy rate this week. what are you expecting? carlos: we are expecting a rate cut. if you look at the returns over asia-pacific, that is the yield on the 10 year note adjusted for inflation. malaysia offers some of the best relative to the u.s. they do have a little bit of room to implement cuts. inflation is stable. of growth notorry being as robust as expected. potentially there being a second outbreak. the pmi is definitely showing uptick, which analysts have said is a sign the economy is growing faster. pmi is volatile. it is based on the level it was last month. malaysia has moved to loosen some of the restrictions. that is going to reflect upside
in this month's pmi. we do not think upside is going to be as sustainable going forward. room tospeaking of continue easing, the pboc likely to continue policy support at a slower pace. we have inflation coming up for the mainland as well. what indicators will be provided from that data? carlos: we do expect inflation will remain stable. around 2.4%. most of that is coming on a cooling of food prices. we know that food prices have been very elevated because of the swine flu pandemic last year. with inflation more under control, the pboc has more room. we expect they will continue to do things going forward including cuts to the policy rate. remember that in china, we are not targeting low growth costs. we have moved away from the gdp growth target. we are targeting stability and
the employment figure remain consonant -- meaning constant. in trying companies have access to liquidity -- ensuring companies have access to liquidity. to avoid the uptick in employment. we are going to see a lot more cash injections. [indiscernible] case the global economy is weaker than expected. sophie: how much of the downside risk do you find to geopolitical developments? carlos: a large one. in the context of there being a global recession, this is a tick up -- a timer governments tend to resort to other means including ramping up nationalist rhetoric. we are starting to see this bubble up in parts of asia pacific. you have the border dispute
between china and india. you're also seeing a resurgence of tensions between north and south korea. issues between india and nepal as well. in the context, these economies are facing the worst recession since the asian financial crisis or before then. increasemal to see an in social pressures. the government leaning on the political side of trying to boost sentiment through nationalist measures. we do expect to see a little more volatility. especially in an election year with the u.s., that can continue to be a factor leading to some of the volatility in the months to come. sophie: thank you so much to the head of economic research for apac. if you are away from the screen, you can find in-depth analysis on bloomberg radio broadcasting
haidi: let's get you a check of the latest is flash headlines. face back will meet at -- facebook will meet its prominent critics to address hate speech and misinformation. the company has long denied it does not do enough to combat racism and a scrim a nation, the pressure from advertisers is forcing it to address concerns. has --ckerberg
boringed it is these ways to raise funds as it looks to rise out the slump in the aviation industry. it follows a report it is considering possibilities including a share sale to raise a billion dollars. rolls-royce says no decisions have been made. shareholders of chinese starbucks rival looking coffee have turfed out the chairman days after he survived an attempt by the director to strip him of control. is in a major shakeup. let's take a look at how markets are shaping up this monday. taking a look at s&p in minis, we are seeing fluctuation. moving -- we a
have it moving higher. lee k futures in singapore removing to the downside all 4/10 of 1%. peers.ground to asian a four-month relative low. we do have oil divergence this morning. we have brent advancing amid some of the economic data. eyeing the 43 level. trump is, president said to be weighing more action against china, which is expected to be unveiled soon. the latest on that rising tension and more coming up next. this is bloomberg. ♪
haidi: this is daybreak asia. here are your first word headlines. president trump used his july 4 address to champion his handling of the pandemic even as infections continue to rise. u.s. cases rose by more than 34,000 on sunday to 2.8 million with fatalities approaching 130,000. on the global radar, mexico overtook france to become number five when it comes to the death toll. world health organization reported a record one day high for infections on saturday. the european finance industry is
ramping up pressure on brussels to ensure opposed exit grexit -- to ensure post-brexit access shared that date is critical because it is when the clearinghouses would need to start closing the membership of e.u. firms. the association for financial markets in europe says three marks -- three months i not be enough. three is willing out talks with the u.s., saying washington is using the idea as a tool. . relations between the u.s. and south korea collapsed asked month -- collapsed last month. the north says washington is wrong to think sanctions will change the relationship. pyongyang says it has a detailed strategy for dealing with threats. the u.s. presidential campaign race may be in for a major shakeup with kanye west saying he is on board. social media exploded after he tweeted his intention to
challenge president trump and joe biden. kanye has almost 30 million followers on twitter and seems to have won the backing of elon musk. a review suggests he has yet to file any of the relevant forms. be set toe u.s. may increase pressure on beijing. administration officials told reporters president trump is considering two or three actions against china with a high probability something could be unveiled soon. let's cross to our china correspondent for more. are theitional measures administration considering against china and what about other countries? selina: this administration official declined to give any details on what these actions may be. we have learned the trump administration considering two or three actions. that is a high probability the results of what this will be would come in a matter of days. this comes after congress had
approved a bill that would sanction chinese individuals and businesses that are involved in cracking down on dissent in hong kong. that bill would also require the state department to give an annual report to congress about which individuals are involved in undermining the one country, two systems model. it gives president trump the power to seize the assets of those individuals. even though this is an area in terms of pressuring beijing over hong kong where we have seen strong bipartisan support, the white house has yet to give any indication as to whether or not trump is going to sign or veto this bill. beijing has said no amount of external pressure is going to deter china and that if trump signs the bill, china would take strong countermeasures with all of the consequences borne by the u.s. side. allies are still joining forces and pressuring beijing. most recently with canadian prime minister justin trudeau saying candida is going to
suspend extradition treaty with hong kong. that would make it the first country to suspend these law-enforcement links with hong kong since china did enact the national security law. hong kong does have extradition pacts with 30 countries. this does further escalate can -- further escalate canadian and china ties. u.k. is reportedly preparing to phase huawei out of its 5g network. what are the details? this could happen as soon as this year. selina: we learned the u.k. is speeding up the removal of existing huawei equipment in its networks as well as working to stop the implementation of new huawei gear into the new 5g rollout plans. this according to a person familiar with the matter who also said the cybersecurity
center concluded that the u.s. sanctions against while way means that while way would have to use trusted technologies in any of the security risks could not be mitigated. if this decision is made, it would mark a major reit -- a major u-turn for boris johnson's administration. earlier this year, they had deemed while way could be used in 5g rollout. under certain conditions only including barring its use in sensitive parts of its network. u.k. had argued these efforts could reduce the risks involved in using while way while allowing the u.k. to benefit from the technology advancement. that decision was strongly opposed by trump and opponents within johnson's own conservative party. while way has said it is working huawei has said it is working with customers. huawei says the sanctions
sophie: we are counting down to asia's first major market open this morning. take a look at nikkei futures. we are seeing moves to the downside as we are waiting to see what reaction could be to tokyo reported cases in the city topping 100 for four straight days. you have the economy minister saying the emergency order will not be imposed. the governor, her leadership will be tested as she has won a second term for four years. china has clamped -- china's clamped down on the hong kong has raised questions of the city as being a financial hub. ed rogers is the ceo of rogers investment advisor and brings us his purse active -- his perspective. we have seen the japanese government look for consultation
on how to position itself this way before. what could be new when it comes to pitching itself this time around? ed: good morning should think you for having me on the show. what is different now is the political environment has changed dramatically. that is not a recognition of events in hong kong. is a veryvid -- it dark cloud, but there are some silver linings. the response to the pandemic opened up an opportunity to look at a new approach to how japan positioned itself as a financial center. tokyo is already ranking third among global financial centers after new york and london. her the governor extending term as governor, will she make this a pillar for her when it
comes to the mandate? will.think she we are encouraged by her reelection. she has made some great steps in examining issues and debating issues around -- to restore tokyo as a global financial center. it has always been a significant city. when you look at asset management and the management of those assets and the more cutting edge of financial services, which involved investing in private equity and using private pools of capital to spur growth, tokyo does not rank ahead of hong kong or singapore or many other cities in asia. the governor is dedicated to the idea we can change that. haidi: tokyo or japan more broadly has not historically ranked high in terms of the top destinations for foreign talent. what is lacking or what needs to change? we know the approach to foreign
highly skilled workers is not a new thing. it has been part of the structural reform agenda for some time. ed: quite right. there has been a lot of think spent talking about what the problems are. the article bloomberg just put out really covers the issues clearly. tax wise, we need to change the tax structure for foreigners and incentivize people in this industry to be billing -- to be willing to work here. this is foreigners overall. the tax structure they created has made it difficult for foreigners to move to japan. the regulatory structure -- [indiscernible] very progressive. very forward thinking regulators. they want to make this a more accommodating environment. it has not permeated the ranks
and the actual application processes. this is all very well written about, well defined. the single most important thing is the political environment, the political will to change. if that is now present, that is a change in the past 30 years. there is not enough political will -- there was not enough political will. now, perhaps there is. haidi: you can change the tax code relatively easily compared to the broader cultural aspects. the language barrier is something that deters a lot of people from not just being interested but being able to work in japan. ed: that is an interesting statement to examine. first, changing the tax code requires the mta, which is its ldpindependent agency and to agree they want to change the
tax code. that is a political challenge. with regard to the staffing of people, no doubt, hong kong and singapore have advantages with english as the base language of instruction. it is fairly ubiquitous. when you go to beijing or shanghai, there is a significant number of english speakers. parts of the environment like the legal community and whatnot who need to speak english to support international businesses. japan is a country of 130 million people. quite a large number of japanese who need to speak english do exist in foreign firms. where there is a bigger challenge is where you step back said the more traditional japanese businesses. traditional japanese banks, trust banks, regional banks, pension funds. these are the places we need to
change -- where we need change in the asset management world. that is where the lack of english language ability does create a problem with regards to deploying assets and want to turning risk. -- and monitoring risk. this is a solvable problem. there are plenty of people who would come to work in japan. there are plenty of bilingual people who could help them work in japan if the political will where there to create new environment. sophie: how would you great progress when it comes to improving corporate governors in japan? what are the gaps that are remaining that could deter foreign financial professionals from coming to japan? ed: it is a great question. in 1987, this country so 33 years ago. there is no doubt -- and i have lived here the majority of my adult life. there is no doubt in my mind that japan has changed dramatically in those 33 years.
there are more official moves to create more open and diversified corporate governing structure and a stronger corporate governing culture. the stewardship code that has been put out. the governor is a great example of this. lady astimes elected the governor of tokyo. a $1 as a standalone is trillion gdp entity. 35 million people. if tokyo were at sun country, it would be in the top 20 countries -- where its own country, it would be under the world. that is not to say there has advantages.cant is also appropriate to say there is much more work to be done to use the phrase your hearing in the united states. diversity, equity and inclusion. these are not words that permeate the typical japanese board room culture discussions.
there are significant leaders in this space. there are large companies that are dedicated to this. they are dedicated to having diverse boards. --y are dedicated to having to pushing down to the pension fund level. esg would be the most common catchphrase. thele need to understand pension investment fund, multiple esg indices were set up at the request of the gif. wing,is a strong liberal a progressive wing is a better word for it. the cutting edge of the political and economic leadership. that can be harnessed because of this moment in time to create more change. tokyo is not alone in this ambition. how can tokyo beat out the
competition for the likes of singapore? is going to take more than clinical willpower. ed: you are quite right. it is going to be an effort that signalingoliticians and creating a better environment. second, a willingness on the part of private industry and capital. how does tokyo win versus singapore and hong kong? on one level, it is simple. you add singapore and hong kong together and you still have a population less than the size of tokyo. there is a lot of money here. there are trillions of dollars of assets that could be deployed differently with much more progressive mindsets. that will spur greater economic development in this country. sort with $18 trillion or sitting inside the bank accounts. we start with a $5 trillion gdp.
you can create significant change if you want to. if the political will is there. unleash a here to much more creative and productive japan. . there is no doubt about that. the political willpower and the intellectual property needs as far as the management of that capital is where the biggest challenges are. always having -- always a pleasure having you on. plenty more to come on daybreak asia. this is bloomberg. ♪
haidi: the dutch central bank governors says europe must not lean too heavily on monetary policy is the mainline of defense against the coronavirus fallout and that there is a risk of an uneven recovery. he spoke at bloomberg policy series webinar. >> clearly, if left unattended, there will be asymmetry in the recovery. fiscal packages and fiscal space has been asymmetric. the fiscal response has been more forceful and more immediate in some countries than it has in others. some countries are more depending on things like tourism, which clearly has taken an immediate hit.
differences in economic structure. caused an asymmetric consequence of a symmetric shock. the amount of flexibility and adaptability is a point where i believe the dutch economy -- why the dutch economy is doing relatively well. we have a high degree of adaptability built into our economic structures. if left unattended, there will be heterogeneity. that is one more reason why i think there should be a euro to atide fiscal response least try to compensate for some of these differences. >> we have had a couple questions on inflation and deflation. this is the debate going on. one person saying -- pointing out that you are suggesting you in the past have indicated the velocity of money supply is an
indicator of inflation expectations. money supply the growth has been very high. a lot of that is proportional. whether the velocity has sped up, i could not say. there is a special question saying, what is the risk of a japan style deflation? where do you come down on the likelihood of those two scenarios? >> it is interesting that both scenarios are being debated. there is a school of economists warning for even lower inflation then we have had the last five or six years. the school of economy study saying unwinding globalization, undoing some of these benefits, all of the monetary stimulus that is there now in terms of excessive liquidity, 2.7 trillion. . at some point, the genie should
be out of the bottle. say. hard to personally, i think that in the short term, clearly, the disinflationary effect will dominate. should it take us into deflationary territory, i am not convinced. i must also say deflation is not just a few months with negative inflation rates. deflation is about deflationary spirals. if the negative inflation rates lead to post bond more uncertainty and a self reinforcing spiral, we have not seen that. headline rates and inflation rates came down significantly. there were a couple months of negative rates. inflation i would say is relatively sticky in the euro area. even in 2015, and never fell
below .6 or .7. we are slightly below one. worriedmoment, i am not that even core inflation would enter into deflation territory. at the same time, i must say i have difficulty believing in these extreme inflationary scenarios. they may become relevant in a few years when the negative supply factors become more relevant. firste short-term, the two years or so, i think the forces of corona will be deflationary rather than inflationary. sophie: the dutch central bank governor speaking at bloomberg's webinar. a quick look at the latest headlines. on of america's biggest utilities is turning its back on natural gas. dominion energy is selling most of its pipeline and storage to
berkshire hathaway for $4 billion. the warren buffett investment outfit sma another 5 million -- 5 billion in debt. citing cost uncertainty. --na's state-controlled our denying health talks about a possible merger. it comes after reports china's two biggest investment banks were trying to create powerhouse oak ridge to rival wall street. the statements released to the shanghai stock exchange say no discussions have taken place. semi conductor manufacturing is looking to raise $6.5 billion in shanghai share sale. the u.s. tightens restrictions on the sale of technology to the mainland. almostres have soared 180% on bets beijing will focus on homegrown tech. one of china's biggest drink
makers is said to be weighing an ipo that could raise more than a billion dollars. the company is considering hong kong for the listing. no final decision has been made. would be the latest in a string of mainland chinese companies looking to list in hong kong. haidi: coming up in the next hour, will be speaking to the head of asia strategy about the outlook when it comes to trading at the start of this week and what the second half has in store for investors. we have the market open in seoul , tokyo and sydney. futures looking at a lower start to the trading week. we have a record number of new infections when it comes to global coronavirus cases. the u.s. continues to struggle with new infections. lots more to come. this is bloomberg. ♪ i got an oriole here.
now that's... simple. easy. awesome. xfinity x1 just got even better with peacock premium included at no additional cost. no strings attached. just say "peacock" into your voice remote to start watching today. >> good morning from bloomberg's asia headquarters in hong kong. >> asia's major markets have just opened for trade. welcome to "daybreak asia." asian markets set to start the week in risk off mood amid a tug-of-war between further eco-data and worries about the coronavirus. the aussie dollar recouping losses. handling trump lauds of the pandemic as cases surge at home and abroad.
the world health organization reports a one-day high for global u.s. infections. secures akyo governor second term, a landslide victory while still aiming to host the olympics next year. sophie: let's take a look at how markets are shaping up at the start of cash trade in tokyo. the nikkei 225 slightly to the upside. the topics adding 0.2%. the focus on tokyo, cases top 100 for four straight days. the yen looking little changed. active trading could be muted before the 30 year sale on tuesday. we are going to see whether steepening will continue to build after a gap between 10 and at 58 basis points as we are seeing those spreads billed for japan and elsewhere.
thirdvernment prepared a -- approved a third extra budget on friday, the kospi, the korean won study below 1200. we are keeping an eye on stimulus from the government. local media reporting we could get a roadmap for president moon's new deal next monday. open inng a look at the sydney, seeing little change asx 200 capped a four day gain on friday. aussie dollar holding onto a four day rise. 69 as investors assess the virus response and the state of victoria, which could raise bets on a w shaped recovery for australia. , 10 yearelds rising yield above to basis points ahead of bond sales later this week. let's get some insight on these markets now with s&p head of asia strategy eugenia victorino.
-- seb head of asia strategy eugenia victorino. investors are looking for second-half rebound in asian stocks so they can point to the nascent improvement in manufacturing activity. with infections rising, will financial valuations have to correct economic fundamentals? eugenia: after the dramatic in riskin q2, gains assets in the region are still possible, but i doubt the gains will be as traumatic as we have seen in q2. the market has priced in a v-shaped recovery as far as the growth is concerned, and it is actually ignoring that the level of production even at the end of 2021 will not be where it would have been had the pandemic happened. in my view, the unprecedented liquidity provision by global central banks has provided a strong, but it will require a
continued movement in the outlook for the gains to out source mobility in q2. sophie: hopes for a economic rebound are fading. i want to pull up this chart to show you how equities have performed. we did see the msci e.m. index for stocks approaching the best week in a month even as virus infections continue to rise. we are seeing that push higher index, will. emerging-market gains be as strong as those we saw in the second quarter? not necessarily. pricing,ou look at the the expected earnings are already there. even the expected earnings, most of the confidence have not even given advice, their own expectations on their own sales
or earnings. that makes it very difficult for wall street to assess what would be expected. they areng that writing cases and there are fears of a second wave, it would really drag down these expectations. our markets pricing in a full recovery? is that optimistic given that a lot of economists say we are nowhere near levels of productivity we would have had precrisis? eugenia: exactly. the market is just eager to grab on any positive news. ist we have seen last week that despite the outperformance for the better-than-expected data, it actually failed to rally, considering the rising
number of covid has basically put some cold water on that exuberance, but at this point, actually, a lot of risks the -- and nobehaving in matter how hard analysts or cautious, are very the market is just running by itself. is therew much risk going into november? eugenia: as far as the election is concerned? haidi: absolutely. eugenia: considering that the election -- i would expect the u.s. would keep the support because the economy is actually any important than political tussle with china.
thethat point, it gives incentive for the trump administration to keep the gap, to keep their foot on the gas pedal regardless of what happens to the economy. however, there are already some uncertainty or ambivalence from the other politicians considering that the economic data is projecting it is stronger-than-expected. consideringtsighted the recovery might have already peaked and now the recovery will continue, but gains will not be as strong as what we saw in june. sophie: turning to china and the pboc, the central bank has signaled a slower pace of easing. that may disappoint bond investors as we are seeing the 10 year yield continued to pick up, i think that 3% level.
-- eyeing that 3% level. what action are you expecting from the pboc within the constraints has laid out? eugenia: considering the pboc has been very reluctant to deliver on market expectations of reductions in the interest rates, even a reduction in the requirement ratio, they would prefer to reallocate liquidity and instead, ease market tightness with policies regarding the relenting and -- re-lending and asset purchases. pboc would bee -- to deliver on interest rates as long as the interest rates are not sustainably within their loose interest rate corridor.
sophie: are investors being too complacent when it comes to not pricing in fiscal shortfalls in the emerging-market corner? well, it depends. forsia, there is more room the asian government to stand. it is actually a question of whether they would stand or they would move. in comparison for the other e.m. asian -- the asian governments provide fiscalto support. 2021, when easing liquidity is no longer available, perhaps the credit rating issues would become -- would take more of the attention of the investors. really appreciate your
time. seb head of asia strategy eugenia victorino. there is a race shaping up with asian currencies as the dollar weakens. we will be asking christy tan which one she sees as outperforming. donald trump has yet to sign the law sanctioning chinese officials over hong kong, but he might announce more action against china soon. we will get the latest. ♪
on the global radar, mexico surpassed france to become number five in deaths. the world health organization reported a record one day high for new infections on saturday. ramping up pressure on brussels to ensure post-brexit access to london markets, warning of major upheaval. that day at the end of september is critical because it is when clearinghouses will need to start closing membership of the eu firms. three months may already not be long enough. north korea is rolling out new talks with the u.s. saying washington is using the idea as a political tool. relations with the u.s. and south korea collapse last month as pyongyang accused his rivals of abandoning promises made in recent summits. seoul andsays washington are wrong to say sanctions will change the relationship. goldman sachs is lowering its
forecast for the u.s. economy this quarter but still expects a rebound in september. consumer spending may stall, but the banks as other countries have proved it is possible to resume activity post virus. the bank says the u.s. will grow 25% in the third order, having previously protected -- projected 33%, which would see the economy slumping 4% this year. set tothe u.s. may be increase pressure on beijing. an administration official told reporters president trump is considering additional sanctions against china that could be unveiled soon. let us get over to selina wang. what are these additional measures? detailswe did not get from this official about what exactly these actions may be. we did learn trump administration is considering two or three actions against china that would be unveiled in a matter of days rather than weeks. after theourse, comes
u.s. congress approved a bill that would impose sanctions on chinese officials and businesses involved in cracking down on dissent in hong kong. the bill also requires the state department to give an annual report about officials who are seeking to undermine the one country, two systems model in hong kong. it gives the president power to seize the assets of those individuals. pressuring china over hong kong and human rights has been an area of rare bipartisan's work in the u.s. congress -- bipartisan support in the u.s. congress. we have yet to get an indication from the white house whether trump is going to sign or veto this bill. beijing has said no amount of pressure is going to deter china and if the u.s. does assign this, china will take with allasures consequences borne by the u.s. side. allies are joining the u.s. in pressuring china. justin trudeau said canada is going to be suspending its extradition treaty with china, which marks the first country to
do so since china enacted this national security law. hong kong has 30 extradition treaties with 30 different countries and jurisdictions around the world, including the u.s., europe, and australia. canada will be barring the exports of sensitive military equipment to hong kong, which escalates already very tense relationship between canada and china ever since the arrest of the huawei cfo. the united kingdom may also impose pressure, with u.k. preparing to phase huawei out of its 5g networks. what do we know of this? that u.k. is going to be speeding up the removal of huawei equipment in existing markets while also phasing out the implementation of huawei into its 5g rollout. the person said according to a report from the national
cybersecurity center, new u.s. sanctions on huawei means it will have to use technology which makes security risks impossible to control. if this is implemented, this would mark a sharp reversal for boris johnson's administration. earlier this year, the u.k. set of huawei would be allowed in the u.k.'s 5g rollout if conditions were met. risks could be mitigated while the u.k. would be able to benefit from huawei's technological advancements. that decision was strongly opposed by the trump administration as well as opposition members in boris johnson's own party. huawei has said it is working with customers to try to find a solution in spite of u.s. sanctions that would maintain the u.k.'s lead in 5g. u.s.so claims it -- that measures are not about security, but market positioning. haidi: with the pressure coming
down on huawei. we are just getting breaking news coming from the australian broadcasting corporation. the abc reporting the border between new south wales and -- will close from tuesday. there has been pressure from the new south wales premier to close that border with victoria as they are seeing a new surge in cases across parts of victoria, particularly melbourne. we saw stricter restriction measures in place there in a number of high-rise public housing buildings but under strict lockdowns -- put under strict lockdowns with mandatory testing for the virus. fromorder will be closed tuesday night onward following talks held between the victorian premier and the new south wales premier as well as the prime minister, scott morrison. we will get more on that. there is a press conference coming up in just about half an hour's time.
sophie: tokyo governor yuriko koike has scored a landslide victory in her reelection bid as the city tries to keep its virus surge in check. koike, the first woman to govern the city, is going to win by 60% of the vote, beating her nearest rival by 40 percentage points. perform so did koike strongly given the renewed spread of the virus over the past week? >> i think there are a number of reasons. first, we can say she built up
her support over the past few months. she has been a daily presence in japanese media and television with her messages about how to avoid the virus and what subsidies are available for businesses who had to close down because of the virus. that gradually sort of increased her name value amid -- among voters. also, she is a former tv anchor. she is very good at getting her message across in a clear and simple way. it was very easy for people to understand. i think she was seen as much more proactive than the central government, who has been accused of delays in getting subsidies anpeople, delays in emergency, whereas she was seen as much more active been getting ahead of the virus -- active in getting ahead of the virus. haidi: how does the victory
affect prospects for abe in his next election? enough,i think, funnily although they have been rivals, this is a slightly positive si gn for abe. his support rate has been going down because of a number of scandals and because he is seen as having mishandled the virus in some ways. but i think this election shows, for one, the opposition in japan is still in massive disarray. their candidates were split. their support was split. it did not make much headway against koike in tokyo. the same could tie in a national election. inalso shows the incumbent an election during the virus has because theyntage don't have to get their name known. they can stick to online campaigning. -- she didot really
not go out and make speeches in the streets, but she still won in a landslide. haidi: isabel reynolds in tokyo. let us get a quick check of the headlines. drink china's biggest makers is said to be weighing an ipo that could raise more than $1 billion. wahaha is working with advisors and considering hong kong for a listing. no final decision has been made. wahaha, which employs around 30,000 people, would be the latest in a stream of main land chinese companies looking to live in hong kong. shareholders of a once starbucks rival coffee chain have forced out the chairman. three other directors will follow after an extraordinary meeting in beijing. luckin is in a major shakeup okayed falsels
numbers going back to april. one of america's biggest utility is turning his back on natural gas. dominion energy is selling to berkshire hathaway for $4 billion with warren buffett's investment outfit assuming another $5.7 billion in debt. dominion says it and partner duke energy are killing the controversial atlantic coast gas pipeline citing cost uncertainty. china's state-controlled parent citic securities njp financial are denying they have held talks about a merger. it comes after reports china's biggest investment bank's were planning to create a powerhouse brokerage to rival wall street. the statements released to the shanghai stock exchange say no discussions have taken place. let's take a look at how markets are faring in tokyo. move to the upside from the nikkei 225, led higher by tokyo electronics.
we are seeing to a pharma under pressure with a loss of 1.4% in tokyo. move to the upside for the kospi as we digest the latest roadmaps for korea's efforts to recover from the virus impact. in sydney, we are seeing the asx 200 snap a four day game. keeping above the 6000 level. kiwi stocks edging higher by 0.3%. let's check on currencies. the bloomberg dollar index on the back foot after its worst week in a month. we do have the japanese yen holding steady. the offshore yuan is holding its 7.07. as well, below and the aussie dollar as we assess how the state of victoria is managing concerns around the virus in melbourne. we are seeing the korean won
sophie: breaking lines regarding hong kong's economic reform. the june whole economy pmi june. 49.6 in the number continues to hold above that 40 level. the business outlook in hong kong is improving going into the summer. the outlook does remain clouded by political concerns, even so, hong kong stocks and the local dollar have been resilient. index set tohe
enter a bull market almost at that 20% level when it comes to rising from the march low. u.s. dollar little changed in the asian session, its first weekly drop in more than a month. the greenback was the subject of push and pull. economic optimism coming into play there. , great to have you with us. what trajectory do you see? christy: thank you for having me. haidi: we see this tug-of-war between the coronavirus story which looks to be around for quite some time yet and patchy eco-data, some of which has surprised to the upside. christy: yes, i think markets are starting the third quarter of the year essentially looking at economies that have actually gone down the escalator, but are climbing up the stairs.
the economic data has not really worsened much. but improvement is very gradual as well. looking essentially at the relativity's of which economies are doing better and actually ahead. asia comes into play in that sense. we are looking at flows of funds ,eading into developing markets and we see virus situations quite huge issues in the developed markets. the preference or the movement happeningto e.m. is -- d.m. to e.m. is happening. haidi: why are we seeing the renewed resilience when it comes ?o risk currencies even this news over the border
closure between victoria and new south wales has not pulled any kind of blip when it comes to aussie gains this morning. dollar movement has a part to play with that. the other thing is we are seeing noises and voices alongside the national security law imposed on hong kong last week, and it appears markets at this point are still kind of shrugging it off as diplomatic issues, geopolitical issues. canada over the weekend suspending the extradition treaty with hong kong. hong kong has about 30 extradition packets with -- pacts with other countries and jurisdictions. president trump will probably sign the legislation to impose financial sanctions on chinese officials over hong kong. so i think it appears that markets are just treating this
as diplomatic rows and skirmishes that are not reacting or responding to that within the financial markets or the currency markets. the dollar has not really been on firm footing. the weekend is diminishing the role of the dollar in the sections, but going forward we geopolitical tension actually reflected in some of the risk sensitive currencies like the aussie dollar. sophie: where do you see the leaders in the third quarter? we did have some winners in the face of a stronger dollar when it comes to asian currencies. the fundamental seem to be improving somewhat. what is your favorite pic here? -- pick here? christy: if you look at your today, the underperformers have
been the indonesian rupiah, the indian rupee. these have recovered somewhat over the past few sessions as inflows come back into asia. i think these currencies could stand to outperform because they have been the relative therperformers, as long as north asian economies continue to get out of the covid-19 situation and recoveries continue to gain traction. actually, that will position the other southeast asian countries to recover as well, being pulled along the rising wave of the north asian currency performance. these currencies as well have higher yield relatively. i think as long as the economies do not show signs of tanking even further and the covid situation gets under control in the next few weeks or months,
this currencies will probably outperform. i do like the indonesian rupiah and to a certain extent the malaysian ringgit. the south korean won has actually done well as well in the past few weeks, however, geopolitical tension could limit the korean won's prospects in the coming weeks and months. seeing steepening bets pickup in yield curves across asia from japan to hong kong. how does this feed into your assumptions? christy: well, the monetary policy loosening trend is still ongoing within asia central banks. this week i think we will see the malaysian central bank cut another 25 basis points, bringing rates to 1.75% from 2%. i think this will continue to be the trend that will be quite supportive.
we are seeing there is a rally in asian bonds, especially the dollar bond space as well, continue. well, you know, for instance, in china and most of asia, there is no sign of the in ther qe, while developed markets, the u.s., qe is probably going to stay for the next 18 months or so. getting a lotly of favorites for asian bonds to continue and trend momentum to continue as well. the rba meeting this week as well. has it surprised you the level to which the rba seem comfortable with the aussie at the moment? at this point, i think the rba is not as concerned
about the aussie dollar as it was before. i think the broad dollar environments are starting to ,how signs that the movements flows into developing markets will help, and aussie dollar is not the only one strengthening. the risk appetite front is helping somewhat. it comes to the policy space, as long as the aussie dollar stays around current level, some of the risks from the geopolitical issues in asia are -- the rba is quite aware of that. seeing onll as we are the policy space that it is probably not going to move the trend in the near term. the rba is not as concerned as previously. tohie: thank you so much
christy tan. the former ecb executive board asber is saying caution cases continue to rise. he says we are still in the first phase of what he thinks central bank should be doing. >> the crisis is not over. up or pickinging up depending on the reason. we will have to continue facing uncertainty and helping. more they have to invent new instruments and come closer to the line. haidi: do you actually see that readjusting at any point, or will they be more likely to actually cross that line, that
you say they are getting closer to? if you take europe as an action, strong fiscal from all european governments with domestic numbers, and also for the first time, the plan to use resources, coordinate toources and common spending face the crisis. it is waking up to the crisis and that is good news. want to lean on your expertise for being a former executive boardmember at the ecb. i spoke to a guest earlier who said we will not see positive interest rates in europe, a fundamentally steeper curve, or balance sheet reductions this side of 2025. do you find that problematic? >> that is certainly what markets are telling us.
with the way the european economy will step out of this crisis, it is hard to tell. it is a likely scenario. raisinge here is about productivity in the euro zone from before the crisis so that ultimately the ecb can raise rates. the key is really about lifting productivity. the french government is looking at ways to extend crisis measures with a long-term furlough, turning loan guarantees into partial equity. earlier we were talking about crisis-fighting measures. what are the risks of governments prolonging emergency support in france but also elsewhere? >> it is the transition. phaseope, the most acute
of the crisis is behind us. we do not see signs of the crisis coming back to the extent that would require new lock downs, for instance. that is not the main scenario. what governments have to do is engineer a transition that can be more sustainable. that also informs moving from liquidity. issues.firms will have instruments will have two people -- have to evolve. next, chinese ride-hailing giant is accelerating towards self driving cars. i chat with the autonomous driving coo about how they plan to get there. ♪
economic disruption. a resurgence in infections has led to lockdown in 12 areas of victoria and prompted a wider re-think. australia's finance ministers has he will step down in the coming months even at the country suffers its first recession for 29 years. he had been in the job since 2013 under three different prime ministers. he still has to prepare and deliver australia's july economic statement, the budget in october, as well as the update in december before he leaves politics. chinese telco huawei faces a further reversal with the u.k. government said to be ready to phase it out of 5g networks. we are told a new report says american sanctions mean the chinese tech player would have to use untested technology, making security impossible to control. sources say officials are drawing up plans to accelerate the removal of existing huawei components, though a timetable is yet to be confirmed. the u.s. presidential race in for a major shakeup with kanye
west saying he is on board. it is not clear if he is serious, but social media exploded after he tweeted his intentions to challenge president trump and joe biden. 30 millionlmost followers on twitter and seems to have won the support of elon musk. he has yet to file the relevant forms. haidi: never a dull moment. china's largest ride-hailing company is making an aggressive push toward self driving vehicles. the technology is still far from trusted with full autonomy. we spoke with didi chuxing's coo for its driving unit about how long it will take to replace drivers completely. >> the reaction has been beyond our expectation. we have very much overloaded wish list of people wanting to test the vehicle and have the experience.
our operations unit is working day-to-day to handle requests, having people come in, and give them the ride that they wish. >> right now a safety driver is still required. at what point do you think a safety driver would not be needed? meng: a safety driver today is sort of like the guardian angels of our autonomous driving system. they serve a very important role. right now we are at a time when we start to introduce passengers to our testing process. , withvery important to health and safety standards, with safety drivers, actually have two drivers. one, looking at the road, taking over the steering wheel if necessary, and one looking at the system to observe what the computer sees and does not seem. >> didi faces fierce competition. technologyidi's
apart from the pack? what are your advantages and disadvantages? meng: i think we have a lot of talent and a lot of great companies working to try to solve this very difficult problem around the world. progress solot of far. i think essentially what it boils down is two things. one is ai capability. that really boils down to how much data you can gather and how efficient we are to improve. two is how quickly can you develop a network of vehicles as well as passengers? for didi, we have advantages on both. we have a really large fleet of ride-hailing vehicles as well as autonomous test vehicles. all of them are gathering road data.
we are leveraging data to improve. said, we have a readily available network of users on the network. once we have the autonomous driving running, we can insert those vehicles into our already available networks so the passenger will feel -- they will not feel a thing. it will be seamless to transition into an experience with autonomous services. >> when you look at the industry overall, what is the biggest obstacle to mass deployment? is it technology? regulation? data? meng: it is all. -- thetrying to solve reason it is a difficult problem is it is not a problem only for one party. it has to be a collaborative operation across the technology development, the service provider, the hardware provider
as well as the regulatory body. we are trying to move this toward in the same direction together. hopefully we will solve them around the same time so that it is in parallel rather than serial. had a center in silicon valley for years. how have u.s.-china tensions impacted your planes in the u.s.? meng: i don't think it is a competition for autonomous driving. this is advanced technology, trying to solve the problem of efficiency and safety for passenger transportation. i don't think anybody should compete on safety. it is a humanity problem. observing the covid-19 and some of our u.s. plansrparts, they have changing the structure, leaving
some of the talents outside, and i think for us we believe this is a problem and it is very difficult. we need the global talent base to come together to solve it. we are maintaining our growth in the u.s. office as well as our china office together more talent to solve this problem quicker. haidi: meng xing. let's get you to melbourne now where the victorian prime minister is holding a press briefing. there has been a further 120 seven cases in the last 24 hours in melbourne. we are hearing the border with new south wales and victoria will be shut from wednesday. let us listen. >> there will be a facility for people who live on those border communities to travel for purposes of work, for the essential health services they might need.
us albright hospital, run by , is of course on the other side the border. there are some services that can be accessed and others that can only be accessed in albright. we will make sure people can get in that example the health care they need. i will leave it to the premier to make further announcements in the next couple hours about how that arrangement will be rolled out, but that is the product of a joint decision and an agreement between the prime minister, myself, and the premier of new south wales. one that is the right call at this time, given the significant challenges we are facing containing this virus. beyond that, i just want to go directly to issues of support and care for those 3000 residents who are in the public housing towers that are the subject of a challenging lockdown.
it is very important that we make sure we contain the virus and that we can control the movement of everybody in those towers, unless and until they are tested. that process is well underway. it is my expectation each and every one of those residents gets tested and the sooner that is done, the sooner we have those -- sophie: we are going to leave that there. bloomberg subscribers can continue watching. as well as some events you may have missed earlier. ♪
sophie: the shakeup at luckin coffee continues. shareholders have kicked out the chairman. what can you tell us about what happened? yesterday in the egm, there were reports from chinese media that the chairman has been removed by the shareholders. we are still waiting for official confirmation. they hope it can help distance the company from the scandal. fired --chain already in may.
also, the committee that conducts internal investigation he may beanother clue involved in the bribes. haidi: is it unusual a founder is ousted from their own company in china? there is a lot about this case that is unusual. daniela: exactly. the shakeup is definitely an unusual case among startups in china. it is rare for a company to oust the founder. it is a strong signal to show fighting tois operate normally even at the expense of the founder. consumerr asia reporter daniela we. i.
>> it is not :00 a.m. in beijing . welcome to bloomberg markets china open. i am tom mackenzie. >> i'm david ingles. we are talking down to the open to trade. we are kicking off this new trading week. equity markets are mixed. there are some worries about the coronavirus. the aussie dollar is recouping early losses.