Transcripts For BLOOMBERG Trending Business 20160614

A funding drive for a Silicon Valley startup. The stock is up. Kuala lumpur just coming on line. A lot to grapple with so far today. Whats going on . Market order, just , was dontthe price lose money. Try not to lose money. Try to not lose as much money as possible. Lets get started with what happening injured dan. Japan. What happening in we are down over 7 . Normally, that would be the biggest drop in years. Thats only the biggest drop going back to may. There we go. 8 . 8 now. No one stock is actually driving that. I was looking at my bloomberg. Just about every single stock on the index. Every single one, with the exception of maybe five way down. The its pretty broadbased with across. Declines the nikkei down 2. 25. The global selloff. Let me get you in number. From the close on friday, we are cap thatsa market basically been wiped out. 1. 5 trillion. At least. Thats just the worlds biggest socks. It doesnt include these smallcap stocks. Are looking at yields pushing further and further, in some cases into negatives. Australias 10 year, for example, that has been a record low. Japan is further below it 17 basis points. South korea. Its almost like quicksand. What happening in the bond market. The more you try to get out and find yield, the lower the yields actually get. We are looking at liquidity. 10 year li right now seeing a little bit of an uptick. Lowest april for the u. S. Tenure. Year. We are close to recession lows in the session. You get a sense of which cap is taking the lead. Lets get you updated. A survey by the guardian shows the League Campaign opening a 5 or six point lead ahead of the Campaign Opening a 5 or six point lead ahead of next weeks vote. We heard one person ask businesses to step up and make their voices heard. Listen in. Investors who are concerned should speakspect, up. Many businesses have done so in recent days. A moment to sit it out. People should speak out about what they see are the risks and opportunities. , very quickly, we did a poll and the experts are telling us that if britain does vote to leave, we are looking at sub 135. If britain does stay, we are looking at 150, day after. Lets have a look ,t microsoft buying linkedin one of the largest deals tech has seen. As expected on the news linkedin soars linkedin shares soared on the news, while microsoft shares went down. Bringing together the professional cloud and the professional network. 196 dollarsll pay per share in an all cash deal. Thats nearly a 50 premium. Microsoft largely missed out on boom. Mer web bill this is a way for them to sprint ahead with social tools. Construction will largely remain the same. K in will continue linkedin will continue to operate independently like youtube. Rely on microsoft for potential customers. The transaction is valued as the most expensive of any major deal. It will be, by far, the largest acquisition in the companys history, of microsoft, much companyhan when the bought skype, which had largely been written off as a company to itsd not live up initial promise. Can microsoft get this to work . Its about bringing together the professional cloud, which is in the core of microsoft, and the professional network. The dream we always had is how can we connect these two worlds so that our mutual users, the professionals of the world, can get their work done more seamlessly . That is the vision. How is this integration going to work . Trying to make linkedin the social fabric of all of office. Will besocial profile there on all of your operations, excel, powerpoint, and the like. Why is this an all cash deal and why is microsoft are owing to buy linkedin . They have enough to buy linkedin four times over. It may be because it will lower the tech giants tax ill. While microsoft does have 100 billion in cash, most of it is parked offshore. If they brought home any of that to fund the purchase, it would bill. Te quite a tax as far as how the Tech Industry will respond, many are interested to see what this will bring. In deed. We will have a deeper look at microsoft and linkedin. Let us know what you think on twitter. Changing portals in china. Lets have a look at that story. Likely to take a hit on new rules for online ads by health care companies. The forecast is cut, down from more than 3 billion to 2. 8 billion. Company said revenue has been affected by reducing the numbers to 30 of the results page, which baidu announced last month. The restrictions came after authorities investigated the death of ace to do and who sought a student who sought out controversial treatments advertised online. Now, Virtual Reality and augmented reality are pretty at for theits o future of the Tech Industry. A Silicon Valley startup called is a relatively small player in augmented reality, which superimposes digital images on top of the physical world, and says it will use the money to develop a headset that doesnt rely on a pc for power. Another company is backed by hong kongs richest man. So, korean hour or companies have rated more offices. In engineering and Construction Company were reported to be among the units. Just yesterday, the group said it was pulling an ipo for its hotel unit after considering its internal and external issues. Pressure is building as authorities wide and investigations into the group. On friday, headquarters and other units were rated as prosecutors look into allegations of slush funds and embezzlement. There is another probe going on looking into possible bribery. Shares are falling. We will take a quick look now at how they are performing. All falling this hour. Index investors are about to find out if they will be compelled to buy shares in the worlds worst performing stock market. Heidi is having a look at just what they are getting in for if mainline chinese shares are added. This is not the best right now, but its not all new shares that would be included, necessarily, or am i mistaken . Mistaken. Not it would happen over a fairly get full before we inclusion. It has been fairly quiet on the mainland markets over the last few months, ever since last summers 5 trillion selloff. Its down 23 today, the worst of all markets. Take a look at where we are sitting. We are looking at a loss from the peak of last year. 43. 5 . Here is where they last held off, seeming to dodge a bullet. We saw things unravel. Take a look at this. You can bring all of these charts up on your bloomberg. Turnover has been lackluster as well. Average shares trading down about 84 from last year. The interest isnt there. We are looking at about 23 billion of trading this month. All of this will be one of the we are looking at as they prepare to make their decision in about 20 hours or so. Volatility has come down as well. But compared to last year, we are looking at Chinese Markets now less volatile than what japanese markets are trading at. That is not something we would have expected going back to this time last year when we had aaining at 8 trading at percent on the day. They are hoping this is third time lucky. They are concerned about market worries. Ty, liquidity ownership rules. So many concerns have eased. There is a 70 chance of itssion tomorrow, but going to start off small. A 20 billion 30 billion input. They do see over the next five10 years, broadening out to full enclosure. An investor ownership could go to 10 in the next decade. Thanks very much indeed for that. We have to take a break. Coming up, apple and the instant messaging market. We have the latest from the Developers Conference in san francisco. Up next, the brexit. How much uncertainty can the markets take . Its 9 15 p. M. In hong kong 9 15 a. M. In hong kong, 8 15 a. M. In jakarta. Heat these are these are the stories making headlines around the world. The president said he was a terrorist that authorities have long feared. He was twice interviewed by the fbi but was able to buy a handgun and assault weapon legally because he had no criminal record. 49 people were killed in the pulse nightclub. At the lastama minute, he announced a allegiance to isil, but there is no evidence so far that he was thisted by isil, and at stage, there is no odrick evidence that he was part of a larger plot. No direct evidence that he was part of a larger plot. People have fled the fighting in falluja. Several thousand escaped in the last two days. Iraqi forces and their allies have attempted to retake the city from the socalled islamic state. Human Rights Groups say thousands of civilians remain trapped in a central cities. Chinas Oil Production fell by the most in 15 years last month. Another sign that opecs strategy of flooding the markets is driving out suppliers. Energys the biggest consumer in the world, but reduced output in may, the biggest decline since 2001. By 5 could be falling this year. China expects oil and Gas Production to fall for the first time in 17 years. Powered by over 2400 journalists in 100 50 bureaus around the world, this is bloomberg news. Investors growing increasingly cautious ahead of the u. S. Central bank meeting and britains vote on membership in the eu. A hike rate a fed rate hike is still on the table. Our guest is in singapore. Christopher, thank you for joining us. We have those two, the boj, and msci inclusion. With all of this going on, is it better to be in a darkened cave . Maybe. You have a lot of things going on. Said, the fed, similar to last year, we just talk about the fed every month. Nothing happens. Now we have brexit coming up at the end of next week on thursday. Boj is not expected to do anything, but they have come out with surprises in the past. Shortterm, youre going to see a large increase in volatility. I think we saw this last friday. It started in the u. S. Stock market. The volatility index jumped up 16 and then follow through last night with another selloff, another 23 increase on volatility. We had volatility moved from 14 to almost 21 over two sessions. There is definitely a lot of uncertainty in the markets. Markets like clarity. Until we get more clarity, i think, you know, it might be. Est to step aside our customers at td american Td Ameritrade have been more aggressively buying equities the ghana little more into cash over the last couple of days. I think we will continue to see that volatility as we get through the fed this week in the brexit meeting next week. Lets take a look at the immediacy of things. Thesenclusion for some of asian how big of a deal is this . I guess this is more about the message then the actuality . Agree with that. The msci vote is later today. To include china and most of the shares in the index. , trying to broaden the investment base for the , for Fund Managers to be able to invest in china. You also have the our qc, which for the First Time Ever has billion thatut 38 will allow people in the u. S. To invest in the Chinese Market without having to use an offshore broker. Things are all helping to broaden the investment for the yuan is a global currency. Have a bignt, we vote coming up. You see anywhere from 50 70 if you ask city or goldman if the msci is going to vote yes to add china. A lot of people are Holding Tight to see what happens over the next 20 hours. He reckoned the fed will not do anything, but there could be as many as two rate hikes this year. Of two still in the camp more rate hikes. My camp might even losing some members lately. But the fed hasnt really changed their stance on wanting to have two more hikes by the end of the year. If you look at the fed funds futures, you will see most likely we are looking toward september and a december hike. But dont take july off the table just yet. At about 20 probability if you look at the fed funds futures to raise rates in july. After we get a little more clarity from the markets this week, bank of england, bank of japan, the brexit next thursday, all of these things look hopefully, little volatility comes out the market. We have more direction going forward. At that point, july might still be on the cards for a rate hike in the u. S. Brexit, brexit is what we are hearing all the time. Ready for britain to leave the European Union . Critics you know, its the unknown. Are markets ready for britain to leave the eu . You know, its the unknown. Stocks could decline as much as 24 percent. Brokers like us are raising house margin rates for currency and treasury products that are affected directly by a brexit remain or stay. A lot of uncertainty in terms of what happens. To seize some shortterm volatility increased this july up through 23, next thursday, and shortly thereafter. Hopefully, we will have a better indication of what going to happen, whether they have decided to go or decided to stay. Always a pleasure talking to you. Td ameritrade asia. Lets take a look at what we have coming up next. Reports from brazil. The backgroundat for that and what it all means. Mine people died in a collapse at a mine that is billiton. Y bhp do we know why the judge through the suit out . No. N a word, the suit was brought by the Brazilian National humanitarian society, seeking 5. 7 billion in damages according to the release from the filing. The judge has ruled on the merits of the case. It was dismissed. That ties that up. It follows the agreement of march, the settlement that bhp reached with the federal and state governments in brazil that paid 3. 5 billion over 15 years in compensation for the november collapse that claimed the lives of 17 people. There is still a matter of criminal proceedings to get underway. Police said there was evidence to accuse three companies and eight individuals of negligence without naming them. That is now in the hands of the Public Prosecutor to decide whether or not to press charges. Of the civil suits was struck down today, the legal trouble is not over. Think you. Thank you. We will have the latest on the court action by this judge. , this investor famously bet against subprime mortgages. Now he thinks chinas bad loans are setting the scene for banking turmoil. Market openinga hong kong, shanghai. We look at the opening numbers, coming your way. Music note pilgrim scoringt risk aversion a fourth. They have lost it in asia. Concerns about the european referendum and the Central Banks meetings in america and japan. It remains at a 3. 5 year high. Government debt in australia and japans slipping to record lows. Plunging in trade after cutting secondquarter revenue by more than 380 million. Lemming in part a drop in spending on medical advertisements. That is due to a university a medicaling tied to advertisement he found online. More than 26n, Million Dollars in an allcash transaction which makes it one of the biggest tech deals. 50 premium on fridays close. Market stop open ahead. These social networking. Hats been going on australia. Australia bank. Is this conference in may slipping to three. Downuld represent the move from five the previous month. Is remains a steady. Shanghai, hong kong, at the start of the trading day. Fairly crucial trading day. Before we look at the opening in china, i will give you an update on what is happening in japan. The dollar yen. Theust heard from financier. He says japan is prepared to take action if needed and any action will be in line with agreements with the g7. So nothing out of the ordinary. They dot being said, if step in, not deep doj. If they do step and we will update you. They are still prepared, that is the operative word. That was the low. Let me bring up the chart. If we do fall below that session low we saw on monday, it takes us all the way back to 2014. There is your level, right there. We are still trading at fairly strong levels here for the japanese yen. Against the u. S. Currencys concern. This has to do with risk of version. Up . We get the index i want to show our viewers where we are. Going off a cliff at the moment. 9 down. Roughly, about 220. So roughly, everything except for a few are on their way down. Since augustrive 2015. Remember . Adjustment happened with the redmond be. Broader markets will be like this. We are down for a fourth day. A bad brexit exit, that is something to keep in mind. It is very early. You are seeing some of the funds picking up. It is one of those days. I am referring to yesterday where it happens once in a blue moon. Whenever that happens you tend to see some funds pick up blue chips. We are seeing that across pockets here in the asiapacific. Taiwan is up. There we go, marginally. Up 1 10 of 1 . Very quickly, in the on what is happening in the broad markets. A seismic move. We will follow very closely. 10year bond yields. Low. Ds the more you try and reach for yield, the lower you pull be yields down is what we are seeing. Sorry lot of people have flagged. Watch the 10year. I see notes. 1 before the end of the year before that dynamic. Pulling the yields and searching for returns in in the environment where there are negative yields inflated by japan. Investorsf american betting against. Predicting turmoil in china. Tanks across the country struggle with bad ones. Let us get tom mckenzie. Tom, what is this all about . About kyle talking bass, who made his name in fortune investing against subprime mortgages leading up to the financial crisis. He has turned his sights on chinas inking system and is very bearish on it addicting a lot of unraveling. Some of his predictions may be coming true. If you look at the edges of chinas banking system. The lessobserved parts. I am talking about the 134 city commercial banks. In second and third tier cities very exposed to the local economy. They have been piling up on ok badinvestments as these loan numbers are rising. It is a type of Financial Engineering that lets them disguising investments. We have been seeing that pick up across the board. We have heard from ernst and young. He described this as a smoldering bonfire. All it needs is the wind to change and it could cause a blaze. That is the level of concern where looking at. 134 of the city banks across china. If one of them goes down, it could be a wide affect. Rishaad we keep hearing about this but nothing happens. Leads to doomsday. People going on about how bad things could get. How bad could it get . Tom i guess it is a question of how much longer this can go on. As you touch on that to some degree, the bank is always backstopped by the local government and finally, by the national government. Lets put into context how much of these guys oh. These commercial city banks. About 3. 6 trillion u. S. Dollars in the banks. No insignificant amount. If we look at the mainland, the ones we have numbers for, we have seen over 2015, they loaded up on investment products. These opaque investment products. Three times the amount seen by the big four lenders here. So, that is a big pickup. You can look at a string of these banks with problems. These, China Resources banks saw a profit loss of 19 because they had to triple their loanloss provisions. That is only one example. The concern is the Investment Bankers will default. That creates liquidity pressures and the bank collapses. Analysts say it is unlikely to cause widespread and install disk but it would cause a loss of confidence and it would affect the interbank lending system in china. Rishaad thank you. Let us get to greg. British business and house being urged to speak out and voice concern about a socalled exit at head of the referendum. George osborne said britain would be permanently poor if it votes to leave the European Union. The treasury and Analysis Shows that there would be a depreciation if we quit the eu. That would have an impact on inflation. The important point is yes, there would be concerns in financial markets. Yes, there would be a uncertainty for a number of years as britain sought to work relations with the new union. But the challenge for the country would be that britain would be permanently more poor. Trading less. Less productive. That would be reflected in the value of assets. I am confident the british people are aware of that economic risk and can see the Economic Opportunity if britain remains. The downside we talk a lot about. The upside, if britain remains in the it will remove uncertainty and be undoubtedly the case the u. K. Is the most competitive, most productive place to come do business then all the other economies in the world. So yes, of course, there is focus on the risk and massive opportunities at stake. I did not talk about the precise value of sterling, but it is never a good thing for businesses to have an economy that is weak. Where there are few people at work and the economy is attracting less. That is never a good thing wherever you are. If you are in exporting is this the last thing you want is uncertainty about the trading relationship with your key export markets. Today, the president of the European Council was saying it would take two years to accent the eu but potentially at least five years to negotiate new relationships with these key european markets in the u. K. Side you not think there is any business out there that should be thinking this would be a good thing or them. Checking in on other stories. Mitsubishis saying it will retain its holding in Mitsubishi Motors despite the fuel consumption candle scandal. This comes after they rescue Mitsubishi Motors by buying a 47 stake. Shares have fallen 40 since it admitted in april and overstated minicarseconomy of its in improperly tested other models. Upgrading the service to almost all customers in japan overnight. The clothing chain developing a system with the u. S. Consultancy accenture to pinpoint the location of an item as soon as an order is placed. Part of an overhaul the seeks to see 30 of sales coming from online instead of the current 5 . Microsoft stepped up the battle with sony, announcing new consuls to be released over the next two years. A smaller console will be released which features four k ultra hd video and a streamlined controller. Project scorpio is scheduled for release next year. Harnesst says it will more computer power again to attract users interested in Virtual Reality games. Huge headlines with a big acquisition. One of the biggest deals tech has ever seen. About linkedin for just 26 million. Let us look at the social media response. Of people say they did not see this coming but some are already doubting the acquisition and the price. 26 billion. Movesay this is a strong coming out of microsoft. Plenty are wondering how this will work. How will Microsoft Play with this new toy. They do not exactly have the best track record when it comes to a mundane. Largely written off. Skype has not handout is hoped at an 8. 5 billion deal. Under the former ceo steve palmore. And the recent purchase of minecraft, that hasnt certainly been a bright spot. So they say when it came to expanding market opportunities, writing the tech wave is in the future. Linkedin seems to check all of those boxes. Some already have doubts. One person says they endorse microsoft for badly thoughtout mergers and acquisitions. Another said, microsoft and buy linkedin or because zuckerberg did not want another website that forces you to wish strangers happy birthday. Another says that could be a good idea for linked in. They need resources to play in their space and if done correctly, users could benefit. Got ad linkedin finally great job at microsoft no less. No less than 200 million resumes. Bondman. As a apple introduces new software updates. Will that be enough to offset the slowdown . That is on its way. Taking on . 10. The worldwide Developers Conference in san francisco, we are told they will be able to build their applications into im messages for making payments or take out. Used by millions in china for everything from banking to following celebrity gossip. Thank you so much for joining us. That would also upgrade the surrey. What direction is it going in . Rishaad, one of the key features of the key elements and quiteing that popped out strongly was that apple is definitely looking at pressure for sales in the future. Iphones have fallen. Sales for mac and the watch as well as the tv have been slow. It has been slower. Apple needs to look at other opportunities. It is looking at other Services Growth is surrey, and not going to come by being exclusive. Open up. Ng it needs to the strong message that came out from the meeting was apple is opening its that form to raise the thirdparty windows. This will ride on things up within the platform. Help it to get extra revenue. From others looking to ride on the apple platform. Expectationse meet of the investors. Le has had an excellent 20 2016. We do think that growth will come with a mix of hardware and software. Rishaad is a did a bit late now to do this . Hey should have acted earlier it is hard to say whether it is kind of late or early. Apple has always been a kind of mainstream player. Enter the market when it is as stubble is. When there is scope to grow. Is something double can provide it differently to the solution already existing in the market. In this case, the openness of the map, the openness of Third Party Users is somewhat a novelty. This is thirdparty windows and integrationted the would be. Hailing a taxi. Asking for directions. Proactively eyeing something. Purchasing something. It is something we have not seen any other company do seamlessly or effectively. Apple is known for its uri. It is known for its ease of use and that is something they need to ring out with the integrations. Rishaad in deed. But this company, do you think it is still overly reliant on the iphone . Yes or no . Drags the core business of apple is still hardware. It will remain so for the next few years to come. One of the underlying messages on opening up our message is despite the fact it might give run for whatsapp a their money, it is still very much restricted to the iphone and its platform. In this aspect, growth will be limited. You will see more growth in markets where iphone is much example the United States. Singapore, new zealand, hong kong, canada, and so on. Growth in other markets will be more difficult to come by. India, there are some political issues. There could be a big for them. They could make headway. India is in interesting market for apple. The underlying problem is that its devices are simply too expensive. What services can do to bridge a veryp is help build good Value Proposition for iphones in india so that people can the kind of justify spending the 800 dollars they have to spend on an iphone 6 as opposed to a 200 on which concern the job equally well. Thank you. And the stories making headlines around the world. Donald trump says he is revoking coverage of the Washington Post for what he calls in accurate reporting. He took issue with the post headline on monday that he said donald trump said president obama was involved in the orlando shooting. In politico, the daily beast, and the des moines register. Taxydney, a new property next month. The new government will introduce a 4 stamp duty surcharging and a land tax worth three quarters of 1 . Similar costs are already in effect in pictorial. And banks are tightening lending on Property Investors overseas. And kpmg has quit as the governing body although the reasons have not been released. Tarnished by allegations of widespread bribery. It says it welcomes the opportunity to work with a new congress. The step down is effective immediately. Powered by over 234 journalists, bloomberg news. Rishaad still ahead, asia is seemingly insatiable for power. We will see how that will be generated over the next quarter of a century. Rishaad longtime forecast for the future of energy. A takeaway for this part of the world. What is i mean this is a huge topic. What are the key points . Right. There are a lot of big numbers, right . Over the next 25 years, 5. 6 trillion worth of new power capacity. That is half of the global total. We see there is a lot of cheap energy. A bund and supply. Also fuels are very cheap. , gas, oil, prices are pretty low. Renewables will get cheaper as well. The other thing about asia is is is the only part of the world that has just over half of its electricity coming from fossil fuel in 2040. Different than europe and the United States which is decriminalizing quicker than asia. Chinas mens per capita much less but overall, a huge amount. Here at india versus china story. China coming off but india has faster growth. What does this mean longerterm. Gregs there is a story about china and down. There are two things quite interesting. Very big. Ll, china is so in 2040, india still has a power or that is smaller than. Hinas power check also, pollution and emotions. When it comes to pollution, the new kid on the blog is india. India will come close to overtaking china as the Worlds Largest looter or emitter of carbon dioxide. You look right now, india is about china. That is right. India is catching up to china. Change. Hit its climate we shot what can we expect . Batteries. At least a quarter of eight trillion dollars invested in batteries for residential storage and more if you add electric vehicles. Watch this space mostly. A lot of asian manufacturers are making batteries. Rishaad we are going to take a break. Coming up, reports of further rates taking place. This is on a group of offices. We have details. Also, a market check. A day of declines. Uncertainty. Includes the feds. The bank of england and that Eu Referendum in britain. From our studios in new york city, this is charlie rose. Charlie Brian De Palma has been lighting up screens with films, a modernen hailed as master of horror and cinematic voyeurism. His filmography includes the untouchables. Here is the trailer for de palma. You are being criticized against the fashion of the day. The fashion changes and er