tv Bloomberg Daybreak Australia Bloomberg January 17, 2022 5:00pm-6:00pm EST
>> i am kailey leinz from bloomberg world headquarters in new york. tch "bloomberg green" on bloomberg tv and online. ♪ >> good morning from the asia-pacific and welcome to "daybreak: australia." i am in hong kong. >> i am in sydney. we are counting you down to asia's market open. china scraps winter olympics ticket sales to the public as the rise in covid cases causes concerns.
the central bank could adjust its view of inflation risks. concern over the true scale of the hidden debt steepens. david: good morning to all our viewers joining us across the region. good evening if you are joining us out of the u.s. we will be tracking what has been happening in the credit markets. let's glance at where we are on the earliest indicators. not really a good sense. a little bit higher. i'm being extremely generous. a high close in europe. the next board will show you the real story with yields. the bank of japan comes out in a couple of hours. as far as oil, we are still trading your 2014 highs. more german 10-year bund
is close to zero. we will be back in positive territory. reflation continues to be a theme. we will talk about what the boj might do today. there is a story we are tracking in china with the expected reduction in money market rates yesterday. goldman sachs saying prime rates due on thursday, they do expect a lowering of the prime rate when china comes out with it on thursday. haidi: so much of this is the covid zero strategy. we are watching omicron carefully.
we see the news they will halt the sale of winter olympics sales to the general public in china as cases have arrived in beijing. instead, they will be extending viewing privileges to groups. a grave and complicated situation currently with covid-19 in china with the organizers of the beijing winter olympic games halting ticket sales. we are watching numbers out of new south wales. just shy of 30,000 new cases in the last 24 hours. we see increasing hospitalizations. we have seen a warning from the chief health officer in new south wales that they expect a spike in deaths. the data showing unvaccinated people with covid-19 13 times more likely to end up in
intensive care even when talking about the omicron variant. david: we will see more of that. it brings to mind the comments out of dr. fauci saying it is too early to say we are nearing the end of the pandemic. on a daily basis, we are nearing about 3 million. it is not putting as many people in the hospital but is still causing disruptions. whether that is staff working from home or the olympics or the overall measures put in place. and of course, that goes into the function of what countries have in place as far as covid policies are concerned. haidi: not to mention all the supply chain issues and supply
shortages we see as a result of people having to isolate at home. let's get back to the top story. i know you will be disappointed. you won't be getting a ticket to the beijing winter olympic games even if you could get to beijing. they have halted ticket sales to the general public after beijing reported a third omicron case. cases have been encroaching on the capital the last few weeks. when they talk about these special groups of spectators, what does that potentially look like when we look at what the winter games will be like? >> it is going to be interesting olympic games. it almost echoes what we saw with tokyo during the summer. set out to the public and by invitation only. they did not say what is an
organized spectator. how you get the invitation remains to be seen. you mentioned the statement from the beijing organizing committee that did say due to the situation when it comes to covid, they had to make the decision to halt ticket sales and instead adapt to a different program. this is quite a reversal. originally, the plan was to already ban foreign spectators. that was always the plan. they were supposed to allow residents to be spectators for the olympic games. they were supposed to operate in a closed loop system where you had athletes, staff, journalists, spectators isolated within three clusters around multiple venues. that is all changing as we speak as beijing tries to find out how the latest omicron variant got
into the capital. now they are blaming overseas mail for the spread because the person who tested positive for omicron in beijing did not leave beijing for two weeks but had been dealing with international mail at work. that seems to be the direction they are going now. they have pointed the finger before at frozen food being the way they are spreading omicron before, i should say covid before, but the w.h.o. has downplayed that before. now beijing urging people when they open mail from abroad to wear gloves, masks, and limit international purchases. david: is certainly changes the meaning of a dirty letter. speaking of head scratching, this surprised delta case in
hong kong has authorities scratching their heads. yvonne: it is another surprise given we are dealing with omicron when it comes to delta. this is a 23-year-old woman who worked at a pet shop that tested positive for delta. it is surprising because we have not seen a case of delta for weeks until now. this is just another blow to hong kong's zero covid strategy. they are trying to figure out how this came about. this is coming days after we heard carrie lam extending current measures and flight bans until the end of the lunar new year. now hong kong is facing the risk the delta variant could be spreading here. david: yvonne man with the latest. let's turn our attention to japan. they are eyeing a three-week
emergency with uncertainty over the economy with the bank of japan. let's bring in our chief rates correspondent from asia. garfield, not that the meeting is live but the fact we are excited over it tells you something is happening. we are talking about the boj of course. garfield: you said boj in my instinct is to stifle a yawn. they are usually as exciting as watching paint dry. there has been plenty of excitement coming into this. in the current environment, any central bank meeting is live as far as bond markets are concerned. there has been speculation the
boj may actually talk about talking about thinking about when they might raise rates. it is torturous, but if they are doing that, that emphasizes that everybody else is looking, is going to be pushed toward raising rates. one of the big things to watch is if there is the sort of less dovish surprise from the boj, that might be the sort of thing that helps to push the yields into positive territories. the ecb and boj are the two major holdouts when it comes to moving away from record accommodations. if the boj is taking a step along this route, that speaks to the idea that the ecb will be less accommodative.
there are strong concerns about inflation in europe. there are reasonable signs about growth even in the face of fairly extreme pandemic numbers. that could send the bond yield positive. then you get the continuing vicious spiral when it comes to the bond market with central banks willing to move away from the easy settings they introduced to help fight the pandemic's impact on the economy. haidi: when you talk about
geopolitical tensions, we see more signs of a rising rate environment and look at the value of negative yielding that below $10 trillion -- debt below $10 trillion. take a look at the chart. garfield: that isn't actually chart -- that is an excellent chart. i think it could move under the levels it had gotten to when everything was selling off with the pandemic. honestly, that is what should be happening. if you look at the global economy, geopolitical tensions and a pandemic are at a more normal setting. we have this extreme accommodation for almost two
years. central banks need to move away from that. inflation is the immediate spur in the u.s. but honestly, it is past time from the central bank's point of view to move to more normal settings. more normal settings should see the 10 year treasury yield move above 2% sustainably. i think if it gets to 2%, it might go significantly higher. i do think in the short-term there is the potential the boj fails to be as hawkish as some thought. also, we are now in the fed quiet period in the lead up to the next fmo see. there is a potential we see a pullback in yields. over the next time, the
expectation is the fed will remain hawkish. i think it is hard to see many scenarios where we do not end up with 2% or higher untenured treasury yields, and that will drag everything else up with it. haidi: garfield reynolds with a look ahead of the boj decision. you can follow more on this story and the trading action with one click. there is ongoing commentary and analysis. let's get you to paul allen who has the first word headlines out of sydney. paul: thailand could revive the quarantine visa program for travelers. the country has recorded a jump in new cases but far below the peak during the delta wave. the task force may consider the
proposal to restart the test and go program on thursday that helped attract about 350,000 visitors in two months. president xi jinping has called on nations to secure global supply chains and prevent inflation shocks. it is the third time he has spoken of the event. china was seeking to minimize economic and diplomatic instability as xi prepares to keep our in the second half of the year. >> the fundamentals of the chinese economy are characterized by strong resilience, enormous potential, and long-term sustainability. those remain unchanged. we have every confidence in the future of china's economy. david: the taliban wants china to help its government gain official recognition in the international community. along with the u.s. and allies, russia and china are yet to
recognize the taliban administration. concerns remain over links to terrorism and human rights abuses. that has made it difficult for afghanistan to access frozen reserves held overseas. brazil's next president may have to temporarily increase public spending. he leads opinion polls. one of his top advisors says spending will be necessary to fight poverty and unemployment. public expenditure is tied to the inflation rate. the spending cap was created without effective mechanisms and needs to be replaced, he says. global news 24 hours a day on bloomberg and bloomberg quicktake. i am paul allen. this is bloomberg. david: we will be hearing from a medical services expert on why vaccine passports are needed and what we can learn from the
haidi: our next says global shares are expected to return 8% this year but he expects to see the rotation trade away from growth and tech heavy u.s. shares into more cyclical markets in europe, japan, and other e.m.'s. always great to have you with us. the great rotation trade finally looking to benefit e.m.'s as
well as potentially in australia. >> at his right. -- that is right. last year was rough for emerging markets. i think that was because of continuing uncertainty about the current environment which benefits the u.s. share market and tech stocks. as we continue to gradually get through the pandemic going forward as vaccines help, i think cyclical stocks will do best. i think tech stocks will still do ok but the outperformance is behind it as bond yields rise. that backdrop will benefit non-u.s. share markets over u.s.
share markets. haidi: how much affect do you expect from omicron? now you have everything from supermarket shortages and impacts on the services sectors. will that be seen? >> i think it will be seen. i think it will put a dampener on the current quarter. i think it will be closer to .5%. by the same token, there are positive signs. we are seeing high debt levels in australia compared to the delta wave with 15 deaths in one day. the number of cases from omicron is 40 times the number it was
with the delta wave. the death rate is lower. i would prefer to slow the way we are seeing. i think we are paying a price for that. by the same token, we have to allow it is less deadly than the delta wave was. if you look at the number of cases, there are signs that we are going through the worst of it now in new south wales and even victoria. things should start to ease as more people recover from omicron and come out of isolation and are able to go back to work. a slower pace through the current quarter but i think the broader recovery in australia will continue given pent-up savings and low interest rates and strong business investment. david: is that momentum enough
to prove the rates markets correct which have the rba moving in the next six months? what do you think will happen? >> i think the next six months is too early. i think the rba signaling late last year is to dovish. i think we will be somewhere in between. i see them raising interest rates later this year, probably around november. and probably another hike in december. that is largely because i think the improvement in the jobs market will be faster than the rba allowed for. the unemployment rate is 4.6%. that is in the recovery post the delta lockdown. that might stop in the short-term. i think as it proceeds, we will
see the unemployment pushed down to around 4% with growth pushed up to 3% which will enable central banks to start raising rates. i don't think we will see the full rate hikes and don't see them starting in the next six months in australia. david: your prediction on the aussie 10 year worth 1.5%. >> i would say to buy. i think there's more upside in bond yields to come. i think bond markets around the world can be factoring in secular stagnation. i think that was the story up until the pandemic. some of the shortages will diminish. i think bond markets are too complacent in terms of the inflation outlook. i think we need to see more
aircraft to tonga -- military aircraft to tonga. communication has been hampered after undersea cables were damaged. falling almost 30% in december. and there you have it. woah. wireless on the most reliable network nationwide. wow. big deal. we get unlimited for just 30 bucks. sweet, but mine has 5g included. relax people. my wireless is crushing it. that's because you all have xfinity mobile with your internet. it's wireless so good, it keeps one-upping itself. take the savings challenge at xfinitymobile.com/mysavings or visit an xfinity store to learn how our switch squad makes it easy to switch and save hundreds.
david: you are watching "daybreak: australia." paul: i am paul allen with the bloomberg headlines. the beijing olympics will not sell tickets to the general public to ensure health and safety. select groups of spectators will be invited instead. beijing residents are being urged to wear masks and gloves when opening overseas mail as authorities try to trace a local omicron case. tokyo government is seeking stricter measures in the japanese capital.
more than 20% of hospital beds dedicated to the virus were occupied as of monday. that is the level she said she would consider implementing a because i state of emergency -- a because i state of emergency. local media says she could make a decision as soon as wednesday. medical advisors say it is too soon to say if it will shift from pandemic to endemic. anthony fauci told an online conference research should focus on vaccines that protect across mutations. the israeli trial found a fourth dose found only -- offered only partial defense against omicron. >> it is an open question as to whether omicron will be the live virus vaccination everyone is hoping for because you have a great deal of variability with new variants emerging.
paul: singapore's financial regulator has told cryptocurrency companies not to advertise their services to the public. that is in line with the desire to curb retail speculation in the volatile digital assets. they say service providers should only market activities on their own websites or official social media accounts. global news 24 hours a day on-air and on bloomberg quicktake. david: let's look at the chinese markets. fresh turmoil when you look at dollar bonds concerned over the true nature and scale of debt. stephen engle is here with the story. what is the new chapter we are talking about, the new source of concern?
steve: the real source of concern started bubbling up late last week when country garden, the largest developer in china by contracted sales the last four or five years, when they failed to generate demand for the convertible bonds. that started raising concerns about liquidity. the latest news late yesterday was a smaller developer called logan, debt wire is reporting it could be on the hook for $812 million u.s. of guarantees on outstanding obligations through 2023. it is another example of heightened concern and lack of good news in the sector and heightened concerns about off-balance-sheet liabilities.
we saw that with evergrande and jumbo fortune enterprises. the concern is other developers have these off balance sheet liabilities as well as private bonds and trust products they need to pay and a number of outstanding obligations they need to pay at the expense perhaps of overseas creditors and they are last in line to get their payment. we have seen seven bella bruce since october default on u.s. bonds. country garden bonds plummeting again yesterday. logan had one bond plummet to a record low. country garden seeing declines after failing to get demand for the convertible bond. this is what the micro strategist had to say about the
situation now. risk across the chinese property sector are rising with difficult refinancing positions for even the best firms. it goes on to say greater clarity on disclosures of liability as well as possible asset sales are crucial to shore up confidence. that is where we are now, a deficit of confidence in the sector. haidi: a deficit of confidence not being expressed by the leadership. we heard president xi jinping saying he has full confidence in the resilience of the economy. did he address the property sector woes specifically or give any indication of how policymakers are approaching this? >> the chinese leadership is in constant pursuit of stability.
in taking on big tech and macau and education firms and property all at once, it is not necessarily the recipe for stability. but there is a longer-term game going on and in a politically charged year. you have the olympics in about three weeks. you have the party congress in the fall where he is solidifying his central claim on a third term. you have to question what the endgame is here when you see property accounts for more than one quarter of gdp growth, and we saw a slowing of gdp yesterday in the fourth quarter numbers. the headwinds are there. the policy is in place to add headwinds with the endgame perhaps of returning the state to dominate the property sector where they could cut off any potential risks of over
indebtedness with a reckless disregard for financial stability in private property developers. haidi: stephen engle with us. let's get to calls ahead of the start of trading in asia. emerging markets are set to outperform based on a model showing e.m. stocks are ripe for a relief rally. that model shows e.m. as being more attractive. we heard about rotation into emerging markets from shane oliver earlier as well. david: this year might be it. i would be remiss if i did not say.
this goes into -- this is also set to defy skeptics. j.p. morgan strategists are very positive on the earnings outlook this year and forecast significant beats. output is rebounding. bottlenecks are easing. and the eurozone will be a bright spot for 20% earnings growth in 2022. there is plenty more ahead. this is bloomberg. ♪
>> we started this the wednesday before thanksgiving developing an omicron specific vaccine. it continues to be made. it should be in clinics in the coming weeks. david: the boss of moderna speaking at a virtual world economic forum event. dr. anthony fauci says it is too soon to say whether the omicron variant will herald a shift in the covid-19 pandemic to endemic.
joshua discusses how the pandemic could become endemic. >> the virus can be causing a lot of problems in one part of the country and in another part it can come down. the cases can drop dramatically and the situation can look different. i think we have to think about the pandemic the way we think about the weather. sometimes it is really good and we don't have to carry an umbrella around. other times, we need an umbrella. i think it is foreseeable cases will continue to drop in the united kingdom and as a result it is appropriate to lift restrictions. just because they are doing it at this minute does not mean it is happening in the united states. we are expecting cases to go up on the west coast of the united states. >> if we see cases go up on the west coast, is there a scenario
where a month down the road policies might reflect more of that in the u.k., more the pandemic strategy? -- more of the pandemic strategy -- endemic strategy? >> the omicron surge has been terrible. we are still seeing growing hospitalizations in the united states. in parts of the country, they are continuing to grow. when it comes down, we are in a different situation and have to adjust. hopefully, we will get a bump in collective immunity from omicron and that will give us some protection for a while. that will allow even more opening. 2022 does not look like it will be the future of where we are in the united states. as soon as there is a little bit of light, we think thank it is over and then everything goes
away. we will have to stay vigilant and be prepared to mask up again if things get worse. >> the cdc is starting to offer free rapid tests. how crucial is it that we have the tests more readily available ? >> i think rapid tests are helpful. i think their use can be overstated. the united kingdom has more access to tests and had a huge omicron wave. i do not think they are a magic solution. some people talk about it as if it is the only thing that matters. i think having access to tests is a good thing. if you're going to see the grandparents and want to take every precaution, doing rapid tests on top of making sure
people do not have symptoms is an extra level of security. i don't think people will want to be testing themselves every other day. i just do not think the test will begin to define our life. i think it is a tool we can usep help in certain situations. haidi: the school of public health is supported by michael bloomberg. you can always get a round up of the stories you need to know to get your day going in today's edition of "daybreak" and on your terminal. you can always customize settings as well for the industries and assets that you care about. this is bloomberg. ♪
of japan comes out later today with their latest policy decision that goes into the inflation conversation. we know inflation is an issue when japan is starting to talk about it. they might acknowledge some price pressures. as far as the bond is concerned, the 10-year hedging against a rise in jgb yields is a popular trade at this point. haidi: i never thought we would get to the day where we have the bank of japan talking about the prospect of inflation or reflation. let's get a check on the latest business flash headlines. binance is joining forces with a billionaire to study possible asset exchange. the memorandum of understanding filing says the deal is on expectations of rapid growth
expectations in the infrastructure. crypto.com says it stopped all deposits and withdrawals while it investigates some activity. it tweeted all funds were safe while security is being enhanced. activision blizzard has reportedly fired or disciplined more than 17 employees since july as part of efforts to address allegations of sexual harassment and other misconduct. the ceo held back a report on the actions worried about their reputation. july lawsuit accused the company of fostering a frat boy culture of sexual harassment and discrimination. india said to be eyeing evaluation of about $9 billion with early discussions with investors. we will continue to watch that story.
it would be above the $12 billion level the company hit in 2012. the start up is expected to proceed with the offering this week or next. the consumer help your business could set off a race among private equity firms. they are readying packages to help finance a potential bid. unilever has held talks about extra financing for a potential offer. david: let's talk about the town hall held after the chairman quits. shares took quite a tumble overnight, down 2%. that was the biggest drop in three or four weeks. a lot of uncertainty of what the
future might look like on the back of the changes. let's bring in our finance reporter to talk us through the details. many angles to this story. where do we start? >> so many angles. it was not quite a dramatic announcement on a monday at midnight. we should start their. this chairman had been brought in nine months ago to help fix the culture at credit suisse. when he was in breach of the quarantine rules, that does not speak well to the culture. the board did have to act. it was very dramatic the way he was replaced. his replacement is a board member saying the strategy set by the chairman is the one he would follow. as you say, so many uncertainties now for the bank.
haidi: previous to this, we heard reports maybe we would see disciplinary action, a warning, not outright dismissal or resignation as it turned out to be. was there since there was no real alternative for credit suisse in terms of reputational damage? >> that is exactly right. you know they have come under fire over the past year over the reputational damage around archegos. this was just another thing plaguing the bank. the timing is interesting. you have seen what has happened with novak djokovic and the australian open. you're seeing boris johnson under extreme pressure in the u.k. as well. it speaks to this growing pressure on cortical and sporting leaders bypassing rules in the third year of the pandemic. there is very little tolerance among ordinary people and
shareholders for this kind of transgressions. haidi: rio tinto's iron ore production for the fourth quarter beat estimates. the mining company expects to ship up to three handed 35 million tons of iron or in the coming year -- 335 million tons of iron ore in the coming year. >> rio tinto had comments about china, one of its most important customers in the production numbers saying it seems china transitioning from tightening in 2021 two easing of policies and progrowth measures to support infrastructure and consumption. that has positive implications for the iron ore price.
has eased off a little since then. the price is being supported by labor shortages rio tinto has been struggling with. a couple of mines in western australia have been pushed back in terms of the start update because of labor shortages. production for 2022 seen around 335 million tons which is similar guidance issued for 2021. production for 2021 coming in a little less than 2020 as supply chain bottlenecks bit. rio tinto warning government measures around coronavirus restrictions is one of the key risks going forward. david: what do we understand about the other products? i believe copper is also down. paul: rio tinto iron ore makes
up about three quarters of their revenues. we do keep an eye on other products, copper particularly. 132,000 tons was the production last year. that was up 6% on the quarter but down 7% on the year. a few well-publicized difficulties around rio tinto's major project in mongolia. the underground expansion has hit a few difficulties with an offer to waive the government liabilities for its stake. that might speed up the timeline for the underground expansion. rio tinto also pushing more into lithium. we got an update on the mine from serbia. the first sale from that might expected in 2027. previously, it was 2026. there has been public opposition to the mine in serbia.
over the weekend, we saw some disruptions. we will be watching rio tinto's adventures in the lithium space going forward this year. haidi: paul allen in sydney. other stocks in focus, we will be watching rio tinto at the start of trading in sydney. we will be keeping an eye on the refiner. the electronics retailer reporting just under $288 million. we will reaction for that. consumer sentiment has a question given the spread of the virus. they have emerged as one of the
the question will be, how quickly can all of us execute to build capacity to meet that demand? that is what we are very busy doing in the next 24 months. we expect to get to about 600,000 battery electric units globally. that is before our bigger investments we are making in kentucky and tennessee for batteries as well as assembly. they do not come online until about 2025. ♪