Transcripts For BLOOMBERG Bloomberg Markets Asia 20171222

This is Bloomberg Markets asia. Lets have a look at whats been going on. There has been a steeping of the yield curve going on, more flattening taking place. What we have is perhaps an economic slowdown in prospect. Lets have a look at this chart. It goes back to 1986 and it tracks whats going on in the white line into the two to 10 year yield spread. That is indicated by this axis here. Just over 60 basis points between the two of them. The green line is where gdp is. This is inverted. You can the lowest number of growth here, 4 contraction. What happens next is that the yield curve perhaps sees more flattening. We see growth has been improving of late. What happens in the future . We have a strong correlation between the two of them. One of the head scratchers in terms of what we been looking at this year. We had off to christmas break and volatility has been settling going lower, that if we can hold on to the moment in what we are seeing for this rally, we are going to see the asiapacific potentially ending the first year ever. Lets get it over to the final trading session before christmas. Clearly, volumes will be sluggish, we are getting the signs of a rally. Santa claus rally, hopefully and fingers crossed. Who was he a 12 months of gangs gains for asia stocks. The highest opening ahead of jobless numbers in china. Is off by ae dollar touch, but Holding Gains after a dollar. Stocks are halting a six date drop while the dollar snaps a four date rise. Four day rise. The korean won is hovering around the 10. 80 mark. Thats been fluctuating all morning and the dollar and euro has been very much in focus. Beenollar and has breaking through and the euro is weling the most in two weeks are seeing losses on the nikkei 225. Health care shares are a drag in tokyo pulling on the board to show you whats happening there. Pharma has been tumbling the most in years as it faces a setback from the u. S. Sta. The assad has plunged the most since 1988. Over in seoul, some cosmetics slumming. M are this bed may be temporary and beijing may follow suit. We love to bed looking at this. Lets get to new york with the first word news with jessica summers. Jessica separatist parties have won the special election with a resounding defeat of the National Prime minister. Separatists took 70 of the 135. They exceeded its own expectations, but the party struggled. They took less than 10 of vote in his hometown. Googles parents are stepping down from the role, ending a 17 year leadership role with the company. Also bit says schmidt will become a Technical Advisor but serve on the board. They saluted his career, saying he has offered expertise and a clear vision. Sixun Security Council is considering a drop in sanctions in north korea that would target 90 of crude oil product. Oil imports to 4 Million Barrels a year. The resolution would need support from china. Is a veto onhere the worlds biggest trading partner. Bank of america that says it is not overly concerned about the level of Household Debt in the u. S. Outstanding Consumer Credit continued its upward climb, reaching 3. 8 trillion. However, Ceo Brian Moynihan said that there is a high end of credit and the tax cuts will also help. None of this can be bad because the money will go back into circulation. Shares and purchased dividends. Jessica global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers, this is bloomberg. The can has been kicked down the road and the government has avoided shut down. They passed a shortterm extension of federal funding to keep things humming along for the next three weeks, revisiting the issue in the middle of january. Lets go to washington watching this latest drama payout. Jerry, no set down for christmas, fairly relief. Everybody wants to get home and start the holidays. They will deal with this in january. Guest thats right. I think there was a bit of exhaustion after the fight to get through the tax package. They also have a new years hangover because they have to come back and its not just a matter of doing another funding extension, but they have to deal with the budget for the entire year. They have to negotiate, republicans and democrats, on the caps for spending that are imposed under the 2011 law and they have to raise the federal debt ceiling that will be coming that period, in as well, and possibly welfare reform. Its a big, messy plate they have in front of them. Haidi in terms of the level of disagreement, they couldnt even agree to fund the Childrens Health insurance program, which gives citizens assistance to low income families. Did his partisan divisions run deeper than ever . Guest there are partisan divisions, but also divisions within the Republican Party. Part of what they had to do to a compost this was placate the conservatives in the House Republican caucus, who wanted to increase defense spending, but not domestic spending, and others who were interested in cutting spending altogether to avoid increasing the deficit. There is a lot of talk today from senator mitch mcconnell, the republican leader, and chuck schumer, the democratic leader, about bipartisanship going into the new year, but that remains to be seen whether that can be accomplished and whether they can get everybody in the Republican Party together. Rishaad lets get back to the tax bill here. Theres a story that will be january the third, is that a done deal . Guest no, in fact thats what the white house is expecting because of some budget rules that have to do with triggering automatic cuts. But what the house and senate did today was that they were able to pass a waiver of those rules. That means it could be signed anytime before the first of the eagernd the president is to sign it if the house and senate can get it over him over to him tomorrow. It wouldnt surprise me if its done then. It doesnt affect things in the way in terms of the tax rules, but has more to do the arcane budget rules that it operates under. Very quickly, what is likely to be big on the agenda looking into 2018 . Guest i think its going to be the budget caps. Everybody is clamoring for more money, both for defense. The president wants to get an infrastructure bill through and its going to be running up against the deficit expectations , along with the lost revenue from the tax cuts. That will be the big issue is getting the budget either under control or letting it flow freely. Rishaad thank you for that. Bloomberg congress editor. What is the story for commodities looking into the year ahead . We will have a guest discussing the outlook for the coming 12 months. Next will be here to share his Market Strategy for the new year. This is bloomberg. Haidi a quick check on the latest is this flash headlines. Product is launching an ecommerce platform in china to cap a rebounding luxury market being boosted by online sales. It incorporates a concierge and integrates with stores. China is the benchmark for online sales and a global rollout of the platform is expected by the end of january. Rishaad there are talks over a deal that would talk private jets. It does need the approval of the brazilian government. There is something boeing doesnt have and would allow them to counter a new threat from airbus to operate control of the sec program. Haidi Goldman Sachs is said to be of cryptocurrency. They are setting up a trading desk to make markets in bitcoin and other Digital Currencies and aims to be up and running by june. There are also Security Issues as well as how it will hold the assets. It made goldman the first major wall street name to make a market in cryptocurrency. Rishaad lets have a look at what ahead for markets in 2018. This is a man who perhaps knows, the chief investment officer. Lets start off with this possible government shutdown. We talk about it every year. Guest and we usually use this expression, kicking the can down the road. Rishaad you know we band at that. Guest it will get banned t hat. Guest it will get done, though. There are a number of issues on the table that need to be resolved. There are going to be addressed january 19 now. Rishaad what does this all mean after we get over that . We get the tax thing signed, a big victory for donald trump. Guest i think we talked about the need of getting something on the books. Thats happened. The biggest overhaul in many years. There is quite a divided opinion in terms of who benefits, corporate rates dumbing down very significantly, individuals potentially benefiting, but it appears the wealthy are going to do better with the top 20 accounting for two thirds of the windfall. Some of these benefits are going to expire over a number of years. The 1. 5 trillion it will cost the budget overall may be a higher number depending on whether some of these issues are rolled forward. Rishaad would it make a difference in your view in how it performs . Guest it is clearly a boost in nearterm and they have fully discounted. Rishaad it has been priced in. Guest the bond market is much more cautious. And then 10 years or yields would be more significantly. We need a simple adjuster of turning the rate cycle, this is it. We are at the point, although shortterm rates are creeping up, they are set to go further, now we are seeing longerterm yields start to move up. Signifies one of the big head scratchers we had this year, which is what is going on with the yield curve. Janet yellen said dont worry too much about it others say it is a phenomenon of extraordinary Monetary Policy. Does it hint there could be tougher times for the economy to come . Guest i think the economy is still doing well globally. We have secret eyes growth in all the Major Regions including the make including the u. S. And asia. If we do see mounting Inflationary Pressure, thats where we might see hinge upon growth. Thats i here yet. As a result, we might see equity markets continue to do well, certainly in the early part of the year as earnings, particularly in those economies, continue to push ahead. Haidi i find it interesting is it Inflationary Forces might be the bigger risk as opposed to disinflation. I want to throw out this quick chart to read this is one we keep going back to time and time again. Other than the bre, the Major Central Bank are missing their if you lookrgets, at the lack of inflation as a structural issue, what are the arguments that all of a sudden next year we are going to get a pop in prices . Is a structural issue. We are seeing job creation in the u. S. , but very little so far in terms of income growth, Household Income growth as a result. Because of the structure of the workforce and the way jobs have been created. The arguments that point more towards a reflationary environment, if you are looking at g10, a number of economies are working much more closely to full capacity. This is very little slack in the economies as we go forward. Elsewhere, if you look at the northern part of this region, we see export prices increase. We know have trade prices accelerating at the fastest rate since 2011. Although these are not major statements in themselves, they do point to growing Inflationary Pressure which, as we move forward, could cause a surprise and that would invoke a faster rate in terms of centralbank reaction and rates going up. The outcome in the catalan election have some Significant Impact on the policy going into next year . To moreearly a big blow and a lovely, but they will do you see that as a small regional issue as opposed to something signifying a more systemic problem . Guest clearly a local political issue in the big scheme of things. Not a Major Economic impact. We expect to see the European Central banks with the bank of japan to be laggard into terms of the policy. It much more to do with the fed. There is still an unknown at their. Out there. And what impact that will have on the supply and demand dynamic for treasuries. The other aspect is china. It is very deflationary potentially to the Global Economy as it continues to push for growth and export prices. Thats no longer the case. Aw as he china much more in reflationary mode. We see the pullback of credit expansion, the growth has been has beenecause falling and consumers really picked up the slack despite credit being tied to a number of areas. As long as those capital controls stay in place, that will cause a heating situation within the chinese economy and that will reflect higher levels of inflation. Whether its 2018 or later remains to be seen and also it is questionable how long the illustration will allow that to exist without taking action. Haidi state with us. Hunting more to discuss talking about china in 2018. Still to come, this is bloomberg. Lets pick up on our discussion with mark, group chief investment offer. We will get to more on china. We have to talk about bitcoin. We are ending this year and a they have an asset fall of 20 , but still up 6000 on the year. 1600 . All these questions nobody can answer at this point. I want to look at this chart, which paints a picture. If you think it has been a wild ride so far, compare it to bitcoin running from 20122014. It looks like we have much more to go. Whats your view on this . We have the latest with goldman reportedly trying to get trade set up by june. Thats giving it more the gym is see, right . Mark its certainly become a something we can be traded in global markets. We have marketplaces and exchanges that are fully reliable and many dont understand whats going on underlying and behind the scenes in terms of how those markets and exchanges operate. Its filling a role at the moment, particularly in japan, where a significant proportion of daily activity coming out of japan on leverage and thats coincident with the fact the yen is far less volatile than it has been in the past. Maybe its a way for speculators to tap into a source of volatility, which is otherwise not there. Thats obviously founded on boj policy and whats being found in the japanese economy at large. It is indicative of the need and expression of as long as cheap borrowing is available. Rishaad you managed to not talk about bitcoin particularly. Having ramifications for the Broader Market in your view . Mark i dont think so. Perhaps over time, it gives more critical of the building around it, but at the moment its not mainstream. Rishaad lets talk about Central Banks. Possible change at the top, but unlikely to happen at the pboc. You look atfect how your Investment Strategy in 2018 and is it kind of set in stone . Mark thats a good point. Investors will be looking for continuity and Central Banks need to provide that reassurance. Kuroda is a favorite within the markets and has done a good job in improving communication, delete since the first of december when we had one dissenter amongst the boj. I think the pboc is extremely wellmanaged and we will see good continuity. Investors see it as a source of potential uncertainty, but rishaad have you followed the trend then, perhaps there is more interest in em. Have you seen that in the moment . Mark we have seen more outpouring. This year it has been all about growth. Does this dovetail into em at some stage and do you see any evidence of that at the moment . Mark e. M. Has very much been built on the growth. Thats going to Carry Forward into 2018. If we break down the performance in asia this year, although it looks like multiple expansion, if you look at forward earnings, it is clearly growth that has been driving the markets forward every thats whats encourage forward. Thats whats encouraging investors. Rishaad always a pleasure to have you on the program. The chief investment officer. We are coming down to the start of the last three days before christmas. On the way up. Looking at a gain of 138 points, up. 5 . Computers are also indicating a strong staff. Is 9 29 a. M. Here in hong kong as we count down to the start of the session. Looking good, some strong gains. Looking at general Market Sentiment inc. Dictated to by events in congress, the tax bill likely to be signed early next year by President Trump we have them kicking the can down the road for this latest project, as well. Bond yields are up and having the biggest weekly gain since september. Euros under a little bit of pressure. The catalan artist did well in the election in spain. Oil is at 50 a barrel. Just a flavor of the reaction so far. Down, we may be winding but there is a lot of news flow from investors still out there. Still to come, we have chinas industrial output and foreign gdp ppi as well as trade numbers out of later today, not to mention the u. S. Deflator numbers. Still a lot to come before we had to christmas break. Hong kong markets just opening. Lets get it over to sophie. Sophie some christmas colors on the screen here. The hunting adding. 3 . You have the shanghai compass it under pressure along with caps on the mainland. But that shanghai compass it is set for its first weekly rise in six. Some movers in hong kong, we dont see much in the way of big moves and pc stocks are the best performers so far. They are getting about 1 . If you are taking a look at the industry breakdown, you have textiles leading the rise. Energy shares also helping support the advanced for hong kong shares advance. One for the hang seng, down. 2 . This week, it tumbled to the lowest level in almost two years. The gap between the local and u. S. Interbank rates are widening and it has left ground, indicating that it would after the feds hike. Rishaad i have one word to say to you. Oy. Sophie oy indeed. China telecom is preparing a proposal to require brazilian it comes upy oy, as with numbers at the start of 2018. When it comes to chinas telecom shares, they are particular. We are seeing gains of a about. 5 . Speculation over the deal has been brewing since september and the interest has intensified as we take a look at whats happening here for the stoxx for China Telecom. Oyss intensified giving restructuring talks. China telecom has been on a steady decline since hitting a peak this year back in october. When it comes to other catalysts, we also have an entry into the philippines shaking shaping up when it comes to potential overseas expansion. Rishaad thank you to Sophie Kamaruddin. Im going to move to something that has been getting headlines globally. It is the punitive capital of israel, that and the rest of the first word news with jessica summers. Condemnedhe u. S. Has the notice states of the United States recognizing jerusalem as the capital of israel. 35 nations abstaining. The u. K. , france, germany, and japan all supported the motion. Nikki haley said america would remember the day when the u. S. Was single out for an attack. One of koreas Biggest Company faces a today. They have charges of embezzlement and tax evasion. The chairman is accused of embezzlement and is relieved of duty and prosecutors are receiving prison sentences of 10 years. Nike has promoted secondquarter results that beat estimates, earnings per share came at four six cents. Revenue talks capped estimates. China and the middle east are offsetting declines in north and latin america and in the asiapacific. A Corruption Case that helps the Prime Minister to power in india has been thrown out. A judge acquitted all the accused. Prosecutors say it cost the state almost 5 billion. He has been in power by capitalizing on corruption claims on the previous government. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Summers, this is bloomberg. Googles parent help a butsays is stepping down is staying on as a chairman and advisor. Our guest in San Francisco. How much of a change is this for the company, as well as for eric schmidt . Guest i think its a bigger change for eric schmidt than it is for alphabet area they have been alphabet. They have been in charge of the Company Since google reorganized itself into alphabet in 2015. Rishaad is there any inkling as to why he is stepping down . Guest officially, mr. Schmidt said the realization into alphabet, which he helped a lot with, is basically complete and all the new divisions is working is going pretty well and there is a lot of new executives that have risen up through the company and so, there is enough leadership there for the company to be doing well Going Forward without Eric Schmidts help rid artificially help. Unofficially, there are things about his life and activity that might not be so suitable for health that these days. Haidi hes been described as a visionary, clearly been with google for 17 years now. Hes absent. What does that mean for the company . Guest i think the main thing thatare going to miss is he was kind of an ambassador at a very high level, talking about regulatory issues, like when cuba started to open up he was one of the first tech and tech investors talking about expanding into cuba. Part of the issue is that he was deeply involved in some of the democratic residential Election Campaigns and even be close to president obama. Power, theump is in republicans in power in congress, some of those benefits to alphabet are not quite as positive as they used to be. Time it is a challenging for the Company Going into 2018. They are making these renewed pushes into china, that also in places like europe, there are regulatory problems they are dealing with, too, are they . Guest one of the interesting things in 2011 was that when it were investor getting google, he spent a lot of time with regulators, and he successfully drop that case. It hasnt worked quite so well in europe. Without him, they will have to find some other figurehead to do that negotiating. Reporting from San Francisco on this transition for eric schmidt to Technical Advisor at alphabet. Heres another interesting apple launch in china come up not what you think it is. It was due for delivery earlier in may,. Alex joins us from singapore to join us. Why now and in china . Guest like many other produces morehina apples than anywhere else in the world. About 44 Million Pounds a year, more than half of global supply. They are also the most popular fruit in china. There is going to be some interest in the futures from a hedging perspective for major consumers. Theres also an enormous appetites in china for commodity derivatives from purely a speculative trading perspective. We have seen this explosion in Trading Volume in the Commodity Exchanges over the past few years. There no reason to doubt that there will be Significant Interest in these apple futures in china. Rishaad tell us about these contracts. They start trading today. Give us an idea of what the specs are here. Guest thats right. , theyji variety of apples are the most popular. Abouttarted trading at half an hour ago at about 8001 a time, which is about to hundred u. S. Dollars. Have got to be three inches in diameter. Anything less will be discounted. Like all other commodity contracts in china, they are only open to mainland investors. Than . D no granny smiths what other types of futures are there in the Commodity Exchange . It definitely lists some of the more niche commodity derivatives. In shanghai, you have big metal, steel, and iron ore. The most popular ones are a petrochemical used to make plastic bottles, sugar, and glass even, the most popular ones. There is talk as well of launching later some potato contracts and also some ginger. Pretty soon, you will be able to hedge your entire roast dinner on chinese exchanges. Rishaad i think you have effectively the recipe for an apple pie all there, as well. Thank you very much indeed. , look at the prospects of 2018. This time its metals. This is bloomberg. Rishaad this is Bloomberg Markets, chinas hitting crisis is signaling price strings that may be a boon for traders. They are up 48 percent this year. Perry Williams Joins us from sydney. This is about their cleanup i assume. Guest yes, it is indeed. China away shift in from coal and towards gas and its producing some Pretty Amazing figures, like you say. Lng imports into china just keep on growing. China is now poised to overtake south korea as the secondbiggest its having a real impact on the market. Rishaad whats happening on the production front conjured leading to higher prices . Computing two higher prices contributing to higher prices, perry . Guest lots of new supply coming onto the market and its actually been a pretty bearish signal for whats happening with lng. It was expected that it was going to be this supply glut right into the next decade. But the big demand lever from china is actually changing that quite rapidly and what we are seeing is analysts changing their forecasts. Some, including deutsche, are saying next year might be the year we are demanding demand catches up with supply. Thats quite a shift. Haidi what about traders . Guest of course. Obviously heating homes in china, a lot of demand for lng over the winter at the moment. Those portfolio players are able to get into the market at the right time. Its likely to come off over summer. Theres a real opportunity over the next couple of months to try and plug those gaps. You are seeing spot prices have nearly doubled in the last couple of months. Ts a pretty fluid market most analysts are expecting it to come off a bit in the summertime and there may be other opportunities for traders. Haidi we have seen stories, people not being able to cook soup because it is to energy consuming in china and this shifts from quantity of growth to quality. Is that a game changer in the energy space, not just for lng but more broadly . Guest for sure. When china makes these moves haidi the size of the market. Guest yeah, they do it quickly and rapidly, and its sort of surprised the market how quickly its come into play. Robably right off of coal yet theyre still a place for coal. Will be interesting is whether china can replicate the lng growth weve seen in 2017 over 2018. If they can, like you say, chinas size means it might almost single handedly wiped out there supply glut and might bring forward as much as three or four years the supply demand balance. Haidi whats the biggest risk for next year, then . Risks are how quickly more lng supply comes onto the market. Here in australia, a couple of big projects, the prelude floating project, shells coming on. If that delayed, that would add to tightness in the market. Mid2018,me on by then china comes off a little bit in terms of demand. You might start to see those fears around the supply glut return. It depends how quickly that next phase of production comes on. Haidi interesting to watch in 2018. Perry williams, our asian Energy Reporter in sydney. Plenty more to come. This is labor markets asia. Bloomberg markets asia. This is Bloomberg Markets asia, im haidi lun in sydney. Rishaad im Rishaad Salamat in hong kong. America big boss is not concerned about levels of debt, speaking exclusively to be moynihan to us, but he moynihan. Bobby moynihan. Side,s on the consumer what people are doing. We see that every week. What people spend money on. The your today spending in 2017, checks its cash, atms, written, debit or credit cards, its up 6 over last year. If you look at the equivalent period of last year, it was only up 3 . People are spending more money. Checks written has gone up. Usually it goes down. Credit cards are the fastest number growing. Overall consumers are spending well and when they spend well, it drives you was economy. Economy. Nsumer driven they spend and customers sell stuff and customers are successful and the invest in a house. Thats good news for the u. S. Where are they getting that money from . They borrowing more . Im not worried about credit. Even if you look over all, there is concern about excess and car lending and thats gotten pulled back. There hasnt been anything in mortgage land because we are still working through the memories of what happened before. A little bit and some of the unsecured lending, student lending, not something we are involved in at all, student lending. We are not concerned about Consumer Credits, but that Consumer Group spending dries the economy we believe we will gdp growth year 2 for the year, starting off at zero for the First Quarter. It was interesting. Next year, we have almost 2. 5 . That movement is very big. Is interesting question whether the rest of the world will also grow. We see japan growth slightly, europe grow faster, China Growing to six, euro growing to a seven, those economies moving together is tremendous and different than where we were five years ago when europe was plus or minus zero, japan was negative, china had come from a fast growth rate to down, now they are stable moving out. India up as they went down and up. Those things in brazil moved in and out. Now you have this robot growth and thats good for the world and the United States helps supply that growth you are looking at Something Like 2. 5 growth in 2018 and is that before or after the tax legislation . Thats the path today. Its not including any benefit for taxes. Our experts say that would add higher isbring it to what they settled on that. Taking into account the tax overhaul, you are looking at Something Like 2. 8 percent, 2. 9 . It takes a little while for all this to kick in. Habits are there. The taxing for businesses in america is a strong statement and they are going to be look to do things. Brexit creates interesting questions. You are seeing the rest of the world is ok and we have growth. Do have a sense of talking on the institutional side to corporations on what it will do with the money . 35 to 21 and other changes that help corporations, are they going to return that to shareholders in dividends, are they going to invest that . If you take a look at tax reform on the corporate side, the goal is to get an effective tax rate competitive with the world. What they were doing in the mid1930s and the rest of the world in 2012, the money was being shifted to where final demand is. Theres this huge rule with these people are outside the note states to buy things. Access to raw materials. There are shifting investment dollars over. Because we are now competitive. That was the corporate doubles of the Corporate Sales tax. My guess is you will see a little bit of everything. ,t will buy back more stock some will invest in the business and build things faster than they would have otherwise, some will fundamentally rethink their balance between inside theand outside the not take. None of this can be bad. Rishaad that was our interview with brian moynihan. We are hammering out down over 7 down at the moment. 1094, this selloff taking place. Youll take a look at whats going on. Thats of today. Lets what it into context. We were mentioning this earlier. Back,e a 20 plus fall maybe nearly 30 given we had such a big drop today. It was up to its peak, a close over 1600 bitcoin level and it says more and more people look at this gaining legitimacy. Thei it really challenges tenets of trading and technical down 20 , is it really a bear market if it is up 6000 this year . Thats really going to set the pass forward. As you say, for the credibility. Is letter from Goldman Sachs opening up and trying to get on foot a trading desk to trade cryptocurrencies, including bitcoin. Lets get your latest business flash. A multiyearned licensing deal to carry songs and artists from universal music across its platforms, ending a dispute were facebook was agreeing to compensate when users post videos a putting copyrighted material. The deal applies to facebook, instagram, and oculus, and sets the social network as a more competitor to youtube. Rishaad they decide when they receive bonus payments. Have a republican text changes affect authorization. We are told Richard Chandler has jeffries normally paying bonuses in january. Labor preferred to have a bigger compensation before the new regulations come into force. Still ahead, the outlook for the chinese markets. Of china the Head Equity Research is on the way next. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Rishaad shutdown averted for now, washington humming along for at least three weeks. Independence and catalonia, separatists winning the election, the Prime Ministers party struggling for support. Facing a possible 10 year term in seoul, korea. I am Rishaad Salamat in hong kong. Haidi dialing up a deal, tpg and China Telecom bidding for a brazilian phone company, it is 16 billion in debt. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. The making of a santa claus rally. The msci asiapacific no laggard. Finishing out the year where that index gained every single month of the year. Stocks,er, hong kong the index outperforming a strong year for global equities. This is the chart that illustrates this. For all the talk of the trump reflation trade, record highs stocks, the s p comes in third, and there is the hang seng with again annually of 35 . Down to tencent, one stock, 20 of hong kongs benchmark index. That share price doubled in price and has given an entry into the 500 billion markets are you, joining facebook, becoming the First Chinese Technology Company to do so, beating out alibaba. A huge year for tencent. Analysts saying some of the years best performers are Worth Holding onto. Rishaad where do we go next . Can you put in another stellar year like that . Are you prepared for gains, but not the same magnitude as we have seen this year . Last time a check, the hang seng was up 26 . Fore,ng markets of the a rotation in stock strategies as we move from growth to value. Movement further into the emerging markets phase. Lets have a look at which are money is doing right now. Happy friday. Real estate, industrials leading when it comes to the industry underown, but Health Care Pressure and asia, losing. 6 because of the slump in pharma shares in tokyo. Pulling up the board, one farm company tumbling, and another after its alzheimers trial data disappointed. Japanese chipmakers also sliding , tracking the drop in u. S. Peers amid concerns over chip prices. You see what is moving on the regional index, japanese pharma and chip stocks along with korean cosmetics and tourism players the worst performers. Haidi asian stocks set for a happy friday after a happy 2017. Fx, are we seeing much action when it comes to currency markets . Regional currencies under pressure, led lower by the peso and the Malaysian Ringgit. The hong kong dollar edit twoyear low. The dollar easing gains, after theone level senate vote. The focus has been on the euro, losing ground against all g10 after the catalan vote. I look in the bitcoin space, losing a look in the bitcoin space, losing its footing. This is chart 1183, bitcoin but falling below 15,000. Rishaad looking at that story on the separatist Party Winning this special election, a resounding defeat of the National Prime minister. Separatists taking over half the seats and this assembly, 70 out of 135. Editor is here now. So alive and well it would seem . It was quite the victory for this secessionist, proindependence forces. When the Prime Minister went in there and the Spanish Parliament called this election, the goal was to take away that majority in catalonia for the proindependence forces, and that has clearly failed. Rishaad how much of a setback was this handling of this independence drive a contributing factor . If you look at his own party, they went from 11 to three seeds, so voters who backed him went for another party, the citizens party, which ended up with the most to seats. Semiautonomous relationship, but are pros pain, but for the Prime Minister himself, that creates an alternative to his rule. He is being hit from both sides, the left and the right. The right is saying he should have gone in harder, and the was a total disaster way he handled the referendum earlier. Haidi what comes next after this result . It looks like the path forward will be pretty messy. It is very uncertain where we go from here. Not much has changed in many ways. An option. S remain does he take a different approach after his hartline moves failed . The hardline moves failed . They say theyg is still view this as an internal spanish problem and see no support for the proindependence movement from outside spain, so the premise or has that on his side. Givingt the eu is not more credibility to the proindependence forces. Haidi thank you so much for that. Talking through the results in that catalan election. Lets get you caught up to date with first word news in hong kong. Thank you. Googles parent says eric schmidt is stepping down from the role, ending a 17year Senior Leadership role. How for that says he will become a Technical Advisor, but will serve on the board. Larry page saluted Eric Schmidts career saying he offered this this and engineering expertise and a clear vision of the future of tech. United nations Security Council considering sanctions on north korea that would target 90 of oil products in crude imports. Cappingay, on friday on imports and limit diesel and kerosene. The resolution would need support from china, which holds a fee to on the Security Council and is north koreas egg is trading partner. Is not america says it concerned about the level of Household Debt in the u. S. As Consumer Credit continued its upward climb, reaching 3. 8 trillion. Brian moynihan said the bank worked at the high end of credit and the tax cuts will help. None of this can be bad. The money will go back into circulation if it is Share Repurchases or dividends. One of koreas Biggest Companies faces a court ruling as judges wrap up the yearlong tteal of the founder of lo group on embezzlement and tax evasion. The chairman is accused of embezzlement and breach of prosecutorsty, and are seeking sentences of up to 10 years. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad we have a foreignexchange outlook for the debtshead and why chinas and the drive to reduce them could affect currencies in the asiapacific. Will beext, wendy liu here as we see tackling debt is also having effect on equities. This is bloomberg. You are back with Bloomberg Markets as we look at chinese equities, some saying more resilient as we head into further fed rate hikes. Joining us is wendy liu, the the chief equities strategist for greater china. Composite, the ashare market has been a positive laggard. Has that changed, and why is that the case . That reflects a diversion so performance between the anchor stocks and the small caps on midcaps. That is a reflection of the regulatory environment. Administration as about raising the bar for the party, anticorruption, environment, raising the bar for the financial industry, much less speculation, regulatory arbitrage allowed, and they think for the Hong Kong Market we are lucky to have the internet. At we dont have that in the ashares. Rishaad . Dont we dont we . Tencent, baidu. Rishaad looking at what happened, stock connect, jittery start, proved to be quite a boon and showing his true colors . It is good for the Hong Kong Market in terms of volume and trading. A year ago when we look at the trading turnover in asian markets, hong kong come up as one that has abnormally low domestic Trading Volume. Levelwas at a much lower in the mid to high teens. Hong kong is almost 40 . That is offshore trading. I think it will continue to come down, so structurally we will have more southbound and more northbound. Said all these different spheres, how does that play how you look at the market . Do have to look at environmental , good stocks, not sin stocks . Compliant, so were looking at Industry Leaders that compliant. We get the top players for the next decade in this window lined up. Rishaad or you hope anyways. Ieidi wants a question haid once a question. Haidi it feels like policy changes from day to day. How reliable are the themes in , quality over quantity, environmental improvement, standard of life improvement, and financial derisking . Our though set in stone, or is there going to be a tweaking to that if they get uncomfortable with how much it will slow down growth . I think you hit the nail on the head. Those are the themes. I think that there is a bit of jittery at the start of a lot of these policy moves, but throughout the last five years hit seems that structurally and directionally it becomes more consistent. Haidi you said it is a shame that mainland ashares dont have big tech, but what would be driving these games . Is that the consumer stocks . We have talked a lot this year otte. La it will be earnings growth. When we look at the indices we are not assuming any underlying multiple expansion. We are just looking at the earnings growth. That will give us 10 to 15 upside in many of the indices, but the shanghai composite has small and midcap names, so it is possible it underperforms next year because what we just talked about on the themes and the esg compliance. Rishaad where do you see the biggest haidi where do you see the fallout when it comes to the deleveraging and derisking campaign . Do see more pain ahead for obvious ones like the developers . I think in every single sector where there is high , people have to be more sayious, but i would not that is a risk. The biggest risk is to not be invested. The second biggest risk is the wrong sector or stock. The third one is the opportunity when there are specific credit events to buy quality names. From a portfolio perspective, we underweight the internet stocks because the relative i you wish and is too high and we took off some exposure to the iphone supply names earlier in the year. Rishaad what do we have now . You are moving the same way as u. S. Markets, rotating away from growth and becoming defensive . If you had not been invested in the internet stocks, it has been a rubbish year, hasnt it . We trimmed it in the Third Quarter and fourthquarter them a but added it in q1 and q2. We recently increase more exposure to health care and banks and more to chinese come so we have this Dynamic Portfolio that we had just about every quarter. Rishaad how closely we adjust about every quarter. Rishaad how closely do you follow the yuan and how does that affect your strategizing . The currency . Rishaad yes. A major riskcy was consideration in 2015 and 2016. I think people have a lot more calmed down. Fixed income investors are more positive on china, whereas equity is still somewhat mixed. What we have,is did you look at these flows coming in from abroad and how they are affecting what is going on in china . You have to look at that, havent you . Exactly. We have a set of perceptions onshore, offshore, and when these two meet you feel like there is some misunderstanding in both regards. So this year we have done a lot. Ore crosscountry comparison on the basis of developed market comparisons and emergingmarket comparisons. What we gain is more confidence about chinese equities into the u. S. Rate hike. It appears to us that the hotels, corporates, governments all have similar characteristics , and very much the behavioral pattern that makes japan, korea, and taiwan successful. Rishaad you often look at japan and say this is a model china should not be looking at and they are hugely cognizant of what happened there, no doubt. Ate me one top tip looking 2018. Dont be under invested in china. Rishaad but the invested in the right place. That is the trillion dollar question. I think leaders and their Respective Industries that are compliant, but we will add exposure to the internet if there is more fallback. Rishaad have a great holiday. Happy and merry christmas. Number, chief equity strategist for greater china. Coming up, one of koreas against Companies Awaiting a verdict in a corruption child. Corruption trial. We will take a look at that. This is bloomberg. Haidi one of koreas Biggest Companies is in the spotlight today, awaiting a ruling in a Corruption Case. The yearlong trial of the lotte group wrapped up today with heavy sentences demand it. A reporter joins us on the line. We have been tracking this story a long time, but give us the background to this trial. It is a big day for lotte. The key person today is the chairman. Prosecutors allege he colluded with family members to sell the. Ights he was charged with embezzlement for paying salaries to family members, including the former chairman. The last allegation is that he caused damages to other companies by forcing the purchase of shares. Far as the first and second wasgations, it is argued directed by the founder when he was leading policy. Rishaad what is at stake for lotte. They have had a rough ride this year, havent they . Right. Any convictions may prove a major risk. The lastman has spent two years fending off coup and the retaliation of china. There is the possibility that the leadership vacuum may reignite the battle over management control and impact deals out of south korea. The sales of its businesses in china as well. Haidi what kind of verdict are ofexpecting, the kind sentences that might be handed down if convicted . Will there be an appeals process as well . There are three possible cases. Shin will be taken into custody from the courtroom today if he is sentenced more than three years. Shorter, there is the possibility that sentence can be suspended under current law and he will be freed if he is found not guilty, but many people in another outcome. There was suspended prison terms it has been but tougher after the president ial and imprisonment of the korean president on bribery charges. Jay y. Lee was sentenced to a fiveyear prison term, the harshest among convictions. Haidi what a watershed moment it has been in korea this year. Thank you for that. Watching for that verdict in the lotte Corruption Case. A quick check of the business flash headlines. Aroduct launching prad sitehing its ecommerce that incorporates a concierge and is integrated with physical stores, social media, and Digital Payment services. Says china is the benchmark for global sales and a rollout is expected by the end of january for the platform. Over a boeing in talks deal that would deliver a portfolio of regional and private jets. It does need the approval of the brazilian government. Raer offers planes that would allow boeing to counter a threat from airbus. Joinedmorgan stanley has its peers and explaining how they will trade under the European Union sweeping overhaul of financial regulation. The bank said it would become a systemic and turn allies which means, submitting reports within 15 minutes of a deal on some securities. Rishaad jefferies will let some decide when they receive bonus payments as the republican tax changes affect compensation. The ceo has asked workers if they want this month or next inh jefferies paying mostly january. Some would prefer a bigger compensation in 2017 before the new regulations come into force. Court clearing all accused in indias biggest graft case. We will head over to new delhi next. It is also a day when markets are moving to the upside. Details on that and more, this is bloomberg. Haidi it is 10 29 in hong kong. 10 29 in hong kong. Separate as parties have won the election in catalonia, handing a defeat to mariano rajoy. Separatists took 70 of the 135 seats in the assembly. The president s party exceeded its own expectations, but Mariano Rajoys party struggled. The party took less than 10 in its regional hometown. Condemned the United Nations criticism of its recognition of jerusalem, saying it puts future funding and support at risk. The nonbinding resolution passed 1289, with 35 nations sustaining abstaining. Also reported the motion. Ambassador nikki haley said america would remember the day when the United States was singled out for the attack. Nike had reported secondquarter results that eat estimates. Eps at . 46 against forecasts of . 40. Revenue top 8. 5 billion, again and ahead of estimates. Income rose in greater china, europe, and the middle east. Ubs has been ordered to pay 900,000 to a former mortgage strategist who was says he was sacked for refusing to sugarcoat his report. A manhattan jury sided with him, but awarded less than a third of the 3 million in damages he sought. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thank you for that. We are getting close to christmas. We have aok like santa claus bounds. Asian markets climbing higher on this final trading day before christmas. Of as shown to be the end phenomenal year for asian emerging markets in particular. Lets get the latest with Sophie Kamaruddin on the markets for us. Off withets kick it the mood in japan looking cheerful. The topix adding. 25 after being led higher right energy and financial socks stocks. The topix headed for the biggest gain in two months. The nikkei 225 little changed. Defense stocks mixed in tokyo after japans approved a record budget and budget, and health care scherzer sliding. Care shares are sliding. After that Japan Trade Ministry considering new rules to respond to data falsification scandal, we quickly check countries that have faced such trouble. Mitsubishi materials rising while kobe steel is losing 2 . A quick roundup of Market Movers of note. The euro dropping the most. And the korean won set for a second weekly advance, gaining. 3 this friday, while the kospi is snapping a fourday drop, and the sensex being led higher by real estate. Shares in singapore rising for the first day in seven. Not much reaction in the jgb market after japan announced it would cut on issuance for a fifth year in 2018. Tpg capital and China Telecom are planning to acquire a struggling brazilian phone company and may present an offer in the new year. Our asian telecoms editor joins us now from tokyo. Wouldch of a surprise this be if the deal came through . Was a big surprise in september when this story first emerged that China Telecom was in talks. They are not the big guy on the block in china. That would be china mobile. They have been mentioned in this has emerged now that China Telecom talks are further along for this. China telcos in general have focused on their massive home market and the growth there, not only adding new subscribers to 4g and prospects for building out the 5g. There is a lot of growth left in china to the idea they would be expanding outside china is a surprise, and obviously given the massive debt problem at oi. It took them so long to sort it out and it is such a mess that it is a surprising country from China Company from china would want to wade into that, and that tpg would be involved. They see value and look at the potential for growth, so it is a realistic prospect for them. What about any expected obstacles to this deal . What would they need to overcome, if anything . One of the first things that comes to mind about china participation is that the government of china has tried to cap crackdown on big overseas deals by chinese companies. There point has been some deals have been a rational and they ,ave been opposed irrational and they have been opposed to chinese conglomerates investing in entertainment assets. Tell account telecom might fall on the border there. The Chinese Government signaled they support Companies Investing abroad in infrastructure assets. This could qualify under that, but there is always a lot of scrutiny on chinese Outbound Investment these days. The brazilian government would also have a say on that. There has been some scrutiny there. Some Equipment Suppliers have been blocked from participating in countries because of National Security concerns. Any time you have a telco, that is an issue, and that would probably be an issue here. Foraad thank you a lot that. We will stay with telecoms and stocks associated with indias big graft case surged after a court acquitted all accused then led to the cancellation of some 122 airway licenses in 2008, but ultimately brought down the government there. To court says they failed prove their case. Lets get over to new delhi. This to of a setback is mr. Narendra modi . Modi is a setback because ther the elections viewed telecoms scandal as one of his most important weapons to say the Ruling Congress is corrupt. How tried to remind people this government is corrupt come and now the courts are saying it wasnt really a scam and no charges are proved against those accused, including the minister. It ruined the credibility of his anticorruption crusade. About the court . What did they actually say about these allegations . They seemed to be fairly robust. Doesnt that limit the chances of a government appeal . The court came out clearly , andg there was no scam also came down heavily on the prosecution come and sing the prosecution has miserably failed in proving any of the charges, corruption or conspiracy to chief the government to chief the government. Cheat the government. It said none of those charges were proved. There is deathly a chance of an appeal. Move toecutors will appeal. Enforcement that prosecutes accuse for Money Laundering gave a statement yesterday saying they will move to the Court Challenging this. Broaderre there implications and how they deal with the government Going Forward . Not much. , licenseslecom sector wereted through this canceled in 2012, so most of them are out. Beyond that, there are still no implications because most are given twoces options now. They are not granted on firstcome, firstserved basis. Not much discretion is left with the government anyway. Experts dont really see much of an impact on the industry Going Forward. Corporatesthat the that are accused ok, thank you. Haidi thank you for that. Our india courts reporter there. Guest on thea our currency Market Outlook for 2018. He says the fragile ring it Malaysian Ringgit is more resent these days. This is bloomberg. Haidi the philippine peso is expected to be the worst performer in the coming year, and our next guest says it could slide further by the end of 2018. Our manolo bureau chief joins us now. What Manila Bureau chief joins us now. What is behind this bearish outlook for the peso . Market experts point to the current account deficit this year that will be the first and 15 years. The current account deficit is expected to widen even further in 2018 to Something Like 700 million from an estimated 100 million current account deficit this year, so the consensus view is this is a reflection of the governments push for a massive infrastructure rollout as much as 180 billion for the remainder of the president s term ending in 2022. Rishaad i will pick it up from here. What has the central bank signaled about policy looking ahead to 2018 . Thate messaging so far is inflation remains on target, there is no need to follow the fed, what the fed has done so far, number three, tax reform set to be implemented starting january is going to cause temporary inflation pressure, but should be manageable. The economy, even at the fast pace it is growing at come is not overheating. Nimblee policymakers are and ready to act when necessary, messaging sothe far. No signals on when they will move or whether they will hike rates, although the consensus view of analysts surveyed by bloomberg is that the policy rate will increase Something Like 3. 5 next year from the current 3 . Rishaad great talking to you as ever. Our senior in currency trader and analyst in singapore. Steve, great to see you. Do you have a few on the peso . Does it reflect what is being said there . I am looking at the analyst calls. 51 might be optimistic, even if we see the fed move to an aggressive pace of Interest Rate normalization. At the pesoook structurally different than other currencies that make up the basket. We look at currencies like the korean won that are backed by capital inflow. That does not happen in the philippines. It does not get a lot of investor in flow. That is why it tends to weaken when sentiment dies off. It will be the local whipping boy in the region, but if the fed decides to hike rates absolutely. Whatever happens for em will be contingent on the path of least resistance for the dollar. People are bearish on the greenback looking ahead. What is your take on that . Is a dovish fed narrative that seems will rear , but the problem is a lack of inflation out of the u. S. This is the primary driver of fed Interest Rate decisions, so the lack of inflation should pretend negatively in the u. S. Dollar in 2018. The latest data we saw through the cpi was quite negative. We have also seen lack of wage growth coming through the economy. Will facer headwinds the u. S. Dollar in 2018 as this political malaise in washington and midterm elections given that President Trumps polling numbers are miserable. The could be more shifts in swing votes and could play negative for putting policy through in 2018. This,d looking at all who is the fall guy otherwise looking at the cam it gamut of g10 currencies . It is an interesting scenario. A lot of Market Players are looking at the lack of differentials on the aussie dollar come and expecting the aussie dollar to fall as we move into 2018. I dont really play that hand as such. I see it quite differently. Prices under pending support and china playing a role in support for the region. I dont expect the economy to do an aboutface any time soon. I dont anticipate that falling off the ledge anytime soon. I think the overriding consensus that we will have india idiosyncratic story lines developing through g10 currencies, so we will have to look at each currency individually and play it off that. Given that space and the raisects the fed could Interest Rates and the boj remains dovish, i would expect the yen to continue weakening as we move into 2018 and would expect dollaryen to trade higher. Haidi i dont think there is much consensus on which side of 70 the aussie will be next year. Various analysts are saying fed what the fed might do will go one way, but the slow down in china and follow often commodities will go the other way. I want to pull up this chart that shows the support from that yield premium. That is diminishing. If that continues, do you see further weakness for the aussie dollar . I have a different view diminishing differentials are getting overplayed by the market. As bearish on the aussie dollar as a lot of my colleagues are, simply from the fact that i dont believe the Interest Rate will be more than 2 . The rba will be crying catch up at some point in 2018. On top of that, i am not so negative on the china economy. I realize they are moving towards reform in deleveraging, but i look at it in a positive sense come in a sense they are cleaning up their act and getting the groundwork prepared for expanding the economy, not contracting the economy, but expanding the economy in a more efficient manner, so i see it as a positive. I think commodities prices will stay strong based on the Global Growth narrative. That makes sense that commodities would remain firm. The other aspect is opec basically putting a floor under oil prices. Comenk that plays well although topside will be limited. I think that floor will also support the underlying element of the commodities markets. Haidi a quick word finally on the euro in light of this evenings decision in cattle catalan . It is like trading political risks is always fraught with nature. With danger. What we see traditionally on this political capitulation in the euro is that it tends to be feted and bought on the dips. The only issue i have is that we mostoing in to two of the inactive trading weeks on the calendar, and that pretends that traders are not looking to add risk, so therefore the euro will probably wobble going into isrend despite the market moving up on shifting policy rhetoric. It is one of these unexpected moves that we found ourselves towards yearend. Haidi always a pleasure. Have a great christmas. We will see you in the new year. Haidi plenty more to come. We look at the year ahead when it comes to oil prices and broader commodities. This is bloomberg. At thelets take a look Global Outlook when it comes to oil and commodities. The founder director and senior mine life. Yst at copper is a proxy for the china growth story. Do think there will be Downside Risk from the environment . Not really. , im my personal perspective think there is a firm support copper andp or base metals. A lot of that is driven by china and the reforms they are implementing at a federal level. From the environmental perspective, we have seen the impact those changes have had on the bulk commodities like coal, iron ore. They perform well due to restrictions placed on Domestic Production and led to a true and this increase in imports, not only bulk commodities, but base metals, so i see that pressure continuing through 2018. China is the biggest consumer of metals and commodities in the world. If you tie in the fact that donald trump seems to be achieving some success on the domestic front haidi do you think that infrastructure boom will materialize . We might see that longawaited infrastructure boom that was promised when he won the presidency in 2016. That might start to flow through. We have markets looking ahead, particularly base metals, copper, zinc, nickel, cobalt. That as far as the electric vehicle situation is concerned. Oil, 62, 63 for wti has been the seething, and remains so arguably with the u. S. And shale the swing producer. See a carbon will copy of what we have seen during 2017. The opec supply restrictions providing a very sound base in as far50s per barrel as oil is concerned. On the upside, you have u. S. Shale. I think we are in a sweet spot as far as opec and u. S. Shale producers are concerned because it provides a level of profitability for both sides of the equation. With whereec happy the price is and allows them to justify spending on new infrastructure and subdues domestic unrest on the political front because it allows them to make sufficient profits to justified to mystic spending. At this justify the most expending. The shale production keeps a lid on prices and allows cheap oil, cheap petrol come in the biggest Consumer Market in the world, which is the United States. Rishaad we have about 30 seconds. Where you areand most bullish and most bearish in what you cover, very quickly. Skeptical as far as probably cobalt. We have seen prices doubling during 2017. On cobalt. My dark horses probably gold in the commodities space. I dont see Interest Rates going up too much, u. S. Dollar weakness, both factors together provide very strong outlook for gold, and gold ends to start the year very strongly come at so First Quarter next year gold will surprise and the upside. Rishaad great talking to you. We will leave you with this picture of victorino peak. Bloomberg markets asia continues next. Rishaad it is almost 11 00 in hong kong. 10 00 p. M. In europe. I am Rishaad Salamat. This is Bloomberg Markets asia. Rishaad shutdown averted, at least for now. Congress passing a bill to keep washington humming along for at least three weeks. Independence is alive in catalonia. Separatists won the election. Rajoys party struggled for support. Continues,ypto ride with a definitive questions. Bitcoin, the story at the moment. Now over 10 into the session today, seeing a decline to 13, 907. Lets bring up the chart, it has only gone in one direction. We are down over 10 . 1452 fall back in the session of us for this morning. It is a wild ride. But we have seen positivity taking place. What else do we have going on . Sophie we are so close to the 25 frombitcoin down its alltime high. Taking a look at market action, asian stocks mostly higher, kale and one and the mainland. Treasury yields on track for the best month since september. Gold, little changed. Steel climbing in shanghai while copper looking flat. Bnp saying it is time to short copper. In thee action to note currency space. As the dollar is firming up, the ringgit and peso leading regional declines. The won hovering around the. 10 80 mark. It could snap of four week losing streak. The euro dropping by the most in two weeks, given the developments in catalan. We do have a japanese pharma and chip stocks among the worst in the region. Equity movers climbing the most since 1999. Tsingtao buried rising in hong kong. Lenovo leading gains. Chinese autos gaining ground. China rising almost 4 . Slipping, mgm china. That is the hang seng this friday. Rishaad thank you, Sophie Kamaruddin. Lets take a look at spain. Woneparatist parties have the separatist election in catalonia, heading a resounding defeat to mariano rajoy. They took 70 of the 135 seats in the assembly. Party puigdemonts exceeded its own expectations. Took less thanar 10 of the vote in its regional hometown. The catalan republic beat the spanish monarchy. The most important thing is to start a dialogue. That is the only thing mr. Rajoy never tried. They have to launch a political solution. We will find a solution. Of Corruption Case that held Narendra Modi to power in india has been thrown out. By judge in new delhi acquitted all the accused of graft with a licenses in 2008. Prosecutors said the cheating cost the state nearly 5 billion. Modi has consolidated his power by cap capitalizing on corruption claims. One of koreas Biggest Companies faces a court ruling. A judge in seoul will wrap up the yearlong trial, on charges including embezzlement. German shin dongbin was accused of embezzlement and breach of duty. They are seeking prison sentences of up to 10 years. Bank of america says it is not overly concerned about Household Debt in the u. S. Consumer credit continued its upward climb in october, reaching a record 3. 8 trillion. Moynihan told bloomberg the tax cuts will also help. The numbers can be bad. Money will go back into circulation. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am yvonne man. This is bloomberg. Our top story, Congress Passing a stopgap bill to avert a government shutdown, kicking the spending can down the road again. Markets fighting it. It could lead to an economic disaster. Hello. Rishaad what do you make of this, richard . We get into january, we have to get something in place. Inevitably, 11 45 we get it. Richard the bill has not quite passed yet. The budget at the moment. Richard that is in the nature of politicians, to take it to the very brink. Because that is the only time they are going to make a decision. Rishaad we can move now to the tax bill. [laughter] richard thank you. Rishaad it will be signed in january or thereabouts. Your thoughts as to all of it . Richard politically, it is a huge win for trump. Were thinking he would not accomplish very much. To come through with this is quite a feat. To unite the republicans. He will have a following of interest behind this. Whether it is economically the economy is booming at the moment, 3 growth. We only had 4 trillion pumpkin after the Global Financial crisis. It is certain we are going to see big things. Rishaad are you certain . At 20 of the population, the biggest beneficiaries. Is always that way for tax cuts. It is money going into the economy. It will be a big benefit. Rishaad the top 20 have a propensity to consume, which is less richard the money is still going to move around the economy. Whether it trickles down or not is another matter. Whether it is by investment or equity. Rishaad it could have wider implications. It means less money for the things we are expected to do. For grady for support students, research, education. It is a very surprising move. Of course, he is talking about the other side of the balance sheet. The big deficits that will come down the line. It is something that will come to bite us further down. Rishaad where do we go with the corporate side . Lets not forget, corporations have been sitting in this space, with a lot of cash. Doesnt mean people get paid more, as we have seen with at t . Or perhaps they transmitted through share buybacks and dividends . Richard we are likely to see more of the same. Likely, more corporate investment. I would like to think it will trickle down into salaries. Some of it will. But we have seen trickle down does not work. Rishaad it does work, actually. Richard not for me. [laughter] rishaad it ends up in tax statements, it trickles down to the people there. Richard one of the issues, there will be that money in the economy. It will be used and it will be a big boost. Companies feel more confident because they do not have to worry about their debt levels. A positive thing. The initial site is positive, the debt side is negative. Rishaad where does this leave his grand plans for infrastructure . Richard that is a good point. If i had been advising him, i would say they go to infrastructure first. Everyone loves infrastructure, including democrats. There is a positive possibility having gotten this through, he could get infrastructure through. Prettywould be hardpressed to think he could not get reelected next time around. As a politician you worry about affording it later on. You leave someone else to worry about the mess. There will be implications on the deficit. Maybe it will be worked out by inflation, as we saw in the reagan era. But that is for five years down the road. Rishaad proper inflation numbers, that is what we are all waiting for. Richard harris, thank you. Winning their election in catalonia. Continues. Ild ride shy of 10 . Raising questions about the definition of a fair market. This is bloomberg. Rishaad were back, this is Bloomberg Markets. Malaysias struggling fund intends to make a 6 million arbitration payment by the 31st of december deadline. They are told they have the cash on hand to pay ipic. The payment is the final amount of a 1. 2 billion settlement. Toing in talks with embraer reveal it would deliver a portfolio of regional and private jets. Their completion would be boeings largest in 20 years. It does need approval of the brazilian government. Lacuna int of a boeings production. Google saying it eric schmidt is stepping down, ending a 17 year Senior Leadership role. Willbet says schmidt become a Technical Advisor and continue to serve on the board. Larry page saluted his career, and clear vision of the future of tech. To the currency markets. The euro having a tough time, falling the most in two weeks after the catalans maintained their independence. The German Foreign ministry warned about the possibility of a minority government in his country. Our guest is still with us. Lets start off with catalonia. Goneems the problem had away. But it is not clear. Did we get more of the same it is not clear. Now catalonia is even though it has caused a big majority of separatist to the table, they have 40 of the vote. There are quite a lot of people within catalonia who are not in favor of separation. There will be an awful lot of trading that needs to go on. Rishaad what does this mean for spain and how do they sort this out . Richard it is intractable. It will carry on. In terms of what is likely to happen, the new administration is probably going to be engaged in trying to get back selfgovernment. Secondly, to try to release the leaders in jail. Rcep self exiled in belgium. It does look as if many of the ardent independent people within the separatist movement are having second thoughts and thinking may be a stronger, tough determination would be better. Rishaad the European Commission is looking to other countries for what this could spark off. There is the real danger . Richard i think the European Commission is quite serious. There are comments coming out of the brexit group in the u. K. , who feel themselves aligned to the catalonians. Catalonians. Maybe the dutch will do it, maybe the polls will do it poles will do it. A number of these breakout groups are looking quite serious. Rishaad be careful what you wish for, when it comes to the brexit thing. Saying one economist hacks it was an excuse to sell the euro. Richard i think he is probably right. When you look at what tends to happen at this stage of the cycle, the dollar tends to weaken. The dollar is heavily overboard. Rishaad it has not had a very good year. Richard not this year. It is not unusual as we come toward the end of a cycle for the euro and various other currencies to look strong. It is often only when you come to the end of the cycle people start flooding back to the dollar. Rishaad where do we go . Generally people have been bearish. Richard on the dollar . Rishaad yes. Richard i would not be that bearish. But we are likely to see a reasonable trend of decline. I think we are likely to see weakness in the dollar. It is more like strength in other currencies from now on. Rishaad which ones . I have been buying euros. There is the move with the swiss franc, the yen, they haven currencies. When i am worried about his could easilyuse it become isolated, if the brexit negotiations get difficult. Rishaad it was looking good, 134, 133. Richard it is back to levels reasonably normalized. But it is such an easy currency to isolate. It has no real friends or buyers. Traders want to have fun with it, that is the one they look at. Rishaad youre making me feel sorry for my kith and kin. Check in with all her interviews using our interactive function. Send messages to our guests during our program. It is at tv. This is bloomberg. Back with Bloomberg Markets. We check in with one of koreas Biggest Companies, awaiting the longterm trial of lottes founders. Reporter is on the line from seoul. The firsts the end of trial. Four executives were indicted on embezzlement,ding last october in 2016. It has been more than a year. The south korean court will rule on the sentence. Sentence of the chairman, shin dongbin. Rishaad it has been a rough year for these guys. Sohee yeah, it is. The conviction of shin dongbin is major. It put the risk of china with retaliations. There were coup attempts to years ago. Two years ago. There is a possibility a leadership vacuum could bring a negative impact. They told reporters they are marketto finalize business in china. But it is very possible it may be delayed, as well. Reporter in chaebol seoul. Lets hear from richard harris. It is quite a positive sign that the korean kospi was looking into issues of corruption. From,ct i cant get away it is very much like politics. You have the alpha skins of corruption going through. The president has been impeached and is no longer the president. Investigationsse go to the very center. It will be interesting to see where moves go from here. I am pretty sure they will not stop with the shins. Rishaad chaebols are one of the reasons why south korea has gotten to where it is. And it is becoming a problem. I suppose it is a problem until it is not a problem . Emergingyou are in an market and you favor Key Industries. Chaebols are the Key Industries they favored. They got to such a situation of power and strength in the country, they actually become a threat to stability in the country. Looking at the political side as opposed to the commercial side. It is a conundrum. You want to have national champions. You just do not want them to be too strong. Rishaad and to influential at the top. Richard that is the problem. It makes it easier for the chaebols to stay in place. To a certain extent, this is positive. It will separate politics from the commercial side, which i think is overall positive for the country. It will be interesting to see how they take it from here. Rishaad i want to move to the biggest mover today. We never did end up talking about it. I want to quick look at the price of the coin. What are we now . We are down at the moment. 2100. We had 19,000 at the high. Richard some of the futures were even higher. Bitcoin is the first to do this. Priced people will flood when it is down. I do not think bitcoin is going to go away anytime soon. It is a dangerous development. Rishaad but it does have credibility being lent to it with the likes of Goldman Sachs. If the bank sees a profit, they are going to go for it. Bankers and Market Makers are only there for the financial market. I am not surprised they are in there. Rishaad it is down 26 from its high. Is that the definition that is the definition of a bear market. Richard it has had a bad year, up 1500 . 5500 . Was up but of course, it has done fantastic. It has been in all the news report. People have flooded it that should not be in it. I do not think it i do not see it changing anytime soon. People will stop leveraging against it. Rishaad lets move on to this market story, if it is a market story. Looking at brazil and boeing. Your thoughts of the possibility of these emerging these merging. Richard it is a story of consolidation. We had boeing attack bombardier rishaad not the beer. Richard they were forced into the arms of airbus. It is a fascinating story. Bombardier is forced into the arms of airbus and embraer into the arms of boeing. Rishaad it is interesting. Duopoly. Rces the richard or maybe a triopoly. Rishaad always a pleasure, never a chore. Ichard harris we are looking forward to business this afternoon in tokyo. We get the lunch break done and dusted. The yen barely moving, the nikkei moving to the downside, are pretty much flat. It is the reopen in tokyo on the way. This is bloomberg. I am yvonne man in hong kong with first word news. The u. S. Condemned the u. N. Decision on jerusalem, saying it puts future funding at risk. The nonbinding resolution passed, 1289, with five nations abstaining. The u. K. , france and japan all supported the motion. Ambassador nikki haley said america will remember the day when the United States was singled out for attack. The un Security Council considering new u. S. Sanctions against north korea that would target 90 of oil products and crude imports. Friday on come later capping oil imports to 400 Million Barrels a year, and limiting it deliveries of the diesel and kerosene. China has a veto on the Currency Council and is the biggest trading partner. Japan approved a defense that did 6 billion to bolster its ability in the face of growing threats from north korea. Japans first longterm missiles are on Prime Minister shinzo abes shopping list. Faces another bump in the road with an investigation in singapore. The competition commissioner is asking for public response between the ride hailer and a local taxi firm. They are asked about the taxi companys purchase, 1 of ubers business. Estimates it is 10 of the current book value. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am yvonne man. This is bloomberg. Getting to the japanese reopen. Having a look at the share Price Performance and the movers. Pretty lackluster this morning, the nikkei. Sophie little changed as we kick off the session. Lets look at the key movers. Pharma mover on it disappointing trial, dropping the most since 1988. Nomura sees Japanese Health Care Companies among the beneficiaries of u. S. Tax cuts. Anese chick bankers chipmakers tracking losses. This friday. japanese manufacturers will face tougher punishment for faking data. Punishments might include bigger fines. Steel slides 2 . Another, the worst performer on the nikkei 225 the since 2017. Nissan said there expecting their yokohama headquarters to stop rising. Dollars dollar has shifted gears. Stocks mostly higher today. Chinese shares are under pressure today. The index rising for a second day. The hong kong dollar is resuming. Lenovo is the best performer, leading gains in the tech sector. Great,g stocks not so galaxy and mgm leading the drag. Losing its footing, falling toward 13,000. Bitcoin down more than 30 . Rishaad about 1500 this year. About 1,000,000 since may of 2010. Lets look at the economy in the u. S. Revised slightly downward, but the fastest rate since 2015. Lets get to david in singapore. Is the picture still fairly rosy . Yeah. Down slightly from a 3. 2 . But the strongest since the Third Quarter in 2015. With of the tax bill being passed, everyone expects good gdp next year. The question is, how long does not does that kick in . Is it shortterm or longterm . A lot of economists are debating that. They think it is a shortterm boost. The question, how long does it go . Does it feed into inflation . Fed loves the pc deflator. What does that tell us . David the data for Third Quarter came out, slightly down ticked again. The market was expecting 1. 4 for the Third Quarter. We focus on the data that comes out tonight, for november. If we see a downtick in the trend, they will start questioning the three rate hikes next year. Tonight, very out important for moving forward. Particularly for longterm yields with an impact on the dollar moving forward. Rishaad we have a ton of information coming out tonight. New home sales, university of michigan sentiment, all of that. We will look at another it is a 1. 3 trillion market. It does offer hedge against Rising Consumer prices. We saw the biggest monthly inflow since march. Do people know something that others do not . As you said come on the biggest inflow since march. Traders are thinking, this is a shortterm boost to the economy. Thatnflows are indicating nearterm, inflation may get a boost. Longterm, does it take or not, has yet to be decided. Inflation may get a temporary boost in the shortterm. Inhaad thanks, david singapore. Investors are worried about the rise in outstanding u. S. Consumer debt it debt. It ismoynihan said spending driving the u. S. Economy. It is not as much what we are hearing, that is more on the institutional side. It is on the consumer side what people are doing. We see every week what they are spending money on. Spending your today 2017, whether it is cash, atms, or te llers, debit or credit cards, is up 6 over last year. If you look at an equivalent period from a year before, it was only 3 . People are spending more money. Cks written have come up. Credit cards are the fastest big number growing. But overall, consumers are spending well. That drives the u. S. Economy, because it is 2 3, a consumerdriven economy. That is very good news for the u. S. Are they borrowing more . I am not worried about credit on the consumer side. There isok overall, concern about excess in lending. There were concerns about mortgages. We are still working through the memories that what happened before and what the industry does and what goes on in lending. A little bit in the unsecured lending, student lending. Not something we are involved with at all. Not really worried about Consumer Credit. But that Consumer Group spending drives our economy. The u. S. We believe will finish 2017, 2. 1 gdp growth for the year. Starting at a 0 , it is interesting. Next year, 2. 5 . That movement is very big. Is the first time we have seen japan growth likely, europe will grow faster, the 1. 5 interest 1. 5 range. It is tremendously different than 3, 4, 5 years ago. Japan was negative, china had been down. Now they are stable, moving out. Brazil, are and very interesting. Worldwide growth, that is good for the world. The u. S. Helps supply that growth. You are looking at 2. 5 growth in 2018. Is that before or after the tax legislation . After the legislation, not including the taxes. Our experts would say it adds to that. It adds a 0. 4 . Taking into account the tax overall, perhaps 2. 8 , 2. 9 . That would be at the high end. Probably 2. 6 , 2. 7 . Tax statement is big and they will be looking to do things. Around the world, you have brexit and interesting questions. It right now we you think will grow into the high 3 s. Have you thought about what they are likely to do with the money . There are other changes that benefit corporations. Are they going to return that to shareholders in dividends and buybacks . If you think about tax reform on the corporate side, the goal always was to get an effective tax rate in the u. S. , competitive with the world. You know what they were doing in the money was, being shifted to where final demand is. This huge world with billions of people outside the u. S. That do things. They were shifting investment oliver. That is expected to reverse a bit because we are now competitive. That was a core principle. When they talked about what they will do, my guess is you will see a little of everything. Some people will buy back more stock, someone in best in business and build things faster than they would have otherwise. Some will rethink the balance between inside and outside the none of this can be bad. Bitcoin,coming up, falling 20 over the week, we are down at the moment, 12 . 853. That would normally have put this into a bear market. Can that be true, given it is up 1500 this year . That question, and hopefully an answer. This is bloomberg. I am very excited about bitcoin. I am wearing my tie. It is a global phenomenon. It is a global currency. It is limitless, not subject to the whims of a political force. It is not a stable source of stored value and does not constitute legal tender. It is a highly speculative asset. It has to Gain Momentum in popularity, has to serve as a meeting of exchange and stored value. The demand is for people who want to engage in it. The current fascination with bitcoin another cryptocurrencies feels more like a speculative mania. How do Value Bitcoin . How do decide what the price will be next year or in five years time . That is what Institutional Investors are evaluating right now. At the moment, bitcoin is not posing any obstacle to the bojs Monetary Policy or causing any problems. However, if it is a question whether it is functioning as a form of payment, it is speculative investment. This cryptocurrency one of the big stories of the year. Sparking a huge range of diverse opinions. Are we in a bitcoin bubble that will pop next year . Our asian reporter is with me now. This is the third bear market dip for bitcoin since august. 13,362. 000 to at what point does bear market failed to apply . So far, we would collect it a bear market, it has rebounded right after three or four times in the second half of this year. It is hard to say if this is the definitive time. If this time is different from the others. Rishaad it is always different this time, isnt it . Eric until your left holding the bag. Different from some of the big drops we have seen the last couple months. We really do have to see how things play out the next couple days. Rishaad what is behind the price action we are seeing so far . Eric it is a combination of things. I talked to a currency strategist. You have Retail Investors jumping in speculatively. The frenzy has gotten crazy. You may be left holding the bag. Rishaad we dont want to be left holding the bag. Eric some in the industry call it a refreshing correction. The kind of correction we have been holding our breath, waiting for. From that perspective, buy on, it is. Why not . Rishaad 25 down so far this week. Answer,ck to your first that is the definition of a bear market. When you are up 100 of the year you have to get to 80 before you destroy it being a bull market. Eric that is interesting about the characteristics of a bear and bull market. The s p 500, we have not seen a 20 drop since 2009. We have also not seen a 1600 increase, either. The goalposts have moved with bitcoin because of the rally we have seen this year. Said to Goldman Sachs be a cryptocurrency trading desk to this new asset class. Ifrichard harris was saying, you can make money on it, why not set up a desk . Eric Goldman Sachs as having the same conversations everyone else in the Financial Markets are. How do we relate to this . How do we fit this into our Business Model . Goldman sachs has been fairly conservative so far. Lloyd blankfein said they are looking at how to integrate a bitcoin. Its going they started to clear futures contracts. Have 100 underlying that trait. That is talk of putting in. What exactly is bitcoin . Rishaad that is the thing, people are diving and without knowing anything about it. Eric that is some of the speculation we are talking about. That might make sports bras or iced tea, and they change their name. Rishaad i thought that was wonderful. Island iced tea is now long blockchain, and the stock is up. This is starting to remind them of the 2000 dotcom bubble where Companies Added dotcom to the end, and their stock went through the roof. Rishaad lets hear what they are making of this cryptocurrency. An anonymouset to currency, that is a different question. That is a policy question of whether we want an anonymous currency out there. That is what you see People Struggle with. I do not think you want it. There is a reason why the 100 bill is the largest on the night denomination. So we can move through a verifiable system. Rishaad we have bills of larger denomination to make moving money difficult. It is a way of moving money. But people are worried about it being black money. It is ae fact cryptocurrency, designed to be untraceable. It is important to point out, while a single bit going oin is 13,000,tc you dont trade a single coin at the time. Singlet have to spend a bitcoin at a time. If i go down to the 7eleven, i cannot spend a bitcoin. Eric, great stuff. Bloombergs asia work lam. Ter, eric visit our markets live blog on the terminal. Mliv. You get some of the best commentary in the business, and what is affecting your money right now. Lets have a look at the latest business flash headlines. Morgan stanley explaining how they will trade under the European Unions sweeping overhaul of financial institutions. It can avoid complying with ii rules,called mifid including submitting reports within 15 minutes of a deal in some securities. Jeffries decide when they receive bonus payments. How the republican tax changes affect compensation. We are told that the ceo has asked workers if they want a check of this month or next, paying bonuses in january. Some may want a bigger compensation in 2017 before the new regulations. Nike is that with the secondquarter results that beat estimates. Shares were at . 46, we were looking for . 40. Revenues topping 8. 5 million. Income rising in greater china. Declines in north and latin america. Indias case pushing Narendra Modi in the power has been thrown out of court. We are headed to new delhi. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat. Lets have a look at indian markets, the last trading day before christmas. You need a four rupees to buy yourself a dollar. Tracking what is going on in the broader asia complex. Stocks of companies associated with indias biggest graft case are surging after they acquitted all the accused. A cancellation of some 122 airway licenses in 2008. It ultimately brought down the congress government. Lets get to the capital of new delhi. Be, howtion has got to much of a blow is this for Narendra Modi . It is quite a political blow for Narendra Modi. All his Election Campaign speeches focus on how previous government was corrupt. Even his Campaign Speeches remind people how congress was corrupt. Goesn the coming year, he campaigning in the state elections. His anticorruption crusade and allegations that congress was corrupt, will take a hit. What are the chances the government appeals . They are pretty clearcut on this it seems, the judiciary. Initiallye court said when the prosecution took on the case, it was very robust. But eventually, when they started producing evidence and putting papers on record, the prosecutions case went haywire. Eventually it was clear there was no scam and the prosecution had failed to prove corruption, cheating. Given the agencys challenging , theynd the higher court gave a statement saying they would move to challenge this item. Are there broad implications for other corporations in india . ,as it set any precedents change the way they interact with the government, looking ahead . Corporates, ither do not expect much of an implication. All naturalt said resources it should only be allocated through auction. [indiscernible] it has already been auctioned, not granted on a firstcome, firstserved racist. Rishaad thank you so much for joining us, having a look at these things in india taking place. That is it for this edition of Bloomberg Markets. Bloomberg markets middle east is coming up next. A shot of that Big Christmas tree. Have a merry christmas, everybody. This is bloomberg. Cannot live without it. So if you cant live without it. Why arent you using this guy . It makes your wifi awesomely fast. No. Still nope. Now were talking it gets you wifi here, here, and here. It even lets you take a time out. No no yes yes, indeed. Amazing speed, coverage and control. All with an xfi gateway. Find your awesome, and change the way you wifi. I am Alisa Parenti in washington and youre watching bloomberg technology. The house has passed another shortterm extension of federal funding to keep the government running for three more weeks. While putting off a raft of policy questions the bill still , has to clear the senate before the showdown deadline at the end of the day on friday. The United Nations General Assembly today overwhelmingly backed the measure critical of President Trumps decision to recognize jerusalem as the capital of israel. The 1289 vote came despite of u. S. Ambassador nikki haleys warning it could put funding at risk. On capitol