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tv   Bloomberg Daybreak Australia  Bloomberg  August 18, 2022 6:00pm-7:00pm EDT

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haidi: welcome to daybreak
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australia. >> we are counting down to asia's major market open. >> i'm shery ahn. fed officials offer divergent signals over the size of the next rate hike while pushing back on bets they could reverse course. >> u.s. stocks and the day higher. earnings reports -- >> the indonesian president speaks to bloomberg about plans to boost southeast asia's largest economy. u.s. futures are muted after a lot of volatility on the new york session. we had volumes want to percent lower than the 30 day average. not surprising we have price swings and also mixed economic numbers also mixed earnings. we are talking about the strength in the labor market, more signals of that.
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we had strong manufacturing numbers but more pressure on the housing sector. cisco had an upbeat forecast. you can't blame investors for not knowing where to go. we did see treasury yields under pressure throughout the session after more comments from fed officials that they are backing more rate hikes. oil prices around $90 per barrel. a little more optimism in the new york session. with treasury yields under pressure, look at this chart on the bloomberg because that value trade that has been so popular especially post lockdown has been under pressure. we are seeing less conviction about cyclicals now that we are thinking inflation might have peaked. investors are right about a potential economic slowdown now. >> it will be interesting to see what happens here because we have seen a lot of analysts recommending defensive strategies particularly in the
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markets that are more exposed. in terms of the startup for today, low trading volumes. new zealand stocks online nearly 9% lower. fed officials sent mixed signals around rate hikes. the commodity linked currencies holding steady but japanese yen testing the key 50 day moving average that is acted as a ceiling in the past. if you look at the economic calendar, japanese inflation is due in the next hour. we are predicting the core cpi to have accelerated to 2.4% in july. the boj is saying that's due to rising energy costs. also new zealand trade data is due this hour.
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watching what's happening with its largest trading partner printed. >> the problems with china's economy are wide and varied. this is not the year xi jinping would have wanted going into a new election. there are questions over the scenario that he wants to go into with an unprecedented third term. he is sticking to resolutely dragging on the economy, there is a payment crisis as well. for china, stability is always at the core of everything. >> we are finally hearing from larry summers saying that perhaps that narrative that china's economy was going to surpass the u.s., it's true we
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have taken it as a given in the past few years. that may not happen. it might be the false narrative that we have seen back in the 1990's about japan, the 1960's about russia. now as we continue to see the weak economic data, goldman sachs downgrading the forecast for gdp in china to 3.3%. what's happening in china and the u.s. with the federal reserve has global repercussions. let's talk about fed officials because they did give those diversion signals about the size of the next rate hike. we had plenty of fed speak today. >> it isn't if they're going to
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rate hikes on september 21, the question is how big the hike will be. 50 or 75? the president of the minneapolis fed was a double a year ago, he has become a hawk now. he said the fed now has an inflation problem. they need to get inflation down urgently even if it causes a recession. >> i don't think we are in a recession right now, but as we continue to raise rates, to raise costs of borrowing across the economy, it shouldn't be tapping the brakes on the u.s. economy and makes it more likely that we would end up in a recession. >> jim bullard now a hawk urging the five point basis by -- basis hike. he says why drive it into the next year, get it done now. he was saying frontloaded the
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hard go fast and you can pause and see things -- where things are standing. esther george of kansas city given remarks today said that the case for a rate hike remains strong. she said my colleagues and i are going to continue to debate the size. she said it on the first 75 basis point hike. she said we have rates up and we are doing it fast. mary daly told us what she told us a week ago speaking as well. 50 or 75. her baseline is 50 but she is open to 75. let's talk about the economic numbers that sherry just mentioned. jobless claims 250,000 in the latest week. they have been stuck at a healthy level supporting the fed's view that the labor market is still strong. home sales are down 5.9% existing home sales hit the
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lowest since 2020. this is where the fed is keeping a close eye because organs rates of shot up. people have pulled out of contract closing. this was already hitting the economy and it may continue to hit. >> you can see that push pull in the markets. we saw the jp morgan representative defending the buying the dip call saying he sees more about buffer for these orchids. what about the dynamics that are at play? >> bonds are a choice for investors now attract relative to equities. because the outlook has become troubled enough that you don't know if you're looking at it in a years time, is the stock market went to be higher? you don't know. everyone expects inflation to be lower but the question is how much and what is driving. bonds construed to look like a good deal -- they can start to
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look like a good deal considering the two year yield is now higher than where the market sees the cash rate in two years time. that's three have a potential value in buying bonds. that helps to make the outlook for equities which is cloudy anyway even more cloudy. the other thing we saw in the last couple of days is the market tacking more toward the idea that we are going to get 50 basis points next month. 75 is still on the table. that means the consensus is 50. >> you are an investor, it's your last trading day in asia, happy friday everyone.
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what do you watch? do you set up for jackson hole next week? how do you position was to mark >> a lot of people have already pulled back. the action has been choppy and thin. especially on the bond and fx space. a lot of people have already checked out. in asia in particular and even globally, people are trying to get a handle on what's going on with china. we can see there is a strong slowdown. communication from the authorities that we are not going to stimulate. yes we are going to stimulate. anything that would give clarity on where china is going, i think that would be key in the space today. the japanese inflation will be an important number but that is more tightly contained to japan and more short-term.
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>> setting up for the trading day ahead this friday. vonnie: chinese president xi jinping is urging regional authorities to help relieve the severe drought threatening electricity supplies and adding further risk to economic growth. some factories have been forced to curb production as the heatwave hits power generation. water levels in the yangtze river have fallen to the lowest level for this time of year. the monetary policy committee lowered its benchmark to 13% after keeping it at 14% since december. all 21 economists surveyed expected no change. this comes less than a year before elections. longtime trump cfo has pleaded
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guilty to 15 tax fraud charges. he admitted to scheming for years to avoid taxes by paying certain workers with unreported perks such as housing and cars. trump has not been charged and he did not implicate his boss. football fans have so far snapped up almost 2.5 million out of the 3 million tickets available for the world cup in november. residents from qatar and saudi arabia are among the top buyers. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. >> still ahead, miss our interview with the indonesian presidents on his plan to boost his economy.
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it plus, samsonite makes an impressive turnaround in the first half. we get an exclusive interview with the ceo later this hour. >> we will get insights on the markets. range bound and data dependent are the phrases to watch out for in the coming weeks. this is bloomberg.
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>> i think they will continue to raise rates. if they get lucky, they can get it right but it's difficult to know exactly where you are because the data is coming with a lag and there could be shocks that come in. i'm sure they won't get it exactly right, that's they are trying to do. if they're going to make a mistake, it will be on tightening a little bit too much. they want to make sure to bring inflation down. >> that was the former fed governor on the rate hike path. our next guest says range bound and data dependent are the phrases to watch for the next few weeks. with this now is deputy cfo of bmo family office.
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markets are pretty bullish at this point. >> the markets are erring on the bullish side and not paying attention to fed commentary. they are focused on inflation. the handsomely way because the economic numbers especially as it relates to numbers have a solid underpinning and even as the fed starts doing quantitative tightening, we have aid coming in through fiscal packages. you have that kind of market where the numbers are good some aren't so good and the market participants are trying to parse what everyone will do. the fed has stated multiple times that they are focused on that inflation number and bringing it under control. they're going to be hard-pressed to want to start reducing the rate too soon. >> not to mention we do have
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idiosyncratic risk on the inflation front. especially with the new drought and supply chain issues. factories closing in china not to mention the geopolitical tensions in taiwan. could we see reach tightening of the supply chains and what would that mean? >> definitely and i don't think the market is factoring that through because there are a lot of tensions around taiwan. a lot of tensions around supply chain in and out of their. you have the european issues with the river and trying to get things up and down. there's all kinds of potentially extraneous one-off factors that could exacerbate the supply chain issue again. the thing is that there is solid data the fed probably feels like it has some room because employment data remains strong. they are seeing scrolling and other areas.
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people will be listening very closely to what comes out of jackson hole asked week. in the meantime, waiting and parsing every economic step comes out between now and september meeting. >> what is your biggest take away from this earnings season? it feels like the markets have chosen to look for what they feel is good news even though it hasn't entirely been positive. >> the biggest take away is that it is very company specific. it's tough to look at macro trends or even industry trends because even within particular industries, you have similar companies reporting different things so it takes a lot of analytical prowess to understand what's going on at companies with their supply chains, are they able to pass along products and price increases, cost increases? are they able to hire and
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contain? -- maintain? it takes a lot of extra work from an analytical standpoint to be able to understand the nuance of what's going on. over are keenly, earnings season has been good. with the bulk of the s&p 500 in, average revenue increases 14%. >> at the moment, it doesn't seem like a market that is pricing for any risk of a recession. our question of the week, the idea that a recession is the best cure for inflation, that it's necessary, is that the equation that we are facing at the moment? >> i'm not sure it is. this situation we are in was caused by a medical pandemic not by a traditional access and some portion of the economy. companies went into this
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downturn in very strong shape. the data became discombobulated because of the fact that we shut the entire globe down and reopening has been rocky. it's not traditional. hopefully, the fed can stick soft landing and they employment markets give them more opportunity to try to do that but they have to be careful. >> always great to chat with you. we have numbers from the australian energy giant hel. net income coming in at 860 million australian dollars. missing expectations. we had seen expectations that the decline would be dragged down by some of the unplanned powerpoint -- powerplant outages.
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there has been an activist investor push for them to look at their esg goals. we will be looking out for more earnings coming out of australia. more to come. this is bloomberg. ♪
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>> china's slowing economy is being pummeled by severe weather headed. it is worsening power and food shortages. let's bring in stephen engle in hong kong. we were just hearing earlier reporting from the nikkei saying they're further companies being affected by the power shortages.
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we know there are also issues across other provinces. what are we saying about these added pressures on an already dire situation? stephen: severe weather is not new to china. in a politically charged year for xi jinping with an economy already under severe pressure because of covid zero, the property problems and other issues, this is more critical especially in a place like sichuan province. highly populated and lots and lots of manufacturing. foxconn, volkswagen, tesla, they have so may suppliers. they applied to the shanghai government put pressure on such one -- szechuan so that their
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suppliers can be up and running. this really does go up and down stream. hydroelectric power is down considerably because of the drought. you're seeing pictures of the gangs a river. we're hearing from the government that the reservoirs around the dam is down about 50%. we are seeing according to the government the worst drought on record. spillover effects go all the way down. >> add to that the property slump. covid at three month high in terms of cases. it's also a very important political year. >> absolutely. the pressures are mounting on xi jinping because of covid zero, the property was, the crackdown
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on companies that create a lot of jobs. unemployment for people ages 16-24 is at a record high. you have the increasing risk between china and the united states over taiwan. i hate to say this, it's a perfect storm for xi jinping as he looks for the third term which is likely to be in november. they don't have an exact date for the party congress. he is in the northeast right now calling on all governments across the country to do what they can to limit the drought. that's mother nature at work. he's putting pressure on provinces to help. in the north where i lived 32 years ago, there were issues and
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now it's being hit by heavy rain. >> stephen engle with the latest. let's look at the day ahead for new zealand and australia. in june, we saw high fuel costs locking up the surplus. in austria, we had the national ev summit underway. we will hear from the climate minister and the acceleration of adoption of zero emission carbon cud. cud. - [announcer] imagine having fuller, thicker,
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you get 500 strands free. call right now. (upbeat music) >> the indonesian president has confirmed that his government may impose a tax on nickel
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imports. he wants to move up the supply chain as well as increase state revenues and create more jobs. he spoke with our editor-in-chief. >> we want added value to exist in indonesia so that there is income for the state. opening job opportunities in indonesia and most importantly, we can enjoy the added value. that's what we want. also with copper, tin, and others. we are not being closed, we are being open indeed. u.s. china europe want to cooperate? we are open. >> you've talked about putting attacks on nickel products. is that going to happen this year? an export tax on nickel products. >> it is possible to impose it this year. >> a consistent thing you have
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been talking about is green industries and the environment. you have a goal to reach to make indonesia carbon neutral by 2060. most of your energy now comes from coal, coal prices have gone up. i wonder, will you stick to your pledge that you will build no new coal-fired plants that that is gone forever? >> our target is very ambitious. 51% by 2030 and by 2060, we should be at zero. this requires technology and funding. money. the potential is clear.
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to shift from culture renewables, it is not an easy thing because the coal prices are still cheaper than geothermal. >> you tried to introduce -- there was talk of a carbon tax. two dollars per ton. the government has twice deferred to that. i wonder when you would do a carbon tax on coal. if the prices are this high. >> when it is finished, we will immediately implement the carbon tax. i think we will probably do it this year. >> the indonesian president there speaking to our editor in chief. we will have more from that conversation later on daybreak asia. let's stay with commodities. citibank has an outlook -- a report on the outlook for those
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using these metals. what are they saying? >> this is a new report from citibank and what they are focusing on is chinese producers of the latest generation of lithium-ion batteries. it's interesting that they found from the research the focus from the biggest battery producers in china has been on making the fastest technomic -- technological advancements. what that means is citibank expects the producers to be putting more pressure on supplies to reduce the price. similar to what we just heard from the indonesian president and the reason indonesia perhaps is focused on being up the value chain for commodities, if we look at how nickel has been performing. the u.s. has been warning there will be a shortage of the metal moving forward perhaps over the next 3-7 years.
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>> one it comes to stocks, one of the biggest equity bulls on wall street defending the debt buying call. -- dip buying call. >> is saying if you're waiting for opportunities to buy the dip, you will be waiting a long time. he says they're waiting for the call to top out. the reason they are saying that is basically we are not going to see any kind of global recession. that inflation will ease as well. they say that a lot of what happens is the positioning is still very low. the perception is that they have been vindicated this year, but one should keep in mind economist says the target they have for year end and not the inter-year lows. >> let's get you the first word news. vonnie: fed officials are
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offering mixed signals on the size of the september rate hike. the st. louis fed president said another 75 basis point move. another says the fed has already done a lot. the minneapolis fed president says the inflation challenges not over. >> the question right now is can we bring inflation down without triggering a recession? my answer is i don't know. we know we have more work to do in raising rates. >> the philippine central bank has delivered half-point hike. that brings the total increases this year to 175 basis points. the governor signaled central bank is not done with rate hikes yet. saying it has the flexibility to act against price pressures. u.s. federal judge says portions
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of the affidavit justifying the search warrant for the mar-a-lago resort should be unsealed. the justice department has one week to propose what information should be kept secret. the u.s. is aiming to boost the supplies of monkeypox vaccine by securing a deal with danish drugmaker. it will be packaged by a michigan-based company. there has been an initial order of 2.5 million doses. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. >> we have earnings continuing to come through. where looking at stock and earnings.
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the final distribution security of just about 14 since australian. when it comes to -- that is slightly higher than expectations. the stock is down 10.4% year to date. we have been seeing quite a lot of downward pressure when it comes to property prices and home prices and australia given that we are seeing big declines especially across major cities. we have an exclusive interview talking through those results a little bit later. let's take a look at samsonite.
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we are saying upside of just shy of 24%. so much is on the back of resumption of global travel, the reopening story across most major economies and destinations post-covid. china is samsonite third-largest market. the lockdown and mass testing are continuing to play out there and hindering sales. it's great to have you with us. we had to talk about china printed what was the impact on those numbers? are you optimistic about the outlook given that even this week we hear that covid zero-tolerance still the narrative? >> thank you for having me. we have definitely seen an
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impact in our business, but the reality is our china business has many facets so we have been running down around 40% for much of the quarter. in the past q2, we dropped with the recent lockdowns. for us, i still think there is a positive outlook for china. as we get into q4 and into q1, we start to see some better domestic movement which will fuel a chunk of the business that we have been seeing so far. international travel is still down 95% in and out of china. when that releases -- what i would say is the pent-up demand for travel will be the same is where we have seen everywhere else in the world and i expected to open with a boom. >> it is interesting because we have seen that revenge travel
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take hold globally. i'm curious to see how that happens on the scale that you see with the chinese market reopening in both directions. you talk about the domestic focus as we get domestic activity in china. how does your strategy change with the lockdown of the main borders? >> for us, fortunately we have been focused on this. developing products for many years that diversify our business from just travel luggage. you can see behind me backpacks are a very big business. we just had a very big chinese act a school season and people are moving within china. the types of bags they will be carrying be different than what you might expect for long-haul trips. we have been executing on that for a very long time across our entire business.
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in china, they have done an amazing job of positioning this business. in the month of july, it was down 38%. you would think no travel for exiting china but our business is only down 38% and making good profits because we have adjusted the business. >> we continue to see storing inflation. that is impacting their business. you said you want to focus on margins, that you will go through increases in prices in order to mitigate the cost. does that mean at the same time you are expecting lower unit volumes such as what we are seeing here with lots of retailers in the u.s., you have been helped by price increases but not necessarily sales volumes. >> yes. i think it's important to look at our consolidated growth hundred our overall business is down 16% q2 of this year. last year, 52%.
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the real recovery in travel is here. we are getting some benefit on pricing as we have adjusted pricing and discounts and all the factors that we can do to manage the growth margin which we are running at historical levels today. we have been able to leverage that effectively. there is unit growth still to come. the travel numbers when you factor in international travel are still down in the mid 20% range. as that recovery happens, with pricing which has been for us to maintain margin, we haven't done pricing to accelerate margins, but to deliver historic margins which our team has done an amazing job. i get excited about what the rest of our year looks like this year and for sure, 2023 where i think travel will continue its recovery. i think it will be very exciting for us. >> where are you excited about growth? and what region? >> across all regions.
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europe q2 was positive 10% to 2019. the u.s. business is approaching close to breakeven and q3 and q4 unthinkable going to positive territory. markets like latin america, three quarters have been up 25%. our asia business if i take china out is up around 16% going into july. it was down 60% a year ago. we are seeing active movement. the only market that hasn't fully started its recovery is china. korea and japan are open, but they are moving slower than the rest of asia. southeast asia is moving. as travel restrictions get lifted, as countries and regions
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lift restrictions, people are immediately starting to travel. >> tell us about the environment as well as changes you have had to make on the supply chain side. >> i might tell you, we have been fortunate, our business went through a big trough with the pandemic. we got very aggressive in going through our cost structure and setting ourselves up. we're focused on keeping that in place. we been focused on cost and bingham to deliver profitability. when you look at q2 numbers with business still down 16%, we have achieved the highest margin we have ever achieved at 17.6%. we are already in the game of managing cost inflation.
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on the product side, we are constantly reengineering our products. i think it is helping us. i have good conviction that we will continue to maintain margin even with the pressures coming at us. some costs are coming down. for us, freight is a big piece of our factor. we're singapore dramatic reduction in freight cost. >> great to chat with you. we have more earnings flowing through. the australian gold minor reporting their numbers. updates when it comes to output expectations. we are seeing further numbers
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when it comes to a final dividend for -- per share of $.20. we heard from evolution mining saying that it could rally next year if inflation continues to remain elevated. we will continue to look ahead to their focus on cost cuts as well as getting their output through at a higher level. a number of projects have been their focus for gold as well as copper. we're getting more results ahead of what is already a very busy earnings day this morning. >> very busy eco-day as well. we are getting trade numbers out of new zealand and we are seeing another trade deficit for the month of july. it read talking about the deficit widening to $1.1 billion q. week.
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-- kiwi. that led to a deficit while we continue to see the fuel costs impacting those numbers. exports $6.7 billion q. week. imports coming in for the month of july. plenty more to come on daybreak australia. this is bloomberg. ♪
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bloomberg has learned that qualcomm is taking another run at the market for server chips. we are told that amazon has agreed to take a look at the offerings. let's bring in our senior analyst. qualcomm seems to want to decrease its reliance on smartphones. why are they so focused on the server market? >> i think diversification is a good thing especially in the semiconductor market. if you look at the revenue exposure, it is roughly 82% smartphone exposed. the ceo has been talking about moving into automotive and iot
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business. the server business is a natural foray for expansion into new market opportunity for them as well as diversifying away from smartphones. >> they were in the market before and got out. what has changed? >> the first time around, i don't think they were ready. also the server market wasn't ready for an arm chip. what qualcomm did in 2021 was acquire a new business and they were laser focused on the server business back then. it seems as if qualcomm is ready to come out with a server chip for the cloud companies now. >> we have a lot more ahead on daybreak. it is a very busy start to the earnings day here in australia. we have had a number of top companies reporting.
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their numbers were quite positive when it comes to the output side for some of the copper and gold miners. more ahead here on daybreak. this is bloomberg. ♪
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a german carmaker is ramping up
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efforts to boost ev sales after disappointing earnings. deliveries hit by lockdowns and supply chains. the company says new energy vehicles will count for 30% of sales this year. bloomberg has learned that tesla and another company have said they may have difficulty maintaining production if the power crunch in china continues. they are suffering from -- china is suffering from an energy crisis with its worst drought on record. estee lauder is expecting a drop in sales amidst continued drop in china. the company typically generates around one third of its revenue in china. a fellow retailer also warning about week is in the country
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with revenue falling more than 30% in the previous quarter. >> take a look at how u.s. futures are trading. i'm not really surprised given that we lack clear direction and the you new york session. swings were there but we have mixed data and earnings. investors were trying to figure out where to go from here. u.s. futures not doing much. we're pulling and pushing from most directions. strength and labor demand. u.s. jobless claims falling. existing home sales falling for a six consecutive month. you had the likes of cisco with an upbeat forecast but then cole's cutting guidance. it's a mixed picture. >> really mixed picture when it comes to the fx side of things.
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aussie dollar, we are seeing weakness as we see bullish bets for the dollar seeing two-year high after the fomc minutes. the kiwi also softer. we have the inflation number potentially even though it is unlikely to move for the bank of japan. we're seeing a little bit of weakness on offshore yuan trading given the myriad of headwinds we continue to see for the chinese economy. >> coming up in the next hour, we will assess the impact of china's slowdown on markets. this is bloomberg. ♪
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