tv Bloomberg Daybreak Australia Bloomberg July 11, 2019 6:00pm-7:01pm EDT
so why didn't we do this earlier? life line screening. the power of prevention. call now to learn more. to daybreak australia, i am paul allen in sydney. shery: and i am shery ahn in new york. sophie: i am sophie kamaruddin in hong kong. we are counting down to the major market opens. paul: here are the top stories we are covering in the next hour. wall street rallies to a new high as u.s. inflation comes in harder than expected. the dollar falls for a second day. gold also slips. jerome powell says the u.s. economy is in a good place and he has the tools to keep it
there. plus president trump turns up accusingon china, beijing a reneging on deals in the g20. shery: a quick check of the market close. the thursday session in the u.s., major indices closing at record highs with the dow exceeding 20,000 in the s&p 500 close to the 3000 level. this despite the fact we had a tweet from president trump complaining about how china was letting us down. still the s&p 500 was led higher by industrials. again on chair powell testifying in congress one more time. this time on a senate banking committee talking about how the fed had room to ease, given the tide between inflation and unemployment seems to have broken down. the 10 year yield to spiking to a one month high after higher inflation numbers.
we are seeing u.s. futures unchanged. let's see how we are setting up for the asian markets. paul: let's get a quick check on how markets are shaping up in the asian pacific. take a look at futures in japan. currently looking like this. they are kind of flat right now. were weaker by 0.3%. new zealand trading for a couple minutes now. 0.1% right now. let's get to first word news. powellchairman jerome says policymakers has rout -- have room to cut rates. and the link between inflation and unemployment has been broken. in congressional testimony he stressed to the u.s. economy is in good state and they will use
tools to keep it there. pointxpect at least zero -- a quarter-point cut. >> banks around the world are seeing weakness and offering more accommodation. we signaled we are open to doing that. you are seeing that in the curve now. you are seeing that embedded in the united states interest curve. >> house speaker nancy pelosi says she is committed to raising the u.s. debt ceiling, saying there should be no doubt in the credit of the usa. federal funding expires october 1 and a stephen mnuchin says he wants congress to increase the bar before the six-week recess on july 26. the bipartisan policy center says there is a significant risk the u.s. will default in september. a powerful weather system in the gulf of mexico may put 70% of u.s. lng exports at risk. tropical storm barry is turning
toward new orleans. american lng exports have surged. three plants coming online since december. people on the coast are bracing for the biggest storm since hurricanes -- hurricane katrina. france is refusing to bow to u.s. threats. french lawmakers passed a law to impose a levy on global tech companies, more than $800 million in worldwide revenue. $30 million inside france. they are examining the tax to see if it targets u.s. companies and have hinted at tariffs in retaliation. >> we can and should solve our differences without threats. france is a sovereign state. it will make its own decisions and carry on making its own decisions. >> china is throwing its full
support behind hong kong leader carrie lam. top official in hong kong said they need to govern effectively in accordance with the law. are capable of protecting the public and violent -- violence is a result of those stirring up unrest. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. paul: thanks very much. -- to ourto top story top story. president trump renewing complaints on china. he is complaining china has not -- a promise he said he secured in his g20 meeting with president xi. our senior trade editor and china correspondent are both
watching this story. sara, let's start with you. wasn't this supposed to be a win for president trump? >> absolutely, the big take away trump took from his meeting with president xi jinping a couple weeks ago. china agreed once again to -- to increase agricultural good purchases. this is a politically sensitive area for trump area he is heading into reelection. he wants to make the farmers happy, is giving them aid. plummetedurchases after the trade dispute and that ruptured a key support base for trump. coming out of this meeting it was a big deal for trump to tout that. we heard from him today and his view china has not increased those purchases. we had data backing that up as well. shery: the problem is the fact there is nothing written down, no official document and china does not seem to agree with the president's assessment.
what are they saying? selina: we are hearing from the china side they did not make explicit commitments about purchasing more agricultural goods. in bloomberg's reporting a few weeks ago they said china was considering these purchases as a goodwill gesture. they had not made promises about the size and scale. it would depend how the talks progressed. at the same time we are hearing some positive measures from the ministry of commerce. we heard from a spokesman recently china is willing to restart talks. they are hoping there will be resolutions made on huawei. we still do not know when and where those will start. a lot of pessimism from beijing about the prospects of reaching a deal in the short-term. yesterday i interviewed the national committee on u.s. china relations president. his view is that the position has hardened on both sides. his talks broke down. despite the temporary trade
truce, there are issues they need to work out. agricultural purchases are just one small part of it. to get anre going opportunity to take the temperature of the trade war later. date said to release fed -- trade data. what are we expecting? expectingonomists are this data to highlight the pressure china is singh from tariffs. the expectation is that imports and exports will fall, partially because they are used to make the manufactured products that will be exported. early data indicates this export data will be very weak. for one, the new export component of the pmi data in june showed it contracted from the month before. that suggests external demand remains sluggish. we know the global economy has been weakening. the pmi of china's main partners has been falling.
they went further into contraction territory. they have also been impacted by their domestic economy, showing weakness. despite some uptick in export data in may, the expectation from economists is that was temporary from companies trying to frontload the oncoming tariffs. the expectation is that this month will be pretty weak. shery: we could also see trade tensions on another front. france has taken another step toward taxing facebook and google. what could the implications be? senate passeds legislation for a 3% duty on digital services that would affect companies in the u.s., many giants like facebook and google. this is just a day after the trump and ministration announced an investigation into this tax, the same type that led to tariffs on china goods -- chinese goods.
if this investigation finds this french tax is disadvantaging u.s. companies, which seems likely. france'sconcern, with move, the first in the european underway, there will be a patchwork of these digital tax works, rather than a blanket one. a lot of companies are worried about double taxation. they will have another tax on their revenue abroad. mcgregor in l.a. and selina wang in beijing, thanks to you both. forl to come, audiobooks the asian units have closed. watching what could be the biggest ipo. for itshe fed ready first rate cut in more than a decade. qma strategist looks at the market impact.
paul: we are counting down to the sydney open. abouts pointing south by 0.4% as the asx edges away from that record close. i am paul allen in sydney. shery: i am shery ahn in new york. you are watching daybreak australia. it was a third day of gains for the s&p and the second day in front of congress for fed chair powell. tech stocks led the way higher. su keenan has more on this. it was a day of contradictions. you have a more dovish fed in chair powell, and very strong inflation numbers. they came in much stronger than expected. that put the fed in a tight spot. another late day rally pushing
to records at the close. let's look at the snapshot. we saw treasuries retreating after the latest inflation reading. dollars -- impact on bonds. we saw gold slip. we saw the s&p gain for a third day. check out the nasdaq 100, it was lower. if we check out the big movers you will see very big moves. dropping toeyond the lowest in 20 years. zillow down lower, gamestop lower. snap one of the few positives here. amazon in the spotlight. they are spending a half billion dollars to retrain workers. look at the gains in the stock. they averaged 30% annual return since 2010. in the spotlight now as its market value continues to grow.
let's look at the commodities trading. dropping off.ices what is the story? su: let's look at the falter in the oil rally. if you look at the five-day chart, it has been a wild week for oil. back above 60 for west texas intermediate. a couple pressures coming in on oil. you have the tropical storm aiming at the gulf. countries -- country's refining capacity is in the gulf. you have seen the platform shut down. bigger picture on oil, opec putting out demand numbers. they are seeing a weak market output, so that is a counter pressure. the dollar's gyrations also impacting commodities. that brings us to gold, which slipped a bit on the latest cross current. that has a lot to do with the
dollar, the fact we are seeing not as much clarity on the trade situation has thought, and other issues which have taken gold down from its one-week high earlier this week. paul: su keenan, thanks for that. chiefbring in qma's investment strategist, ed keon. we saw performance on the u.s. equities market. how much can be parked at the door of jay powell? ed: pretty much all of it. the earnings news we got today was negative. it rests on the idea the fed has launched into at least one cut and probably many more in a new easing cycle. paul: in terms of how many more cuts, the data is unhelpfully helpful. we had a really nice u.s. jobs report and as this chart demonstrates, pretty good numbers on the core consumer
prices for june. you can see inflation showing signs of life. if this data continues to be supportive, the fed being data-dependent, that kneecaps the argument for cuts down the line, doesn't it? ed: the fed chairman is a calm guy. one thing he was passionate about in his testimony is the idea that over the past few years people of had low level of skill and low levels of income, but we have seen increases in jobs and pay. the level of inflation measured by cpi is running at 1.2%. the preferred measure is 2%. they think the 2% target is symmetrical. they have been running low it for many years. that means they are also willing to tolerate inflation somewhat above that, if it achieves their objective of getting full employment.
by that definition of 2%, stable prices. i do not think the fed will be spooked too much by the latest cpi number. i think they want to see a series of numbers at 2% before they consider the course of cutting interest rates. shery: what are you expecting for the rest of the year? 25 basis points are already priced in for the july meeting. what about the rest of the year? two more cuts, three more cuts? ed: it depends on the data. i would think at least one more cuts. that would get u.s. real interest rates to essentially zero. even at zero, that would leave it the highest in the developed world. during the old internet age people used to say information wants to be free. in today's world it seems money wants to be free, at least in inflation-adjusted terms. that would be two more cuts from where we want -- where we are today. whether it is free or not
depends on whether inflation data shows signs of perking above 2%, or the economy, thoroughly mixed in the last few months -- yes, we had strong readings, but the pmi's have been poor. it looks like the soft beta -- data has been soft, but the data on jobs has been stronger. shery: we continue to see small caps lagging the broader market. showing what the russell 2000 is doing in terms of evaluation against the s&p 500. we are seeing the biggest discount in well over a decade. how does this bode for the rest of the economy? could we see the rest of the large-caps follow small-caps lower? ed: that is a good point. a lot of gains in the market have been driven by the large-cap growth, especially
tech stocks. having a narrow market with relatively small number of stocks powering ahead in their energy,like finance and that is not a really healthy sign. i would much prefer to see the small caps enjoying with large caps and the rally. it is a cause for concern. paul: in terms of looking for gains in the rest of 2019, what potential do you see, if any? ed: i do not think we will see a lot of gains from here. we had a tremendous run despite the fact earnings would be quite weak this year, low single digits. i would not expect it to be a great deal better next year. earnings drive the bus over a long period of time. when you have a market where valuations have been responsible for gains, that is problematic. we had valuation gains, that is
why the market is up this year. partially because low rates have led people to take more risk in the stock market. i would not expect this evaluations rise that much from here. i think we will see some gains. i would not expect much in the market for the second half. keon, thank you for joining us. this is bloomberg. ♪ omberg. ♪
paul: i am paul allen in sydney. shery: i am shery ahn in new york read you're daybreak australia. more insight into how china's economy is faring. the president of the asian infrastructure investment bank tells us he is confident china is doing what it can to support better quality growth. lothe government is doing a
to improve the quality of growth and take care of people. as well as investing more in green economy, renewable energy. china is doing more to take care of low income people, low income areas. china is theay beneficiary of globalization, no wonder you embrace globalization, but other countries suffer setbacks or consequences. this is unfair. but you see in china the growth does not mean the same thing for everyone. domestically the domestic policy should take care of those people who might not be so fortunate to take advantage of the faster growth. this is what china is doing to improve the equity, social equity is important. >> we have a prolonged
u.s.-china trade war. one, what are the chances of a deal and two, what compromises must the two sides make? >> the chinese did not talk about the trade war. it is a dispute. now since i am in the international institution, i am no longer part of the chinese government. development, but sides, asnk, by both you have seen in the meeting trump, president xi and both sides need to sit down and trump -- and talk. only by talking about their differences they can understand each other better and look at issues from the perspective of the other side. forably could be better them to understand what are the
real issues, where you should compromise. a lot of chinese believe cooperation and coordination could bring a better situation of both countries. i remain optimistic. i know there will be differences with veryo countries different historical, social backgrounds, but over the last i would say there are lots of positive things between the united states, when they work together. shery: that was jin liqun. you can watch that interview in full in a conversation first airing july 20 in asia, 2:30 in the afternoon in sydney. paul: let's get a check of the
latest business flash headlines. dover airlines boosting its forecast with lower fuel costs and the grounded 737 max allow it to command higher fares. they expect to earn $7.25 above share. the increased estimate after rival american boosted its own outlook. shery: nike going ahead with a new factory in phoenix, despite -- it will generate 500 full-time jobs and investment of over $180 million. the state commerce welcome to the move. so-called etsy ross sneakers. paul: worldwide shipments of personal computers rose 1.5% in
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a.m. on a disturbingly warm winter's morning in sydney. by 0.4%currently weaker despite a higher close on u.s. equity markets. it was only the nasdaq that closed lower. i am paul allen in sydney. a veryi am shery ahn in warm new york as well. it is 6:30 here. you are watching daybreak australia. let's get first word news. >> president trump abandoned his attempt to insert a question on citizenship into the u.s. census after being defeated in the supreme court and will now seek
the information through other means. cities, counties and states groups challenge the administration, saying it could frighten immigrants and citizens and stop them responding. the latest opec forecast for 2020 says the oil market faces even longer and tougher challenges. the cartel estimates it is producing half a million barrels a day more than will be needed next year as a continuing surge in u.s. sales threaten another surplus. opec also says oil supplies from independent producers will grow more than twice the anticipated global demand. sri lanka held its benchmark rates at 8.5% amid slowing inflation and demand in the global economy. the decision was protected by all seven economists we surveyed and comes as inflation decelerated for the first time in six months to 3.8%. the central tank cut points by 50 basis points.
the economy reels from april's terror attacks. they revise the constitution to make kim jong-un head of state, adding to the duties he already has. a new legal foundation to kim's status could normalize relations with other world leaders. european satellite's launch ampany has apologized after rocket carrying equipment to the united arab emirates failed to reach orbit. they suffered what the company called a major anomaly a few minutes later. it was the first time it has failed. they said they are looking at the data and will open an independent inquiry. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
this is bloomberg. shery: thank you. let's turn to sophie in hong kong for a check of the markets. this after wall street surged to a record. sophie: we look to track that move on wall street. retreating from a record high. train tensions back on the menu. we will measure the damage from tariffs. 1.4%,s may have fallen slipping from again we saw,. on the agenda today, outlook from malaysia and japan, and singapore. later in india we will get factory output plus earnings. lines fromching for the japan south korea talks. said anti-japan sentiment could hurt sales, given the boycott from customers. paul: let's get more on what we
should be watching us trading gets underway in asia. adam haigh is with us. is there anything that can move the dial for what looks like a lackluster end of the week for asian equities? adam: it is about the trade tensions and trade talks in focus. that is what is really the main talking point today. that china trade data could provide some leaning to people expecting more stimulus from the pboc in the second half of the year. that will be interesting to note. as we shifted to next week it becomes a story about company fundamentals and whether the equity rally we have seen companies can follow up with fundamentals and provide a bit of strength and underpinning to the rally and also there outlook outlook -- their guidance. you can see how gps numbers have
been downgraded in the states. that is the picture we are seeing globally. the earnings environment is cloudy. ongoing slowing down in the global economy. we will hear from more and more companies how that is playing out. we will see if we get another drive or leg up for equities. shery: at least the monitor side of things seem to be supportive, more dovish fed than chair powell. still we have inflation numbers for june harder than expected. one macro fund managers still expecting three cuts in 2019. how come? adam: the main take away from that cpi print is it is thrown in and raised the question again of how policy at the fed goes forward. investors are still generally speaking pretty bearish on treasuries and expecting that
short position in treasuries. hida capital they are expecting three rate cuts. they are betting on short and medium-term government bonds. what the fed is doing is fueling more fire further down the road. as cuts come, you build further stresses in markets that goes into 2020. that is when you get the delivery of returns on the bond side of the portfolio. that inflation print has left a few wondering how deep the fed may need to go this year. paul: thanks for joining us. you can check out the gtv library on the bloomberg terminal. shery: jay powell continuing to push the case for rate cuts during a second day of testimony on capitol hill. why are we seeing two other fed
policy makers starting to push back? kathleen hays the story. let's start with powell. did he veer from the message that a rate cut is coming? kathleen: i do not think he veered from it at all. he repeated what he said in day one. the trade war uncertainty helping to cause a global slowdown threatening u.s. growth. length betweene low unemployment and rising inflation is broken. he said it turns out after all the fed said in the past year or more, the fed may not have been as accommodative in stimulating the economy as it thought. let's listen to jay powell earlier -- >> the neutral interest rate is lower than we thought. the natural rate of unemployment is lower than we thought. monetary policy is not as accommodative as we thought. we are learning all those things. at the end of the day there has
to be a connection, higher wages will drive inflation, but we have not reached that point. the connection between the two is quite small these days. kathleen: consider the number three man at the fed, john williams, president of the new york fed speaking today said, the argument for easy policy, actually a strength. an interesting backing up of jay powell's decision. the plot thickens. we have two other fed bank presidents not as ready as powell seems to be. consensus around jay powell? the richmond fed president speaking to michael reporters, theo fed does not need to step on the
gas. however, when he looked at what jay powell said, he did not change the message for the june meeting. let's listen -- said the same thing yesterday he has said for the last month and we said in our last memo. we do not have forward guidance anymore the memo. we are watching carefully what is happening in the data. we are looking very much on upside risk and downside risk. at this point they are tilted to the downside which is why we are looking at it. another: let's bring in fed president. he played down the need for a rate hike as well. he said in fact that -- here it is. from an employment perspective, the economy performs in a positive way and the numbers are not as weak as some suspect. the aggregate numbers look pretty good. remember the consumer price
index coming in stronger than the month of june, up 0.3%. that came up before powell even spoke. that is the biggest gain since january 2018. 1.1% year-over-year. this surprise on the consumer price index seems to have bondibutor to a very poor auction. miss to the price that was posted or expected before the bids were put in. the 30 year bond had quite a selloff today. full points. jay powell for two days has been telling the world he is ready to cut interest rates. granted there will be pushback from other fed members, but an interesting day. if i were jay powell i would be wondering what i should say next time i speak perhaps. paul: kathleen hays, thanks for joining us. poisedo come, ab inbev
to price thev is hong kong ipo of its asian unit. the largest brewer targeting a billion. of $8.3 sophie kamaruddin in hong kong has been tracking the story. does this deal seem to be positive for ab inbev? sophie: some investors believe it is credit positive and would allow ab inbev to speed up deleveraging depending how much the ipo proceeds go toward the billion.2 , -- long-term
debt to total assets and net debt to total equities. expecteden slower than and net leverage has been higher, and given the target valuation, it can help management with their leverage goal of four times by 2020, which the company stated was not contingent on the listing of its asian unit. inclusive on the proceeds, they times, whichto 3.7 could cause agencies to revisit their outlook for the company. if the cash is raised he could also be used for m&a. what are the potential markets for ab inbev? sophie: it has died down since the 2017 acquisition and the 2014 buy of oriental brewery. they will seek out japan and
southeast asia. grow theiroking to premium business with higher margins. they want to go against rifle heineken.- rival potential target companies would be adverse to stock acquisitions. even so, ab inbev will want to seek opportunities to grow with asian market share, at about 13%. budweisere now on the ipo.g ipo -- brewing threedy is one of analysts covering ab inbev with a sell rating. what don't you like about company? >> it is relative to history. the environment for beer is
normalized. i think the m&a will normalize. we feel there are better laces to be invested in beer, such as heineken. shery: the idea is that they see great potential in asia and you yourself say they have attractive existing businesses in china, south korea. will this help? standpoint, the way they leverage, there are opportunities. both within the philippines and thailand and vietnam. having a local listing does help facilitate m&a to equity and depth -- debt. paul: you mentioned debt. are you concerned about the amount of debt the company is carrying? ed: i think the company has been slow to deleverage. disposals,
transactions in china and the u.s. they came in below the overall price. they have been hit by negative effects. that has slow down the rate of deleveraging. last yearhe dividend and through this ipo they could another half-lever turn. investable.more paul: so we have pricing today, probably toward the lower end of $47 hong kong range. how do you see price to earnings? ed: the published number we put billion.5 the upper end of the range is $64 billion.
we are coming in with a low valuation. that reflects the fact this business is not up pure china business. it is also australia and south korea where the markets are mature. overall this is an attractive business. they have done a fantastic job of pivoting the chinese business toward premium. like the low end of the range is ahead of the 15.5 times we are ascribing to this business. shery: they cut their dividend in half in october. can they do that again? ed: they can bring it -- they might not bring it back until they deleverage further. they have had a major m&a roll up. it is part of their dna. i would expect them to deleverage before they participate in major m&a. shery: compared to other
companies, who do you like? heineken at ak at similar multiple to what is being ipo'd here, left over businesses look much cheaper relative to abi. i think heineken has got better natural growth and probably is less well-liked. carlsberg, the company is patchy and there are lower hanging fruits. is veryese business attractive. thank you.undy, we will have more about that ipo on daybreak. we will talk about how budweiser will bear in the chinese market. universities --
paul: just want to get you across breaking news the bloomberg. in ai at $7nvest billion valuation. the alliance between these two carmakers is growing closer. expected to cooperate with vw on electric vehicles as well. there will be announcement about york on8:00 a.m. new friday. we expect to hear more about this investment on vw-ford's argo ai. more ahead in a moment on daybreak australia. this is bloomberg. ♪ this is bloomberg. ♪
york. paul: i am paul allen in sydney. you are watching daybreak australia. saidorld's largest miner to be looking at options to divest which includes assets in australia and columbia. let's bring in jim thornhill. exit? bhp heading for the >> bhp itself is not conference. of course if they were to do this, it would be a response to an incredibly strong environmental pressure that is now growing on these companies ofmove away from perceptions heavy polluting fuel. we saw in recent months norway has been prominent and they agreed to sell all of their fossil fuel, some $13 billion in assets. shareholders are putting pressure on oil companies like
bhp. shery: will there be any willing buyers at this point? jim: that is a good question. what we tend to find in the australian case were big companies tried to get rid of interestl assets, is from privately owned companies which perhaps are not experiencing the same sort of shareholder pressure. they have huge pension funds backing them. that could be where the pressure comes from. in terms of price outlook, it has been a soft outlook for coal, partially because of import restrictions from china, which is put on australian coal. that had a negative impact on prices. if you look at the longer run, estimates in asia remain robust. ada slow grow, though pace. demand will be there. i would be surprised if bhp could not sell these assets.
paul: a disturbing picture because rio tinto got out of australian coal. can you identify whether or not this is a theme? jim: you make a good point. they have to feed their portfolio and power stations in india. that is why they are looking to get into coal here. companies have to deal with the backlash from environmental groups because it makes sense for them to do so. that will be the case in the next two or three years. the pressure is not going to go away. the environmental argument is a strong one. it is hard for companies to ignore that. glencore be key is for -- they said they would not add to any production. there is pressure from shareholders saying it is not enough. companies like that, we need to watch things closely. anglo american another big producer.
they will be under pressure to do something about their thermo coal portfolios. shery: thank you. check of the latest business flash headlines -- uniglo retailer fast retailing doing better. million, but mr. the estimate by almost $50 million -- missed the estimate by almost $50 million. 20% againsts surged a 5% gain for the topics. -- topix. >> the china-u.s. trade war itself will not make us change our production plans. productivity and quality are very high in china and we have no plans to reduce our capacity there. we will have more options for production as we grow globally. as a result, we have been
growing and have become more resilient to different types of risks. tencent wants a bigger slice of the smartphone profit pie. they want to boost the revenue they get from games sold on their platforms. they are seeking as much as 70% of the sales generated from their gains, up 50% now. that would bring his portion in line from what it sees from apple's ios store and google play. nba's a 22% stake in the oklahoma city thunder is up for grabs. held bye has been chesapeake energy co-founder mcclendon, who died in a car crash a year ago. it is worth about $1.5 million, according to forbes. coming up, hillary kramer joins