Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20170504

Relationship, turnbull had for new york after what was described as the new president s worst ever call. We have world coverage here in daybreak asia, lets check Energy Markets and see whether chinas challenge to boeing and airbus is actually a threat. Betty and we will see if whether President Trump and australias Prime Minister can mend ties after that tends phone call this year. And come up Berkshire Hathaways shareholder meeting. Liu inive, i am betty new york. It is just after 7 00 p. M. Yvonne it is just after 7 00 a. M. Here in hong kong. We have this capitulation in the commodities market. Betty the markets would have gained except for the fact we had oil prices really dragging down to some of these Energy Shares. Oil continuing to plunge lower and lower. Brighter for investors, the Health Care Bill passing the house, the senate, and whether it will be put into action. We have the big jobs report. Yvonne they are looking for a reprieve, not what they have seen in march. The fed has put pressure on them now. Look how asia is performing new zealand, flat. 6972. Olding at australia, closing to the lowest levers since the Commodity Index since september with oil taking a 5 leg a lower. We see it at. 4553. Brent holding below 49. Futures heading lower today. Could see pressure on stocks. We wait for the Prime Minister to meet president in new york. Japan and south korea, japan the celebrating childrens daytoday as we wrap up those three days. Dollaryen, 112. 51. We did touch 113 briefly. Bullish signs for the dollar moving forward. Lets take a look at markets this week. We have seen several obstacles when it comes to apples earnings and u. S. Car sales. We see the weakness in commodities continue on. The big question is, will this be the Inflection Point where we see weakness going through . Betty absolutely, the markets are richly priced right now. Any kind of negative news will take stocks down. Lets get more with su keenan on the ins and outs today and what drove the market. Su the oil route spread through commodities. The fact we had insurers rebounding with of the health care passage news. Lot to do with why the s p rebounded and ended up in the green. Nasdaq came up. You have an unchanged close setting up for friday, the big jobs number. Lets go to the spotlight stocks because they have everything to do with earnings. You see really strong gains here. Of earnings result we talked about after the bell last night, theyre hitting the sweet spot. They are tracking big merchants. Viavi solutions blowing out earnings. They turned around the late in the day as stocks recovered. Snapshotto the market and look at just how much we had oil and gold and copper under pressure. We sued them change as we get into extended trade. 46. Is that it was down at least 5 . Gold coming off its biggest to date decline us in september. They say the fed will be raising rates ahead, in part on a strong jobs number. If we go into the bloomberg, we will see how the fact there is a return on investment curbs curve down in the blue, versus the curve in commodity, a big gap there. It has to do with the supply and demand situation. It has not tightened to merit the entanglement we see at the top. There is a loss of faith that these opec types can do anything to reduce the glut. Yvonne thank you, lets continue the conversation about the oil rally. Futures on both sides of the atlantic dropped to the lowest since late november. Take a look at this chart. It is at 82. 25. They are backing off their bets that prices will rise. It shows a fall in the net long positions as this optimism wei ghs. Lets get more from San Francisco. Good to see you come i think you can point the finger at many things, whether it is u. S. Shale or china or opec. What caused oils latest fall . You can point most of the fall to the fact that the market is losing faith. Opec had agreed to cut its production. You had the Nigerian Oil Minister say he thinks theyre are going to extend that agreement to cut production. But they have not acted, and the Oil Supply Glut in the world persists. U. S. Production is rising. Output is still at its highest since 2015. Knock of that, you have a on effect from china, saying it will clamp down on its Financial Leverage and increase scrutiny. You have investors leaving commodities, including oil. Big catalyst, a does this selloff seem overdone . Lynn that is a good question. Technicalere is one indicator that suggests we may be headed for a rebound, or at least there is an argument he made for that. The 14 day relative strength index for the u. S. Benchmark, texas intermediate, has fallen below 30. That suggests what you said. Betty what does this all mean about opec . What does it tell you about the influence of opec and how much they matter to the oil market . Lynn that is a good question. I think it is fair to say that opec still remains an incredibly important part of the global oil market. It does something and prices go in one direction or the other. What really signaled is the fact the market is done was talking and wants to see more doing. It wants to see opec come to an extension of the agreement. U. S. Production continues to rise. Producers here are hedged to the point they can continue drilling at these prices. You could very well see the supply glut persist. Yvonne talking about the spillover affect, it has been comesd so far when it across asset classes. How is this weakness affecting the stock market . What happens to the energy exporters . Here got emps clobbered. Chesapeake energy was the worst performer in the s p 500. Pipeline operator williams, transocena, marathon oil, got hammered by this. The interesting thing to know, this came at an incredibly unfortunate time. , theyme of these emps reported earnings that exceeded analyst expectations. Chesapeake had its First Quarterly profit in more than two years. The oil marketn transcended all of that. Thank you so much on the oil market. Whats get the first word news with courtney collins. Seeminglyp, the doomed to mission to replace obamacare has staggered through the house as republicans mustere d just enough support for their new bill. It sends the bill to the senate, where it is having little chance of passing in its current form. Republicans are worried the plan would cause millions to lose health insurance. President trump that obamacare is essentially dead. Mr. Trump it has been a catastrophe and this is a great plan. I think it will get even better. Make no mistake, this is a repeal and replace obamacare, make no mistake about it. Republicans and now see what they gave their name to. They put their name next to paying more for less. We will make sure the public is aware of that. The leaders of Frances National front privately agree Marine Le Pen faces defeat in sundays president ial election. They now say even winning 40 of the vote sunday would be a success. 22 latest poll puts macron points ahead after surveys made in the clear winner in the debate. You can be sure bloomberg tv and radio will bring special coverage of the french president ial election sunday and full reaction on monday. Set for second round of reforms with as many as 10 companies proposing to sell stakes. Once the private sector to become a minority investor. Air china and China Southern proposes to consolidate their free units into a new company. Watch the open after the Bank Reported a fifth Consecutive Year of rising profits. To 1. 6ome rose 7. 5 billion dollars, beating estimates compiled by bloomberg. Earnings from trading bonds in the First Quarter helped boost they predicted similar results this fiscal year. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am courtney collins, this is bloomberg. Thank you. We are looking at financial leads, the bidding race for moneygram. Is a worried u. S. Regulators will intervene . Ask why bonds are at a turning point. This is bloomberg. Yvonne this is daybreak asia, i am yvonne man in hong kong. Betty i am betty liu in new york. Equities slide after strength magnified losses in the selloff of european bonds. We have the head of americas fixed income strategy. Say the bond markets are at a turning point. What do you mean by that . We are at a confluence of forces happening at the same time. On thed was mildly hawkish side. Theyre looking through the weakness on the data. Were looking at the charts and how yields are forming. I can look at the moving the resistance around the 230 level on the 10 year. Those need to get resolved in the next week or two. Betty there is still debate about whether the bond bull market is over not. There is a big question whether the bond markets or said it really reflects what is going on in the economy. Richters,e had jim who said the u. S. Will be in a recession. What does the public think about this . I put out a twitter poll and a 900 people voted. It is still going on, so if you have not voted, i encourage you to go on my twitter. And vote. We asked people, do you think a recession is coming in 2017 . Over the last few hours, 65 of those who voted say yes. They see a recession this year. Are we appropriately pricing that risk . George we are nowhere pricing any sort of assessment risk. Some of the lingering concerns are captured by both your viewers and investors. It has been a weak recovery all along. You couldrstandable call it bad blood in the sense people feel betty they have been left behind. George that is right. The bond market has been quick to figure these things out, faster than the equity markets. The bond market has been skeptical. Type tradereflation has created a diversions between bonds and equities in the last 20 years. Usually the bond market tends to be right. Were at a key inception point. What is happening here is pivotal, in our view. George, if the First Quarter is a blip the fed will overlook, it puts the burden of proof on to data. As we look ahead to the u. S. Jobs are poor what numbers do you have to see to support a june fed rate hike . George anything near consensus, it is accommodation of adp labor stats have been relatively robust. Of fed have a lot speakers that characterize what their interpretation is after the numbers. Messaging is out there, the data has been ok. Anywhere between 160 to 200. 200 is fair game. The weakness in the q1 is spilling over further. That takes away possibilities of the fed hiking in june. Yvonne not everyone is convinced this is transitory, right . We seebout breakevens, renewed pressure. Now the commodities story is racing down as well. I want to pull up a chart and show what we seeing, not just with energy, but industrials. Precious metals have been rolling up. How do you square this type of weakness and commodities with your view that rates could still go higher . Ultimately, there can be moments where we have soft patches. It could be regionspecific. Some of the weakness is starting to show up in china data and that is what is driving the commodity story, not a global phenomenon. Itthis were to persist, causes us to question the european recovery. And is the u. S. About to take an into a further leg of eight years plus recovery . We are watching the breakevens very closely. We have to hold above 175 on the tenure to keep reflation trade alive. Al of these, commodities are stealthy reminder that it is not recovery globally. Yvonne george, great to have you. Head of americas fixed income strategy joining us live from new york. Taking on the global top two. Can china clip the wings of boeing and airbus . This is bloomberg. Betty this is daybreak asia, i am betty liu in new york. Yvonne i am yvonne man in hong kong. Achieved generating Profit Margins to rival apple, in an industry where doubledigit earnings are remarkable. 29. 5 of sales in the First Quarter compares to apples 31. 6 profit margin. Is peers do not even come close. Betty rollsroyce has a new shorthaul jetliner from boeing. Rolls has been looking to get back into jets since it quit the market six years ago. They are working on middle of the market planes. The jet is likely to be named the 797. Is expecting less competition from international rivals. They see overseas carriers increasing capacity by 5 in the fiscal second half, compared to 11 in the first half. It will not be enough to lift fullyear earnings. Qantas expects underlying profit before tax of 1 billion. That is down from a record 1. 1 billion last year. Chinese aircraft mayor has thrown down the gauntlet to boeing and airbus. Today is another step forward. The Maiden Voyage of their first 919 to competee, c with the boeings 737. Lets take a look from sydney. How big of a milestone is this . It is a big deal for them. Out,hing we have to watch the intended customers of this aircraft do not seem enthusiastic about it. Look at the a320. 570 at thenly moment. Thoseantly, almost all of are Chinese Airlines and lessors. Ones one isre making engines for the c919. Even among Chinese Airlines, they are buying the minimum order. , comef the orders, 3 4 from lessors. It is a different picture. Betty may be airbus and boeing are still getting it right . I want to pull up a chart that shows the stock price of airbus which has increased twice as fast as the benchmark in france. All of that in anticipation of some of their orders and air traffic, which i am assuming is why they wanted to bring this plane to the market. Our boeing and airbus doing anything wrong here, is there any market share to give up . By 2024,bear in mind china will be the biggest aviation market. C919. Ves a bit to the the are not keen to give it up. Investors and boeing are not worried about the c919. It is decades old technology. 1980s plane. To a estimate, but maybe it burns 1 3 more fuel than the a320 per passenger kilometer. It is not a competitive product. Especially in a market that has been suffering yield declines in ticket prices. You do not want to buy a plane that drives up costs and fuel. Yvonne real quickly, what can they do . We talk about the technology being 10 years old. What can they do to gain the trust from airlines beyond china . Big deal, getting this beyond china. Previous big check, a smaller passenger jet than this one, they had their maiden flight in 2008. To fly in Foreign Countries you need a special certificate. It got its first foreign flight certificate last december, eight years after its maiden test flight. And that was for the republic of congo. It is quite a long road to getting this approved for flying outside china. That is the real challenge. Betty thank you. We have one headline from the trumpturnbull meet yvonne 7 30 a. M. Friday morning as we wrap up the trading week. Is 7 30 p. M. Thursday here in new york. It is getting later and later as we head toward the summer. I am betty liu in new york where markets are dragged down by oil prices. Energy shares the worst performers. Yvonne i am yvonne man in hong kong. Lets get first word news with courtney collins. First up, australian Prime Minister Malcolm Turnbull prepares to meet President Trump, it seems he is echoing some of the u. S. President s rhetoric at home. Next weeks federal budget is expected to contain and Infrastructure Spending splurge as mr. Turnbull attempts to appeal to voters with the nationalists, nationbuilding policies. It will likely see the deficit expand. Wto has upheld australias right to import packaging on tobacco products. A dispute panel agreed at introduced in 2011 are legitimate Public Health measure and do not violate trade deals. They could usher in a new wave of restrictions around the gore around the world. Suisse says it could swallow up half 1 trillion. Beijings drive for influences more promising the President Trump pulling back from global engagement. The bank says most money will flow into india, pakistan, egypt, russia. Williggest beneficiaries be midsized construction and machinery firms. Philippine president Rodrigo Duterte called his chinese counterpart this week at the behest of washington to discuss chinas role in reining in north korea. He said President Trump asked him to find out if beijing to do something about kim jongun. Duterte told president xi he can help with tensions around the korean peninsula. The bond market states three socalled repo squeezes were some of the most traded bonds of became unavailable. The state bank of india says more discipline is required. What needs to be done, there needs to be more discipline on both sides. Both in respect of those bankers shorting the market. If they are doing shortterm speculative gains, we need to know why. Investors in the market need to go ahead and lend. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am courtney collins, this is bloomberg. We are counting down to major market opens here in the asian pacific. For more lets get to adam haigh, joining us live from sydney. We have the u. S. Jobs report later in the u. S. And the what else are you watching for this morning . Adam oil, an extension of the route we have seen in commodities earlier in the week. The bloomberg commodities index is down to an eight month low. The assessment investors are making around chinese Economic Growth is feeding in here. Some people are dialing back some of those china Growth Numbers for this year. Getting quite pronounced with that big move in oil and copper. And a big selloff in iron ore yesterday. The yen isexchange, relatively well supported here. A bit of strength overnight. But the yen is still weaker over the dollar for the week. So there is no rush to safe haven. Equities are holding up reasonably well this week. We ended the week for equity slightly lower in asia. We are not wanting to put extra risk ahead of the jobs report. It feels like the risk is skewed to the downside. There is more noise in the market about people thinking about it. Listening to that report tonight rather than an upside surprise. We have to wait for the number. It should end slightly weaker for equities, at least as we get the trading session going. Japan and south korea closed today. Thinking about south korea and risk on, it seems all risk on in south korea, despite the bad news that has come out with the president being impeached and north korean tensions. Why are investors so bullish on korea, given these Tumultuous Times . At face value it might seem to be risky market. But if we dive into the bloomberg and look at this chart, this is key to the argument for the bullish basis on south korean equities. That is stemming from a valuations. It is one of the cheapest markets in asia, we tracked against its peers. It is cheap relative to itself over the last five years. That is important in an era where growth is still hard to come by. In south korea, were expecting profits to double for kospi companies on average at the next 12 months. World where Global Growth and reflation trade is at the forefront of investors minds, south korea works well and is highly geared to Global Growth. If you continue to get an uptick in there, south Korean Companies should continue to do pretty well. We got a few bowls we have been speaking to do speaking to. They are happy to be adding equities exposure to south korea, even after the run up and outperformance of this year that left at a record high. Thank you so much, adam haigh out there in sydney. A softer tone it will end on, given the jobs report tomorrow. Another event we are watching, President Donald Trump and australian Prime Minister Malcolm Turnbull in his short meeting in new york. Headlines crossing, trump saying a deal has been worked out on the refugee situation, which was the subject of that contentious phone call between them two. Inocencio has more. Do we have details or ideas what this deal could be . Ramy not yet. In the past 10 minutes, they decided it was worked out. This was very quick work. Something was a ready already and they decided to hand it over to Malcolm Turnbull and his administration. Not yet sure. He earlier in the past hour, floated a couple things. One thing, maybe australia could do more patrols in the South China Sea to keep china in check. But he negated that. Australia could commit more military services to the middle east, potentially syria, to help and support mr. Track what iss to happening with the Bashar Alassad and russia. Those are some of the things likely, mr. Turnbull had had in hand. He said we will do something for you in order to take the 1200 refugees there. That is the next big as contentious issue with this 1200 refugees. Lets show people what were talking about. This function is another thing we can talk about. It shows the trade revenue that happens between the u. S. And australia. It is not just china and japan, it is the United States, one of australias biggest trading partners. Billion, as you can see here. Will mr. 25 years ago, trump up and all that time with mr. Turnbull . Maybe he will, but we not sure. With all of that money floating between the two countries, that is a big deal. Yvonne it is. Turnbull was meeting mr. On an Aircraft Carrier, less time than expected. I believe he called them to say he was running late by a couple hours. It does not look ideal, does it . Ramy not really, they were delayed by three hours. Mr. Turnbull himself already arrived in new york on wednesday night. A full 24 hours in advance of to trump mr. Trump had deal with things with the Affordable Care act in washington, but that said, it looks like mr. Turnbull was waiting for mr. Trump to turn up. From the sheer fact he was late, they only had about 30 minutes. That was condensed from an hour. And the comparison with the Aircraft Carrier, and xi jinping last month that maralago and in washington, d. C. Just today, there are issues. When you the best, but are any head of state, youll get what you can with mr. Trump. Yvonne ramy inocencio, thank you. Deal or no deal . We asked doug fagin if he is worried moneygram will be blocked by u. S. Regulators. This is bloomberg. Yvonne this is daybreak asia, i am yvonne man in hong kong. Betty i am betty liu in new york. Moneygram earnings beat the highest estimates. Theyre still the center of a big war between euronet and alibabas financial. Euronet says it is still thinking u. S. Regulators will block the chinese firms bid. From ant financial, great to have you with us. It has been a busy time here. Doug thank you, glad to be here. Betty for now, your deal is outbidding what euronet has put forth. There are questions, will i get through regulators . How confident are you it will . Doug we are quite confident in will get through. It is strategically important transaction for us. We need to submit a voluntary review here in the u. S. , that process started in january. It has been proceeding at pace. The state Regulatory Approvals are also underway. We are confident we will be able to get through these. Get throughill it the way you are forming it now, or do you believe you will have to offer acquiesce some things on this deal . Doug we are confident the deal will get through as we have it. The deal itself is a cash acquisition of moneygram. We plan to keep moneygram based in dallas, run by its existing Management Team here in the United States. We expect to grow the business here. We think that structure and position will be acceptable to regulators here. Is designed to assess whether there are National Security issues for the United States for such a transaction. We do not see any issues there. We will take guidance from regulators for further protection they want to have in place. You mentioned issues regulators might bring up like National Security, some dealing with privacy. What kind of assurances will you give it regulators on the privacy front . Doug the Money Transfer business is similar to ours, it is built on trust. That is really protecting consumer data. What moneygram does today is keep all personal identifiable information here in the United States. Those policies and procedures of surrounding the protection of that data will be maintained under our ownership. Moneygram has servers in minneapolis where the data is held electronically. Betty no changes . Doug nothing changes, servers will still be based here. All those and procedures around the protection of the dead cat around the protection of the data will be maintained. We plan to do that here in the u. S. You, whatwant to ask you think is the biggest merging withtween ant financial and moneygram, versus euronet and moneygram . How does it make more sense . Is, the biggest difference we are buying this business because we want to grow it and we want to leverage moneygrams network of a global Money Transfer around the world. In contrast to other industry players, who will be looking for consolidation and cost savings, we are looking to grow the business and expand it. Moneygram operates in 200 countries and is operated over 500 Financial Institutions across the world. Network,o take that combine it with our foreign hundred 50 million users in china, 200 million plus in india, and build a more Seamless Network of Money Transfer around the world. It is that expansion and growth of the differentiates the way we would approach the deal versus others. Yvonne we just mentioned about moneygrams earnings for the First Quarter, which has missed. It has been uneven. Do you have plans to rejuvenate earnings . Businessesxisting for ant financial in china that you can replicate in the u. S. . Doug we are bullish on the remittance business globally. In certain areas, it is a flatter growth curve. We see a real opportunity to bring new technology and capabilities. For example, using mobile technologies for Money Transfer, that we will accelerate. Moneygram has its own application here in the u. S. We look to further adds that technology there and build that to be a more consumer friendly experience, one where you can have more available options. Through that investment in technology and expansion, we think we will see much more volume through the business and growth. Doug, you came from Goldman Sachs to ant financial to expand their financial base. And they are preparing for an ipo. I am curious if this deal was relevant, you needed this deal to continue with the ipo plan . Doug this transaction is important for us in terms of international growth. I was brought on to expand ant financial globally. The network moneygram brings to us will really accelerate our ability to do things for customers worldwide. These kinds of businesses take decades to build in terms of connectivity to banks and other Financial Institutions. In one step, this will bring us connectivity. Betty but is it critical to expand the valuation of the company in order to be appealing to public investors . Doug i think it could be quite helpful to expanding our mainstream and evaluation. We see opportunities to create shareholder value with this. But it helps with partnerships in asia where we have atm in india, send money in thailand, partnerships in the philippines, indonesia, korea. Through connecting those users with this network, we see huge Growth Opportunities for us across the world. I think that will enhance revenues and valuations as well. Yvonne on this merger, would you consider another funding round to support International Deals you have made . Doug we are not a capitalintensive business. Having run a Financial Institutions group that goldman before i left last year, i know what a constraint capital can be. Fortunately, ant financial is more of a technology company. We are not constrained by capital in terms of our growth. I think this will enhance our earnings stream and give us greater earnings capability. We do not see an immediate need for capital to grow. We have been a successful in prior rounds. As we go forward, you may see capital in the next coming year or two. Betty i want to talk about moneygram and its competitors and her you plan with strength of togetherness to compete with others like western union. Willoughby on price . Will it give you leverage to undercut the competition . Doug we are not going to focus on price in terms of competing. We are investing in technology, to use the capabilities we have with mobile platforms in china and around the world, to give users a more from experience in terms of transferring money. You could just go in your mobile phone, transfer buttons. It is easier than having to drive somewhere. That will enhance the capability. Also, the Network Globally with have, it is awe multifunctional application with many things you can do. Those could eventually be connected to moneygram to do Money Transfer. But also a lot of other things. It is an exciting platform to expand services beyond that. Yvonne i feel we ask you this question every time you come on air. You mentioned the ipo. You mentioned how it has been pushed back to this year. Where are you in the process right now . Is there a timetable, have you been talking to regulators . Doug we do not have a specific timetable or plan on the ipo. We see the benefits of an ipo at the right point in time. As i mentioned, we are not a capitalintensive business. There is no urging urgency to do an ipo to raise capital. We will continue to grow our business and expand partnerships like the ones we have announced in asia, to do strategic transactions like we have with moneygram and expand in that way. Betty thank you so much. Doug thank you for having me. Betty doug feagin from ant financial international. You can get a roundup of this story and others to get your day going in todays edition of daybreak. Subscribers can go to their terminal. Also available on mobile. To get newsettings on industries and assets you care about. This is bloomberg. Betty this is daybreak asia, i am betty liu. Yvonne and i am yvonne man. Berkshire hathaway set to hold its annual Shareholders Meeting soon. Thousands of chinese investors expected to go to omaha to see Warren Buffett in action. Joined now from there. Lets start with the results. What is expected . People are expecting to see a slightly better operation. It was not that great last year. You saw with the rail traffic, berkshire owns the railway. You sell the traffic rebounding in the First Quarter. I think a lot of people are expecting slightly better numbers there. But Berkshire Hathaway shareholders are longterm thinkers. They are not too interested in one quarters results. They want to see what profits can do over the long haul. You have seen how many more chinese it seems every year ago to listen to him. In terms of investment in china and asia, we know about byd. Has he found anything more in asia . That is a great points. As i landed here at the airport this year, you see a lot more chinese speakers. The interest is definitely there. As you point out, there is not a lot of investment that has been going into china with the exception of byd. When you look at that investment, on the scale of the berkshire Balance Sheet it is not a lot. There is a lot of interest of their. Whether that is translating into action so far, that story is not quite materialized. Know how popular Warren Buffett is in china. Is that the big reason why there is so much interest from chinese investors . Overace is on a coke can there. E bye agreed to help cok putting his face on the cans. But i think people are attracted to success, whether they are from china or any other country. We are talking about an investor that had an incredible track record. People want to come see him alive. Live. His Business Partner will be on stages and saturday. People can learn a lot from them. Much, thank you so joining us live from omaha ahead of the Berkshire Hathaway meeting. Plenty more to come. We are waiting for the u. S. Jobs report. Betty oil prices, we saw Energy Shares take in the u. S. That will be affecting some of the stocks and market in your neck of the woods. Japan and south korea close. It might be a little lighter. Career, but the rest of asia faces ending the lower. Oil drags on energy. Quick success at last. President trump earns a legislative victory as the new Health Care Bill scrapes through the house. And americas lack of engagement boosts chinese drive for global influence. Their roads project may top half 1 trillion. This is the second hour of daybreak asia. Am yvonne met hong ko betty i am betty liu. We have been watching oil markets. Energy dragged on u. S. Stocks. We have been watching the mountain turnbull and President Trump meeting. Trump not only said they support they resolved the refugee issue, but that the phone call earlier this year was a little bit of fake news. He likes to point everything that is not in his favor as fake news. But they did work out a refugee deal. This is affecting metals as well as oil. That seems to be continuing as we look at chinese futures. Should we be panicking yet . Well, im still here. Once you see out the window a my body, then come yes. We go for into where headline inflation. Thats what all of us are hearing at the moment. It could all change. But have a look. This is the contract on the exchange. The overnight asia session closed at 480 three yesterday afternoon. We made our way back to 470. I have a chart to show you where weve come from and where we are. 4554 on oil. We have the open in australia, just about flat. Of fourth straight day decline, which takes us all the way back to early march. Take a look at how things are breaking down so far. It takes more time to get warmed up. Also loading alphabetically. Materials. There we go. Overall, the magnitude of the drop is not as bad. We are looking at maybe 1 overall. Let single out this group of stocks, energy, metals, what have you. 2. 5 three percent lower. Iron or prices. His is the contract there is your ticker. Heavy metal and we are now down to about 470. If you look tax six months back six months, its about 31 from the peak which was closer to 700. Something to talk about his markets open up. This is inflation. This is when the agreement took place back in november. We are basically back to levels preagreement. The index is to its lowest level since that was collected. You so much. Watching commodities. Lets get to the first word news. Thanks very much. Credit suisse says chinas belt and wrote trailing to the west could swallow half 1 trillion. Beijing is striving for influence and that looks more promising with President Trump pulling back from global engagement. Biggest beneficiaries will be midsize construction of machinery firms. China set to launch a second round of enterprise reforms with as many as 10 companies proposing to sell stakes. China nuclears aims to ask state owned peers and the private sector to become minority investors. They also hope to consolidate their freight unit into a new company. In france have privately relief that Marine Le Pen faces defeat on saturday. Herlatest poll puts muc opponent 22 points ahead. We will bring you special coverage of the french president ial election this sunday and full reaction on monday. Countrysdia, the biggest lender is urging banks to a void shortselling for speculative gain. The market faces three rico squeezes in march and april when bonds become unavailable in a repurchase market. Bank of indias chairman says more discipline is required. I think what needs to be done as there has to be more disciplined on both sides. Both in respect of those bankers that are shorting the market if they are doing it for shortterm gain, they need to avoid doing that. Whereas the lenders in the market also need to go ahead and whenever its required. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 160 countries. As we saw earlier, shares of Macquarie Group are trading up almost 4 . The open in sydney after a profit that narrowly beat estimates. Paul has been watching mccrory for us. Macquarrieong set for us. Another strong set of numbers. About 1. 63 billion u. S. , up 7. 5 on the year, their fifth Consecutive Year of rising profits. An impressive to second half as well. They were up 11 on the first half. How did they do it . That that sector delivered a profit contribution 6 higher than it was in 2016. Also underpinned by income purchases and freedom aircraft. Take a look at the stock. Up 40 on year. The market really does like this one. Dividend almost 80 per share. That is 45 . Guidance is broad. So much. Ank you we are certainly watching that as the session rolls on in australia. Looking ahead, not rolling on but flying high. Chinas first domestically designed passenger plane set for its first maiden flight. It hopes to challenge airbus and boeing. Yvonne next, all worked out. President trump says his relationship with australia has been reset. We will see whats on the agenda in new york. This is bloomberg. Check lets do a quick of the latest headlines. Ferrari has achieved a rare feat, generating Profit Margins to rival apples. 29. 5 ed earnings rose to of sales in the First Quarter. That compares with apples 31. 6 profit margin. Gm makes 13 . Teslas upcoming model three has an unlikely doubter, elon musk himself. Two months before production is scheduled to begin, the ceo told investors hes concerned expectations are too high. He said tesla will be offering no test drives in the car and will do no advertising for up to nine months. Of ones targeting output million cars per year by 2020, a 84,000 e to from the 84,000 used in 2016. Rollsroyce has been looking for a way to get back into shorthaul jets and is preparing a pitch for a socalled middle of the market plane, possibly with an engine partner. The jet is likely to be named be 797 and may seat up to 260 passengers. President trump is now with the australian Prime Minister in new saying a dispute over a refugee deal has been worked out. The talks were delayed three hours after the house passed a repeal of obama. Lets get the latest. It seems like this bromance has started again. I wonder if thats what they would call it. Is the firstace start, especially after the contentious telephone call that happened back in late january when it looked like things word definitely going on the fritz. One of the big things the two leaders are probably going to be talking about and are probably talking about even now is the economy and the bilateral trade agreement. The ectr show you function here. What youre looking at is total trade revenue between australia and the United States area the United States is number three here. China, by japan and australias biggest trading partner. In the western world, the United States is number one. And it begs the question whether donald trump or turnbull want to upset relations that could potentially impact this. The short answer is likely not, especially as they meet today and as you said as this bromance continues. One thing that is a Sticking Point that we just got some word on in the past hour is a deal on the transfer of refugees from Papua New Guinea as the island and the transfer from those countries to the United States. Right now we are taking a look at live pictures from the uss intrepid, what is happening here is mr. Trump and mr. Turnbull are expected to speak in front of this audience. They are celebrating the 75th anniversary of the battle of the coral sea. That was the first time the u. S. And Australian Forces turned back the japanese in world war ii. Waiting for any headlines to come out of that. But the economy and the refugee deal, donald trump said, is all sorted out. So, they are joined to put the past behind them and maybe this is the start of some type of friendship. The meeting was brief and on an Aircraft Carrier. In terms of optics, it doesnt look that bromancey. Optics, sure. The an Aircraft Carrier as opposed to xi jinping at maralago last month. Would you rather be at the white house . Yes. Would you rather be a maralago . Yes. Was working out the details of the Affordable Care act passage in the house. That kept him in washington. If you had 30 minutes with the powerful the most country in the free world, you would still take that. Fullurse, he wanted the hour, but they are talking and hanging out over dinner. They still are talking. So i guess its a winwin for now. We will continue to monitor this , especially when they come at to speak to us. Betty looking forward to that. , bullish on euro and european stocks ahead of the french elections. This is bloomberg. Betty this is daybreak asia im betty liu in new york. Yvonne i am yvonne man in hong kong. To suggest the centrist will win the french president ial election. French nationalist even admitting Marine Le Pen faces defeat. In markets have been pricing rcron win. Le pens odds coming down substantially from late april. Also coming down is the influence spread. , someones from sydney who remains quite bullish when it comes to the euro and european equities. Have you. At to so, is this weekend pretty much a nonevent then . Most likely. Poles got it right in the first round, and now we have a , but there is still a tail risk. Slight there is a possibility of le pen, i guess, pulling a donald trump. Talk about the volatility we have seen in the markets. It has been so complacent. There seems to be a lot of optimism when it comes to Emmanuel Macron winning. The euro has dropped 10 . Compare that to brexit or the first round, it was as high as 20 . We have that chart. How much higher can euro go from here . Well, thats the thing. First of all, putting the tail risk in, the market is pricing it in. If that is true and it happens, we put one more big event in europe behind us. The past seven years, we have seen a lot of events and a lot of potential to derail the euro, and it hasnt. If you look at the underperformance of european , there is a lot of upside. Time, the base is a lot lower. The base has a lot more leverage. There is a lot more leverage when it comes to european countries. A shiftwe will see from u. S. Equities to european equities. Betty even if le pen wins, and i know it seems like its almost a 0 possibility according to , but even if she does staying in europe . Thats a good point. First of all, the probabilities are against le pen, but the market tracing is for 0 of le pen. Pricing is for 0 . There is still a 30 chance of her winning. Tohave made some allocations euro stocks and implied volatility features. And there is a symmetric payoff here. It is unlikely will fall much further. Wethe case that le pen wins, would probably see a 40 jump in volatility. So, we maintain our position for factor in the risk. Markets hadwon, and an instant reaction and nothing else. We reserve judgment for that and watch when the dust settles. Lets turn to the other president ial elections that are happening, in south korea after the impeachment. That seems to be even more of an uncertainty, doesnt not, that the polls are right question mark yes. Absolutely. That thet seems thirdparty has truly lost it. We have the democratic party. There is an 80 possibility of winning the election. The korean stock market has priced that in. It has had a very strong run, but when you look at the korean won, we dont see the same pricing. There is a bit of remorse. A higher probability of a moon win is priced in by the equity market at least. Yvonne if you take a look at just the cosby itself, its still quite a bargain. We have a chart come kospi itself, its still quite a bargain. We have a chart here. Is it all down to samsung . I have to ask you about that. It has contributed more than 100 points to benchmarkings this year alone. That is true. Its a concentrated market. Exports are picking up quite dramatically. We now have a potential win. There is a potential for increase in fiscal outlays. Its quite a big increase in and on top ofg, that, you have the potential and for Corporate Governance reform. Korean riskduce the and reinforce the korean markets. To ask you about pricing in extra stimulus. Pull up a chart here. Lets pull up a terminal chart. 34 77, which shows this nice runup that we have had in korean equities. Guys, lets bring it up. They are represented by the purple line. The korean won this is actually onedollar. Its also strengthening, but not as much as stocks. I wonder, is there some catch up to do here with currencies . I think so. When it comes to the korean won, you know, the case for increased individual spending really has not been priced into the market in the currency. The korean stock market has , butited from a turnaround as you said, there is a disconnect between korean won pricing and stock market pricing. There is real pressure on interest rates. The korean won, especially against lower yielding other asian currencies like the tie when he is actually quite taiwanese dollar is actually quite a good race. Betty how can you ignore the geopolitical risk when it comes to north korea and the south . We have seen the exports to china. I know the boycott and the missile systems. Can you shrug that all off . Know, north korea has gone through quite a few different episodes. At the end of the day, north korea is willing to use any move to use Nuclear Weapons and that would be the end of the regime. South korea has survived the cold war, the fall of the soviet union. To guarantee suicide, i dont think its something they would want to do. But at the same time, going back to the election, the democratic , is likely ton start having a more conciliatory ne with north korea which would further reduce risk. Thank you for joining us live from sydney. If apple were a bond fund. It would dwarf its rivals. And how much is invested in corporate debt . Like its rivals, has a history of transferring money it has earned corporate avoid taxes. Betty a german automaker has secured orders from apple to sensors. Iphone with sources say the component would be split roughly 5050 between companies. Usually tim kirk ok wants to make it easier to negotiate prices. Yvonne a chinese smartphone maker wants to raise 1. 7 billion for a startup. It is working with a Venture Capital arm of the province to the top way to act to of the domestic market is dominated two years ago. In a moment, china preparing a second round of reforms. Yvonne happy friday out of singapore. We are now just half an hour away from the open in singapore. Watching iron or and futures down another 6 . I am yvonne man in hong kong. Betty we could take a picture of singapore. Everyday it looks the same. Its gorgeous out there. I am betty liu in new york. You are watching daybreak asia. Lets get to first word news. As australian Prime Minister Malcolm Turnbull is meeting with President Trump, it seems as if he has been echoing some of the president s rhetoric at home. He is attempting to appeal to voters with nationalist, nationbuilding policies. That move will likely see the deficit expanded and could cause the nation its aaa credit rating. The wto has upheld australias right to impose plain packaging on tobacco products. A federal dispute panel agreed the laws introduced in 2011 are a legitimate Public Health measure and do not violate trade deals. This could usher in a new wave of restrictions around the world by governments who held off after four tobacco producing filed complaints. The mission to replace obamacare has staggered through the house as republicans mustered just enough support for their new bill. The 217213 vote moves to the senate now, where it is seen as having little chance of passing in its current form. Would cause millions of people to lose health insurance. Trump says obamacare is essentially dead. Mr. Trump it has been a catastrophe. This is a great plan. I think it will get even better. This is a repeal and replace of obamacare, make no mistake about it. This policy the public will now see what they gave their name two. Nancy pelosi the public will now see what they gave their name two. They put their name to paying more for less. We will make sure they are aware of that. Rodrigo duterte a called his chinese counterpart this week at the behest of washington to discuss chinas role in reining in north korea. The president asked him to find out if beijing could do something about kim jongun. Due to their case as everyone agree Rodrigo Duterte a says everyone agrees china can help do something about the nation. This is bloomberg. Yvonne time to see how the asian markets are shaping up so far this morning. Not a whole lot of big news. Are watching commodities. Lets get to the latest. You might want to close her eyes when those markets reopen. Are with oilwe prices. That takes you all the way back preopec Production Cut agreement. These are the latest prices we are getting out of shanghai in a value exchanges. These are as of midnight asia time. From the afternoon close into the overnight session, we are across the declines board. Yearolds are on their way up. We dont have trading yields are on their way up. When you are looking at pressure on the equity market, there is not a lot happening in commodities. There is a preference for cash this friday. This is the function that takes you into the index in australia. Session lows there. Broadbased selloff. 100 32 out of the asx 200. Leading those declines are a lot of commodities. One market we are following in about 30 minutes is taiwan. There is a cut off for 2017. We are basically not even halfway done through the year. We are halfway there. That has driven the index closer to 10,000. We could get there today. We might have to wait a few more days, but there is pressure now on the commodities market. Now, lets break things down. This is what has really driven the markets in taiwan. This really breaks things down by sector. Apple is your tech proxy in asia. You can see the bestperforming sector is the group of Taiwanese Companies that puts technology into electronic devices. Manufacturers. T are aurth best performer lot of parts makers in taiwan. To answer the question, is this a trade on apple because of tech earnings coming through, this a sickly answers that question, and its almost a resounding yes. As you can see, just about every single one has performed very well. Thank you. China is set to kick off a second round of state owned enterprise reform with as many as 10 companies preparing to sell today. Asia go to our chief economics correspondent. Trimming equities is a big pillar of the president s plan to rebalance the economy. We are seeing another run at this now. As far as where chinas economy is going to go over the next decade. In many cases, they are very inefficient companies. We are seeing in the latest the railase for sector, the Nuclear Sector and others. It is a vital part of how china has to reshape its economy. We are talking about the scale of the 1990s to the 2000s, but we are talking about allowing Income Investment , which the state will continue to have a hand and incorporate of the economy. Betty do we have any more details other than allowing more private investment into staterun enterprises . What else can they do to accelerate this reform . Its small steps, betty. Big physical changes with party in november. Ng up we are seeing some private investment being allowed into the sectors, but we are not talking about whole scale privatization or whole scale public listings or any of the other kind of changes you might expect. Its going to be gradual, incremental. They dont want to oversee upset the overall economy. Betty we are seeing 6. 9 right now for china. Could this revamp that kind of optimism . It could. It might be more of a slow burner. It will take a while for the management of the companies to change, for the consolidations, for a new growth trajectory. You have toe, tackle these kinds of Zombie Companies and the debt they have. This will be more consumer growth rather than a drag. Much. thank you so infrastructure. Cautiously optimistic about some ambitious projects the government is flagging and next weeks budget. Ross israel spoke to bloombergs if the plannd asked would provide new opportunities for the private sector. I think it probably will longerterm, particularly if those assets become part of the recycling program we are seeing in a number of the states. There are benefits within New South Wales and victorino in the last 1218 months. And victoria in the last 1218 months. Is the government doing enough to address the infrastructure debt in australia . Its trying. Its part of increasing our competitiveness. Theres opportunity for us to Grow Industries and be competitive with we invest in if we invest in infrastructure. We are certainly a sophisticated Infrastructure Investment market, said the capital is fair and we have the duration in the capital to invest in the long term for assets that can be productive for the country. Are their profit opportunities in infrastructure in australia . There are. Less not to privatization then there may have been in the last 18 months. There might be more secondary opportunities working with strategic players to build infrastructure or expand infrastructure. Its pivoting to a slightly different origination opportunity. How about the new airport for sydney or the land real between brisbane in melbourne . Rail between brisbane in melbourne . Elong investfair very Long Investments to deliver. Sydney is western going to be a very important part of a growth sequence in New South Wales. We look with interest at how we can leverage that growth. Betty that was ross israel speaking to paul allen. , it was only recently the big smartphone name in china. Now its number five. They are not going to stay there, however. They want to claw their way back. Details coming up. This is bloomberg. Betty this is daybreak asia. Im betty liu in new york. Yvonne man inm hong kong. A chinese aircraft maker steps upsets challenged to airbus and boeing today. The c 919 you are taking a look at right now is slated to go headtohead with the boeing 737 and airbus 320 series. Lets bring in bruce einhorn. It poetically, they call it the flower of the industry. Could it loss him and breakup the monopoly two wobbly airbus and boeing have had for decades . Duopoly airbus and boeing have had for decades question mark it cut, but this is a longterm play. This is the first it could, but this is a longterm play. This is the first test flight. We are looking at a 1015 your program. Year program. And it has been delayed twice. It was supposed to happen a couple of years ago. Bring up thisto great diagram of all the different parts makers who made 919. E c they are from all over the world. That madee companies parts are in the u. S. , ge, honeywell. This is very different they and what the japanese did when they were building airplanes. It was all japanese. Why are they doing it this way . The chinese have decided it doesnt make sense to try to build a whole program from scratch. Oute is a lot of technology there, a lot of companies out there that are happy to work with him. Why do it all by yourself . They have a lot of partnerships and joint ventures with several of the companies you have mentioned. Betty do you think they are able to gain interest from carriers outside of china . The order we have seen from local companies include china eastern. To be mostly local for a while. Chinese airlines will take direction from the chinese government. They clearly want this to succeed. Over the next fiveeight years, most likely you will see more government pressure on the airlines to buy these planes. Well, weather permitting. We will see if it takes off today. An exciting day. Lets get a quick check of the latest headlines. Bondage is expecting less fon etition quantities is expecting less competition from international rivals. Isy expect qantas expecting less competition from international rivals. Toshiba is said to have turned down a bid for its energy tech unit. A reuters report says it is hoping to get a higher price at auction. Toshiba is selling assets after saw losses. Yvonne viacom plunged after the admitted many channels have been moved to a higher tier of service. New charter subscribers can only have channels like nickelodeon and Comedy Central if they pay for the most expensive package. It could reduce viacoms subscriptions. Betty a chinese smartphone maker aims to clots way back to the top eye teaming up with the government by teaming up with the government to claw its way back to the top by teaming up with the government. There was a time they were considered the top smartphone maker and then they branched out to all these other kinds of products. Serious now getting about being a top smartphone maker . Its hard to say. Smartphones are always the entry a broad ecosystem strategy. Otherwise, the valuation would never be close to 45 billion. They are trying to invest in to advance how popular their phones are in the market, but there is some stiff competition. Largely due to samsung kicking itself in the but with the samsung note 7 debacle. Apple or samsung should be threatened by this . Launch thet to iphone eight and the f8. Exactly right. Reason apple can get better products into the ecosystem is because it has a global audience and its consistently one of the biggest chippers of smartphone shippers of smartphones in the world. The Chinese Company has to dedicate themselves to creating products that appeal to its customers. It remains to be seen if they can be taken as a serious competitor on the global stage. They stay in the top five . Its quite questionable. , samsung always has the technology and the money to bounce back. The question is whether they are able to execute. The brand handled the note seven stuff prebadly, but it can recover. Pretty badly, but it can recover. Xiaomi could drop to number six, and that would hurt it. , they were scant on the details. All we know is that they are going to be lead contributors with the government into this fund. At the moment, they have 77 Ecosystem Companies. You can buy those products online. Over the next five years, they want to invest in 100 more Ecosystem Companies and this will help them pull that off. So much. Hanks certainly, we watch them with great fascination. All theget a roundup of top stories you need to know to get your day going on todays edition of daybreak. Onare available on mobile the bloomberg app. You can customize your settings so you only get the news on the industries and assets that you care about. Yvonne this is daybreak asia. Im yvonne man in hong kong. Betty betty liu in new york. After the fed made it clear that a stopgap in the u. S. Economy will not change their closelye plans, we are watching jobs data tomorrow. Here with the preview, it looks like a big adjustment is expected, right, kathleen . Frexit certainly does. Remember, it certainly does. Remember, the jobs report comes on the first friday of the month in the u. S. It is the mother of all economic reports, the most closely watched one that we get every month. This will have added significance after the week Consumer Spending in the First Quarter. A very, very tepid number. Payrolls are at 190,000. Lets put this in perspective. Lets look at the previous months. March, only 98,000. Not that thats a terrible report, but it seems to be a pullback. So now, economists seeing a nice bounce back. Unemployment is supposed to stay low. It ticked up just a 10th. Wages though. Why arent they rising . Lets jump into the bloomberg. Year over year, Hourly Earnings stay at 2. 7 . You see this chart. Unemployment has been steadily falling but wages are barely rising. This is a concern of economists who think the fed could move prematurely. There are other indicators that wages are rising. Constance hunter of kpmg was on daybreak asia a couple of days ago saying she sees all the signs that wages are rising. Again, a lot waiting on this report. Yvonne we have six fed speakers set to speak later on in the next couple of days. I wonder, given the soft patch of data we saw in the First Quarter, are they going to be doing a lot of convincing similar to what we saw a leading up to the march decision . I think so, absolutely. They have already been telling us for some time that there are loopholes in the economy, loopholes in the data. Toet yellen is speaking the last 100 25 years at brown university. Thats an important topic, but she will probably not talk about the economy. Fischer, the vice chair, is going to give a speech on monetary policy. He recently talked about the fed being a little more data dependent. Then there is a panel at bloomberg. Charlie evans is on board for two or three rate hikes this year. Williams, San Francisco fed, pretty hawkish, speaking in new york. The question is, is it inevitable that theres a rate hike in june . World interestrate projections, the odds of a june hike are now up to 93. 8 . Its getting close to that 100 certainty. Ofhave seen a little bit volatility in bonds, in stocks, in gold. Basically, this is what the fed wants to do. Achieved certainly their positions so far. Kathleen hays joining us live. Thats all for us here at daybreak asia. Heres a look at what coming up with the next few hours on Bloomberg Markets. We have been talking about how important the jobs report is going to be. Looking at that and the bank of australias minutes from their meetings. Speak with one of our guests about comac shares. That was a great story. That is a great story. So, what other topics are you covering today . Looking ahead to the jobs data as well. Get aheade benchmark of asian fixed income, jpmorgan coming in. Talking aboutaugh further yen strength and pound weakness. And the chief executive of crucial perspectives talking about the claim and if it can be a success. On the Deputy Governor of the Philippine Central Bank as well. Haidi i am haidi lun. Rishaad i am Rishaad Salamat coming to you from bloombergs asian headquarters in hong kong. This is Bloomberg Markets asia. Haidi no japan, no korea, commodity strike on markets. Oil falling to its lowest since november. Rishaad President Trump earning a first legislative victory