Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240713

The u. S. Revised down its revised forecast for this year and next. The outlook for automakers in a postvirus world. We look at the prospects of japan the boss of lamborghini. Shery breaking news out of south korea. We are getting the Unemployment Rate for the month of april, coming in at 3. 8 . This would be below expectations of more than 4 and at the same level than in the previous month. South korea of course has implemented big fiscal measures, not to mention the relaxation of social distancing measures and president moon jaein asking his ministers to swiftly draw up a third budget. He has announced something of a korean style nodeal with statement investments, and we are seeing the south korean Unemployment Rate at 3. 8 , the previousl as in the month as south korea continues to battle the coronavirus pandemic. That seems to have restarted and regained some momentum with those infections around nightclubs in seoul. Lets turn to Sophie Kamaruddin in hong kong for a check on the markets. What are you seeing . Sophie aside from the korean jobs data, later, we will be getting malaysian gdp and ahead of that, a lackluster session potentially in asia after u. S. Stocks fell and bonds rose as markets assess trade and virus risks. U. S. Futures from the downside while treasury futures are just ticking higher. The offshore yuan staying above 710 after erasing gains, introducing a bill to impose sanctions on china. Are watching autos after toyota and hondas earnings. We have sony, square enix keyrting alongside tencent, to watch for insights to the pickup in gaming during the pandemic locked down. Checking on new zealand assets, stocks in wellington halting a sevenday gain while the kiwi dollar is below towardsear yield edging 70 basis points. It is seen holding on rates but staying kiwi. Retreating from a fiveweek high, a click economic reopening has shifted focus back to week energy demand, haidi. Been talkinghave about, the top u. S. Infectious fauci, official, anthony has been warning against states reopening quickly. It risks new coronaVirus Outbreaks. There is a real risk that you will trigger an outbreak you might not be able to control, which paradoxically will set you back, not only leading to some suffering and death that could be avoided, but could even set you back on the road to trying to get economic recovery. If you would only turn the plot back rather than going forward. In emilyts bring wilkins in d. C. For more. We heard from the head of the cdc, robert redfield, saying we are still not out of the woods yet, this after the president saying we have prevailed over this virus. Today, aat we heard defendant hearing, we had a redfield,top people, stephen hahn, all of them had a very somber and serious message about where we are currently at as a country with the coronavirus. They mentioned that as states begin to open up and they begin to relax some of the restrictions they put on, there is absolutely potential for cases to increase and for that to have a negative impact on the economy anyway that so many governors right now are hoping to avoid. Shery we are seeing how democrats are proposing a 3 trillion buyers release build. What are we expecting on this front and how soon could we see it . Emily think of this bill as an opening bid from house democrats. Bid from house democrats. It has already been shut down by republicans in the house. They arethey are expecting to se another corona stimulus package. This is what we want. They want 500 billion targeted to states, 370 5 billion to localities. They want things at the post office, elections, another stimulus check to go out to all americans. We are going to see how this process develops in the next several weeks. There has been some talk we might not see a bill voted on until june at this point. We finally have something on paper as far as what this next stimulus package might look like. We will see big aid going to states. This will be good for some of them, like new york. Governor andrew cuomo saying billions of dollars will be needed in federal support. Absolutely. There are a number of states with similar sentiments as far as what they need. Think jobs here, people, law people whose salaries come from state and local spending. Democrats talk about this in congress, and that is what they focus on. Eight is not so much money going to states, but it is that he going to make sure individuals with frontline jobs they will continue to do their job and they do not have to be fired or laid off because states run out of money to pay them. Haidi shery Emily Wilkins with the latest from d. C. To testead, wuhan plans its entire population as new as newmerge after cases emerge after the lockdown was lifted. We have the latest. The latest. Karina you are watching daybreak asia. I am Karina Mitchell with the first word headlines pinch japan says it is winning the virus battle with the tokyo area not seeing any rises in the overall mortality rate. Capital region reported just over 33,000 deaths in the three months through march, slightly fewer than the average of the preceding four years. The numbers do not provide details of cause of death to indicate there has been no surge during the pandemic. India is reopening parts of its rail network this bite virus rates despite virus rates rising. The virus has devastated the Indian Economy with factory output collapsing in march. Manufacturing fell more than 16 , twice as much as seen in a bloomberg survey. Oil slipped from a fiveweek high after the u. S. Government orders output forecasts for the year. Futures in new york gained revised as the eia down its 2020 and 2021 projections. Consultancy market does not see oil prices recovering to previrus levels until the second half of next year. Saying it expects a series of stop and go rallies and declines. U. S. Lawyers prosecuting huawei for violations of iran sanctions essay the company should not be allowed to share pages of evidence in china. Teams have classified thousands of documents as a sensitive. Huawei denies it evaded sanctions. The cfo continues to fight extradition from canada. Local news, 24 hours a day, on air and on quick take by bloomberg powered by more than , 2700 journalists and analysts global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am Karina Mitchell. This is bloomberg. Haidi our next guest says many parts of asia are already in a deep recession but sees the rebound led by china and those countries that have been able to flatten their curves. The head of asiapacific economics joins us now from toronto. Great to have you. We get ever closer to the reality of economic reopening, particularly when it comes to this part of the world in it as some of these countries like here in australia progress beyond the lockdown into letting their economies emerge from the virus restrictions. Are you more optimistic in terms of the timing and the shape of what the recovery could look like . Recession ina deep many parts of asia and globally, and it is clear that the first and Second Quarters are going to be the most challenging quarters this year, but on a small positive note, i think there are signs of an imminent peak in the Virus Outbreak in some countries, and therefore, economies have started to plan how and when to reopen their economies. The domesticll see demand recovery to be led by china, and some other asian countries, but the recovery will likely be fairly gradual because it will take some time for Consumer Confidence and Business Confidence to recover, so it is going to be a fairly gradual rebound over the second half of this year. Given the fragility of these growth expectations, how much damage would you expect to be caused by things like another round of trade tensions . We are seeing back and forth between washington and beijing and we are seeing the emergence of what looks like, you know, trade related diplomatic disagreements between canberra and beijing as well. Is definitely a very difficult environment, and another round of trade tensions or trade war escalation, is the last thing the asian economy or even the Global Economy needs at this point. I would think the biggest Downside Risk for the regional economy right now is the second wave of covid19 infections. But escalating trade tensions is definitely another major one out there. Shery we just got south koreas jobs numbers for the month of april. They seem better than consensus, coming in at 3. 8 . The government is saying they are preparing stabilizing for the job markets. To put it in perspective, we have seen a lot of job creation in south korea really coming from the government even before the pandemic, not necessarily because private companies are willing to hire more people. So for how long can this trend last . Overall, south koreas Economic Outlook continues to be challenging, even though it sounds like the economy is weathering the turmoil better than many other countries in the region. In terms of the labor market, i think we will see further loss of employment over the coming months and the jobless rate will eventually rise, given that businesses are having financial troubles and that will be reflected in the labor market and had been of course on consumer spending. The government has been stimulating the economy by a substantial fiscal measures and the central bank has been implementing quite significant monetary stimulus. And that will help the economy recover. I think the recovery is starting to take place and it will continue over the second half of this year and into 2021. Bank thatther central has been doing a lot has been the rbnz. We are expecting a policy decision today. The governor did not necessarily rule out negative rates. What are we expecting to see . Leadthink the rbnz will the official rate on change 0. 25 . Policymakers in new zealand have said they accommodated to keep rates there for at least next year. I think it is time to really reflect how the economy is starting to recover following some easing in social distancing measures, and of course, also to see how the economy is hasonding to the rbnz injected. If the central bank decides to do something today, i think it will be likely about finetuning its asset purchase program. Coversow, the program 30 billion worth of government of local 30 billion government funding debt. Those numbers could be made bigger today. In the meantime, of course, the fed continues to push back on the idea that they will be forced to go into negative rate territory by fall of this year. We look at the bond markets and they are still hedging against that risk. Is it something of an inevitability . Would it create more problems than it could potentially solve in the u. S. Economy . Sounds like the fomc members are not too eager about negative policy rates in the u. S. , and i do not think the time is right for that. There are other policy tools that they could look into before example, yield curve control. I do not think the economy is there yet, but it is certainly something that investors globally are putting a lot of thought into it right now. Thank you very much for joining us today, scotia bank head of asiapacific economics. Coming up next, the coronavirus is not slowing down. The expansion of popeyes into china. Even after the outbreak decimated the countrys restaurant sector. We hear from popeyes china ceo, next. This is bloomberg. Shery a record collapse in chinas restaurant sector amid the pandemic is not slowing popeyes expansion. The nation will become the fast food chains second largest market in as little as two years to three years according to the Companies China head. He outlined his Expansion Plan with the first store set to open this week. Among the chinese consumers for the long haul. We are definitely bullish with the prospects of the Chinese Market for the restaurant industry. We do believe theres still a large space and still growth. The urbanization rate, growing middleclass, all of these are still there, and we believe there is enough market for a wide number of competitors. We also believe popeyes offers a that will cater well to chinese customers. Your first store in shanghai, what is your Expansion Plan . How many stores are you willing to open for the next few years, and where are they going to be . The decision has been a longterm decision. The plan was announced in july to have 1500 restaurants by the next decade. The plan is still there. With the pandemic or without it, an unprecedented black swan, but in the long term, it will not change our plans. When you were developing your china plan, that was before the pandemic started, so what kind of recovery are you expecting now for your business . This is one crisis. This is one of those crises that will not change a 10 Year Investment thesis. Than 10 yearsre investment thesis, so we will navigate that, just like tf i navigated multiple crises in the last 25 years they have done business with qsr. Looking ahead, we see covid19 accelerated a few things such as digital, that we talked about. We are in good shape to launch this system and be in a good position to grow the brand in this post covid19 world. Really, we are confident on the recovery of the china economy. A great jobne fighting this outbreak. We see how this situation here in the lives of people are Getting Better and better every day, and that gave us the , even amidst a Global Crisis like that, to aill pursue our plan, longterm plan on may 15. Things are not going to recover. We put our trust in the recovery of the economy. Will it be any different from the u. S. . We are proud to bring this heritage for louisiana cuisine to china, but secondly, of course, in addition to serving the traditional authentic fried chickenand buttermilk sandwich, which has been a craze launch, in addition to that, we will have a few items that cater to the chinese. As an example of that, we will have products that are not in the fixed part of the menu in the u. S. How long will it take for you to become profitable in china . Is the Million Dollar question. We have a good track record with burger king business. When tf i decided to invest in china, with burger king, you had less than 100 restaurants in 2013. Actually, the business was not in good shape. Reachedafter that, you 1300 restaurants, so that definitely, we want to have a similar trajectory, but most importantly, we will do things right. We do not cut corners with our food. Right, great food service, great operations, and strategyainably with a where you have a certain area in key cities, and im sure it will come. Was rafael quite low coehlo. It will bring employees back over the coming months including at its campus in silicon valley. We are told the first wave has begun around the world and will extend to major offices late this month and in june. A second phase is being set for july although timelines are said to be fluid. Elon musk thanked President Trump for his support in the reopening of Teslas Fremont plant as he defies orders about bringing the factories back on stream. Alameda county and other bay area officials have warned against restarting businesses, something musk has described as fascist. He congratulated workers returning to their jobs. Goldman sachss Summer Internship Program will be fully remote for interns. On april 7 but was pushed back to the first week of july. Goldman says it intends to fully honor the original internship program, both in terms of duration and financial commitments. Investors have plenty to digest today in ecodata not to mention a centralbank decision in new zealand. Lets turn to sophie for a check of the markets. Sophie lets focus on japan, with a halfhour to go until the opens of cash trade in tokyo. Taking a look at nikkei futures in chicago, we are seeing weakness. We are seeing just a little changed when it comes to that contract as we are looking towards a session that could be lackluster. Little changed after halting a three day drop. Tos, they are starting decline after a solid 10 year auction, plus the bojs regular bond buying today seems to be supportive. Lets jump in the terminal now to get a snapshot of foreign appetite for japanese stocks. We have seen that come under pressure with foreign funds during april for the First Time Since 2000. Disappointing earnings from toyota may add to the drag, haidi. Aidi coming up next, taking look at india with the countrys commitment to a huge virus relief package as cases continue to climb. We will get more details on that, ahead. This is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Karina this is daybreak asia. I am Karina Mitchell with the first word headlines. Toldop disease expert officials that reopening the country too soon that would bring a new spike in infection speed Anthony Fauci is concerned. His comments are in conflict with the president , who was pushing america to return to normal. Real risk that you will trigger an outbreak you may not be able to control, which in will set youcally back, not only leading to some suffering and death that could be avoided but could even set you back on the road to trying to get economic recovery. You can always turn the clock back rather than going forward. Karina senior officials at the Federal Reserve are warning the shutdown of the u. S. Economy could trigger a decline of historic proportions. James bullard said there could be business failures on a wide scale that would prompt a new depression. Loretta mester said u. S. Unemployment could exceed 20 as the virus fallout spreads. Twitter is offering employees the opportunity to work from home permanently when the coronavirus out rake finally received. Told staff that company is unlikely to reopen physical offices before september, but after that, most can work wherever they want. Twitter employs about the head of macaus gaming regulator has resigned just as the worlds biggest gaming hub is facing its worst crisis because of the coronavirus. It was do to end in december and no reason was given for his departure. He will be replaced in june. Gross gaming revenues fell by 97 in april as travel restrictions and the coronavirus kept gamblers away. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am Karina Mitchell. This is bloomberg. Haidi. Wuhan is preparing to test its entire population. That is 11 Million People, for the coronavirus. This after he came the first new infections since it lockdown was lifted. The news comes as China Remains on high alert for a potential second wave of cases. Tom mackenzie joins us now from beijing. How exactly is this going to work, this task of testing the entire population of wuhan . Tom it is an ambitious plan. They will get all districts, which of course was the center of the original outbreak, to draw up plans for how to conduct testing of all the residents within 10 days. The plan will prioritize groups. The firstfter we saw locally transmitted infections since the lockdown was lifted in wuhan on april 8. We had six cases from the same residential compound, and the size and scope of this plan reflects chinas anxiety over the second wave of infections if the economy gets back to full speed. We have seen other clusters on the china and north korea border and also on the border with russia. It points to their efforts to try and avoid the second wave as fast as possible. Shery we are getting breaking news on the bloomberg. Chinas province reporting six additional coronavirus cases, for may 12. This is as they announce a partial shutdown. Coronavirusouncing cases. It borders russia, which has seen a surge in coronavirus cases. It is pretty interesting that the numbers for the province are coming separate from the usual National Numbers that we get. What do you make of this and also, given the rates of infection, in china, where is this outbreak going . This continues the trend. We have seen small numbers of locally transmitted cases in cities and towns that border russia. As you say, that has been a particular problem area, and officials have tried to isolate those cases. They used the tracing system that has been put in place, and they quarantine people, of course. As we are seeing, those infections continue to rise. It is not terrifying numbers at this point, but there remains skepticism over the quality of transparency. This is a real stress test of the system china has put in place as the economy gets back to full speed and that system is one of testing, mass testing, as we are seeing in wuhan. Andwhere as well, tracing, then quarantines. On top of that, temperature checks everywhere and people having their smartphones scanned with their apps showing whether or not they are at risk. This system has been put to the test. Government as they try to get the economy back at full capacity. We are seeing a lot more Economic Activity in the mainland but we are not still seeing sporting events or cinemas open. Some of the big social events are still yet to get back open and this kind of poses a challenge around those areas. Shery what about Economic Activity in india, another country that has been badly hit by the outbreak . Tom we heard from Prime Minister narendra modi. Billion. Pend 265 this package which he announced last night includes some measures that have already been unveiled. 10 within gdp, so in line with the stimulus we have seen in hong kong but not as much as the stimulus we have seen in singapore as a proportion of gdp. Modi said spending will focus on land, labor, liquidity. There were few concrete details in this speech, but the initiative that was announced as well as tax cuts for new plants and factories and incentives for overseas companies is an attempt to lure investors to stop the virus, completely crushing indias economy. The economy is on track for its first full year contraction in four decades and we have seen 122 Million People lose their jobs. Despite the lack of details around this announcement, indian duties have rise on the news so there is an element of optimism. Certainly people waiting for details. Haidi Tom Mackenzie in beijing with the virus round up and do not miss a big interview later on. The finance minister will be along with us to discuss the countries path out of the pandemic. Coming up next, japanese carmakers see tough times ahead as sales slow on the back of the virus pandemic. We will be discussing the prospects of the industry with our guest. This is bloomberg. Shery toyota is warning profit may tumble to a nineyear low and says it could be another year before global car sales return to previrus levels. Rival honda hosted an operating loss for the First Quarter and declined to give an outlook. Lets take a closer look at the prospects for japanese carmakers. I attest markets japan and korea vehicle Sales Forecast manager. Great to have you with us. What are the prospects for toyota and honda and how they compare with other japanese makers . And the Industry Outlook in general, because we have seen both an impact on supply disruptions, but also demand. Thats right. I think it is in general for the covid19, continuing to see impact around the world. We have seen significant drops this year. General for the industry on the market, china markets showing some signs of recovery for now. The market, compared to the severity of the lockdown for japan or europe, depending on the state as well as the u. S. Some of the markets extended lockdowns, so maybe having some headwind mostly for japanese with a footprint in the market. In china. Lifted could be some of the tailwind for the market, which means, you know, the japanese or the yen may have some advantage compared to the yen. We see some of the mixed picture as well there. Sector,nese automotive relying on which to recover first, hit harder depending on condition of each measure. Most majorspeaking, markets in north America United states, china. Manufacturing footprint is larger portion. They are doing well in china. Headwind, on the back of the strategy, some obstruction there for relatively new launches in the market. Toyota is launching this year so that could be some of the tailwind in the markets. Shery how long will it take until the industry goes back to previrus levels . That could be taking years. Years to take it. It may peek out within this year. Maybe some of the accurate you macroeconomic ones. That could be delaying further recovery. It is gradual approaches coming back to the normal period. At thetarting to recover end of this year towards the next year, the beginning. The level that could be taking some years to come back for the japanese market as well. Are Lower Oil Prices likely to affect the outlook for demand at all . Yes. Those oil producer countries are having severe economic downturn, committee prices and crude oil down. A severe situation in russia and middle east countries. As long as these countries have a serious situation for the Commodity Prices and crude oil prices lower, then they might be having some headwinds going forward, particularly for the suv, very much popular. Very popular in those markets. It may have a headwind as well. Haidi are we likely to see any changes to supply chains on the other end of this pandemic . Fairly early stage of the pandemic, there are some issues, very much on these. Right now, it is changing to demand. That is the most important part for the volume settings, but in general, for the japanese where they have already had some severe situations in 2011, the system tried to understand the supply Chain Industry deep or as quickly as possible when the emergency so what is happening in the supply chain, and what is the bottleneck on that one, replacing alternative, you know, sourcing systems, so Getting Better because of the experience going through it. Better by now, so if that is the case, only in china, they could have shifted toward the supply chain and also put a production level. Into the global setting, that could be more of a headwind. They cannot really replace it. Or the shift at least Getting Better right now because they have learned very much of the japan outbreak. Haidi great to have you with us. The outlook for auto sector. We are going to stay with the auto sector. Lamborghinih the ceo earlier about the demand seen in china as the economy begins to restart. Wethere is one thing that need to consider. First of all, as you were saying, we are 95 next boards, though that is around the exports, so that is around the world. China is growing rapidly. I have to say one important , i can see for the great majority of our customers that it is not the problem of liquidity. It is difficult to have the right environment to buy it. Korea, e, in south very strong. Where i willeek see 90 will reopen back again. Fundamentals understand the markets. Segment will be closer after the first months four weeks. It is not about being liquid enough. We need to understand how we can be flexible. The backlog is very good, but it is important now that the market is reacting the right way. We use this to we had a great success. That is where it should be. Italyn do you anticipate will be out of recession and that numbers will go up again . What is your forecast for sales of lamborghinis . No one has a crystal ball here. We can see the different numbers and the different situations. I think we need to be prudent. The gdp is growing at 10 , even more. 4 of our production. Month willhe first be very difficult and i really hope the system that we put in segments start up as soon as possible. As an italian, we really do hope it will be back to trade as soon as possible. We going to see a plugin hybrid this year or do you think what is going on around the world is going to prevent either of those two things from happening . But for sure,ar, that is the future. Very successful last year. It was huge. We start the journey from that moment. Completed in the shortterm for sure. That was the lamborghini ceo. Coming up next, australias largest retail bank exits one business and doubles down on another. The billiondollar deal. This is bloomberg. Bloomberg. Haidi we are getting some breaking members crossing the bloomberg when it comes to japan , march current account numbers. A surprise a surplus of 1900 ¥71 billion. 1971 billion yen. That coming through when it comes to a current account surplus of 1971 billion yen there. Stake inaken a 55 Commonwealth Banks Australian Wealth Management business and pension unit. It is valued at 1. 1 billion u. S. Dollars. Joining us on the line from sydney, our Bloomberg Finance and investing reporter, emily cadman. We had heard some attempts to move that wealth unit last year, but give us the details of this deal and the timing for this restructuring. Coming out of australia, they have been trying to exit. It is part of the general move for the sector to get back to basics. Plans for some type of separate yearwere abandoned last and the fallout from the world commission. It really focused on the mediation. It is a revision. Taking a 55 stake. Roughly 135 billion dollars of domestic retail funds under management. Into the unit, but it will now be a separate business. Itry how much sense does make for kkr to take this asset . Emily i think it is an interesting move for kkr. Not mean somebody else wants to get out of Wealth Management. Fourth largest pension. This is a way for kkr to get some exposure to that huge pool of money. The reason it is being sold is the business does not work for Commonwealth Bank. It has associated scandals and customer problems over the years. It is involved in one way. Else did we learn about that, given we have heard from their peers with regards to the exposure to the pandemic related slow down . Throw earningsll season. Expected, they are adding how much pressure they are under. Commonwealth bank put aside 1. 5 billion in bad loan loss provisions, roughly similar as its main rival, westpac. Anticipation of the spike as the economic fallout continues. Overall, these are thirdquarter numbers for cba, so they are not like and like comparable, but it shows profits further under pressure. Very roughly down a bit more than 40 sorry, down about 20 for the same period last year. Shery emily cadman in sydney with the latest. We are seeing Downside Pressure across asian markets with kiwi vstoxx falling for the first time in eight days, this ahead of the rbnz decision. Right now, the expectation is for the governor to increase the size of their Quantitative Easing Program and provide guidance around the potential for negative rates. Sydney futures at the moment down 1. 5 . This of course after we weighed the westpac Consumer Confidence numbers. Mckay futures down 1 . Japans currency, the japanese yen, under a little bit of pressure, although Still Holding at that 107 level. Kospi futures down. 6 , haidi. We have more coming up in the next hour of daybreak asia. We will have the australian finance minister with us in just over half an hours time to talk about latest trade tensions and the economic recovery from the pandemic lockdown. Stick around for that. This is bloomberg. S bloomberg. Save hundreds on your wireless bill without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, youll only have to pay for the data you need saving you up to 400 a year. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. Its the most reliable wireless network. And it could save you hundreds. Xfinity mobile. To daybreak asia. Japan, south korea have opened for trade. Top stories, the white house pushes to reopen, but the top official warns against moving ne too fast. Tensions between washington and beijing threatening to trigger a new cold war. China,ia has issues with its biggest trading partner. We are joined by the finance minister this hour. Lets get to the Market Action was Sophie Kamaruddin. A down day in asia. 0. 7 , tokyo off by under pressure. Steady, and ag solid 10year auction, easing concerns, providing a boost. We will focus on automobiles given the disappointing earnings from japan. Unless have raised profit estimates, making it the only industry with a stronger outlook than before the virus. Off by see the kospi 1. 3 . The korean won on the back foot. Data from south korean won showing job losses for a second straight month, unemployment at 3. 8 . Businesses and households seeking a lifeline. Support, one trillion won. Lets check in. The asx 200, off by a third of 1 , yields down by two basis points. The offer is likely to be christ. Be priced. To wellington, sevenday gain. Again ahead of the central bank decision. They are forecast to hold rates and boost qe. Right, we are watching Commonwealth Bank of australia, australias biggest lender starting to trade. We are seeing the first few minutes of the open. It is trading to the downside, 0. 8 lower. Selling 55 stake in its domestic Wealth Management to kkr, this as the bank doubles down on domestic banking and finance. Also, that Third Quarter trading itate, that exposure when comes to the pandemic slowdown. Thirdquarter profit dropping 24 . A pretty horrific earnings season for the big lenders in australia. Marketsacross emerging about to get worse. The Worlds Largest publicly a lack ofge fund sees fiscal space for emerging markets to stimulate their economies. New cases of the coronavirus are not letting up. Our next guest is an associate director of family Wealth Management, one of australias largest providers. Do you think investors are being too complacent at the moment . Good morning. You just mentioned emerging markets. Wheres a good example of investors are mindful of the risks currently involved. Markets,k at emerging they have held up well, but we are worried they have under reacted. The first reason is less capacity to cope with the health crisis. Were seeing that with infection rates picking up in brazil, suggesting mexico, the peak will be later and larger than developed nations. They are relying heavily on exportled growth and are vulnerable to the collapse in oil prices. Lastly, there debt positions can be quite large across emerging markets, many denominated in u. S. Dollars, so they dont have much fiscal capacity to respond with stimulus to this crisis. That is one example of where we are, and why we are cautious, and exposure to emerging markets will be a risky place over the next couple of years. Not all emerging markets are created equal. What about china . In terms of the language, the pboc and the government, we will see more stimulus. Does that make you more hopeful that a stronger recovery in china . Itunfortunately we dont see being the stimulus anticipated by investors. They were banking on largescale infrastructure spending, which was the case in 2009, but i think it will prove disappointing. Fiscal stimulus is less than a 10th of what was spent at that time. Tensions,political which have flared up again with the u. S. And australia, and also a slowdown in global growth. In the longdent term growth story of china and happy to hold positions, but we are not adding to them. Not even in those sectorspecific stories, like the consumer narrative in china being strong . Not to mention we expect more investment in new technologies like 5g . It is a good point. Certainly alibaba and tencent have proof they are global in nature and are major beneficiaries, but also true as we look at technology across the board, in the u. S. , technology has been the driving force. We are seeing the acceleration of digitalization, with more people at home using ecommerce and teleconferencing, so we are seeing progress that would normally have taken place over a couple of years brought forward and has occurred over a couple of months, but unfortunately, we are not seeing those opportunities in Chinese Markets at the moment. To be honest, we are quite neutral across the board. There is a set of select opportunities and australia, simply because our economy is faring better. There are still some opportunities out there. Yuan australia sensitive tolia is china. So where are you finding opportunities . You are spot on. We are sensitive to that relationship with china, our Major Trading partner, but looking at the Australian Market , it has recovered a third of losses since the low in march. That stripped away quite a bit of that value, so the opportunity set has narrowed. Needmentioned before, we to be selective. There are a couple of criteria we are looking for, those High Quality Companies with strong balance sheets, manageable levels of debt, surplus cash, including a longterm outlook and strong management, so rather than opportunities across sectors, we are seeing companyspecific opportunities, so some of the companies ,eporting over the last week those companies fit the bill in terms of that criteria. Haidi thank you very much for joining us. More on australias trade relationship with china was the finance minister joins us. Plus, the council on Foreign Relations says the cold war is n the u. S. And china the interview is coming up. This is bloomberg. You are watching bloomberg daybreak asia dr. Fauci has told congress that reopening the economy too soon threatens a new spike in coronavirus infections. He said he is concerned about cities and states relaxing curbs without meeting guidelines. His comments are in conflict with the president come pushing america to return to normal. There is a real risk you will trigger an outbreak you might not be able to control, which will set you back, not only suffering and death that could be avoided, but could set you back on the road to trying to get economic recovery. You would almost turn the clock back rather than going forward. Senior officials at the Federal Reserve are warning the shutdown of the u. S. Economy could trigger a decline of historic proportions with bankruptcies and job losses. James bullard said there could be business failures on a wide scale that may prompt a new depression. Loretta mester said unemployment could exceed 20 as the virus fallout spreads. Meanwhile, after the u. S. Government lowered its output forecast for the year, futures in new york gained almost 9 . One consultancy does not see oil prices recovering until previrus levels until the second half of next year, saying it expects stop and go rallies and declines. Global news 24 hours a day on air and on quicktake by bloomberg powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Testhan is preparing to its entire population of 11 Million People for coronavirus after reporting the first new infection since the lockdown was lifted. Cases inorted six new a northeastern province. The government remains on high alert for a second wave of cases. Tom mackenzie joins us from beijing. This mass testing going to work . Has the government of wuhan told every district to draw up plans how they will conduct testing of residence resident s. They will start with vulnerable groups then expand testing, but this plan comes after wuhan reported its first locally transmitted infection since the lockdown was lifted on april 8. Six cases from the same residential compound. It is an ambitious plan. It points to chinas wave of anxiety over second wave of infections in provinces. This, as the economy tries to get back to full speed. Border,have seen on the additional infections announced today. It is testing china system to track down and quarantine and make sure they can stop it from spreading. It is a bit like whackamole. Right. Data, whathe latest is it telling us about the mortality rate . Rate, theortality data seems to suggest that they did not see an increase in overall deaths during the outbreak. It appears to support officials and their claims they largely kept infections under control come despite criticism they control, despite criticism. Deathsere around 36,000 in three months through march, slightly fewer than the previous four years. It suggests they did not see a big surgeon deaths due to the coronavirus surge in death due to coronavirus. So far, six under 33 deaths in linked to33 deaths the virus. There inckenzie beijing with us. Deteriorating tensions between the u. S. And china are prompting new analysts to warn of a cold war chill. The council on Foreign Relations says such a breakdown would be shortsighted. Its president bo bloomberg washington should push back, but not prevent cooperation. Told bloomberg that washington should push back, but not prevent cooperation. U. S. Soviet the relationship defined the second half of the 20 century, the francogerman, british relationship defined the first half, so goes the u. S. Chinese relationship in the 21st century. If we end up in Something Like a cold war, which is possible, but thankfully by no means inevitable, imagine how difficult it will be to tackle Climate Change, to manage future andemics, to deal with iranian or north Korean Nuclear challenge. We dont wanted to happen. Could it happen . Obviously. That is a challenge to chinese and American Foreign policy and statecraft. Part of that challenge is trying to get an understanding of what chinas ambitions are. You draw a line to the reforms , ithe 1970s and go to today mean, how do you assess what china wants to be and how the u. S. Should respond to that . It is a big question in big debate. I think the biggest preoccupation for xi jinping is to keep his position. He abolished term limits. Keep the communist party paramount. Maintain the territorial integrity of china. They want to stop liberalism and separatism in hong kong. They are worried about taiwan and oppose any Independence Movement there. They want a lot of influence over the asiapacific, so for us , the challenge is how do we criticize behavior at home when it warrants it over repression of minorities, violations of commitments and hong kong, and how do we work with our allies in the region, south korea, japan, australia, and others to push back on chinese extension of power . That is a familiar challenge to foreign policy. Tot is different is we want push back when necessary, but not preclude cooperation on Climate Change and to kill off entirely the economic aspects. It seems like china keeps getting in its own way. I think about how it wants to step into the Global Leadership vacuum, but it is clumsy about it. Has beijing missed its opportunity . Or does it still have time to exercise soft power effectively . They have hurt themselves with the pandemic, the fact that it broke out in a wet market or out of a laboratory, then the chinese silence the critics and Public Health experts and allowed people with the virus to leave wuhan. Day, chinaay after mishandled this challenge. Their authoritarian system is not an attractive model to places like europe or the rest of the world which is democratic, so there are limits on chinese appeal. I think the real question is, can we compete with them . It is an opportunity and challenge for us. We can show the way we are dealing with the pandemic is superior to them, so far, we have not covered ourselves in glory. We have to show that western democracies and economies offer a better path. It is a competition of example, and right now neither side is distinguishing itself. We get that npc next week. Are you expecting to hear anything from that congress to give us some insight into the direction president xi jinping will push china . We will see a lot of boasting or statements about how well china has done dealing with the pandemic, no admission of mistakes or responsibility. It is not in their dna. Also, they will appeal to the nationalist instincts, the idea that u. S. And other parts of the world are critical of china, they want to block chinas rise and so forth, so president xi jinping will try to distract attention from the slowdown of economic growth, the mishandling of the pandemic, and in some ways wrap himself in the flag. The president of the council on Foreign Relations there. , theing news out of china latest coronavirus numbers for the country. Seven additional coronavirus cases on may 12, saying they found eight new cases without symptoms. We have seen a slight resurgence across china. We have seen them try to test their entire population of wuhan city not to mention the lockdown of the city in the northeast. Earlier today, china reporting one province reported six additional coronavirus cases as well. Plenty more to come. This is bloomberg. Societies general one bank has taken a large hit on the collapse. The oil trader filed for protection. Lets get more from our reporter in sydney. , have they cooled off . Overnight, nice move showingy u. S. Data reduction was likely to be cut dramatically for the rest of the year, cementing the view the is rebalancing. It has cooled off and asia. Part of that was dr. Anthony fauchers comments that it was important not to rush out. It reminds people that demand picture will take time to turn around. We have seen prices cool off a bit. As you mentioned, you have that news from Societe Generale halting funding in the asiapacific. It is possible we will see more activity down the tracks. Despite the plunge in oil prices, saudi aramco reporting earnings, retaining their massive dividend. What is this telling us . Yeah, that was the most interesting thing out of saudi aramcos results, that they kept the dividend. Vast important given the majority of the stock is held in saudi arabia. It is important to keep dividends rolling. Drop indespite a 25 profit, worse than analysts expected, so the collapse in oil prices is already hurting, and it will only get worse. The worst of the drop happened after the First Quarter. The Second Quarter is likely to be messier than the first four saudi aramco. They need 76 a barrel just to break even this year, and it seems impossible they will get that, so clearly there is more pain in store for the saudis. If they keep dividends going, it offers some support. Right. Our energy reported there. Lets get that check of the business flash headlines. Five carriers have been given the lions share of u. S. Federal aid, as the travel sector reels from the coronavirus. 5. 8ican airlines raking in begin dollars in payroll assistance. 5. 8 billion in payroll assistance. Steven mnuchin has approved help for other companies. 11 musk thank President Trump for his support in the reopening of the fremont plant elon musk thanked President Trump for his support in the reopening of the fremont plant. Officials had warned against restarting businesses to something elon musk described as fascist. He congratulated workers, saying he appreciates the drive to make tesla successful. 40 jump for grubhub on news that a potential takeover. Build out its food delivery platform. Shares rose by as much as 8 . It has been hit hard by the coronavirus, although food delivery has been driving sales during the lockdown. Australianext, warning of a sobering outlook at a time of escalating tensions with china. More on that with the finance minister next. This is bloomberg. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Some breaking news. The Consumer Confidence index for australia for may, 88. 1, picking up from the previous month, 75. 6. The Consumer Confidence seasonally adjusted month on month numbers seeing that gain. Really reversing that contraction of 17. 7 we saw in the month of april, so in terms of Retail Sentiment in retail sales and Consumer Confidence, continuing to see resilience when it comes to australia. Hascountrys treasurer outlined a sobering outlook for the economy, on the day he had hoped to deliver the first Budget Surplus in a decade, but also a day when china appeared to ratchet up trade tensions. The australian finance minister joins us now. Great to have you. Argue increasingly concerned about this war of words spilling over to a war in trade . The timing of this on the back of the threat of tariffs and on the back of what the Chinese Ambassador said a couple of weeks ago in terms of the potential boycott of australian beef and other products . Is it too coincidental to ignore . We have an important bilateral relationship with china that benefits both of us, in particular in the economic sense. Process that a started months ago under the wto framework. Countries all around the world are members of that organization and able to pursue investigations into issues they believe where there are some breaches. We dont believe there have been any breaches. We are engaging in that process in an appropriate way. We dont believe there has been the dumping. We are working through that in an appropriate fashion. There is an allegation of technical breaches with concern to beef and are working through that. In the end, in any relationship from time to time there will be disagreements on certain issues. We pursue those constructively and pragmatically, with a view to solve them in a sensible fashion. Has it been a misstep in the diplomatic statecraft too loudly and publicly call for the investigation into the origins of the coronavirus . Lots of other countries have supported that investigation, but it seems like china is targeting australia in terms of the punishment. How are proposition is there should be an independent inquiry into what happened and how we responded is unremarkable. Given the extent of the crisis globally, the number of people who have died, lost their jobs, have had their lives disrupted, of course there should be an independent inquiry into what happened to ensure we minimize the risk of it happening again, and also how we do respond if it does happen again with a future response. Interest ofhe people all around the world, including the people of china. Australia ready to turn away from china if the relationship deteriorates . Is on getting the best possible access to markets all around the world for australian products and services. China will continue to be an important market as we are a market for china. We are an important supplier for china. We are always focused on the best possible access to countries all around the world to make sure we can sell as many products and services as we can. Minister, lets turn to the australian economy. The central bank has anchored the cost of government borrowing with rates at or near zero. What is the government going to focus on now . Next budget will be delivered in october. We have deferred the budget because of the level of uncertainty in the economy, making it near impossible to provide credible forecasts and projections that we need in the context of a budget. Initially on the Crisis Response in the context of the covid19 crisis, saving lives by slowing the spread of the virus. We are winning the fight. We have provided support to the economy, to business, to working australians to keep as many in their jobs as possible, to provide enhanced support for those who lost their jobs. The task is to maximize the strength of the recovery on the arers, but before that, we clearly going through a process of easing restrictions, monitoring it is safe to continue to gradually ease restrictions and we dont have any new, large outbreaks that are not able to be responded to swiftly. We certainly want to avoid a second wave that would require us to go backwards in terms of economic restrictions. In the budget, we will put for the next installment of our National Plan to maximize the recovery moving forward. The australian economy is strong. Our economy was strengthening prior to the crisis. The Unemployment Rate was low. So it is now a matter of working ourselves back into the strongest possible position. Beennister, there has pressure to scale back the programs. Will you be ruling that out as a possibility . If you dont, does that threatened the fragile economic recovery . Stick to the plan. We are sixweek sin to a sixmonth program. In to a sixmonth program. We can potentially extend that, if required. We are right now getting on top of things on the health front. But we also flagged that there would be a review midway through that sixmonth period to assess if the program was working as intended. Once that has been completed, it will represent the findings to the government. Considered them at the appropriate time. Minister, are you concerned about the danger of moving too quickly . We heard from dr. Fauci in the economy and the economic reopening could be set back if things move too quickly. Is that a danger in australia . Continent part of our essentially has not had any Community Transmission for a number of weeks. A number of jurisdictions have no active cases. Around austria it is quite low. The cases that do arise and around australia it is quite low. In the cases that do arise, they come from overseas and are properly quarantined. We have increased testing to manage the health risks, we can efficiently trace the contact with anyone infected to help us manage that risk, and also the capacity to respond quickly and effectively to localized outbreaks. We are putting measures in place to measure the risks to men men eyes to minimize the risk of a second wave so we can reopen the economy, hopefully by early july. Right. Thank you very much for joining us. Check ofget it quick the movers at the moment. Shares fluctuating after reports of additional bad debt tovisions in its wealth unit kkr. Take a look in japan, climbing after announcing plans to cut costs by trimming headcount, bucking the trend. Were seeing downside for japanese markets, including one company that posted a steeper been inspected plunge. Inpex, cutting forecast by 90 . We have low oil prices peered we have a soft batch of earnings. Losingannouncing toyota 1. 5 after its profit warning. Honda falling after a surprising loss for the quarter. Asian gamingrelated companies are expected to report today. We have seen a boost given more people stuck at home playing games. And is inports today the spotlight. The stock is at a twoyear high ahead of earnings. Tencent next. E on this is bloomberg. This is bloomberg daybreak asia. These are first word headlines. Japan is winning the virus battle. Tokyo not seeing a rise in mortality rate. The capital recorded just 33,000 deaths through march, fewer than the average of the preceding four years. The numbers indicate there has been no search during the urge during s the pandemic. Trains in the reopening of the rail network in india. Output collapsing in march. Manufacturing fell. Twitter is offering employees the opportunity to work from home permanently. Jack dorsey has told staff the company is unlikely to reopen physical offices before september, but most can work from wherever they want. U. S. Lawyers prosecuting huawei say the company should not be allowed to share evidence in china. Legal teams have classified thousands of documents as sensitive. Evadeddenies it sanctions. The cfo continues to fight extradition from canada. High forons are tencent when it reports wednesday. This after optimism over its videogame business push the stock to a twoyear peak. Joining us now is Morningstar Investment Management asia equity analyst. Great to have you with us. How much do you think the gaming segment will help the overall business . The gaming segment accounts revenue. Hird of it has a high margin. Fact its from the top its top two games is top two gamesits is doing well. Thedata shows you that three months consecutively have the highest growth globally, then in the third month, which is march, they actually did really well. There was a sequential increase of 21 . So i think it is quite apparent that amid covid19, which nobody knows how long it will last, people prefer resilient names. Tencent benefits quite a bit from this Gaming Business amid covid. It factor inoes that some of their titles are aging . We have seen some weak performance from one in particular. Another of all, i think game has become number one. Haveally speaking, they some new ways to monetize, and they continue to push out new schemes. They do festivals where they have promotions and game tournaments to continue to engage gamers, so i think these are all the things they are doing cry well to retain users doing quite well to retain users. Mobile games, kind of like social, it is kind of like a social game where you play with friends it is not like a Long Duration game. It is maybe 20 minutes. It is more like something social that you want to do during leisure time. I think, in general, it is quite resilient. Do you think permanent changes in Consumer Behavior with regards to technology and consumptions coming out of this pandemic that will serve Certain Companies in sectors well in the future . Yes, for sure. Even if you look at some u. S. Earnings, we already see that some of the Cloud Business is an businesses are doing relatively well. They are more resilient. Thinkample, in china, we that Online Shopping or shopping for fresh food online, i think they will have a faster adoption. Also, there will be faster cities orn lowertier areas where previously there was less penetration. I think everyone already knows that work from home or remote they aren china, really doing very well in terms of usage. Example, alibaba as an they have more than 100 million daily users. The onlinese are all segments that will benefit longterm from covid. Regards to those work from home apps or Remote Working apps, do you see those opportunities and growth persisting even after the lockdown is relieved . Yes. After the lockdown, and lets say people just go back to work more regularly, i think it is easy for us to see usage come down, but the usage will still be much higher than precovid crisis, because some of these mobile apps, for example like videoconferencing, it is more flexible, and sometimes, i think some employees might be able to work from home a bit more often after covid, and also some of them help you to get approval for planning of work tasks, so these are related to efficiency gains, and i think they will continue to stay, but i think it will be right that some of the covidmight decline after is completely gone. Thank you very much for joining us today. We will have more on tencent ourr when we are joined by guest to preview earnings. Next, no luck for luck and coffee. Chinas answer to starbucks, now two top executors have been shown the door. This is bloomberg. S is bloomberg. Lets check the business flash headlines. Staffplanning to return to global offices, in contrast to work at home policies of other tech companies. It would bring employees back in phases. We are told the fourth wave has begun around the world and will extend to major offices in june. A second phase is said in july in. Both timelines are set to be fluid. Pnc financial raising 14 billion after selling its stake in blackrock. For 420 apiece. Thanks behind the sale will benefit to the tune of 140 million in fees from a welcome given ipos have been shelved because of the coronavirus pandemic. The head of macaus gaming as theor has resigned worlds biggest gaming hope faces its worst crisis because of the coronavirus. There is no reason given for his departure. He will be replaced in june. Gaming revenue fell by 97 in april as travel restrictions cap gamblers away. Gamblers away. Some breaking news, a hadince under lockdown, it halted Train Services wednesday, state news network in china. Cases. We had seven new that province is bordering north korea and russia, and the source of the latest outbreak in china. Has fired its ceo and another Top Executive after a scandal. Has the story about the drama of luckin coffee. The ceo and cofounder has been removed. This is the first time she was linked to the scandal. The coo has been terminated as well. The scandal broke out a month ago. Transactionsed totaling more than 300 million. They have resigned from the board. The director of the board and Senior Vice President has been named acting ceo. Other employees have been suspended or placed on leave. What a turn of events. This Company Started as a chain of less than a dozen stores, and exploded to more than 4500 last year. They surpassed the number starbucks had in the country. It seem like as datadriven model was working and stealing market share, but it was fueling its growth in other ways. A lot of challenges ahead for the acting ceo. What does this shuffle at the top ranks mean for the future of the company . The stock has been suspended for more than a month. It plunged nearly 80 since the scandal began. The Company Faces scrutiny from regulators on both sides, the u. S. And china. Also, the impact from the coronavirus has her consumer spending. Luckin coffee has delayed earnings, saying they are unable to report because of the outbreak. There was speculation they might go bankrupt, but no indication of that just yet. We have seen many consumers in china have tried to redeem their coupons in case there is more fallout. Over, here isand say look at how markets are trading now. Downside for equity markets across asia. This, ahead of the policy from the rbz asx 200 also losing. After aussie, this dollar weakness, after data showing Business Conditions have deteriorated. The Unemployment Rate at 3. 8 today. The nikkei down, the japanese yen Holding Around 107. Yeah, and persisting questions over whether it is underpricing risks in emerging markets. We will have a guest to talk about that. Plus, one guest coming on tomorrow. Smith,be joined by craig giving his outlook amid these troubled pandemic times. That is it. Our market coverage does continue. This is bloomberg. Selina it is 9 00 a. M. In beijing. Welcome to Bloomberg Markets china open. Thisur top stories for hour. The white house pushes the u. S. To reopen, but stocks fall as a top disease official warns against moving too fast. Anthony fauci fears a new spike in infections. Infections continue to climb around the world, including the city where it was first