It is past 8 00 a. M. This daybreak australia. We are a few hours from the major market open. Betty it is after 6 00 p. M. Sunday evening in new york. What a weekend it has been so far. We caps off friday with capped off friday with some gains in the indexes. You can see the dow jones just ekeing out that game, the nasdaq higher. The s p also higher as well. Numbers, from friday, making people think the fed will not raise Interest Rates as much or as quickly as some might expect. But we saw this over the weekend, the tragedy in charlottesville, President Trump under fire now as we mentioned for his response. We will see if that will affect any type of agenda the white house for the white house. We are listening to news on north korea. Haidi the idea of political discord is in the u. S. And if that will affect the policy agenda, what that means or the fed Going Forward. Have the follow the loser, follow the leaders sentiment. U. S. Stocks posted the biggest weekly decline since march last week. That rebound friday, that could lead to a mixed session in asia. New zealand is trading, the index looking pretty flat. The kiwi dollar was one of the worst performers last week. Likely the aussie, the qe at the yen to have changes. The kiwi and the yen to have changes. We see a pretty flat start to the trading week with the aussie dollar where it is. We have the Chinese Industrial production, all of that is coming up out of china. That will be key for us when it comes to the aussie dollar and the kiwi. That is one of 7. 91. 107. 91. From bloomberg. We will give you more details on that. Lets get you caught up with the first word news. Haslinda amin has updates. Haslinda good morning. President trump is repairing to turn up the heat in china. He is expected to sign an executive referendum. They could consider launching an investigation. Officials say it would focus on u. S. Companies in china being ced to offer for technological expertise. Trying to keep paris off the agenda as they prepare for nafta talks this week. Mexico is approaching the meeting as a way to modernize the deal to block any attempt to reintroduce tariffs. Most issues will be wage issues related to labor and intellectual property. Chancellor merkel and her challenger want to protect the german auto industry. That is in the election next month. Seeking to escape political fallout, they put the blame on volkswagen. They said makers put the issue under the park it and that management was irresponsible under the carpet and that management was the responsible. Dont miss the 30 minute special every wednesday half past 3 00. We have the latest political analysis ahead. The uber investigators say the this is designed to hold the company hostage. They wanted to quit. The investors do not have to impeach themselves but one other shareholders to end their support. One man withheld information before asking the board for additional information. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am haslinda amin. This is bloomberg. Betty lets get to the top story, top u. S. National Security Officials have tried to cap down fears of tamp down fears of nuclear war with north korea as they prepare to meet with south korean leaders. Joining us is ross krasny. What do we expect from this meeting between top generals and the president of south korea . I think the top general may want to go into south korea and address the fears that have been generated across asia the President Trump in his effort to keep homeland safe, with the parts of asia as collateral damage. Also to clarify and private the things he has said publicly. We had the fire and the fury. We had the escalating round of comments from donald trump. And our asian allies would like to get clarification on behind the scenes. Haidi can trump really take a hard line with china . Hisan lean on support of coverage with korea. Ros it kind of goes back to some of the things President Trump said on the campaign trail and his efforts to really tie any progress with china and trade. Now it is all about south korea. Im sorry, north korea. Behink there may once again more going on among his advisers and we really know about van we really know about. Than we really know about. It would be seen hard to see china pitching in and the focus of the trade investigation as we expect to see tomorrow. Betty certainly there will be a lot more headlines out of north korea, but we saw over the weekend all of the headlines from the tragedy in charlottesville and Donald Trumps response, which drew a lot of fire for his critics. From his critics. This is what h. R. Mcmaster said on one of the morning shows about this event. Anytime you commit an attack against people to incite fear, it is terrorism. It needs the definition of meets the definition of terrorism. But you see someone who is a critical, committing a criminal act against fellow people. It may have been motivated, and we will see what has turned into this investigation, by the hatred and bigotry. We have to extinguish this in our nation. Betty criticism that trump was not harsh enough, condemning the attackers. To upset att this all the agenda that will be a distraction for President Trump this week . Ros there is not too much going on with congress out and really much of washington on a summer break. There may not be any immediate impact, but we could see a number of republican lawmakers who normally would be supporters of trump including Senator Cory Gardner from colorado, the mainline republican, coming very critical after the president. After losing support from his own party, that makes his legislative role more difficult to achieve down the line and even anthony scaramucci, the disgraced former communications director, said he said he should have said more. And trumps issue is he will not say the word. The white house had a statement saying trump condemns the white supremacist groups, but people would like to hear it from the horses mouth. Haidi it is interesting because you had a response from hillary clinton. You had a response from barack obama, but is there a sense that this is confusing messages, trump himself always saying one thing, then you have other people in the administration walking back to finetune the message . Ros that is definitely not unique to this issue. It is something we see often. President example trump on friday talk about the possibility of a military option in venezuela, which took a lot of people by surprise. It has been walking back of that as well. There has been walking back of that as well. There is this issue with clarity and consistency out of the white house. I will be back with you for more updates in the next hour. Something going on in washington, what to watch out for. Staying on the korean peninsula, the news that south and north korea, which seoul stocks are the goto for investors. Haidi investors with a high risk for appetite. And the interview with the gm ceo. From highurning away rollers and betting on the mass market. This is bloomberg. Betty good morning. Haidi im haidi lun, you are watching daybreak australia. Tensions triggered demand for safe haven assets. We will go with more on what that means. We have the head of fx strategy. To look at your portfolio and go into a safe haven. He represents the subject he suggests gold. [indiscernible]. It is still very binary i think something will happen. Haidi really bad . I dont think we can talk ut vanilla the relative they will be going to the supermarket for bottled water. We use the vix as a shorthand proxy for risk sentiment. We have gone from 10 to 15 . The longtime average is 20 , so it is the environment where it is more on that off. So in that sense you cannot argue the market has taken significant positions against the escalation. Haidi how do you calculate that risk . As you say, it is a binary thing. We really should not [indiscernible] ray you think gold is the obvious sort of shortterm. That is the most obvious one rather than deciding on the relative merits. Haidi are you surprised by the lack of reaction . Ray not really. It is confusing because we have also got ongoing soft data. There is a downside to price on cpi, so we are trying to disentangle the stepping up of rhetoric with respect to north korea, or the message is the u. S. Treasury market remains a safe haven. The japanese yen is the preeminent they haven currency safe haven japan currency even though japan would be close to what takes place in the korean peninsula. The market is scaling back expectations. 35 , and them market is looking to the end of next year. That is obviously relying on the downtrend in treasury markets. The yen is benefiting both safe haven states and it is still the currency most sensitive to the treasury market at the moment. Is a counterintuitive ,ith a complex set of factors japan is quite clearly one of the players and on the board or potential escalation . Ray when you think about safe havens in the currency world, what is driving is the countries with the biggest stock of savings outside their country. Japan is the worlds biggest saver as far as assets overseas. Comeses of stress, money out to safe havens whether it is the bank account. There is more japanese money to come back into the bank from overseas. That is the key driver, and japan is integral to the geographical site. It does not change that dynamic. Betty talking about safe havens. There is a bloomberg story last week that was one of the most widely read about how the current renminbi is becoming full of risk. Let me show you what is happening in the last few sessions. 4993, you can see it is representative of the offshore and onshore, represented by the blue and white line. The yuan picking up ever so slightly, getting this status at least for now, and is widely debated, can it be a safe haven, but giving it a safe haven currency status. What do you make of that . Ray i would not describe the yuan as a safe haven. They get in and out in a short notice, and it does not qualify on those grounds. The u. S. Dollar has been trending lower. That allowed authorities to give it relative strength to shine through. Moderatingssful in for the various measures. We need relative strength in that context. It is a u. S. Dollar that finds its feet. Risk is that we would see the dollar against the chinese currency start to trend higher. I am willing to sign up for the concept of a safe haven. Mark you cannot look at it as just isolation. You have to look at the dollar and with the fed as you alluded to earlier. Do you think the dollar will find its seat later on in the year . Ray we do because we have faith in the evidence of higher wages, High Consumer price. I dont think it will be evident until late in the year which is why we are sticking with our guns until next september which the market has it is pricing out. Says it is pricing out. If you look at positions on friday, we have the short u. S. Positioning against the composition of g10 currencies. It is the shortest since 2013. You look at the euro, it is at the highest long position going back to 2011. Last summer with decent streams, it did preface quite significant correction, the euro from 115 to 140. 5 ine dollar rallied by 2013. So i think the position has become extreme, that is one reason why you are on the lookout we are on the lookout. Markets are reassessing for the fed, that would be one fundamental capitalist. Betty you surprised how the numbers were in the u. S. . Ray we were looking at that consensus. Reading around the numbers, there was a bit of a quirk in the hotel prices, that was the big source of the downside of the price. It is hard to square with the fact that hotels continue to trend high, which would be associated with higher, not lower hotel prices, but there you are. It will take a little while before we start to see the numbers picking up. Looking at earnings numbers, it will not take much. We get a quarter percent of a year, average earnings are above two and three quarters. So he will be modestly higher between now and the end of the year. Haidi you dont you like that is putting off a longer theme in the u. S. But not just globally . If you look at the dollar weakness given the dovish0ish said dovishish said, what does that say for the aussie dollar . Ray if the dollar stays weak, there is no doubt the aussie will be here. Interesting on the back of the bank of new zealand, rba trying to talk down the currency. The data had a bit of an impact, but the numbers were coming into context. The u. S. Dollar starts to weaken again. The aussie and qe are back above levels before the respective job earnings. Still for a is recovery that will bring the aussie material up before the end of the year. We can be confident the high is in. Haidi the r. B. I. Would be willing to intervene in extreme cases. Be for themave to to intervene . Ray more like . 90 rather than 70 something. It is more overvalued quite as much as 10 . Again, Market Conditions have to be conducive to intervention being successful. In the context, that is not nearly there. The last time it was in gse, it was a buyer, not a seller. Rba trying to the fight the tailwinds of a strong dollar is a long way off. Haidi thank you for joining us this monday morning. The head of fx strategy. We will have more on analysis when it comes to north korea and how markets are reacting. We will speak with the south Korean Ambassador to the u. N. That is in an hour. This is bloomberg. Betty good morning. Haidi a policy for looking at what is happening at australia, earnings season arrives. 188 million, we were not expecting that. We have signaled a couple of major impairments with just one month ago. There was another one back in january for 236 million. It was a pretty grim set of numbers. I believe there is some word of ending off into businesses, putting containers on trains. And citigroup, the report was out this morning there could be worse to come. The two rallies were electrified. We have issues with rising electricity prices in australia. We have more from that with the ceo joining us later on at 10 past 10 00 hong kong time. And new crist, we are waiting on them. There will be gold prices keep even though quarterly production slipped. The cost has been reducing. We watched a possible change in dividends whether new crist will continue to new crest will continue to hold on to that were get back to shareholders. Betty glencore managed to grab that stake in rio tintos unwanted coal assets, now chasing another company. Paul this is according to local reports. Nobody cited here, but the u. S. And gluten at glencore is looking at rio tintos alumina business. That is a big division that owns a power station in australia, in large smelter which produces 210,000 tons of aluminum only and new zealands only aluminum smelter. We look at g btv 6411, aluminum is performing well in the past year, outstripping other metals. An attractive asset. It is worth knowing that rio tinto has tried to sell this business before. It is possible glencore and century, it is a bit of a bargain. You. all right, thank paul allen with what to watch in australia. Up next, we are live in beijing to find out how facebook is on a new way to secretly enter china. Another way in. This is bloomberg. Betty you are looking at a scene in charlottesville, the scene of the car attack in charlottesville where one person died. Twoto state troopers state troopers dead. We had vigils across the country with people chanting love trumps hates. This is an commemoration of the people who died in the attack and several who are still injured. Trump, lambasted by many, saying he was too late and too soft on the attackers. This is all over the removal of the confederate general Robert E Lees statue in charlottesville. The scene of the attack, visuals being held tonight. E are watching this today whether it will have any impact on the white house agenda Going Forward this week. Lets get to more news, first word news with haslinda amin. Senior u. S. Officials have tried to lower fears in north korea after days of rhetoric from President Trump aiming to support him but not raise the alarm. Mcmaster said there was no indication of hostilities to break out. The chairman of the joint chiefs of staff will meet with the south korean president later on monday. President trump remains under fire after the reaction from the White Nationalist rally in virginia. He failed to denounce the anti the the altright group. Driver has been charged with seconddegree murder. Donald trump we condemn in the strongest possible terms this a gracious display of hatred, bigotry, and violence on many sides. On many sides. Response the lukewarm brought a furor from lawmakers. The white house has released a statement saying the president condemns forms of violence, bigotry, and hatred. That includes white supremacists, the kkk, neonazis, and more. People wanted your the president say that himself. Want to hear the president say that himself. Bank is under fire. Caliphate in the californias Maxine Waters once the bank to disclose its review of 300 million in loans to President Trump before he ran for office. The u. K. Aims to rejuvenate the sluggish brexit negotiations this week with the first outline of its positions. They will enter discussion talks ahead of august 28 which set of proposals for northern ireland. These talks have led the chief you negotiator to warned that the agreement may not be possible by the next leader summit. Iran is boosting spending of the Missile Defense in response to new e. U. Sanctions. 106 million will go to the system to improve the capabilities. Hostilees say it is against american adventurer aimed at sowing division. Washington has imposed new sanctions since President Trump took office. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Amin, this is bloomberg. Thanks for that update. Lets look at the markets. New zealand is trading. We are seeing a pretty flat kind of morning. Dollarnchanged, the kiwi sitting at 0. 73. The future is looking not good. E have china data out today retail sales, we will be watching the aussie. And looking more broadly, the japanese yen, clearly we are watching safe haven assets given north korea very much continues to dominate. The 109 holding onto handle. The yen is holding onto the 109 handle. Well talk about relative vulnerability with the treasuries and the other Asset Classes in a minute. A reminder of how we close on wall street. We had a bigger rebound with stocks. That should lend going into the asian pacific. Lets look at trading in asia. Haigh, looking at this. Talk about the rates market compared to the turmoil we have seen engulfed in the fx. It is quite stark the thetive bond prices and spike in equity volatility. We have a great chart here, 3708, which captures the move index, which tracks options and treasuries. There is a key here at the blue line. We have the fix data spiking up data spiking up here looking at the average of the year, it is well below that. Is a sense of what is going on domestically as well. Weak cpi numbers on friday. The bond market is not worried about geopolitical concerns would forgive Equity Investors some hope would give Equity Investors some hope. Mrs. Coming back after a tough week last week. This is coming back after a tough week. Betty there is a warning for inflation which would have been negative for bonds, but the depth market is unruffled. Why is that . Adam it is. 4038. T this chart, btv it shows you the extent of how the bond market is on the blue line, holding on the change of last quarter against the real ramp up in prices with the white line. It is showing you the kind of a lot of that is speculative activity at the moment in the steel market in china, domestic speculators have been bidding up prices. That is on the belief that demand is holding up and will continue in a pretty strong situation. You would have expected in that case for the bond market to selloff a little more. It is not happening at this point. It remains to be seen whether this is shortterm speculative activity or more a vindictive sign of longterm strength with demand for commodities holding up in china. Today we get the latest indicators. We have retail sales, fixed asset, production numbers. That gives us the latest the data. T key data. Betty adam haigh in sydney. Lets stay on china. President trump may find out taking on china and trade is harder than it looks. Takesoperty investigation the spotlight. Tom mackenzie joining us with the details on that. He found out there is no easy win on the issue of trade with china. [no audio] ok, we cannot get the sound up for tom mackenzie. We will get back to him. Oh, we have him now. Tom . Tom i was saying you will remember trump leading up to the inauguration voiced potential, potentially he was going to slap tariffs of up to 45 . That has not happened. They have been looking for ways, pressure points to put on china over trade. Over the weekend, we heard trump will on monday, the u. S. Trade representative will consider investigating china over the intellectual property violations as the u. S. Sees them. If they take it on, it will carry on for a year, and it could result in tariffs. The other issue was when we heard at the end of the week the aluminum foil products china ships to the u. S. And the fact the administration is looking at slapping tariffs on those. What experts have been telling bloomberg is it is a complex procedure. It is difficult for the administration to hit out or u. S. E tariffs, impacting consumers, businesses or allies, whether south korea or japan. Many countries are supplying parts to china which are shipped to the u. S. Aluminum steel exports from china make up 3. 5 of the overall export time for china pie for china. 0. 7 . It is proving a difficult issue for the u. S. Administration to tackle. Saya, bloomberg economists that trade war with not happen. It would impact chinas economy about 0. 1 . If that were to happen. Aidi lets talk tech for second. In china, we are trying to get into that. They found a new way to enter the market. Tell us what we know. Tom colorful balloons. It is an apt that looks like that looks like instagram. It was launched secretly and a way for facebook to get a better feel of the market. All facebook has told us is they are learning and spending time trying to learn about the chinese market, but we know they are keen on trying to get some kind of foothold in a market where we have 700 million internet users. Facebook was banned in 2009, but Mark Zuckerberg has studied chinese to try to see what they can do. At a time, china is clamping down on censorship of social media to a greater degree. Haidi overtures indeed. Thank you for that. Tom mackenzie in beijing. Pressure mounting with the tech giants in china. We are discussing what could happen from alibaba and tencent. This is bloomberg. Betty this week on wall street, up fresh round of earnings. Tencent, major conflicts involving the white house, domestically and internationally. Plenty more. That is when you have seen volatility spike up. Su geopolitics could overshadow the new earnings, the new economics. Not only the geopolitics in korea, but this new political storm that has resulted from the events in charlottesville. If you look at the green on the screen, it does not get any clue of the volatility we saw throughout the week. Thing, see from this chart it was the biggest fiveday spike in the vix we have seen in a long time pretty much since the election. So that tells you how many ,trategists have been saying they were due for some kind of event in the market. When you throw in the politics, this could be one of the risk off week, very difficult to tell. Looking at the earnings, these are major names, cisco, home depot, big tex names. Tech names. Retail sales are key, because they determine how consumers are spending, while likely we will hear more from Ramy Inocencio in the next hour. It has been tempered by local auto demand. Housing sharks, business stories. All of that will provide some indication of house gdp how gdp will be stronger in the second half than the first half. We talk about big companies, these are Major Chinese retailers. Alibaba and tencent, a lot of investor focus here. Lets go into some of the issues that are in the forefront. First of all be traded much higher from facebook. We talk about bank stocks, facebook, amazon, these have done so much better in terms of the expectations, the expectations 30 , profit gain for alibaba alone. Justifyhey will have to their high stock prices. Thank you so much, su keenan with a look at wall street. Lets stay with the talks she mentioned. The head of asia, telecom and internet research. It is great if you are an investor in the stoxx or made quite a bit of money. Or made quite a bit of money. Do you think these valuations are too rich . It is reasonable at the current level especially for the big names. Theou look at alibaba, forward growth is over 25 . For tencent, you are trading at a premium. It is only because they list in hong kong. They are everywhere. Now we dont see the amount it ifl contract from here, but they go forward for year, the stoxx perform. Stocks perform. Betty some of that is from acquisitions. Alibaba went into gross earnings far earlier than amazon. They have been acquiring and diversifying. We have seen jack ma want to connect more with brickandmortar, that industry and bringing the retailing iling offline. Ta would that be enough to propel earnings Going Forward . Elinor a lot of people worry , alreadyna ecommerce too high, 50 retail sales, well above the rest of the world just behind korea. And it is below 20 this year. And when you look at the data, that surprised everyone. China online sales grew accelerated 32 , 26 year on year. You look at this it is growing 26 . A very strong number. China consumption and second, the product premium line. Third is because he grocery egrocery, and also ecommerce. The market is ready in china versus the rest of the world. Betty i want to talk about tencent, which has a huge gaining base. Some are saying, how much can they really grow . This shows how much gaming revenue has propelled the stock. This is 1265. You can see that tencent with the white line here finally getting to the consensus target price among analysts. You could see the stock was dropped after that point. About howome concerns much more can they get out of gaming, and what can they do about ad revenue. Add revenue on the weekend platform. The chat platform. Elinor mobile data is very strong. In particular is tencents new game. Playerser 50 million playing the game i daily basis, and the good things about the game is a mobile type of game. Is player versus player, you dont need to do extension packs to drive the excitement of the game as long as you launch more tournaments. People can take place in the game, and they will pay tencent in return. That is why the game is doing extremely well so far. They are at the beginning of monetization. We see the mobile game market will continue to sustain at the current level. China, tencent, it is already dominating the market. Tencent will continue to be a major player. On the advertising side, we also benefit from ecommerce. That was one of the major platforms that will advertise to do random advertisement in china. In the last quarter they relieved inventory on their chat platform. It could be strong. Haidi thank you so much for that. The head of asia telecom joining us in hong kong. Breaking news in bloomberg, a couple of things from the bank of australia. By the end of the 2018 financial remuneration, it was 5. 5 million aussie dollars. He has been at the helm of the afternce december 2011 the bank came out and said he would remain enrolled, and his resignation calls for executives to be punished in this scandal, to do with some 53,000 cases of large cash deposits. Money laundering and financing of terrorism, the latest is potentially a Parliamentary Committee will determine whether the man will be facing parliament over this case. It looks like the scandal involved with the bank of australia continues into the under week. Into the new week. Like the scandal is continuing to claim his victims, so to speak it victims. Its victims. Necrest, for underlying profit at 435 million. 308 million on net income, that is lower than estimated, 343 million. Also noting Gold Production for 2. 4 to 2. 7ar, 2018, million ounces. Their net income coming in short of analyst estimates. All ahead. Betty good morning. I am betty lou in new york. Haidi you are watching daybreak australia. We look at the business flash headlines. The last of the people thatsoned in a chapter showed illegal gambling, the highroller revenue cut in half. The head of the international highroller corporation with the last of three australian crown employees to be free after sending spending their jail sentence. Betty another loss for cathay pacific. They need an urgent change of course. They can forget being asias top choice for premium flyers and need to attract chinese travelers. The first half lost on wednesday of more than 150 million u. S. Haidi that is also it for daybreak australia, but sherry and betty are up next. Lets take a look at what we will be watching as the asian trading week gets started. Clearly geopolitics will continue to dominate. North korea shery the u. S. People were saying there where we are not facing an imminent nuclear war. And also talking to south koreas ambassador to the u. N. I have not spoken to him in a decade. I knew him from my time covering the Foreign Ministry in south korea, he is the perfect person to give us perspective of where south korea and north korea are in the geopolitical tensions. Betty sounds like a great voice to have, a voice of reason amid the rising tensions. On this chart i have, 8641, tells the story of japan. This is what we are expecting, gdp numbers coming out in the next hour. Nicholas smith will be joining us to talk about that. And shery,betty will follow this story, the turmoil with the australian lender. In the last few minutes, they will step downeo and retire by the end of 2018 financial year. This comes weeks after the allegations of 53,000 cases going into terrorist financing and Money Laundering. Whoooo. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if. There was a single site. Where you could find the. Right hotel for you at the best price . There is. Because tripadvisor now compares. Prices from over 200 booking. Sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Betty lowering the tone top u. S. Security officials seek to call the rhetoric, saying war with north korea is not imminent. Shery President Trump tries to ward off the critics as a Top White House officials says the charlottesville death was terrorism. Betty just breaking moments ago Commonwealth Bank says the ceo is to go. Cba accused of breaching Money Laundering and terrorism laws. Shery facebook secret message has found a way to enter china with a new
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