Pick amid tensions. Rishaad there we go. Talking about apple. Nasdaq,ows how the which hit another record high has been powered up by apple to some extent. You can see that with apple included in nasdaqs total , but if you growth remove apple, just shy of 160 . Important apple is as a retains its status as the worlds most valuable company. You have been taking a look at the yen, i believe. Haidi thats right. The two stories, apple and the , not much in terms of reaction on the equitys story. Equity story. Japanese markets not getting a chance to react to this yen weakness. , technicalsat this when it comes to where they again is at now, still above that 112 level. The dollar is at a shortterm peak. We do have a call from rbc saying it should be easy to get but japanese markets are off until monday, some not getting a chance to get the boost from a weaker yen. We are 30 minutes away from the open. Singapore, taiwan, and malaysia rey. Ing the trading fo sophie not much in the way of direction to guide the fomc, singapore coming online come up. 4 percent, taiwan in focus given their reaction from apples results, and all see shares sliding for a second day, down. 2 . In the currency space, the its 200looking to test Day Moving Average for the First Time Since october, the kiwi dollar climbing after firstquarter jobs data out this morning, and the taiwanese dollar back below that 30 mark. Taiwan after on apples results, extending gains for an eighth day on the taiex, the longest since 2016. I. T. And telco leading gains. Lets check in on shares of ande suppliers hon hai. 5 . Up they have been the champions for year, bringing in foreign funds. This year, tie when he stocks have edged closer to 10,000 points. The last time we saw these levels was 2000. , they havese dollar helped to boost that currency. Levels lastack at seen since 2014, so line of tie when he stocks picking up around prospects of apple, although with a dampened outlook regarding sales, we will see if that has a knock on effect for tie when he suppliers and the taiwanese dollar. To now, investors appeared be using the taiwanese dollar as a hedge because it has not fallen when other asian currencies weakened. Rishaad thank you very much. More on apple, and amongst the first word News Headlines. Apples down in extended trade. Sold 50. 8 million phones on the Second Quarter against 51. 4 million forecasts. Between 43 . 5 billion and 45. 5 billion, again below estimates. Investors are expecting a major iphone upgrade later this year. President trump has tweeted the u. S. Government needs a good afterown in september congress agreed a budget deal that denies him much of his wish list. It includes no money for the border wall, a smaller cut to the epa, and full funding for planned parenthood. Democrats called his threat to shut down the government after a successful bipartisan deal shameful. The know can Institute Global conference has heard warnings over a developing credit crisis in china. Of chineseassets Wealth Management products are another sign of a major problem. 4 trillion well to in assets in the past few years, and there have been repeated warnings that chinese banks need to be restructured. What you start to see when liquidity dries up is people start going down and Company Start having problems. This is the beginning of the chinese credit crisis. Says japans top diplomat his country is ready to take the lead in reading north Korea Nuclear weapons. The u. S. Once tokyo is under threat. He told eight United Nations conference that japan would lead denuclearize north korea. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Good stuff there. Na group furthering its ambitions in global finance. It has raised its stake in Deutsche Bank to just shy of 10 . We have a look now. What do we know at this point . It is part of their Global Expansion plans and to diversify away from airlines. It is into logistics, port , plane leasing, but also insurance and finance. Hna capitalilding up has a Global Investment bank, top 10 by 2030 or so. They want to have a big footprint overseas. They made a bid for that german nordbankbank hsh and now we are learning they have increased their stake in Deutsche Bank to become the largest shareholder. In february, we heard they took a 3 stake. In march, they disclosed a 4. 8 stake. Now we are learning it is a 9. 9 stake. That takes them past blackrock, the largest shareholder at four 9 5. 9 . Bank, they saw the erosion of capital through some of the scandals that happened over the last year with the legal probes and misconduct charges, so Ceo John Cryan looking to emphasize growth because of that erosion of capital stemming from those incidents. Haidi as you know, this is one of the most exuberantly Acquisitive Companies in china. Theiroes this say about ambitions outside of china . Does this change the strategy at all . Time is an interesting because the directives from be morehave been to selective than more strategic. We have seen the struggles Given Capital controls to stem outflows, irrational outflows, na has been, but h i aggressive, really diversifying the company, taking stakes in a swiss dutyfree company, and we are expecting they are in negotiations to expand their stake in another dutyfree con company, hilton worldwide, a big stake there, sky bridge portal, but also Swiss International they took a stake in that come also gate group, a , and lastort caterer year they bought ingram micro from california for 6 billion in the i. T. Space, so very ambitious in their overseas goals. Haidi will not be deterred. Thank you for that. The fed set to carry on with its low and slow approach to rates. We will take a look at what houston expect from tomorrows decision. Next, we will be talking Exchange Traded funds or etf strategy with the chief executive of vendor securities. Rishaad this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. The worlds top aluminum producers says profit doubled, rising to 1 billion. China releasing figures a month late after a disagreement with ernst young and a short seller attack. Shares have been suspended since march 22. Suing the short select for a defamatory report. Asia and latin american spending drove gains with total firstquarter revenue reaching 2. 7 billion for mastercard, highlighting south korea, japan, and south korea helping the bottom line. Many emerging markets had not yet embraced digital payments. Looking to raise as much as 4. 5 billion in a private share sale in hong kong, bank. Everbright it will use the funds to bolster its core tier one capital. The boom in etfs rolls on, 1 billion float into etfs to buy emergingmarket stocks and bonds come eight straight weeks of gains. , this activeinable versus passive investing strategy . We will get to the founder and ceo of vandham securities. Everything isile good and the flows follow performance, but once performance is shaken, how steep is the drawdown, particularly when you consider the market has the sense of fragility to it . Thats right. It is a few things. It is not just passive etf flows. It is retail in general. That is what is making them so crowded at this point. In terms of catalysts, they could be anything. The drawdown that you could see could be in the catalyst at this point. The u. S. Equity market remains extraordinarily crowded. Haidi you say the trump reflation trade has been crowded since election, but arguably it was extraordinarily crowded over the past few months. Thats right. Harp on about how important positioning is, and it has never been more important than today. You look at any trade, it is about am i going to be expectations. The reflation trade started a month before with the end of japanese negative Interest Rate policies, but when it got a narrative, crowding got extraordinary and certain sectors, particular one that is still crowded is emerging markets, stocks, bonds, and currencies. Positioning is crucial right now. Isdi i suppose the argument when youre talking about the reflation trade in the u. S. Versus emerging markets in asia, they are very different drivers. Thats right. The dispersiones within not just emerging markets, but equities is the relationship to the u. S. Tenyear Treasury Bonds. Where you are with tenyear Treasury Bonds is they are susceptible against positioning. Speculative long positions in 10 year treasuries today is around 2. 4 standard deviations long. This kind of stress level, the last 20 times it has been stretch more than 1. 5, and we are at 2. 5 standard deviations, the payout has been positive, so we have a High Conviction that yields are going higher because the speculative community is so. Ong the 10 year bond if i tell you yields are going higher, than i know what to do ,n dollaryen, japanese stocks emerging markets. The rest is just correlation. Etfs borrowedof a hugethey could have discount invaluable if we see a major downturn. How will the etf bubble burst . It is the only question. Is the etfain you bubble will burst only when markets selloff. What makes markets selloff is the question you are really asking. The thing about passive etf buying them you are left on your own. When you give up the option audi of active or hedge fund, you are on your own. When you get a drawdown for whatever reason, then lots of behavioral responses come into play, and it will be flows chasing flows. When you do see a drawdown come the s p is the one we are concerned about here come the magnitude could be big on a flow basis alone. Rishaad im going to bring up showsart here 8238, it two energy etfs and how they divert from wti. They used to be lockstep, but in recent months, the etf energy futures, the Energy Select etf and this oil and Gas Production one, they have proved to be cheaper than oil itself. Which is correct . The etf or wti . The underlying asset is now more expensive. What gives here . It is the most difficult of all the Asset Classes to predict, and trying to predict the ratio between the etf and the underlying is harder than that. Thet of things move around oil price, the physical oil price that we dont understand, geopolitics, saudi, and aramco deal or something, plenty of things can move oil but we dont have any clear view on, and it is hard for the market to interpret that. It trades at a discount. That is telling you where most people think oil prices are going, but with the impending saudis saudi and influence on spock oil prices, i would be shocked to see or prices come down much lower from here. Rishaad nice to talk to you. Vanda securities. , question of sanctions President Trumps china pick and his strategy for north korea. That and more is on the way. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. We are talking about north korea and the tensions between washington, d. C. And pyongyang over nuclear ambitions, Ballistic Missile tests, but it hasnt stopped what is going on with the kospi, 8239. It suggests investors are sanguine about this. Thee is something called korea discount that has always existed. Have seen vibrations for korean equities market down because of the risk of war. Thethe last six years, kospi has been in this narrow trading range and we have roque and out of it with the valuation story very good. Its not like it is overpriced or anything, eps for kospi stocks below 10. There you have it. They are sanguine. Surprising, the resilience come not just external geopolitics, domestic political turmoil. Turn over a new page as we head into south korean of elections next week. Lets talk more about these geopolitical tensions. Donald trump pick Us Ambassador for china is open to sanctions on beijing over north korea. Terry branstad said the goal is to pressure beijing to do more. Lets get it over to Ramy Inocencio for more details, pretty remarkable rhetoric coming through here. So. definitely this time from trumps pick to , but onina for the u. S. The face of it, he said this. North koreas nukes are the biggest threat to all of humankind. That is a quote. Be using his diplomatic leverage potentially for some economic leverage from china to make them do what the u. S. Wants to do with regard to north korea. A little about that relationship, turns out that they have a long relationship spanning the last three decades, ever since 1985 when xi jinping who was then a provincial official visited Terry Branstad when he was a firstterm governor of iowa, but the ministry of Foreign Affairs has couched the relationship as one between old friends. That will be put to the test event when he becomes the top envoy to china. Roomd today he does see for sanctions on china when it comes to north korea. Think there are other things they can do diplomatically and economically that theyclear signal as well as the United States and other countries in the world and do not tolerate this expansion of the beginner technology and missiles by the north korean leadership. That. Not just he is also talking trade issues at that Senate Confirmation hearing, recognizing the fact that critics have said china is dumping steel and the United States and china does not allow chicken imports from the United States as well. Most importantly, north korea, boilse tensions are at a between the u. S. , north korea, and china. Nice one. Ramy inocencio in new york for us. Coming up, iphone customers holding out for an upgrade. What fallingat sales mean for suppliers in this part of the world. , buddhistictoria peak birthday, no trading in the territory. Trading in shenzhen and shanghai. Stocks doing well. We are counting you down to the start of the session. And we ared salamat broadcasting from bloombergs asia headquarters. Haidi i am haidi lun in sydney. China markets trading per usual as it is much of southeast asia, but the two biggest movers in terms of price action, the yen going past 112, heading towards 115 according to some analysts, and the apple story, disappointing. Apple falling in the after our session come up but not much of a reaction because apple suppliers listed in japan and korea, so it is the ones in taiwan seeing reaction to apple earnings. Lets get a look at the shanghai and hong kong open. Some Retail Investors are getting more fearful about how economic momentum is going. And drugs finding favor when it comes to defensive place in the chinese market. Closed along with japan and south korea, but chinese stocks coming online lower. , the specter of that regulatory clampdown, which investors are hoping will be short term pain. Commentary that chinas stock market should not overreact on the front page of the newspaper today. In shanghai, we have materials leading the drag. Taking a look at Consumer Staples, given the emphasis on defensive stocks, down. 2 . Have ins and drugmakers the top gainers, but liquor makers the biggest beneficiaries. 8267 on your terminal, indicating chinese Stock Traders have the most defensive positions in years. They have been ditching banks and oil producers. The likes of credit swiss, erring on the side of caution, saying those traits are getting crowded. The Consumer Staples index has fallen. 6 percent, and health care falling. 9 . I want to check on shares of everbright bank, the stock ending. 3 , the beijingbased Company Plans to raise 4. 5 billion in a private share sale in hong kong. Rishaad thank you so much for that. Right, lets get over to sydney and get first word News Headlines from paul allen. Group raisinghna its stake in Deutsche Bank to almost 10 . It first reported a 3 holding in february. Hna holding would surpass blackrock, which had been the largest stakeholder in Deutsche Bank according to data compiled by bloomberg. President trumps pick for ambassador to beijing says there may be a case for sanctions against Chinese Companies that do business with north korea in defiance of Security Council resolutions. Told thenstad Senate ForeignRelations Committee that he hopes recent actions by the north have convinced china to take the situation more seriously. I think there are other things they can do diplomatically and economically to send a clear signal that they as well as the United States and other countries in the world do not tolerate this expansion of Nuclear Technology and missiles by the north korean leadership. Zealands an opponent rate fell more than anticipated, the lowest since 2008, thanks to the expanding a economy. The rate dropped to 4. 9 from 5. 2 . Higherimmigration and levels of participation mean employers can offer jobs without big pay increases. Wages are rising at thisin seven years. A slump in the u. S. Auto industry shows no signs of letting up sales at all six of the biggest carmaker falling again in april. Ford and honda posted the steepest declines, about 7 each. Gms sales fell a must 6 . Fiat chrysler fell 6. 6 . It was immediately reflected in slumping share prices. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Haidi thanks for that. Apple fell in extended trained after secondquarter iphone sales disappointed, earnings ahead of forecast, although revenues fell short. What does it mean for apple suppliers . Our gadfly columnist joins us from taipei. Is this just the cycle of innovation when it comes to smartphones coming home to roost . Ofit actually it is a case as tim cook pointed out that a lot of people have been leaking too much information about the iphone and there is a lot of hope and expectation and they may be holding off on a purchase. The two Largest Companies trading in taiwan are both up, taking the taiex towards 10,000, so there is a lot of hope and believe this will be something in the Third Quarter. Unfortunately that is hurting in the Second Quarter, so it comes down to will this hype and hope to be realized or will there be disappointment in the Third Quarter when the phone finally comes out . That even if sense they really managed to it will probably not reach expectations. The more hype you have, the harder it is to get there, isnt it . That is the problem. The smart has had a great 10 years. The smart phone market is slowing down. Whichever market you look at, it was not what it was the year before that. China is one example of that. Even india which has a lot of potential is also not growing at the clip it was a couple of quarters of ago. So be slowdown is there, but look at china, india, other markets, even the United States. Percentage on top of a large number means a lot of growth is there. The key to look out for for apple will be can they keep growing but had more and more services. The other thing is that apple is managing to sell their phones at a more expensive price, and this is key. Lateste this with the samsung galaxy, a more expensive phone than the year before, so we are not seeing prices come down. We are seeing them rise because they are putting more functionality, more hardware, better cameras in their, and guess what . Consumers are willing to buy. Rishaad that is all good news, but ultimately when you do that, you continue to compress margins. Their margins are incredible, but the good days cap lest forever, can they . It is all about the software, the services. Hashardware of an iphone never been the best offering out there in the market. ,ven going back a few years ago they were coming out with cameras better than anybody else and designs that were really cool. Samsung regularly does great phones. The margins there are not about the hardware. It is about the Services Apple is building on top. As long as tim cook can keep building those services and say ,ay a premium for my phone reliable os come all the services we know you will love, then they will keep those margins going, but of consumers say i dont want to pay a premium for hardware because those are Services Mean nothing, that is when things fall apart, but we have not seen that yet. Rishaad thank you very much. Telling bloomberg are many opportunities for private equity in china, the chief executive spoke to us at the milken institutes global conference and dismissed the idea that there is too much money chasing too few deals. With all the names quoted about alibaba and tencent wherever i go. Come on. Traditionalot of businesses in china, chicken , real manufacturing estate, all kinds of businesses waiting for private capital to invest in. A lot of internet related businesses are invested in by funds. He see funds vc i dont consider those as private equity. They are vcrelated. We look at growth in china. We have private capital. We put money into small and mediumsize companies in china and help them grow. Cows,n farms, milk mining, manufacturing, there are so many things. Business is waiting for private capital to invest. People are too focused into internetrelated stuff, which is something we need to cure. Lets latch onto valuations. If we can bring up a chart, 7569. It shows how valuation and china is below average right now. What do you make of the valuations . Company,e look at a the file you wish and is calculating in the traditional way you learn from that this is school. From the business school. They comes down to negotiating skill, your personal relationship with the founder, that matters. The number is just the beginning. Not too long ago the lucrative deals, the bigger deals, were only assessable to local companies. That. Disagree with we have been investing in china for 17 years. We have our network. If we were to travel to a third tear city in china, nobody cares about the companies there. We talk to the government and the local government welcomes us they love us. They give us a lot of support. When we asked them to tell us some good companies, they are more than willing to recommend. Haidi that was inventis investment ceo there. Coming up, as the fed prepares discussions, can we expect any surprises when it comes to that policy decision. That is next. This is bloomberg. Rishaad i am Rishaad Salamat in hong kong. I am haidi lun in sydney. The quick check of the business flash headlines. Hasian carrier alitalia entered bankruptcy for the second time in a decade. Says it has exhausted after shareholders voted against plans. It was not prepared to continue. Staying with aviation, United Airlines again apologizing for hauling a passenger off a plane, saying it was a mistake of epic proportions. Telling lawmakers it should never be repeated, the hearing wass after david dao dragged off a united flight having refused to give up his seat to a crew member. Oh this public and committee answers. Hundreds of millions of people fly in this country every year. 2 Million People will fly today. They are tired of being treated inappropriately without courtesy. Something is broken, and the obvious divide between passengers and the airline needs to be addressed. Haidi Westjet Airlines plans to order as many as 20 boeing 787 dreamliners. It is expanding its longhaul capacity. Billionr is worth 5. 4 to help wes just strategy of entering new markets in asia and across the western hemisphere. It is a victory for boeing over airbus as they grapple with depressed sales for 20ill jets. Aisle jets. Fomc to assess risks sheet as it maps out its plans. Kathleen hays joins us now from yokohama. Lets kick things off with risks to the outlook. I know there is no press conference, but they may be able to do that. Basically they have that tersely worded policy statement. Reasonsone of the main why no great changes expected right now. There is no press conference, and there is some data that may throw some question over the feds plan for two more rate hikes this year. Lets jump into the bloomberg and see why they think this is the right have to be on, 3476, feds dualart, the mandate, unemployment at 4. 5 , at inflation rate, core pce 1. 6 come the headline at 1. 8 , so close to the target. Get moreion is if you granular about the data, we saw a deceleration last month in inflation, 1. 6 and one point 8 are down and moving away from the 2 target. Ets take a look at a list First Quarter gdp was only 0. 7 percent, but scene being stronger and the Second Quarter, maybe 3 or 4 on some current forecast. Spending only 0. 3 percent, week auto sales, but it is seen as transitory, and in fact again, the pickup in the Second Quarter. The inflation question may be harder to answer. The fed saying that as transitory as well. Market say there is an 11 to in may. Of a hike it is the june hike that is 70 . Carl weinberg on daybreak asia said labor markets get better all the time, wages are rising, and the fed has to move. Listen. Acknowledgede fed that this happens and it is driven by data. If prices locum maybe they wont go in june, but right now everybody is ready for it and they dont have to say anything different in order to keep that expectation around 70 . The fed may be data dependent, but the idea is they want to normalize, so people expect them to be flexible with that data dependency. Haidi it is interesting, the policy statement from the fed is only a few paragraphs long. Doesnt have enough room for it to mention a Balance Sheet issue . When it comes to the economy, lets start there. You can change a couple of words on the strength of the economy and what inflation is doing and send a signal to the markets. The Balance Sheets, they may repeat what they said in march, which is they will keep reinvesting the proceeds of the point 5sheet, four trillion dollar Balance Sheet, until they start normalization and normalization is well underway. Something the key rate has to be 1. 5 . 555, Balance Sheets from the u. S. Come ecb, and boj, they are all in or miss. This is the question, how do you unwind that . There is no rule book written here. They will be going into uncharted territory, possibly disrupting the bond market, so they are expected to take a couple of days and try to hammer out what they will be saying. Ere at who Bloomberg Intelligence is saying late this year or early 2018. Rishaad nice one. Kathleen hays in yokohama. You can join coverage of that Federal Reserve decision 2 00 p. M. New york time, 2 00 a. M. Thursday in hong kong. We wont have reaction from Janus Capital bill gross and alan blinder. Up, mays way, Peter Mandelson giving his for to on the British Governments brexit strategy. This is bloomberg. Inhaad i am Rishaad Salamat hong kong. Haidi and i am haidi lun in sydney. Details of a meeting between theresa may and jeanclaude reminder of how tricky brexit negotiations could become. The task. He is up to Peter Mandelson has criticized her approach. He spoke with bloomberg at the milken global conference in beverly hills. She said today she will be a bloody woman and negotiating with the European Union, and i must say i fear for this. At the moment, they seem to be lining up in front of each other , playing a game of chicken. They are prepared to drive headlong at each other, daring the other to blink or to turn away before they reach a head on collision. This is not a sensible way to negotiation, which is as complex and is important both for the european side and for britain, and i hope they can reset before they certificate underway and risky doing huge damage to the european economy, but im afraid if there is a crash, britain will come off for us. There is aome say sense of complacency that will end in humiliation. Jeanclaude juncker has said britain cannot expect to get out of this better than it was before as a member of the eu. How do you read that . He is right. If you have an organization like the European Union which bestows huge trade and other privileges on its members, if you cant unilaterally terror up your membership card, leave the club, and then expect to come around through the backdoor in order to use the facilities as you choose and as you wish as if you never left in the first place. Problem on the british side, and i regret having to say this, is that i think they dont realize what membership in the European Union really entails, in particular, they dont understand what the rules of the Single Market are. Mrs. May and the British Government could have taken a different approach in the beginning. They could either go from a clean break and walk away from the whole of the European Union, or find a way to remain and retain a Close Partnership with the European Union. Would meanatter leaving the European Union, but staying in the Single Market, and that was an option open to the British Government, which they unilaterally chose to take off the table right at the beginning of this negotiation. Haslinda all indications so far suggest a hard brexit. Can a hard brexit go handinhand with solid growth . Look, i dont believe that there is going to be some overnight disinvestment from the u. K. Of economy. What you will see is a steady incremental, cumulative affect , and the many years price that britain pays will be in future opportunities of investment in growth rather than a rapid disinvestment taking place in the meantime. Rishaad that was the former European Union commissioner in losandelson there angeles. Right, well, coming up, talking to the British Airways china on investment plans. Also looking at its hopes for asia and how brexit plays out and affects the Airline Business there as well. On the day with limited trading with japan, hong kong closed alongside south korea, but generally an up arrow story so far. Announcer from our studios in new york city, this is charlie rose. Charlie President Donald Trump marked his first 100 days in office this weekend. P thiseriod is historically the time when the president uses their momentum in popularity to set the agenda for the next four years. Its a common benchmark for evaluating their performance in office. According to the latest polls, President Trump has the lowest job Approval Rating of any president in history after the first 100 days. He has failed to achieve Core Campaign promises, including the repeal and replacement of the Affordable Care act and the construction of a Mexican Border wall