Transcripts For BLOOMBERG Bloomberg Markets Asia 20240714 :

Coming up. Tom a riskoff mood percolating through the markets. Of course, we had u. S. Officials coming out and downplaying hopes of a trade breakthrough at the g20, and the commentary from jay powell and james bullard, seeming to disappoint some investors who were banking on a 50 basis point cut in july. Warningsay powell said of Downside Risks have increased, but stopped short of saying that cuts are imminent, a nd jim bullard said a 50 basis point cut might not be warranted, going for more like 25 bits in july. We saw equities pullback from the initial fedinduced rally. China also looking in the red, hang seng futures down 91 points. Yesterday, the chinese banks really tipped the market lower here after the reports that they may have been involved in not agreeing with subpoenas when it comes to north korea violations. More on that later on. Moment, 6. 88 at the pretty flat, but Dollar Strength story is percolating through the asiapacific. The bond market continues to see yields going lower. Broket slightly, but we below 2 for the u. S. 10year overnight. 2. 01 at the moment. Crude getting a decent boost today. U. S. Stockpiles falling once again, so we see west texas at 58. 79 at the moment. The currencies to watch, the aht, boththe thai b with central bank meetings, and economists do not expect a change, but quite a rally for both of these. Well see if there is any dovish tilt that could derail the rallies when it comes to their currencies, at 10 00 for the rbz. Before we go, weve eased off and the on the rally, riskoff move we are seeing, negativeyielding debt in the market. You can see the safety haven play still has quite a bit of legs. The accumulation of negativeyielding debt is pretty much moving in tandem with the goal price. Out, when it that comes to hedge fund positions, still not extreme in their positions in gold. Meantime, first word news. President trump is threatening iran with overwhelming force if it attacks any u. S. Targets. Relations between washington and tehran continue to crumble, with the president even using the word obliteration, responding to the iran warning that the path to Diplomatic Solutions has closed after the u. S. Imposed new sanctions. Tehran accused washington of being retarded. The certains failure and defeat of the United States. I do not have any doubt about that. The americans have become confused, and they do strange things, things no wise person in the history of politics has done. The white house has a mental disorder. Trade war tensions hit three u. S. Hinese banks, after a media report suggested they may be caught in an inquiry into violations of sanctions against north korea. The three banks fell after the Washington Post said a u. S. Judge found three identified chinese banks in contempt for refusing to comply with the investigation. Hong kong leader carrie lams popularity has plummeted amid vast protests of her controversial extradition bill. Her Approval Rating dropped to a record low 23 . Support for her government is the lowest since 2003. The u. K. Is suspending sales of tear gas and crowd control equipment to hong kong until an inquiry is held into allegedlys brutality at protests earlier this month. Global news 24 hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Tom thank you very much. We do have breaking news crossing the terminal. Robert mueller has, is agreeing to testify before has committees on july 17. This will be seen as a victory for the democrats, who have been pushing to hear from mueller after the investigation into trump and whether he colluded with the russians. Of course, the finding was that there was no collusion, but there are still question marks and questions the democrats want to be following up on, so that will be seen as a victory for the democrats. Mueller has agreed to testify before the house on july 17. More as we get it, on those developments. Yvonne and meanwhile the Trump Administration is playing down expectations for trade talks at the g20, saying it is not prepared to compromise. President trump and xi are expected to meet on saturday in osaka, with the u. S. Demanding meaningful reforms in china. Bloomberg news has been told the u. S. Will suspend the next round of tariffs on another 300 billion of chinese goods while beijing and washington prepared to resume negotiations. Our next guest says it will be the status quo. Lets bring in Thomas Poulenc of t. Rowe price, joining us in hong kong. Note,s great to read your saying dont be a hero. What is your thoughts on the equity markets, the bond market on a tear . Is competing forces in the market, with accommodative policy, low inflation supporting risky assets. On the other hand, you have onentions on the tensions trade putting uncertainty on earnings. We dont want to take either side at the moment. We think having an approach where you take yields on one it would be the way. Yvonne it seems like the equity market and the bond market are conveying different messages. Are you saying that this is not sustainable . What will cause that to break, do you think . Thomas two things. First, trade, secondly Monetary Policy of the fed. For the last few months we had a high level of complexity, especially around trade. Now the market is resuming pricing in the middle scenario, great outlook for globalization, but still future tariffs, sanctions. The market is looking at the fed for what would be next. Bad news used to be good news for markets, but now with a rate cut priced in, bad news might be bad news. So you have to be careful. Tom thomas, one of your calls is a preference for Growth Stocks overvalue stocks. We have a terminal chart, which we will pull up shortly, showing how cheap value shares have become. Global value shares havent been this cheap relative to Growth Stocks since at least 2005. Does that undermine your conviction call on this . Thomas look, this is something we pay a lot of attention to, of course. We see a disruption in the market at the beginning of the year, the s p. Estimate 30 of Customer Companies in the s p were at risk of cyclical disruption. You see tech is delivering the future growth we want to benefit muted growthra of for the economy. So better Earnings Growth from these companies is justifying our outlook. And if you look at the composition of the sectors, growth and value, value in particular is dominated by financials and energy, and energy, we view low inflation and muted economy growth dampening oil prices. Yvonne Jay Powell Tom jay powell, before we get to an additional question, we go to Scott Morrison, the australian Prime Minister. Meeting, scott0 morrison is calling for the u. S. And china to end their trade war. Live, he is giving his first Foreign Policy speech since giving since taking office. You can catch that exclusively on bloomberg live, and later on the show. Lets listen in to Scott Morrison now. P. M. Morrison a long period of time, and he may still to this ay, but that is only demonstration of how much time andrew spent on the road, which continues to this day, promoting our incredible opportunities and linkages and the friendships we have, friendships that andrew developed prior to coming into politics. Tom that is australian Prime Minister Scott Morrison speaking at bloomberg offices in sydney. We will keep dipping into that, and we have that exclusive conversation with the Prime Minister of australia later, which we will bring you as well. Back to the conversation around the fed and trade with our guest in the studio, in hong kong. Aomas, you say you see deterioration particularly in the manufacturing sector. Fed is something that the officials are talking about, as a result of trade tensions. You say that if this bleeds over to services, it could be a trigger for a recession. Tell us what you are seeing. Thomas first of all, manufacturing in the u. S. Does not matter as much as in china or germany in particular. What we are seeing right now, momentum inl weak the leading Economic Indicator for manufacturing, justified by the uncertainty that we see in the trade tensions. So when you do not know the root of the game, you dont play it, is the trade tension putting a cloud over what the rules are. We see that manufacturing in step countries, the next would be services, potentially on hold for future capex plans, leading to not hiring as much as is needed for the economy to sustain growth. And if unemployment is rising, there could be a risk for a recession. This is not our base risk right now, but it is something we are monitoring closely, so any leading indicator of manufacturing and services would be key. S we talktay with us, a more about the fed. Ourr on, well catch exclusive conversation with australian Prime Minister Scott Morrison ahead of his trip to the g20. He already mentioned that australia wont sit back as the u. S. And china fight worsens. More from that coming up. This is bloomberg. P. M. Morrison the crosscurrents have reemerged, with progress on trade turning to greater uncertainty and incoming data showing renewed concerns. Sitting here today, i think 50 basis points would be overdone. I dont think the situation really calls for that, but i to prejudgeate meetings, you know . Tom that was of course fed chair Jerome Powell and st. Louis fed president james bullard. The yuan, at 6. 87, so slightly weaker fixing there. We had a little bit of weakness in currency, offshore currently 6. 88. Lets bring back our guest, thomas from t. Rowe price, who is not as optimistic on the market. You expect to see a 25 basis point cut in july. If the base Case Scenario comes to fall where we get some kind of resolution of talks in terms of trade, but no major deal at the g20, a 25 basis point cut in july as you predict, how would the markets react to that, do you think . Thomas first of all, for the trade scenario, that would be what the market is pricing right now. Is the fed, the Market Pricing higher than 25 basis points ,and what we are concerned about is not so much the july meeting, but more the price over the next 12 months, 100 basis points of cuts. Its difficult for us to imagine, given the strength of the market, the lowinflation data, nothing pushing that number higher right now. So that would be very difficult for us to justify, 100 basis points of fed cuts in the coming year. So i think there is a bit of complacency in the market, which we have seen over the last few days, where commentators have been more cautious about the amount of rate cuts we could get in july, and that has started to be priced into the markets, and the market is now reducing enthusiasm they have around the fed. Tom explain to us why you prefer the front end of the Treasury Curve to the back end end. Thomas what we see, the 2year is more sensitive to the change of fed pricing, so we still see we could have a lower 2year on so back of Market Pricing, more of a shortterm view that we have there. The 10year, although it might not go that far higher, it is still at a place where growth and inflation would justify a higher rate than sub2 on 10year. So having this secular strategy is allowing us to diversify our portfolio further. Yvonne how convincing does the data have to be now, to change the feds mind about cutting rates . Thomas i think that what would be key, as i said before, the services leading indicator, the hiring plan, and potentially the Global Economic momentum as well. I would say that as of now, the 25 basis points already give them a bit of room to reevaluate for potentially not september, but the december meeting. So with the current state of the economy, we would say 25 basis points. I dont really have any specific numbers, but i would say that where we are now, if that is stable, we could have 25 basis points and a reevaluation in december. Yvonne thomas, thank you so much. Head of multiasset solutions for asiapacific at t. Rowe price. A reminder once again, the australian Prime Minister Scott Morrison is currently speaking at bloomberg offices in sydney before his trip to the g20. Bloomberg clients can listen to that on live go, and stay tuned for our exclusive conversation with the Prime Minister later on this hour, the q a with our very own haidi stroudwatts. This is bloomberg. Yvonne welcome back to Bloomberg Markets china open. The mobile World Congress kicks off later today in shanghai, where our very own china correspondent selina wang joins us. Good to see you. A lot of bright lights and a lot of buzz going on this year. What is on top of the agenda . See, buzzingu can behind me there are thousands of people at the conference today. The public conversations are really focused around the applications, how china will lead in this industry with its massive market. But behind the scenes, the focus will be the geopolitics of 5g and the tensions between the u. S. And china and how that will play out. It certainly comes at a very sensitive time. Huawei has been put on a u. S. Ban, and u. S. Allies are pressured to further ban huawei from their networks. We heard from the micron ceo in its Earnings Call that they are resuming some shipments to huawei, but still huge questions about whether the chipmakers will be cut off from the largest market because of these tensions between the u. S. And china. So regardless of whether they are talked about on the main stage, this is the overhanging discussion privately. Yvonne right. Obviously a lot of talk about huawei, the 5g rollout. Who are you looking forward to hearing from the most at the conference this week . Out hereell, huawei is in full force. A gigantic exhibition hall. They have several executives speaking today, including the deputy chairman. We will also hear of executives from nokia, ericsson. I will be hearing for how european telco players might be benefiting from challenges huawei is facing. We will also be hearing from chipmakers. I spoke to the director general of gs ma, who worked with erickson for 15 years. I spoke about what the huawei ban means with him, and he is surprisingly optimistic, saying that despite what is going on right now, he believes that 5g networks will be unified, u. S. And China Networks will interact, and it is too early to say how exactly the export ban will impact huawei in the long run. Tom thank you very much. Selina wang at the mobile world conference in shanghai. A quick check of the latest Bloomberg Business flash headlines. Investors are taking billions of dollars from h20 Asset Management over concerns about a liquid holdings tied to a controversial german businessman. After almost a decade of constant inflows, they saw a group of large funds lose 6 billion in four days. They say losses are slowing and some inflows came on tuesday. Fedex recovered some regular session losses in late trade after fourthquarter earnings butshare beat expectations, the annual forecast trailed wall street projections as the trade war drags on and turnaround efforts at the struggling European Unit continue. Yvonne we are also counting down to the open of markets in hong kong and mainland china. Not looking too good at the getgo here if you are long these markets. China futures down about 85 points. Shanghai composite broke below 3000 yesterday. The banks are still in focus. It seems the u. S. Investigation hito north korea links has three chinese banks particularly hard, sending the market lower. Hang seng also down 0. 5 . Not much change from the renminbi, after a weaker fix from the pboc at 6. 88. The movers we are watching out for, the banks, China Merchants Bank taking another leg lower, 2 . It fell over 7 yesterday. Some of these banks may have been singled out by u. S. Subpoenas when it comes to the european investigations. Ping an insurance is buying back shares. China mobile, talking about 5g, that seems to be heading a little lower today, down 0. 7 . So we are Just Moments Away from the australian Prime Minister Scott Morrison speaking at the bloomberg offices in sydney ahead of his trip to the. His trip to the g20. That is coming up. This is bloomberg. Yvonne you are watching Bloomberg Markets china open, counting down to the g20 and equity markets heading south today, despite learning from our sources today that the u. S. Is willing to suspend the next round of tariffs on another 300 billion of chinese goods while the u. S. And china prepared to resume talks in osaka. Seemarkets still disappointed about the fed. Tom and u. S. Officials trying to play down expectations ahead of this g20 meeting, those riskoffeading to a move. The china beige book saying that for the Second Quarter the economy looked like things were improving, but they say dont hold onto your hat, things probably wont be sustained in the improvement they see in the Second Quarter. Opening in the mainland markets, the csi 300 below the 3800 level, with red on the board as investors digest the comments, taking some risk off ahead of the g20 meeting. Shanghai down 0. 7 . Shenzhen down 0. 8 . The individual stocks, the individual stories to highlight. China mobile, as yvonne said before the b