Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240712

The s p thought biggest rise in two weeks. Saw its biggest rise in two weeks. Korea may send troops to the dmz. Seoul remains on high alert. Shery lets get a quick check of markets. U. S. Futures under pressure. We have the s p 500 rising the most in more than a week. We had seen optimism over the u. S. Economy really offsetting any can turns over a second wave of virus infections. Nikki futures unchanged at the moment. We are waiting japans may trade data. The deficit likely narrowed. We had the boj increasing at support for corporate financing yesterday. Futures up 0. 6 . This after the best day in over two months. Yesterday, we did get the rba june Meeting Minutes with more concerns that the economy is likely to need policy support. Gaining. At the moment stocks reversing five sessions. Do watch out for new Zealand First quarter gdp numbers out later this week. Lines getting some across the terminal from jd. Com at of its trading debut in hong kong as the ecommerce player saying that its retail offer was 179 times subscribed and it is billion hongt 29. 8 kong dollars in this listing. We are seeing this at the fastest pace since 2015. China has ordered all schools in beijing to close as it struggles to halt a new coronavirus outbreak, which has already spread to neighboring provinces. Lets head to the capital. Just how serious is this . That beijingfact has lifted its Emergency Response levels to the second highest also the decision to close all schools shows just how severe this growing crisis is. Beijing is also requiring that people will have to be tested for the virus before being allowed to leave the city. You have seen officials take a more targeted approach to trying to stem the target flow of the virus. The stakes are high in beijing and they want to avoid any aggressive lockdown that risks undoing the economic opening. Taxis and ridehailing apps have been banned from leaving beijing. Most trains and other forms of leave the city and come in. The total number of infections has reached 106 and the case is linked to the beijing cluster have spread to two provinces in the Northern Region of china. We are also seeing customs authorities step up testing of all shipments of imported meat. This is information we learn from a trading executive with a major supplier. Alls are being conducted on shipments of imported meat, after the outbreak has been anded to a chopping board major city salmon has been removed from Grocery Stores and supermarkets. Standoffe sevenweek between china and india taking a deadly turn. Thats right. Conflict along the himalayan border is the worst conflict in four decades. We dont know exactly what sparked the clashes or how many died in the violence, but india has confirmed 20 of its troops were killed. Chinese military have said there were casualties on both sides, but did not elaborate further. Both countries dont want to further escalate, especially india, where there forces are not nearly as powerful as chinas. It is unclear how they can deescalate tensions with neither side backing down and both countries blaming each other for the latest class. Both also have National Leaders who have taken an assertive posture toward the border dispute. It is unclear what next step india can take. Supported ai has nationalist foreign policy, but they are in no shape to deal with a war. In china, you have seen an increasing nationalistic of theh with the Editor National times warning india not to be arrogant. He also said that china does not want to have a clash with india, but that we do not fear it. All right, our china correspondent. Lets get to Karina Mitchell. We will stay on india. Theng 862 fatalities from virus after discrepancies and counting. Mumbai virus death soaring by more than 38 . 4500. Ties up 11 to all cases reported covid19 as a cause of death, but were not integrated into the master database. Virus numbers continue to rise in the u. S. With florida reporting the most new infections since the pandemic struck. Texas also reported its highest level of the california saw its smallest daily game in three weeks. It now exceeds the number of americans killed in world war i. People are more unhappy with their lives today than at any time in the last for years. Meanwhile, virus death in indonesian out of 40,000 with the government saying Economic Growth will suffer. The outlook for gdp is being cut as low as 0 with warnings of a fullyear contraction. The finance minister says the though thereshrink is a rebound in the following period. Be deployed to the border after the interliaison Border Office was destroyed. South Korean Defense stocks reinforced gains. Jonguns increasingly powerful sister said it was time to split with seoul and threatened the next move would be taken by the army. 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. Sophie still ahead, we speak about the rising tensions on the korean peninsula. Thet, jay powell reiterates path to recovery remains uncertain every it we will have his latest testimony and the outlook for policy next. This is bloomberg. Uncertain,l quite but we appeared to be entering of the economyse reopening. We are seeing the beginning of that with the employment report. We would expect to see large numbers of people coming back to work. There are look parts of the economy that will struggle to get back to the economy. All of this assumes the virus remains reasonably well under control and does not experience the virus ise widely across the nation. Im confident we will have a full recovery. The economy is going to recover. Jerome powell testifying to the Senate Banking committee. Hours after his testimony, after he said the u. S. Economy had entered a rebound, but it was still far from a full recovery, the president of the dallas fed said the economy will grow strongly and Health Care Policy will be key. Our Global Economics and policy editor is here with her exclusive interview with Robert Kaplan and how it compares with Jerome Powells testimony. Kathleen i started by asking about that very strong u. S. Made retail sales report that got the markets going. He did say that strong retail reason why he did expect it to bottom. Economy to keep growing, he was very clear, consumers need to feel safe. Lets listen to one of the things the president of the dallas fed just told us. There is Downside Risk to the recovery and there is upside. Beot of which it is going to in my view at this stage has less to do with monetary and fiscal policy and a lot more to do with how effectively we execute the health care policies. He does even though see a lot of people out shopping, he thinks there is more that can be done. A big increase in cases in houston, austin, dallas. Saving money because they have not been spending. A big move down, a big move up. You can see that things are looking better. This pent up demand for shopping ledger retail sales gains across the board. We have a bloomberg list of all the various things. Im not surprised that apparel is at the top of the list of things that really grew. 188 . That is month over month. That is not yearoveryear. About 90 . Look at vehicles and parts. That means people are buying parts. They be the dont want to ride the subway. Foodservice doing better. That is a good sign. Everybody seems to have been cooking so much more. Time pent upe demand event. Are people going to continue to come back . Are people feeling more confident to get out there . That is something that remains to be seen this summer. Thanks, kathleen. Up next, the Global Portfolio as investors drive equity markets world theyre in the are finding more upside. This is bloomberg. Sophie Global Equities marched higher as wall street move past peak pessimism. Joining us now is a Portfolio Manager and managing director at qi may. Thank you so much for joining us this morning. Global stocks are seeing some valuations looking a little bit tested there. Given where we are with the , is thishave seen sustainable . Yes, the rally itself is sustainable. You are not going to get the same kind of gains that we saw. I think there is still juice left in the market. Also because of opportunities in ,he tech sector, opportunities broadening into small caps. Taking a look at the b of a fund manager survey, more Fund Managers are using their dry powder to chase this rally, but only 18 expect a vshaped recovery. How do we square that . We want to be having a vshaped recovery in the equity markets. The two of them are not necessarily incompatible. Clearly on as recovery path. This is going to be a deep, but sharp recession. You have sectors that are likely to do well. Online dealers. And we are likely to see broadening to some of the sectors like banks. Airline, leisure, hospitality, those have fallen quite sharply. They have opportunities. Above all, i think that the small caps. For u. S. Investors, there are opportunities outside the u. S. Shery lets focus on the cyclical sector. We have team retail sales surprising even the most optimistic forecasts, but when it comes to the savings rate last month, also a surge to record highs, some people are really uncertain about the future. What we are seeing right now when it comes to the economic recovery and retail Sales Numbers jumping, is this just a oneoff burst of pent up or canopy maintained and will it translate to those sectors of the economy that potentially could come back with the economy . Some of them are going to take a very long time to come , especially travel, leisure, hospitality, all of those things. Until they find a vaccine or treatment, people are going to be weary about those. But there are other activities where there is spending going on. People are able to shop online. There are opportunities in that sector. There have been some trends that have been going on even before the covid crisis, like digitalization and increases of technology. Basicallye covid19 put those strengths on steroids. Cloud computing, 5g, all of these strengths. Industries that have had a very strong one. These strengths are likely to continue even after the economy reopens. Those sectors are opportunities. Are those sectors you also prefer in other geographies Like International markets . Some of those sectors are not as big in outside markets. Sectormple, the tech makes up almost 25 of the s p 500, but it makes up less than 10 elsewhere. In those economies, you probably have to look for other sectors. Countries where you , i thinke debt sectors there are opportunities in those same spaces. Countries where that sector is not that big, you will have to look for opportunities in other sectors. Shery john, thank you very much for your time today. Lets not get a quick check of the latest business flash headlines. Oracle fell in late trading after reporting sales that fell short of expectations. Revenue declined more than 6 to just over 10 billion, signaling that the virus fallout has triggered a pullback. After been caught off guard by the switch to cloud computing. Reopen 75 Stores Across the nation. All outlets apart from china were closed in march as the Coronavirus Spread and apple begin a phased reopening last month. This week should see the majority of its 271 domestic outlets reopen, although some will operate as Sidewalk Service only. Tencent is reported to have approached baidu about a stake in its netflix style subsidiary. Wants to surpass baidu as the units biggest shareholder. About currently valued at 14 billion. It is not clear if tencent has approached them directly about a potential deal. A moment, tension remains high on the korean peninsula. Government analyst will join us next to discuss. This is bloomberg. Daybreak asia. Markets amidhut 11 fears of a second wave of coronavirus. 27 cases reported in the capital overnight, bringing the total to 106 since friday. One person is in Critical Condition in hospital. All schools in the city have been closed. Rising tensions between beijing and washington mean china think is countries are ditching new york listings, with the latest to head for the door. Grouped is to take listings by auto private. The u. S. Government is suing to stop the publication of a book by john bolton. The memoir claims the president was willing to endanger the nation in order to win reelection and is being touted as the book donald trump what doesnt want you to read. The government says publication will Compromise National Security as the book contains classified material. A year of street protests amid the coronavirus pandemic has seen unemployment rise to its highest level in 15 years in hong kong. The jobless rate rose 5. 9 while the underemployment rate climbed to its highest in almost 17 years. The job market is at its worst since 2005 1 hong kong was recovering from the sars outbreak. 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. Im Karina Mitchell, this is bloomberg. The koreans turn to peninsula. Tensions remain high after north korea blew up the shared Liaison Office on its side of the border, a rebuke to seoul that appears designed to draw maximum global attention with a minimum immediate risk of war. Our next guest is Rachel Minyoung lee. She joins us from seoul. Great to have you with us. It is not like this Liaison Office was axis recently being used, but how much does this tell us about how desperate north korea is for attention right now . Rachel so, north korea had warned of demolishing the building, but i think it came as a shock to all of us that it was being demolished. Ofis really a symbol reconciliation and cooperation between the two koreas and it was one of the first things that was done after the interkorean summit. Shery what has been interesting is how prominent the role of kim jonguns sister has become. Just an hour ago or so, she released a statement condemning the south korean president for his speech, apparently being irresponsible, marking 20 years since the first ever northsouth, in 2000. North korea asking moon jaein to take responsibility for the worsening ties. What can we gain from her role in the regime right now . Rachel i think the way that she is being portrayed and handled in north korean state media tells us two things. That kim jongun really wants to elevate her in the regime. And secondly this seems to be intended to cement her position as a policymaker in north korea. Before, she was mostly known as kim jongun sister who accompanied the leader on public visits. Even though she had a party title, it was unclear what she did in the party and to what extent she was involved in executing party policy. The incident was among the most provocative since 2010 when it comes to intercareer relations. Office was not very active realistically speaking, it comes toext when undoing the diplomatic efforts that have been underway between the two koreas . See thato, we can south korea is trying to make contact with north korea behind the scenes. They apparently offered to send special envoys to the north Korean Leader and north korea announced that they rejected that offer. Ofhink that those types reaching out activities will continue behind the scenes at least on the part of south korea. My feeling is that for the time being, north korea probably will respond positively to these outreach efforts. I think for a while, we are going to see tensions. I think pretty much everything is on the table from north koreas military drills along the border to possibly even provocations and artillery exercises by south korea. Sophie what can we make from a potential u. S. Response . Raised amongire the more hawkish voices in the Trump Administration. Rachel i dont see the Trump Administration taking much interest in Korean Affairs at the moment. President trump has made it clear on a number of occasions that he doesnt really care much korean artillery exercises as long as they dont impact the u. S. Exactly, the Trump Administration has plenty on its hands. Including what is going on right now. The same thing for china, who said they wish for peace on the peninsula. What is the strategy here for north korea to do this right now is to mark rachel i think this ongoing situation globally helps out north korea. Tooou said, the u. S. Is busy on its own front to pay much ability right now. There is growing risk between the u. S. And china, so that could work in their favor. They will move on to the u. S. I could see north korea in the late summer or in the fall moving on to testing longerrange missiles. That would be also in the lead up to the u. S. President ial election and that would be a and show off to the world and show off the weapons capabilities. Sophie thank you so much for your insight this morning, rachel. Rachel minyoung lee. The covid19 pandemic has tested governments around the world is economies and Health Care Systems struggle to cope. It is also fostering debate about which political systems are best to deal with the crisis. We spoke to Johns Hopkins school of advanced International Studies to get a view on the virus and good governance. It is difficult to talk generally about how the virus is impacting leaders because it is very specific nation to nation. Even when you look across europe. You can see that leaders who have been successful or perceived as having been successful have been reinforced in power and are doing better. You can look at Angela Merkel and germany. You can look at the Prime Minister of greece. They are perceived as having successfully fought at whether through technology or early lockdowns. And then when you look across europe and again across the world, those are who have been perceived as failing are in trouble. Boris johnson and britain is in trouble. He has been heavily criticized for how he has handled it, but you can also look at bolsonaro, the president of brazil, and so on. It is very hard to generalize. One of the most interesting aspects of how the virus has touched International Affairs is that at the beginning of the crisis, many people were saying partly because this was a chinese line of argument that it seemed as if dictatorships were going to do better at fighting the virus. The chinese were pushing this idea, that we can control it can forceause we people to do things and so on. As the crisis has played out and particularly more recently, it has become clear that the dividing line between who has done well and who has done badly is not dictatorship and democracy, it is more to do with social trust and lack of trust. Countries that have high levels of trust and really effective lack of bureaucracy, those who have a lot of faith and expertise have done better than those who have not. Irregardless. You can find countries that have done well. You can find dictatorships that have done well. The impact of the virus is going to be quite complicated. Shery if you look at the reopening conversations happening in European Countries and the u. K. , why are they so different . They are different partly because the impact of the virus has been different. In different places. Also the politics. You have this slow lockdown. You have this long period of time where there was this resistance. There is a lot of confusion. So there is a disagreement. Countries are feeling safer and safer with opening up. You see spain beginning to open next week. You see italy opening and these have very high levels of virus in very high levels of illness. Growingthere is confidence in the system, there is growing confidence in the reopening. The European Union is trying to incorporate the reopening, so there will be more intereuropean travel this week. My guess is that the impact of that we will see in a month or so and then you will see adjustments next month. There fromappelbaum Johns Hopkins. The Johns Hopkins Bloomberg School of Public Health supported by michael bloomberg, founder of bloomberg lp. Coming up, oil lids on the back foot amid a worsening supply picture and fresh fresh virus fears. Recoveray not fully until 2022. Our conversation begins next. This is bloomberg. Lets get a check of the markets early in the asia session. We are seeing moves to the downside while the yen is trading study. Some swings early in the session. A quick rebound after tuesdays selloff with a focus on boj bond buying. Corrode assess the shape of the yield curve that that is generally appropriate. U. K. Futures in singapore gaining ground, up about 0. 2 . Iscking on this chart, this the visualized move we saw for japanese stocks. 1000 point225 with a again, one of the handful of such sessions in the last 30 years. Lets pull up the board. Wti retreating by as much as 1. 8 . Slipping below 38 a barrel. Technical indicators are suggesting the rally in crude may fade. Oil demand may not fully recover until 2022 according to the International Energy agency. The executive director told bloomberg where he sees it back. We are seeing demand getting stronger. Weaker before. Mainly driven by china. Demand is basically equal to what they had before the crisis. What would you predict christ will do given the demand elasticity that you describe . I dont want to quote to the pennies, but give us a sense of what oil does from 40. Higher . Lower . I mean i have no idea. There are so many uncertainties. There are so many uncertainties. , as iseconomy rebounds expected by all the financial institutions. Second, if there is no second wave of coronavirus, i would expect Oil Prices Remain at tose levels, giving a boost the of the, even some of shale producers in the United States. Staying on oil, futures are now sliding, reversing strong gains in new york and now trading below 30 per barrel, fresh signs that the second wave of the coronavirus are causing some to doubt the oil market recovery. Su keenan joins us. We also have potentially bearish supply data later wednesday. Yes. Traders are expecting another gain in u. S. Supply. When you combine that with fresh signs of a resurgence of the virus in china and signs of a resurgence in several states in the u. S. , we have florida case is surging to the highest level yet. It is really raising questions about how the recovery of oil demand will play out. West texas intermediate rebounding. Trading. Know, it is brent crude saw a ferocious rebound from the lows of the pandemic. Technical indicators are showing brent crude is overbought. As we heard, the International Energy agency says oil demand will rebound next year. They are seeing demand much better than the worst case and area projections they had, but they are now questioning or pretty much determining that recoveries to precrisis levels could take a couple of years. Just to underscore how the opec player separately cut act on their production to try to help stabilize the market, saudi oil experts are so far on track to be at their lowest levels in 35 years. Traders sayinge ahead of the u. S. Weekly Inventory Data . Su they are saying that another round of bearish data could really put the market once again to a volatile session. If you look at the last five days, you will see we have up days and down days, but within those days, there have been wild swings. The latest session was the perfect example. They say it has stockpiles rising by 3. 9 Million Barrels in the past week. That is on top of last weeks government report showing a record high 538 Million Barrels and that despite u. S. Production having declined by 2 Million Barrels per day since midmarch. Bearish Inventory Data could really add a bit more volatility to the market, as well as the latest data on coronavirus cases. The market is hypersensitive to these two data points. Back to you. Shery that was su keenan with the latest on u. S. Soil Inventory Data that will be due later wednesday as oil right now traits below that 30 get dollars per barrel level. Really losing a little bit of ground after rising in the new york session. We have an alert on the bloomberg right now. We have heard from the company send that their chairman has died. This is according to their president. He was 85 years old. San miguel is the largest food and drink corporation in the philippines, also one of the largest in Southeast Asia. Very much known as a household name because of its brewery business as well. San miguel of course operating 100 facilities in Southeast Asia and china and now its chairman has died. That is according to the Company President. We know that he has not been in the day today decisions of the company, but the chairman has died. He was 85 years old. This according to the Company President of san miguel, the largest food and Beverage Corporation in the philippines. And we also have breaking news out of japan. We are getting trade data right now. We are seeing that the adjusted number for the trade deficit in japan coming in at ¥601 billion. This is a smaller figure than was expected. It is also smaller than the previous deficit. The smaller number for the trade deficit unadjusted is 833 ¥. 4 billion. Exports, doubledigit falls. A decline of 28. 3 . This is the third month of exports plunging in the double digits for japan. Imports also plunging 26. 2 . Both exports and imports year on year plunging more than expected. A bigger plunge than in the previous month. Plenty more to come on daybreak asia. This is bloomberg. A quick check of the latest business flash headlines. Boeing is facing further pressure over the 737 max with lawmakers in washington calling for more government oversight of aircraft certification. Legislation would address concern about playmakers being able to self certify new models and what rick higher more direct action from the faa every it Self Certification is a major issue in the two crashes that killed three hundred 46 people in 2018 and last year. British airways is reviewing his strategy as it looks to emerge from the coronavirus crisis. Working with Goldman Sachs and Morgan Stanley on future Business Plans that could include debt or equity fundraising. Moneys also borrowed through governmentbacked programs in the u. K. And spain. Air asia is mulling an expansion into the food to table market with plans to transport fresh food and produce across Southeast Asia. They are planning closer ties with its ecommerce platform, which has 7000 trucks on the ground. Air asia has been looking at ways to generate new revenue, the coronavirus slowdown every hospitality casino conglomerate has cut 3000 jobs from its workforce of 20,000. Group also has casinos and resorts in las vegas and singapore. They have been struggling under lockdown because of the virus pandemic. China pacific insurance has sold more than 2 billion of global depository receipts in a listing in london in what is the biggest ever european Stock Offering from a chinese company. 17 atrs bought in at the bottom of the marketed range. Trading in the shanghai and Hong Kong Listed group begins later wednesday on the london shanghai stock index. Shery lets get a quick check of where markets are trading at the moment. We are seeing stocks gaining 1. 2 . A second session of gains for kiwi stocks. We are looking ahead for gdp numbers in new zealand. Sydney futures also higher by 0. 8 . This coming after the best day in over two months. We had yesterday the rba june Meeting Minutes. The economy likely to me policy support for some time to come. The aussie dollar also strengthening against the u. S. Dollar. We are seeing a little bit of weakness for the bloomberg dollar index, which is under pressure right now. Nikkei futures also pointing higher. 0. 4 . We just had trade data out of and importexport data sing doubledigit declines. Another month of exports falling. A third session. We have those exports to china, the plunge easing with china only falling 1. 9 percent. Exports to the u. S. Plunging more than 50 . You can kind of see the diverging economic recoveries happening right now globally. Next hour ofthe daybreak asia, dws asiapacific head of em equities joins us with his view for outlooks for stocks in the region. Plus, dont miss another big interview coming up with Englands Premier League set to resume later, our guest will tell us how the clubs can keep the cash flowing without the crowds. The market open is next. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Im Sophie Kamaruddin in hong kong. The regions major markets have just opened for trade. Welcome to daybreak asia. Beijing such press markets and closes all schools as coronavirus cases drop. The city says high risk citizens may not leave. Asian markets hope to build on gains in the u. S. Optimism about a swift post recovery recovery balanced wite second way. North korea threatens tensions soar. Sophie lets take a look at markets in tokyo. Japanese stocks opening this morning after we saw exports slump deepened. Points on tuesday, the best session since march. The yen Holding Steady this morning. Jgb traders watching the bond buying operation after governor kuroda said the shape of the yield curve is generally appropriate. Lets check in on the moon in south korea this morning. Pyongyangs provocation did not rail the stock value that we saw for the kospi on tuesday. The benchmark added about 5 that day. The kospi moving to the downside , marginally so. 2 10 of 1 . The pathwayon is on down, 4 10 of 1 . 1240 is a strong resistance level for the currency. Bok monitoring markets, volatility may rise depending on the risk from north korea. We are keeping and i on peace talks as well today. South korean authorities will be announcing details around steps to stabilize the Housing Market in the 21st round of measures under president clinton. Lets check in on the antipodes this morning. Stocks and wellington. 120 o the upside for 1. 2 . The kiwi benchmark back above 11,000. The asx 200 moving higher as well. Up 2 10 of 1 this after the best session for sydney stocks in 10 weeks. I that 6000 level. The aussie dollar is studying studying below 69. Shery lets delve deeper into the markets. Our next guest is favoring north asia equities in that region. Cio and head of emergingmarket equities sean taylor joins us now. There are positives to this reason region. We have into korean tensions, china u. S. , china india tensions. Much more shows how expensive asian stocks are getting, given that earnings forecast is falling. To the positives outweigh the negatives . Sean its relative. Look at the gdp growth. We have talked 1 for em this year. Recovering to about six next year. The real pain is going to be in the lem region and eastern europe. That could translate through the earnings. Taiwan,hina, korea, earnings are better. Ofres a better composition where the companies are. Theyve done well. The asian indexes are already down about 6 on the year now. Em is down 11. Yes, we have to be cautious. Especially with all this increase political volatility and the outbreak of new cases in china. Fundamentals clearly point better. Shery how much will the rebound in semiconductors help these markets as well . Sean if you look at the export data, particularly taiwans is interesting last month. Exports are up 2. 3 . 9 was driven by china. We need to see the rest of north asia having more demand coming in from the rest of the world. , that willeconomy increase. Semiconductors did benefit. Given the resilience we are seeing in the Asian Electronics sector, which has stocks, will the market cycle expansion be shortened given the structural demand issues that continue to play out . Sector hasnk the gone well. Globally,t few weeks, more of a value catchup. That has been the case in em. You have wretched catching up, indonesia, brazil. I think the Technology Story in asia is both the chinese and u. S. Trying to rebuild their supply chains. That is highlighting how good korea and Taiwanese Companies are. They will benefit from that. Some companies are going to get hurt by the changes. Some will benefit. It is a good stop and technology there. Sophie youre overweight china. Tell us more about details here as to why you have an optimistic outlook regarding chinese equities. Sean yes. A number of things. The ecommerce story. We are selective. Markets have done well. The earnings are coming in. Channel checks are doing well. We like policy driven areas. When china is not stimulating as much as europe or the u. S. , it will be helped with stimulus. We like property. We like the longterm trend of sportswear or consumer discretion. That is beginning to pick up. Like education. That leaves us overweight china. Produced ave reduced from where we were two or three months ago. The China Economy was the first to come out of the virus. Now we are seeing catchup from the rest of north asia. We are moving more money into korea and taiwan. Still staying overweight china. Shery we had commentary earlier today from local media saying that china could be cutting the rrr by the end of june. Not to mention the benchmark deposit rate also cut in the third quarter. How much will this help the equity levels right now, given that they are having skepticism about the pboc wanting to do more at this point . Sean yes. There is mixed debate about whether the pboc and government has done enough in china. Look at the amount of fiscal spending. Compare it to the u. S. Or europe in the 20s. We have a forecast for china to grow 1 this year. If the second wave of the virus starts walking down, the number will be suggestive downgrades. The u. S. Economy will slow down more. It doesnt need to do that much more. Equities will be much more focused on actual earnings. Weve seen pretty good data out of china. We need to see it continue. It has been domestically oriented. We need to see that data show a pickup and the global effect. In the global effect. That is what we are waiting for. Some indicators are incredible in china. Domestic travel 20 below its highs. Shery let me turn to latin america. We just got a couple hours ago, chile holding their key rate steady at 0. 5 . They did not have much room to move anyway. When it comes to emerging markets, how much leeway do they have for their economies during this pandemic, when there is such a huge gap in incomes and poverty . Lockdowns may not be efficient for poorer economies. Sean not every economy. Chile is countercyclical. It is a wellmanaged central bank. They cannot do much more on the monetary side. It has to be fiscal. You will see that countercyclical policy come back in. Brazil, we could probably have another 75 basis points cut overtime. That is a market that cant afford to lock down the economy. By thewas heard also fall in currency. It is now 5. 2. Brazil is also held back by the political domestic situation. Some market moves reflected the virus. Some reflect the political situation. Now that fiscal situation is getting better. It is really down to the market. Bolsonaro and the finance minister are working together to reform brazil. That is very positive. Removed foremium is the time being. People are now focused on the real economy. Another sophie thank you so much for your insight. Thats sean taylor. Lets get to Karina Mitchell with the first word headlines. Karina north korea says it will to play troops to the border after destroying the shared interkorean Liaison Office. The building was blown up. Defense stocks reinforced gains. Tension has soared after kim jonguns sister said it was and saidplit with soul that the next move would be taken by the army. President trump has signed an executive order to curb Police Brutality amid widespread protests following the death of george floyd. He expressed sympathy for family of those killed by police made it clear he wont abandon his hardline law and order stance. He praised officers as euros and blames democrats for longstanding issues among minority communities. The u. S. Government is suing to stop the publication of a book by President Trump former National Security advisor john bolton. The memoir claims the president was willing to endanger the nation in order to win reelection and is being touted as the book donald trump doesnt want you to read. The book contains classified material. Rising tensions between beijing and washington means china is leading the u. S. Market as the quickest clip since 2015. Companies are ditching new york listings with the online classified firm, the latest. It agreed to the buyout. 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. Im Karina Mitchell. This is bloomberg. Shery still ahead, robert potentialls us why distortions to the market. More from our exclusive interview shortly. Up next, beijing shuts fresh markets and closes all schools as coronavirus cases jump. This is bloomberg. Shery china has ordered all schools in beijing to close as it struggles to hold a new coronavirus outbreak. The cluster has spread to neighboring provinces and people must test negative before being allowed to leave the city. Chinahead to our greater executive editor. The world had thought that china had reigned in its outbreak within its borders. How serious is the situation now . As you mentioned, the closing of the schools was a pretty big setback. They just started to open over the last month or so. Beijing raised its alert level to the next highest. We had just come down one level last week. Its pretty serious. We dont know the full extent just yet. From thenment experts China Centers for Disease Control are saying the next two or three days will give a sense of how about this how bad this outbreak is. We will see how under control or not things are. Bloomberg has reported that china is starting pensive testing of imported meds for coronavirus. What do we know . John theres no conclusive evidence yet of where the supper excited from. Theres been a lot of conjecture, a lot of investigation that some imported. Almon they found samples on the virus on a cutting board. That sparked this concern. People started taking action. They are testing all the meat that they get shipped in. They are testing everybody who works in seafood markets. It is trying to get ahead of the curve as much as possible. Shery how targeted is the lockdown right now in beijing compared to what policymakers did back in lawn wuhan . John it is more targeted. They have locked down some of the communities around the markets where infections have originated. Earlier inosed to the northeast when they locked down the entire city after a little cluster of infections was discovered. Obviously, theres two reasons behind that. One is, beijing is the political Business Capital of china. Has ang down beijing substantially higher cost. Over the last couple months, authorities have gained a lot more knowledge about how to tackle this. Sophie thanks to our Greater China executive editor. The number of coronavirus cases in the region remains a concern. Understanding in taking Health Issues seriously has allowed the countrys to bounceback more smoothly than some developed nations. A ceo spoke on Public Health. We started with china. This was an issue last year. Theres been a lot of flirting with that. Learning with that. Culturally, theres differences. Big of hong kong. 1085 cases in hong kong. Four deaths. Those are tragic but a shockingly low number given the amount of crossborder travel from Mainland China and the early exposure they had to people who might have been exposed to the list. What you did see on the ground was, culturally, before there was government policy, caution around health. People wear masks in asia as a currency courtesy to others. North american friends always say, im wearing a mask. They think it is for them. It is generally for someone else. Sarss muscle memory from and bird flu and things. Cultures understand and take a youth Health Issues seriously. Economies,nce of asia started with growth. Europe would have started the year with flat or negative growth. You have more to work with economically. Its the same policy decisions for these leaders. They are trading off income for health and Financial Inclusion and health inclusion. Singapore has been very genetic. Singapore is referred to as the switzerland of asia. That would imply a very serious focus on their economy. They do. It is very well developed. They are one of the most conservative, health care centric of the governments in asia. They are most cautious with their populace health. Thats why people trust the government. That is why they are supportive. They see those tradeoffs being made. Theres an alignment with social policy, people executing. Populations are smaller. Theres borders. If you look at the u. S. , intrastate travel and the individual policies were completely unaligned. New yorkers werent welcome in florida. License plates from new york were a scarlet little letter. Those policies are addressed in a more National Level in asia. I think theres a cultural illnesses thatf is more developed from having dealt with other challenges. Coming up next, tensions rising on the korean peninsula. The north threatens to deploy troops to the dmz. We will have the latest. This is bloomberg. Sophie north korea says it is planning to send troops to disarm areas on its side of the border. Soldiers will be stationed in the western city which has a Liaison Office the kim jongun ordered to be destroyed on tuesday. Little change this morning. South Korean Defense stocks are gaining ground. Peace talks are under pressure. These are Infrastructure Companies that were benefiting from interkorean business. Our chief north asia correspondent Stephen Engle is tracking developments and he joins us now. Talk us through the latest developments. Stephen the experts we have heard from from south korea did not expect this to be a precursor to renewed hostilities. A. K. A. War. It is likely an indication that pyongyang is getting frustrated with souls continued support for the u. S. Sanctions on north korea through what was probably a pretty bitter winter where the economy there has been suffering and the whole world has been suffering with recessions sparked by the coronavirus outbreak. There were those fresh fears about the fate of kim jongun who disappeared from public i for about three weeks back in april. So theres been a lot of uncertainty with north korea. They were frustrated as well with leaflets being flown across the border by south korean activists trying to undermine the regime of kim jongun. That frustration spilled over. We saw that this interkorean joint Liaison Office was blown up yesterday. Thats a sign of that frustration. South Koreas Unification Ministry says it was a senseless act. At the same time, not unexpected given the level of threats coming out of pyongyang. Seeing a are now prominent role being played by kim jong moons sister. Kim jonguns sister. What do we know about her . Stephen shes the one who responded to the speech and the comments coming from the south. She said moons speech is irresponsible. She was the one that rejected a request to send an envoy to smooth over the latest flareup intentions. It was on saturday that the sister issued an unusual statement, saying it was high time to break ties with soul. She was the one who warned on the weekend that the next action from pyongyang against the enemy would come from the army. Clearly, she is kim jonguns most trusted confidant. Highersimply in the echelon due to the bloodline. Does it mean she has earned more trump . Trust . . Is kim jongun somehow incapacitated . She has taken a more leading role because of that. She may just be filling out her role. Her title is the first Deputy Director of the propaganda and agitation department. She is maybe taking that to heart. Much. thank you so our chief north asia correspondent. Lets take a look at the Broader Market reaction now. Mixed session so far in asia. We saw the benchmark gain 1000 points on tuesday. Giving back some of those gains. The kospi is under pressure as well. We assess the geopolitical risk on the peninsula. Gains for the entities. Antibodies. Modest gains after the best session in 10 weeks for sydney stocks. Up next, the dallas fed president says its possible the u. S. Economy recovers faster than expected but the department of defense highlights. This is bloomberg. Sophie lines across the terminal now from singapore. Trade figures from a lion city. Export growth coming in slower on aexpected, falling 4. 5 yearly basis after the 10 jump we saw in april. On a monthly basis, we are seeing a drop of 4. 5 as well. The lockdown dented singapores economic activity. Electronic exports did hold up. Yearg 12. 5 year on compared to an expected gain of just 2. 5 . Shery we have breaking news out of china. The beijing daily numbers reporting coronavirus case numbers in the capital, beijing reporting 31 coronavirus cases for june 16. This would be 31 coronavirus cases in the Capital Beijing. The capital shut its schools, not to mention some food markets in relation to more coronavirus cases. 31 new cases is higher than what we saw yesterday when they reported 27 cases. We continue to see rising infections in the Capital Beijing in china. Sophie the president of the dallas fed is sticking to Jerome Powells view that the u. S. Economy has bottomed, saying he sees strongs strong go from here. Halfling hays joins us. Kaplan isrob reasonably optimistic on the u. S. Economy. The retail sales number we got , about 18 th of may falling 15 the month before. He takes that with a better may jobs report as a sign that the economy bottomed in may. Its recovering. It will depend a lot on how much stronger gets on health care. Lets listen. I felt strongly that after severe contraction for the first couple months, first half of this quarter, that we probably bottomed out in sometime in early may. Continueect growth to to the end of this quarter and into the third and fourth quarter. I think the surprise and the jobs number and strong retail sales is part of that narrative. We are going to grow pretty strongly from here. Dig more intos what you just said. Perhaps, ang to be, faster recovery than a lot of people have been looking for, including people at the fed . Its possible. Theres Downside Risk to the recovery. Theres upside. Be,t of which is going to in my view, is going to have less to do with monetary and fiscal policy and a lot more to do with how effectively we execute the health care policies. Kathleen i have a couple other tools. I know you are not a fan of negative rates. The minneapolis fed had an opinion piece. He said you guys are making a mistake. That negative rates would boost employment and help businesses and put encourage lending. Said that by not doing this, you are favoring banks over people. What is wrong with that argument . My concern is, first of all, when i look at the performance of negative rates outside of the u. S. , for me, i have studied it as carefully as i can, the jury is out as to how effective theyve been and whether they actually have helped growth. In addition, there are side effects to negative rates. Negative impacts on the financial system. We have a very large money Market Industry in this country. Many Companies Access commercial paper, which depends on a healthy money Market Industry. My concern is negative rates may wind up doing more damage and have more side effects. Its not as clear to me what the benefits are. Kathleen i want to ask you a question about yield curve control. You are open to it. You mentioned that it could distort signals for the market. A lot of people are saying, yeah. And inverting yield curve could send everybody a message. You said that could happen, right . Why would you consider going for a policy that is going to distort important signals that you say are so important . As ive said, im skeptical about yield curve control. At the moment, i need to be convinced of the reasons for it. Happensaid that, look at is weve got a substantial amount of Government Debt that needs to be issued. We had a substantial amount before this crisis. It has now gotten exacerbated. As we are in this crisis, while we are still in net, if i saw some evidence that treasury strained,e being because of the substantial amount of debt issuance, that would be one argument that would cause me to want to examine yield curve control. I dont see evidence of that right now. Thats the reason why im skeptical. I want to be openminded. Robleen i also asked kaplan about the fact that they say they are not going to raise their key rate. Thats their forecast. All the way through the end of 2022. They are not even meeting their objective then for 2 inflation or getting unemployment down closer to 4 . I said, have you run out of tools . More . Need to do he said, we have plenty of capacity. Even as he looks at what kind of for, hes expecting to go hes ready to do whatever it takes around the world. Sophie thank you, kathleen. Lets get a quick check on the sing dollar. Holding steady. 113 nine. Export Growth Continues to come under pressure. In rebound that we saw april. On a monthly basis, we saw expert growth slow at a slower pace than we saw last month. The forecast is for 6. 9 drop. We saw that shrink by 4. 5 . China and indias ties face a test. What is at stake for the two regional powers, next. This is bloomberg. Karina im Karina Mitchell with the first word headlines. Strictas reinforced violence curbs. 40 new cases have been reported overnight including 27 in the capital, bringing the total to 106 since friday. One person is in Critical Condition. All schools in the city have been closed. Beijing raises its covid19 alert to its secondhighest level. Virus numbers continue to rise in the u. S. Florida reporting the most of infections since the pandemic started. Texas had its highest level. California saw its smallest daily gain in three weeks. The u. S. Death toll exceeds the number of americans killed in world war i. Statistic. The university of chicago says people are more unhappy with their lives today than it any time in the last 50 years. Virus deaths in indonesia now top 40,000. The government saying Economic Growth will also suffer. The outlook for gdp is being slashed as low as 0 with warnings of a fullyear contraction. The finance minister says the economy will probably shrink by 3 in the creek quarter. The rebound is for seen in the following period. Indias Financial Hub has revised its virus numbers after discrepancies in filings from counting centers. Moon by virus deaths soaring by 38 to more than 3000. Authorities say all cases reported covid19 as the cause of death but werent integrated into the master database. 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. Im Karina Mitchell. This is bloomberg. Shery lets get a quick check of the markets trading at the moment. A mixed picture right now. The nikkei is falling 8 10 of 1 . Real estate and financials leading the declines. Reversing those gains we saw yesterday. Continued easing efforts by major central banks. The kospi is down right now. We are seeing that asx 200 and kiwi stocks gaining ground. The asx 200 being led higher by health care after its best day in over two months. Lets turn to chinas sevenweek military standoff between the country and india. The deadliest border conflict between the two regional giants in four decades. Clashes along the contested himalayan border have left casualties on both sides. Our Senior International editor Jodi Schneider is on the line. How surprising is this . It seems that diplomatic efforts were working. A few days ago, they were. There were efforts to lower the temperature. It did appear to be working. The two sides said they were pulling back forces while they continued to talk. Now, that situation is a very different one. This is a very sharp deterioration in the ties between the countries. Its unclear what sparked the clashes or how many actually died in the violence. India has confirmed 20 of its troops were killed. The military spokesperson in chinas western battle zone said that there were casualties on both sides. Thats all theyve said. Obviously, this is a sharp deterioration in the situation there. What are the regional implications of this . Jodi the first ones will be this escalation does risk undoing the scheduled meeting between india and Chinese Foreign ministers at a russian india china summit that is supposed to take place on june 22. It could set back the diplomatic progress that had been made at informal summits. Their most recent one was in october. It did appear that there was progress being made. This is not a good signal for both sides. Prime minister modis leadership will be tested. He has this crisis in the surging coronavirus epidemic in the country. The economy is in trouble. In china, the president there does face a number of tests. Whencomes at a time neither side really can afford this. Shery and yet this feud has been going on for decades. They fought a war in the 1960s. Jodi thats right. We think that this uptick in tensions is part of rising nationalism stoked by both governments as they try to have regional influence. Theres a lot of these tensions. India has those differences with pakistan. Those are continuing to summer. Relations with a traditional ally, nepal, have deteriorated as well. Theres problems in bangladesh. Beijing is under pressure from governments around the world. The pandemic exposed some of the problems in those ties. There is this International Push to investigate the coronavirus. Both sides have a number of tensions. Some are saying they cant afford to continue in escalation. Both sides are saying that they want to try to diffuse the situation. We will see if that occurs. In the past, they have been able to put aside their differences over this issue given the strong economic and trade tides that they have. Where are they at now . Jodi right. The next few days will be very telling about this. We are hearing from both sides, saying that they dont want to see in escalation. Late tuesday, india tried to diffuse it. They said they remained committed to please on the border with china. Obviously, we are hearing that from the other side as well. They have had these summits recently. There is a good deal of reason for them to try to deescalate this. Were hearing from analysts that say its not in either countrys interest to be locked into a border conflict. Its a very serious development. ,t could lead to a call for lets deescalate this pretty quickly. Really, the next few days will be very telling. Sophie thank you. Our Senior International editor. Next, sport leagues are starting to return. The longterm impact the virus is happening. This is bloomberg. Sophie some breaking lines regarding chinas virus numbers. As of juneses of 16. 11 were imported. The country slowly emerging from the coronavirus shut down so too does the sports world. English premier League Football as some of the first event to resume play. Is not all positive. The nba and mlb continue to negotiate plans for a return with no solution yet. Those returning sports come with a caveat, no fans. Will there be a longterm impact on sports . Joining us now is our guest. The Summer Season looking very different from years past. ,an you see a return for sports at least behind closed doors . What does that mean for different stakeholders . Victor sure. It does look like most of the leagues in the United States and europe are going to go back to playing. Either they have started or they will go back shortly. All the games at this point in europe and the United States are going to be behind closed doors. No fans. The bigger leaks like the nba believe that it can make 60 of its normal revenue even if no one walks through the doors. Sponsorships and merchandise, they can capture a bunch of what they were going to make otherwise. That is still a 40 hidden revenue for them. If you are a smaller league, Like Minor League baseball in the United States or major League Soccer, those are leagues that depend much more on people tstually having lets but in the seats. Those are leagues that are in much more difficulty in terms of trying to make ends meet. Sophie sports fans will want to tune in from their screens. What does this mean regarding tv rights . Will we see a pickup in ondemand contact content . Victor all of the contracts and sponsorships, there will be some level of renegotiation. We are going to have fewer games , a bunch of games have been missed. Or there will be games being played at different times in the season. That will require a renegotiation. If you are one of the leaks that come can come get out of the rates gates first, you look at the biggest ratings. The German Professional League where the first up out of the gate. Gotten big ratings, the best ratings we have ever seen in the United States for german soccer have come when the German League was the only sport on tv. The first be one of ones out there with your product, you have some advantages. Sports fans all over the world are dying for some new, live content which we have not been able to see for the last several months. Shery you just mentioned smaller leagues that will have bigger challenge is coming back even though they need spectators there. Are we going to see more consolidation among smaller clubs with some of them going out of business . When can we start seeing that happen . Victor timing is a real question. If we look at second and third and Fourth Division soccer in the u. K. , even before coronavirus hit, most of those teams and those leaks are basically hanging on by their fingernails already. Huge number of soccer clubs at the lower the division are technically bankrupt at any given time. This is the sort of thing that could push a bunch of franchises over the edge. Not the new york yankees, but instead, those second, third tier teams. Minor League Baseball teams in colorado or Third Division Football Team in portsmouth, england. Those are the places that are in real trouble all across the globe. Shery whats happening to the mlb . They have been in heated labor negotiations for quite some time. I we going to even see a baseball season this year . Victor yeah. Thats the real question among all of them right now. The National Hockey league and the nba are going to work something out. Major League Soccer as well as the large professional womens Soccer League in the United States, they have things settled out. They are likely to come back. Major League Baseball looks like the whole season could be in jeopardy. This is blamed completely on the owners in this case. The owners want the players to take huge pay cuts and want the players to have to share all of the risk from coronavirus. They are asking the players to share all the downside losses but not willing to then share the upside gains when things turn around. Players dont have long careers. They have to get everything they cannot of it while they are here. Theyve already offered huge givebacks already. Offeredhe owners have essentially no concessions on their sides. It really does look like the season might be in jeopardy. From what we are hearing, maybe six or eight of the major League Baseball clubs dont want to play it all the summer because they think they can make more money shutting down for the year rather than operating in some sort of closeddoor format. If eight clubs say no season, that means they can outvote the remaining clubs. You need at least a 75 vote to go on with this. Theout eight clubs, baseball owners cant get the vote that they need to renegotiate all the contracts. Sophie thats adding to the uncertainty. Theres concern around resurgent infections and a potential second wave of the coronavirus. How will that impact the reopening of leaks leagues . Victor we are only talking about the summer. We have not even talked about what will happen when College Football tries to come back in the fall and when the nfl comes back. The nfl is essentially acting like everything will be fine and dandy one september rolls around. Theres no sense that will be the case at all. You could not ask for a worse situation for the spread of coronavirus than Something Like a professional sporting contest. Tens of thousands of people all packed in one area. People singing. People shouting. People here that helping one another. Thats a real problem. Even if you restrict the number of people in the stadiums, its pretty easy to spread them around. You still have problems with things like concessions, entryways, restrooms. This will be a huge problem. We know that sports can be real epicenters for Coronavirus Spread. In fact, the first major location in europe that had coronavirus were milan and valencia, which were involved in a large champions League Soccer match even before there were known cases. We know that they that was a huge location for the spread of coronavirus in europe right at the beginning of the disease. Those are the two countries that right away had that first wave of bad situations. Shery we could see a potential second wave. Thank you so much for your time. Professor of Sports Economics at the college of the holy cross. More perspective later with daniel. How the clubs can keep the cash flowing without the crowd. Thats it from daybreak asia. The china open is next. This is bloomberg. Eight is 9 00 a. M. In beijing and shanghai. Im tom mackenzie. Welcome to Bloomberg Markets china open. David im david ingles in hong kong. Top stories, beijing closes all food markets and schools us coronavirus cases in the city jump. The city slaps restrictions on residential compounds and blocked potential carriers from leaving. Tom troops to be sent to an