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Steve mnuchin says the u. S. And china have made significant progress ahead of new trade talks next month. Iran will also be eight on the agenda. Be on the agenda. And the alibaba cofounder steps down. Kathleen lets take a quick look at how u. S. Stocks ended the session. Lets go write down because the Dow Jones Industrial average up about. 1 . Health care stocks helped boost it. Closed minutely lower. It got within one point 6 of its alltime high. Despite the trade war a lot of people are still buying stocks. Nasdaq down about. 2 . Stock futures pointing higher. Moodys got fords credit rating. We will hear more on that is that progresses. Now i want to get right to sophie to find out how things are shaping up for asian markets. Sophie early in the session and looks like rick sentiment may be stabilizing. Stocks could be heading for a mixed start. Bonds under pressure tracking the overnight moves we saw in treasury. Kiwi 10 year. We are seeing that move lower with yields moving for basis points. Declining steadily even as north korea has more weapons. Caution ahead of the fed position next weekend. We have the ecb meeting this thursday as well to consider. Checking in on sterling, just Holding Onto Gains near a july high. Most of the losses we have seen since Boris Johnson came to power, and of course brexit headlines very much in focus as johnson is trying to secure an early election. Bear in mind today Indian Markets are closed this tuesday. Paul lets check in with the first word news with jessica summers. Sales in china fell for the 14th time in 15 months with deliveries down almost 10 to 1. 6 million. Manufacturers arent reeling from the longest downturn in three decades with no sign of an end. A similar gloomy picture in india where car sales saw their biggest monthly drop on record in august. Overall deliveries plunged more than 40 while passenger vehicle sales fell by one third. Exports rebounded more than expected in august. The protracted trade war accelerated the relocation of manufacturing plants to taiwan and a new iphone launch cycle lifted demand for smartphones. Overseas shipments rose 2. 6 last month compared to a contraction of. 5 in july. Imports felt 2. 7 , leaving a trade surplus of about 6 billion u. S. And north korea says it is willing to resume Nuclear Talks with the u. S. , but that washington must come to the table with what pyongyang calls acceptable new proposals. Observers say north korea wants the u. S. To offer security guarantees and also extensive relief from crippling sanctions. There has been no official response from washington, but the administration has recently said it is ready to resume talks. And smallCap Investors remain bullish in china. The china index gamed gained and entering a bull market for the second time this year. Investors have been particularly keen on tech stocks amid optimism of further easing from the pboc and a trade deal between china and the u. S. Global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is bloomberg. Paul thank you very much. We have had some ongoing debate in the house of commons in westminster today on the future of brexit, but more presently Boris Johnsons latest efforts to force a snap election. Seems like that debate is going to be in vain, however. Boris johnson saying he will not seek an extension to brexit. However, a bill has been passed ruling out a no deal brexit on october 31. The Opposition Leader Jeremy Corbyn saying the government has no mandate to leave without a deal. Lets get the latest from london with our u. K. Government editor tim ross. Tim, with this debate going on in parliament at the moment, Boris Johnson is very unlikely to get the majority he needs to force a snap all. So is this just more brexit theater . Tim it looks like, as you say, it will be a losing battle for johnson. If he loses this vote i think it will be six out of six he has lost in the last week or so, which is a bad record. But he is not giving up. He is going to have to try to keep piling on to get that election, otherwise there is really no way he will be able to do anything. You will remember that he throughout 21 conservative mps last week after they refused to follow his orders on brexit. So he has no majority. A long way short of majority. If he wants another majority will have to have another election. Wasnt there a dutch official who smilingly, jokingly likened the former Prime Minister, theresa may, of the knight in the holy grail, the monty python movie where he keeps getting up and saying i am fine. Is Boris Johnson starting to look like that . Tim Boris Johnson is sitting there on the bench slumped into his seat, his arms folded, shaking his head somewhat grumpily. Stand uphappy as mps around him and say they will not vote for his plan. It has been a bad week for the Prime Minister, no doubt about it. Hes lost one cabinet minister her left the party in protest. Weekis own brother last even left the government, saying he could not cope with the Prime Ministers approach. He cannot even keep his family on board, which is a pretty bad look. Sooner or later something will have to give. One thing is clear, is that all parties seem to say they want an election now. So there will be one at one point. It is just a matter of one. Kathleen thank you, tim. It is quite a complicated story to follow. Now we are going to get on the china, because factory prices are expected to fall even further into deflation while consumer places prices are easing. Fornumbers to watch, and our china correspondent Tom Mackenzie joins us from beijing. Tom, what are we expecting . Top line forecast for cpi and ppi out and around 9 30 local time are these. Consumer prices are expected to fall just marginally from the month of july to august. 2. 7 is expected in terms of cpi. Vs. 2. 8 in july. That is the year on year figure. Part of that, wholesale prices for pork are up about 50 from july. A big pickup import prices. But because pork is a smaller it is nothe market, expected to have as much of an impact as some might expect. Demand from consumers overall is expected to be weak because of the weaker economy. That is the number we are expecting in terms of consumer prices. Producer prices, we expect those to fall almost 1 . For, a contraction of 0. 9 august versus 0. 3 in july. Further deflation for chinas industrial sector, largely as a result of weaker Commodity Prices. Things like steel, rebar, Softer Oil Prices compared to a year before. That is dragging down the prices. The concern that this will drag on corporate profit, make it harder for companies to pay down debt. That is firmly in focus as well. So, those are the lines we are accepting. Cpi and ppi out around 9 30 local time, both expected to fall. Paul just getting back to those pork prices, how concerned are chinas policymakers about this . Tom they are increasingly concerned about this. We heard from chinas vice premier who lambasted local officials for what he said was something of a coverup, not giving enough information to top officials in beijing about the extent of the problem. We actually see officials across the country announcing various different measures to get this under control. Swine fever has just submitted the whole population here. Pork is a staple for chinese consumers. The major issue, we see things like price caps put in place, a call for subsidies for farmers, we have seen the bank told to ensure they are not calling in loans to chinas farmers as well. Sayinghave seen some they are going to release frozen stockpiles of pork over the holiday to try and depress the prices. Going back to the vice premier, he said overall across the full year 2019 they will be a shortage of about 10 Million Pounds of pork. Others have said that could be underestimating it. Some say it could be three times that level. And not a major issue, expected to be resolved anytime soon. There is a question mark whether or not trying to get pig farmers to increase output will actually be the right solution, given the disease continues to sweep across the country. Paul china correspondent Tom Mackenzie in beijing. Thank you for joining us. Now for a closer look at chinas economy and Global Economic picture. Before the former Federal Reserve governor joins us from hong kong. Randall, thank you for joining us today. Just want to start with the trade question around china. Looks like we are going to have talks in october. Treasury secretary Steven Mnuchin sounding notes of optimism, but if history is any guide, an optimistic Steven Mnuchin doesnt really mean anything, doesnt . Randall it will be continuing back and forth on this. We will try to have some talks, there will be some issue that comes up, then we will pull back. I do not really see a resolution in sight, because i think there are more fungal fundamental issues, like soybeans and automobiles. It is about the intellectual property regime and legal regime. I do not see how the u. S. Will ever be satisfied that china has really moved the regime to where they are comfortable with. Paul can you see that there might be a potential path forward through all this . Sort of an your mental approach dealing with these smaller issues, and perhaps even easing the tariffs that are expected to come in december on Consumer Electronics . Could that be a small way to dial down the tension on this . Randall i think that is exactly the sort of thing we will see. We will see some tariffs coming off, other tariffs coming on, maybe or maybe not implemented. But i think this will go on for a long time. I do not think there will be a full resolution. It is a bigger issue that i do not see the resolution coming anytime in the next few years. Kathleen it is great to see you, and i know you have been over the years traveling frequently to asia. Now, when we look at china itself, i think i got an order in quick enough to show when on the latest charts on chinas imports and exports. What was a big deal was the fact it was actually down, exports were actually down on the month. Shipments to the u. S. Were down 15 . Shipments,ts, 15 on and 5. 6 drop even on imports. Clearly they trade war is taking a bite out of chinese growth. How bad do you think it is going to get . Chartl and i think that is very good at showing that this is having a big effect on china, but i think the effect on the u. S. Is much smaller because trade is a percentage of gdp, and it is much greater for china than it is for the u. S. This is precisely why the president has chosen this is one of the instruments where he believes he can inflict relatively more pain on china they now the u. S. Certainly than on the u. S. Overall it has a relatively minor effect on u. S. Gdp and a much bigger effect on chinese gdp. Kathleen of course chinese gdp, some are saying it looks like chinese growth will not be enough to stay above 6 . Before they wanted above 7 and it keeps getting weaker. I have a chart up now looking at the rrr cut announced friday. Pointing out of course that there are different rrr rates. Major banks, smaller banks, and commercial banks. Commercial banks now down to about 8 . When you look at chinese Monetary Policy, when you look at what they are doing, does china have the capacity now to slowdown, to put a because there are a lot of countries and companies that slowdown too. They not only export, but they buy stuff from other countries. Randall particularly emerging Market Countries around the world where slowdown in china has enormous impact on Commodity Prices and exports into china. And so i think that is a very important issue. It is funny that we are having a similar debate for the Central Banks in the west. Do they have the ammunition to be able to prevent a slowdown . These questions are starting to come for china, because china is clearly easing, the central bank is clearly easing, trying to provide support against the slowing issues of trade, the slowing consumption within china. They have some instruments, but the central bank will never be enough if there is a real, major slowdown. Paul we are just getting a question from a viewer on our instant messaging platform, asking what geopolitical circumstances would push a deal on trade. Reading between the lines, i am wondering if it is that slowdown you mentioned. Randall clearly that is going to change the dynamic for both the u. S. And for china, because it will depend on where the Economic Situation is in the two countries. But i think President Trump is willing to beat some bear some pain in the short run for what he believes is longterm gain of changing the regime in china. I think he will be willing to tolerate that, and so well have to see how these things work out. How much tolerance the president will have, and how much pain he believes he can inflict on china, and then how that affects the internal dynamics. Paul all right. Randy is with us for the whole hour, so keep it right here. Morehead on bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Paul and im paul allen in sydney. What to watch in the markets this morning. Sophie bonds will be very much in focus, given the mood we saw in treasuries overnight. We are seeing aussie and kiwi notes head lower this morning. The aussie 10 year yield up by about five basis points. This apparently sparked by news that germany may consider fiscal stimulus. We have course are counting down to the ecb meeting on thursday, and that may be a watershed moment for traders. The question is if it will be a renewed move to lower rates, or will we see other forms of stimulus . Jump into the terminal as we see yields gain ground, putting a dent in the pile of negative yielding paper, pushing the total value between 16 trillion. Last week we saw the biggest drop in market value since they began compiling that data. Kathleen thank you so much. I want to bring in the latest news. The u. K. Parliament is starting its vote on an early general election motion. Its hard to say how it is. It is chaotic. We are watching for confirmation of how that bill comes out, but this is a big day and night for the parliament, for how Boris Johnson can or cannot move ahead with his plan to pursue, or at least settle for no deal brexit if he cannot get the real deal. We will have more of that if we when the news breaks. Lets get to the fed. We are going to put you back at that table, around that big conference table. The meeting is next week. On the one hand we have the president of the st. Louis fed, he has argued for a 50 basis point rate cut. Now on the other hand, you have the economyed, looks solid. In the middle seems to be jay powell. The market is strong but he is worried about trade uncertainty. If you were there, what would your position be and what would you vote for . Randall i would focus primarily on inflation and inflation goals. And so, i think back in december when they raised rates they thought the economy would continue on a reasonably good path, which it has, but they thought it would help inflation and export and Inflation Expectations move to the 2 goal. It has not. So i think it would be reasonable to be considering not cuts now, because the economy overall is broadly involved where they expected, evolved to where they expected but inflation has not. You dont want to be like japan where you are so far behind the curve where you break credibility. Cutting now when information inflation is a little below its goal probably makes sense. Kathleen what about the yield curve . With this big move we had in bonds, if we had some bayer steepening as traders , still, the curve has been inverted. That is why the camp jim bullard is part of, the fed has lost control of the bond markets and yield curve. That is why a 50 basis point cut is necessary to get ahead of the market. Do you see any agreement in you with that argument . Randall i would not go quite as far as jim was going. Unpack try to impact why it is so flat. It is probably about very low Inflation Expectations. We see those moving down. The new York Fed Survey that came out earlier this week showed individuals are having lower Inflation Expectations. Market measures of Inflation Expectations are very low. At least from my perspective i fire were still in the fed, that would be concerning for me because of the markets are saying we dont believe youre going to make your goal, we are worried you are like japan, so i would want to make sure to stay ahead of that. I do not think that would give me enough wherewithal to say lets move 50, but i do not think moving down now would make sense, given that the markets seem to be concerned about whether we will make our 2 target. Paul i could not help but notice you mentioned japan a couple times now. Is that country perhaps a rather chilling case study for Central Banks around the developed world, that the usual stuff is not working anymore . Whether it comes to controlling the yield curve, sparing inflation, or anything at all . Is Monetary Policy reaching the end of the line . Randall i think it does worry people, and i think reasonably. Elected, he has a whatever it takes movement. But it has fallen off. They have really tried. They have a Balance Sheet more than 100 of gdp. They buy equities, they buy pretty much anything that is not nailed down, and even a few that are. They have not been successful in doing that. Thats an important lesson that these tools diminish, and if you allow inflation and inflation exultations to get too far from your goal, it may be really tough to get back. Paul randy, thank you. You are sticking around. We have plenty more to discuss and there is plenty more to come. This is bloomberg. Is is bloomberg. Im Kathleen Hays in new york. Paul and im paul allen in sydney. Lets get a quick check of the latest business flash headlines. We work and his largest investor are said to be discussing the possibility of shelving the possibility of a sale. Workank is pressing we over concerns about their Business Model and Corporate Governance. They were expecting to hold a roadshow to promote the offering this week. Kathleen British Airways stages a second day of chaos as a strike continues to wipe out the schedule. It is expected to cancel almost all flights again tuesday. More than 1500 departures and arrivals. It mainly affects heathrow. The bill could amount to the equivalent of 50 million a day. Another airline is also facing action. Tycoon isng kong making an approach to work with another group in indonesia. They may combine the telecom operations, although talks have not started yet. It is malaysias biggest wireless carrier. Last week it scrapped plans to merge. Coming up next, we return to Federal Reserve governor randall, who will weigh in on the biggest global risks, from brexit to hong kong. This is bloomberg. I am jessica summers with the first word headlines. U. K. Lawmakers are currently voting on whether to back the general election on october 15. Boris johnson has repeated his determination to leave the eu with or without a deal at the end of the month, and says an election is the only way for him to move things forward. Say johnsoneaders is refusing to accept legislation that requires a brexit extension if no deal with brussels can released. Our government will go to brussels on october 17 and negotiate our departure on the 31st of october. Hopefully with a deal, but without one if necessary. I will not ask for another delay. The only conclusion that can upreached, and it is backed by all the reports in the press, is that the governments intentions to negotiate are nothing but a sham. Jessica treasury secretary Steven Mnuchin and says the u. S. And china have made a lot of progress ahead of renewed trade talks next month, adding the administrations objective is to win a new deal. He also insists the rumbling trade war has had no effect on the u. S. Economy so far. The chinese team agreeing to come to washington is a sign of good faith and a pboc governor may be part of that growth. I expect the governor of the peoples bank of china to come over for these talks, so part of the conversations we will be having around them is around currency and currency manipulation. Jessica and a survey of the japanese economy suggests sentiment is the gloomiest in years. The outlook among restaurants, taxi drivers, and shopkeepers fell to a fiveyear low last month, reflecting deepseated concern at the looming sales tax rise. A slightlydicated improved view of current positions, but respondents are much more pessimistic about the future. And the world bank now says growth in indonesia will slide below for 5 next year and it warns of quote, severe outflows if the global picture darkens. The forecast for expansion next year is 4. 9 , the slowest since 2015. The World Bank Report says indonesias reliance on for burn investment in stock and bonds makes it vulnerable to outflows. Global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is bloomberg. News out ofng westminster. Discover the u. K. Parliament has again projected Prime Minister Boris Johnson thateded 434 votes to get early poll, he only got 293. 46 against. Perhaps the vote count has not finished. There were a lot of extensions, but whatever the case, there will be no early election in the u. K. You can watch live go on this. Boris johnson on his feet now speaking in parliament. Kathleen we are half away from the open in tokyo, sydney and seoul. What are you watching now, sophie . Sophie i am keeping an eye on the likes of nissan. This, as the ceo is to be ousted over a pay scandal. He was asked monday to step down by september 16, and he is to be replaced by the coo until a permanent successor is to be named by the end of october. Seeing more than 600,000 customers still without power this morning after a typhoon outside tokyo monday. We are also watching samsung in seoul after they announced a new it could compete with qualcomm. Keeping an eye on korean peace talks, this after the north fired at least two projectiles into eastern seas, after exposing willingness to restart talks with the u. S. Kathleen now we are going to go on to stocks. Many socalled software momentum stocks were part of the major selloff. Su keenan is back. Where should we start . Su that reversal in the treasury market did spook some investors. Strategists said that had some of the momentum players and high flyers hitting the sell button. You will leading the way down in some of the stocks was health care and Software Enterprise stocks. The sector of the s p was down over 1. 5 . Lets go into another piece of the story into the bloomberg, and that is smallcap come back, maybe. We are looking at the russell 2000 atf. They got its largest inflow in nearly a year last week, 1. 5 billion pouring in. Also kicking off the week, the russell 2000 index with a 1 gain. Smells strongly of a serious sector rotation. Some interesting movers. Roku, which enables streaming, it was down as part of that cashing in on the momentum stocks. Date,as up 425 year to even at the end of the trading day. Notice at t in the spotlight as billionaire activists had found Hedge Fund Owner took a big bet on at t. In proposing a plan they said would double or raise the stock price by 50 . A lot of critics say easier said than done. And lets go to the selloff in the Software Enterprise. Big losses there. Huge for out terex and crowd strike. Two stocks that have more than doubled in 2019. A lot of momentum players getting concerned about evaluation. After hours you have ford getting the downgrade from moodys to junk, although they raised their outlook to stable. This has a lot to do with questions about the ceos turnaround plan and the difficulty ford is having with the slumping auto market in china. Paul . Paul thank you. Just to get you back to london now, and the goingson in the house of commons. You see the Opposition Leader Jeremy Corbyn on his feet now responding to the Prime Minister, Boris Johnson, who has of course just lost again in his bid to force an early election. The Prime Minister saying that parliament will be suspended now until october 14. That he aims to get a brexit deal but he is still prepared to leave without, but will strive to get an agreement in the national interest. And the u. K. Government will not delay brexit again. [cough] excuse me. Lets return now to randall. Randy, i just want to get your reaction to what is going on in the u. K. Parliament right now. Surely one of the biggest sources of global geopolitical risk there is at the moment. Randall yes, i am keenly focused on that because i recently moved to london for the year because i have a campus there. It has been quite a tumultuous week, with johnson running into this buzzsaw, even within his own party. Incredible amount of uncertainty. It is really unclear, even for people who have been watching this for a long time, exactly what is going to happen. Interesting, it is isnt it. Your timing is great though. The opening of that campus over there at this point. Where does this leave . It is hard to say where this is going. Marfor the bank of england, k is getting ready to leave. What does it mean for them to be at this juncture where they are no closer to a brexit plan than they were when they started . Randall and i think one of the key things that has allow the u. K. Economy to go along relatively well i mean, if you compare it to Continental Europe and the euro zone, the u. K. Has done relatively well despite all the noise around brexit. A lab that is attributable to mark and his colleagues, cutting Interest Rates, providing easing against the shock of the brexit vote. And theres a question of how much more they can do if things really start to go south. I do not see that in the short run. The economy seems to be reasonably resilient. But in the longer run this will be a real challenge for the u. K. Kathleen it is not such a challenge for the u. K. , it is a challenge for the eu. Because if they go crashing and burning, it seems there are repercussions not just for the of eu exports. Er what does it mean for the eu centralbank . Super mario is coming back with more bond purchases and morgan more negative rate, et cetera. Randall i think super mario is coming back within mario is leaving the stage. And super Christian Lagarde will be coming in. So she will have her hands full with dealing with the broader slowdown. The attempt by the ecb to revive the economy. But as we were talking about earlier, there is probably diminishing marginal impact of going further negative on rates, purchasing more assets. So it may not be as effective to do more of this, even if the economy is slowing. Kristen lagarde is someone very focused on fiscal policy, and i think she is someone who will be arguing that a lot of the governments, particularly the german government, should be loosening the pursestrings and spending more because the ecb will not be able to fight the slowdown by itself. I think that will be one of the big debates and it will be very interesting having someone from the imf, where people sometimes joke imf stands for it is mostly physical, is now head of the European Central bank. Paul is there anything he can do to cushion the blow of what is going on in the u. K. Right now . This is really another example of a political solution needed for a political problem, i guess. Randall there are some things, and i think the bank of england has taken a fairly cautious stance and is looking out for the risks associated with brexit for markets, for the real economy. Fortunately so far we have not seen a major negative impact on the real economy. Obviously a lot of volatility on the pound and on some of the markets. So we will be watching that closely. Fortunately i think that the europeans and that the british have worked out a number of protocols, so even if there is a socalled hard brexit at the end of october, the markets will continue to function. The euro clearing will not suddenly stop. That will not go on forever, but i think that risk, the Financial Markets easing up is unlikely, and i think thats a big positive that both the european and u. K. Regulators should get credit for. Theres plentyl, of geopolitical risk unraveling as well in one of the former outposts of the former british empire. Lets get over to hong kong for a moment. What do you see the risk there if these protests drag on for too much longer, a heavyhanded response from beijing, and really bringing the curtain down on hong kongs special status . Randall lets focus on the economic impact. Certainly what we are seeing in the short run is there are fewer tourists who are coming in, there are fewer people going to restaurants and going to hotels. And so, it is having an economic impact. Then the question will be how quickly will this be resolved. Will this be a longterm issue . Kathleen i want to bring in a guest i spoke with this past summer. When i asked her about recession and people talking about that, said people are underestimating the risk of shock. Sometimes they start with a whimper, and certainly hong kong was near the top of her list. Do you agree with that view . Do you think any one of these number of things could blow up and be that tender that starts the recession fire going . Randall it is always easy after something happens to say, ah, it was so obvious. It is really hard to know in advance. Obviously there are a lot of issues going on with respect to north korea, in the middle east. Ofi think there is a lot very dry tender around the world that could ignite and cause tumbles in the markets and in the real economy. So far the u. S. Economy has been quite robust to a lot of these global geopolitical risks. But obviously there could be something that is out there. I get worried when markets are not worried. And the volatility indices i think are little lower than i would think they should be, because there is a lot of risk out they are globally. Out there globally. Seems like markets are a bit going bit sanguine. Kathleen maybe keep worrying for us so things dont get too bad. Good luck over in london. Thank you, randy. Coming up on the show, its one of the most highly anticipated bes of the year, but could plugged be pulled due to concerns from softbank . This is bloomberg. Mberg. Kathleen im Kathleen Hays in new york. Paul and im paul allen in sydney. Bloomberg has learned softbank is pushing we work to postpone its ipo. Softbank is we works largest stakeholder. The ipo has been troubled with concerns. Bloombergs asia tech editor joins us from tokyo. What is the latest with this idea . Peter hi. What sources are telling us is that we work and softbank had been hovering on whether to postpone the ipo. The company was supposed to start its roadshow for the ipo as soon as this week. This is kind of a sudden turn of events. What is happening behind the scenes is the evaluation the company was expecting a could get as much lower than what it hoped for originally. The last private round of valuation 47 billion. As you mentioned, softbank is the biggest shareholder and they put in money at that 40 7 billion valuation. When they were considering the ipo, some investment banks including Goldman Sachs pitched them on the idea evaluation could go as high as 65 billion, 20 billion higher than the previous round. Instead what they are finding as they test the market is it could be much lower than that, 20 billion below that for the overall company. So in the face of that negative reception that has to do with some Corporate Governance issues also, they are thinking whether to postpone the ipo, wait for more Financial Results to come out from the country company, and perhaps a stronger ipo market. Paul so is this just a question of Corporate Governance . Because there have been a few other questions about the entire Business Model. What are some of the problems and challenges here . Peter it is a combination of the Financial Performance of the company and some of the Corporate Governance issues. The challenge with the we work since model is that they need to take out these longterm obligations for real estate. They end up using these offices around the world with very longterm obligations. But their customers are only committed over a shorter period of time so there is financial exposure. So far the losses have been increasing right along with the revenue growth. On top of that, there are some questions about the founder, adam newman, his control of the country company. He has control over the company, and there are some deals they have done in the past with adam that have raised questions. They paid about 6 million for the rights to one of the trademarks they had. There is also some compensation going back and forth for some real estate he owns. So this has raised issues around Corporate Governance, especially when you have somebody who has complete control over the company. Those can make investors nervous. Kathleen softbank is the biggest outside shareholder and we work. They pumped about 10 billion into the company. So what is at stake for them . Obviously some money. And what is at stake for the executives within softbank who have been so keen on this project . Peter there are a couple different tiers here. They put many billions of dollars into we work, as mentioned. They hold about 29 of the company, which is the biggest stake, even bigger than adam newmans stake. There is challenge on what the money they make on this deal in particular, and that is always a concern. More broadly, the executives at softbank and is Division Fund half their compensation tied up and how the deals perform. Not just this deal but other deals like uber and many other startups they have behind that. Moving in the background is an even bigger question. Itsbank of course raised First Investment fund of 100 billion. They are now trying to collect money for a second that they would like to be even bigger a little, which sounds extreme to everybody. But they need Strong Performance to do it. So if they have a stumble with a highprofile ipo like we work, that may height hurt their ability to do that and collect the billions of dollars they need to really launch this second fund. Kathleen all right peter, thank you for joining us from tokyo. You can get a roundup of the stories you need to know to get your day going in todays addition of daybreak. Bloomberg subscribers go to dayb go on your terminal. It is also available on mobile, and you can customize your settings so you only get the news you really care about. This is bloomberg. This is bloomberg. Kathleen this is daybreak asia. Im Kathleen Hays in new york. Paul and im paul allen in sydney. Less than a year after the fall of carlos ghosn, nissan is losing another leader. The ceo is stepping down after a scandal about his pay. Lets go to tokyo with our Global Business editor. How big of a setback is this for nissan . Dave this is really big. I think from the beginning of the break of the scandal you had questions raised about how long he would be able to stay at the top of the company. Known as being part of the scandal, at least with it happening on his watch and him being the ceo of the company at the time. So it was only a matter of time. For him to be departing under these terms is a huge blow to the company. Last week we already saw they were forced to delay the pricing bond. 50,000 billion yen it cost them every day that is delayed. They are now in a process where they have to select new leadership. That slows down all the reforms they had been planning to make at the company, and implementing changes, including their partnership with renault and mitsubishi motors, getting that straight, and possibly forming other alliances, which is the big issue in the car industry in general, boosting capacity by forming alliances that are necessary to compete in todays automotive world. This is a huge setback for them. Even though he will no longer be heading the company, his name will still be coming up. Keep in mind that he is the key to the carlos ghosn trial, so it is not like he is completely removed from the scene and there is a clean slate. He will still be coming up. Kathleen one of the parallels with the allegations against ghosn is pay, and this affect his pay . Dave already you see pundits around the world pointed to this as sort of a double standard. When carlos ghosn was accused of misstating his pay, he was arrested and whisked into jail and not offered bail. Whereas in this case, basically he is being offered a chance to simply step down from his job. Now, they are not a oneforone parallel. The kind of allegations that were eventually brought against ghosn and the indictment are of a much broader and larger scale. It involved a range of alleged involving activities misappropriation of funds, the sort of thing. So it is quite a different set of allegations. But at the same time this is the only this is only the first thing we have heard about. It is important to note that this was uncovered by ghosns former right hand man. So he have may have more to say about this and this could be just the beginning of those struggles. Kathleen dave, thank you so much, wrapping up a complicated story so efficiently. Markets open at the top of the hour. What are you watching, sophie . Sophie we are preparing for a mixed start and a quiet start potentially for asian stocks. Keeping an eye on socalled korean p shares after the north fired unidentified projectiles. The pound it near a july high, as parliament voted against an early election for the second time. Johnson falling short of a two thirds majority he needed. We are continuing to see a selloff. Investors biding their time before cded. The corporate debt issuance flood has continued unabated, with few signs of slowing, which belowought that pile back 16 trillion because we are seeing more influence issuance. Junk bonds are being left out in the cold as investors are shifting to get more exposure to the rising yields. Paul still to come on the next hour, bank of America Merrill lynch china economist joins us ahead of the latest inflation numbers. This is bloomberg. This is bloomberg. Paul good morning. I am paul allen. Evening from new york, i am Kathleen Hays. Sophie im Sophie Kamaruddin in hong kong. Welcome to daybreak asia. Our top stories this tuesday. Brexit battles continues as u. K. Lawmakers reject an early election. Boris johnson refuses to, parliament will be suspended until october 14. Steve mnuchin says significant progress has been made ahead of new trade talks and month. The yuan will also be on the agenda. Kathleen the end of an era for the house that jack built. The alibaba cofounder steps down. Lets get straight to the Market Action with sophie. How are things going . Sophie so far in japan, stocks gain ground. Nikkei 225 up 2 10 of 1 . Keeping an eye on nissan as we got news that the board has told the ceo to step down by next monday. Checking in on the yen, just Holding Steady at 107. There could be some limited downside as we are waiting for the fed decision. Yield seeing the 10 year in the 23 basis points. We could see some pressure on the yield curve. Now to check in on korea, we have up 1 . Of 1 against the dollar. We are checking in on samsung shares. And as the new 5g chips keeping an eye on some korean stocks after we saw it launch projectiles. In sydney, asx 200 gaining 1 10 of 1 . We are seeing aussie yields gain ground along with kiwi yields this morning, tracking overnight moves we saw in treasuries. s weeklyralia, anz read on Consumer Confidence despite stimulus and the return we saw in the housing market. Holding off from big buys. Later this morning, we will get the Business Confidence survey at about 9 30 a. M. Hong kong time. Paul lets chicken on the first word news with jessica summers. Jessica thanks. Treasury secretary Steven Mnuchin says the u. S. And china have made a lot of progress ahead of renewed trade talks since month next month, adding that the objective is to win a good deal. He insist the troubling trade war has not no effect on the economy so far. He says it is a sign of good faith and the pboc governor may be part of the group. I expect the governor of the peoples bank of china to come over for the stocks, part of the conversations we will be having with them is around currency and currency manipulation. Jessica a survey of the japanese economy suggests sentiment is the gloomiest in years. The outlook among restaurants, taxi drivers and shopkeepers fell to a fiveyear low last month, reflecting deepseated concern of the looming sales tax rise. It also indicated a slightly improved view of current conditions, but respondents are much more pessimistic about the future. Taiwans exports rebounded more than expected in august. The retracted trade war accelerated the relocation of manufacturing plants to taiwan and a new iphone cycle lifted demand for smartphones. Overseas shipments rose 2. 6 last month, compared to half a percent in july. A tradefell 2. 7 , surplus of 6 million u. S. Dollars. The world bank now says growth in indonesia will slide below 5 next year and warns of severe outflows if the global picture darkens. The forecast expands next year at 4. 9 , the slowest since 2015. The World Bank Report says indonesias reliance on Foreign Investment and stocks and bonds makes it vulnerable to outflows. Global news 24 hours a day on air and on twitter. Powered by more than 2700 journalists and analysts in more than 120 countries, i am jessica summers. This is bloomberg. Kathleen thanks. Moving onto u. K. Prime minister Boris Johnson who lost another vote in parliament with the house of commons voting 29346 against his demand for a snap general election. Johnson is digging his heels over any delay to brexit. Our government will go to brussels on october 17 and negotiate our departure on the 31st of october. Hopefully with a deal, mr. Speaker, but without one if necessary. I will not ask for another delay. Kathleen Senior International editor Jody Schneider joins us. What drama. You could not write this. No one could believe the script. Where are we now . Jody quite a dramatic scene in the parliament over the past few hours watching this. I was in washington for a long time and watched these kind of things and capitol hill but this is quite remarkable. The Prime Minister basically tried to get yet another, got another vote to try to get out. F his impasse the way he wanted to do that was to have a general election and he was resoundingly rejected. The parliament is suspending after this session, again at his behest. The queen approved of that until the middle of october with that october 31 deadline duly looming. It is all quite remarkable. He had lost all these votes, yet he is still the Prime Minister and the brexit deadline is still october 31. He said he wont ask for a delay and he will go to the eu on october 17. They believe britain will leave on the 31st with or without a deal. That is where things stand now but there is no support, very little support for him in the parliament. Extraordinaryseem that this minority government is being propped up but nobody wants an election at the same time. It is a very weird situation. Mps on both sides of the aisle are enraged by Boris Johnsons tactics. Why is that . Jodi they are enraged it is the right word for several reasons. First, they dont see him as trying to do anything to negotiate with the eu, to get an actual deal. The labour Opposition Leader Jeremy Corbyn said johnsons negotiations with the eu were a sham. They are also enraged that he has pushed, he will push this no deal brexit even though they passed legislation to block him from doing so. Further that he is suspending parliament for essentially a month before the crucial brexit deadline, what they view as tying their hands to get some kind of deal. Than 21 of hisre party were forced to resign. That was another really frustrating angle in all of this that was debated late into the night. There is a lot of frustration and nobody seems to know where to go now but they have just voted down for the second time a general election. Kathleen what do we know . What do we imagine Boris Johnsons strategy could be now . It seems like his strategy has not worked so well. Jodi that is the real question, where does he go now . We just showed the clip showing he will leave, he will not negotiate with the eu. He will not ask them for a delay. That is what he is saying. That he would rather die in a ditch than delay the brexit. At this point, that is the real question. Parliament will be suspended. How will this get resolved . Also on top of this, john bercow, the speaker of the house of commons who had been pushing, who had been a thorn in the side of the government who had been really seeking some ways to stop that no deal brexit. He has said he will resign on october 31. Kathleen entertaining to watch on television, john bercow, he will be missed. Jodi, thank you for that excellent update. We believe that there but bloomberg subscribers can watch live go. You will see a big diary entry coming up today and later this week as well as some of the events you may have missed earlier. Now for a check on the early stuff, we are going back to sophie. Sophie we want to check in on nissan which is rising about 3. 1 this morning. The carmaker loses another leader less than a year after Carlos Ghosns departure. The ceo was asked by the board to stepped out by september 16 amid a scandal over access pay. He will be replaced by the coo until a permanent replacement is named. Another quick check on u. K. Access cable, trading steady. The 100 futures are looking steady, about 2 10 higher early in the asia session after Boris Johnsons election bid was rejected. Paul thanks. Still to come, the chinese Utility Company is one of morningstars top stock picks. We will talk to the director next. Plus, british Drugmaker Astrazeneca sees china accounting for the bulk of its revenue in five years. Our exclusive interview was ahead. This is bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Aul i am paul allen in sydney for investors in asian equities, there is only one list that matters according to morningstar and that is the trade war. We have lorraine joining us now from singapore. You still see that trade war escalation as a risk. We do have a meeting in october. Steven mnuchin says he is cost is the cautiously optimistic. Are you cautiously optimistic or will it all end badly with another tweet storm . Lorraine we are always kind of optimistic or hopeful it does not end the nat end in a tweet storm. Whatever it is, it will be a win for the market if there is no further escalation in tariffs. It will be difficult to bring that down from where we are now a state whereage, we enter into competitive escalation as a minor risk at this stage. Paul trade war risk is something all investors are dealing with in this environment. How do you position for it . Lorraine i think the main thing is we are expecting china growth to slow. We have seen weaker Growth Numbers outside of the u. S. And i think the issue still remains that Consumer Confidence could still be impacted down the road. Although youve got some supporting factors with the fed expected to cut rates still come i think what we are looking at his opportunities to find value in the market. We do think that there are some opportunities, although we dont think the market is excessively outside the u. S. Right now. Kathleen lets look at some of your opportunities. Youve got enn energy. Represents a buying opportunity. Is it also the kind of company that is going to keep going regardless of how it is affected by the trade war . It is something that is more trade war proof . Lorraine yes, thats right. We are looking longer term as well because we think there is that we expect a trend china will seek slowing growth down the road. The aging demographics is a large part of that. Debt constraint as to how much the country can do as well. We do expect a reduction in fixed Capital Investment over the but that will favor domestic consumption story which is really happening. Companies like enn energy which is a town gas utility will see steady growth. Basically, transparent cash payments. Especially with the government, a key priority being pollution patrol control. Paul so, you like enn. You like utilities. Is there anything in china you dont like at the moment, that is really flashing red and you should stay away from . Lorraine at this there are some pockets of excess values that we think are excessive. Maybe price perfection. On a sector basis, we would still stay away from the larger infrastructure. We are staying away from the Building Materials companies because we think there is risk globally on that front. Thinkindividual note, we shinzo International May be to perfection right now given the fact there are rising costs constraints in china from labor costs. Kathleen you are the asian equities strategist so could you look beyond china for us and give us a couple of industries or companies that you think look good . A lot of people looking at Japanese Equities right now. Lorraine yeah, so one of the things we do like over the longerterm is if there is a pullback, we like the automation story. This ties into the aging demographics in china as well. Opportunity of the robotic companies. Have the bype, we on the moment. We think it is one that would benefit from a pretty decent secular growth in this sector. At the moment, the sector has been basically seeing Slower Growth because of fiscal issues, but we think the cycle should recover towards 2020, 2021 time frame. We think if there is a pullback, they would be soft setting. Kathleen youre an Equity Analyst so i would not expect you to be diving into this, opening up china bond market but for a lot of people, that is a very interesting place to put money potentially. Investing andf investment ideas, the pboc cutting rates, what kind of companies are you looking for in the wake of that because of a trade war continues, people think there will be more stimulus unleashed in china. Lorraine we are expecting nearterm stimulus and we have seen that. Cranesreased demand for and Machinery Equipment now. Those are shortterm. Stories. We prefer the longterm trends. Wed put our bets on the chinese consumer. Even over time, we are looking at, there is still opportunities in terms of domestic internet players like tencent, alibaba. They are still trading at what we would call a china discount because of the trade war concerns. Those two companies are still in our buy list as well. Kathleen thank you very much. The u. S. And china actually have that in common, putting a lot of confidence in the consumer. Lorraine tan, thank you so much for joining us. You can get a round up of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers go to their terminal. It is also available on mobile on the bloomberg anywhere app. You can customize your settings so you only get news on the industries and assets you really care about. This is bloomberg. Paul this is daybreak asia. I am paul allen in sydney. Kathleen im Kathleen Hays. Chinas push to bring new medicines faster to market opens up new opportunities for global drugmakers Like Astrazeneca which counts china as one of its Fastest Growing regions. Selina wang spoke exclusively to astrazenecas executive Vice President of International Markets. What did you discuss . Selina that is right. I spoke to the astrazeneca executive vp of International Markets in china about how they are trying to expand their footprint in the country and take advantage of chinas fast regulatory changes in the health care landscape. The backdrop is that china is a growing importance to astrazeneca. It recently overtook europe as it second largest market. Now this british pharmaceutical giant counts china as about 20 of revenue. China has a rapidly aging population. They have increasing rates of cancer, diabetes, other chronic illnesses. These patients have significant unmet needs. To try to bridge that gap, the Chinese Government has been trying to Lower Health Care costs and the costs of drugs but that has been putting pressure on these drugmakers. China has unlimited this bulk purchase buying products which has seen the products go down as much as 95 in some instances. At the same time, you have the Chinese Government significantly speeding up their approval process for these drugs so that is a huge source of opportunity for these global drugmakers Like Astrazeneca. Take a listen to what he had to say to me here. I think government is actually doing a lot of efforts to speed up new drug approval, innovative drug approval. Also, the speed of reimbursing these new drugs, especially oncology or Specialty Care products, are much faster than before. The launch speed is much faster. I believe there are a lot of treat morechina to patients with innovative products. Also, the Health Care System is becoming more chronic disease management type. A lot of patients are using drugs and for life, rather than go to the hospital because of stroke and hospital. Selina how else is astrazeneca trying to take advantage of this . We have seen regulatory changes that are getting drugs to market much faster. Leon we have a strong local development organization. We have been investing heavily in that organization. More Clinical Trials in china and filed much faster and earlier in china. Astrazeneca, which is very different from other companies we have a huge stake in china. We have put quite a lot of effort to help the drug to speed up in china. Selina when looking at astrazenecas business in particular, this process to cut prices from the Chinese Government has brought the price of drugs down, more than 90 for some. How do you see this impacting overall sales . Leon astrazeneca is in relatively good position with a lot of excitement of innovations. A lot of devices and Formulation Technology which prevents us from being rapidly declining in this. Selina you also see over oversee operations and africa, middle east, russia. When you look across emerging markets, where do you see the most room for growth . Leon i think emerging markets is a place full of opportunity and also uncertainty and instability as well. I think but, there is one common thing. The huge need. Untreated and medical needs. And follow the patients. No chronic disease management. Opportunity was, it is huge because a number of patients, untreated population. The middle class is rising. The populations will be younger. Theyre still, the economy is rising. I see huge potential in emerging markets. Selina i want to switch gears to the most recent retaliatory tariffs that came into effect, targeting some u. S. Imports up pharmaceuticals. Retaliatory tariffs from china. How have you seen the trade war Impact Business or strategy . Leon i think pharmaceutical products are actually quite nicely excluded in many rounds of this trade friction. At the moment, i dont see any big impact to the pharmaceutical industry. Not to us because we dont import from the u. S. Hope that i always those countries can reach a good deal, transaction which benefits both countries, patients and people. Selina i also asked him about the impact of the hong kong protests given they have significant operations there. He says it has not impacted hiring yet. Paul just quickly, how are these regulatory changes in china going to impact astrazenecas revenue . Selina astrazeneca is expecting 60 of its revenue come from new treatment from revenue in china. That is up a fraction. More drugs getting first approval in china first before anywhere else in the world, including u. S. And europe. We saw that with their new anemia treatment last december. Increasingly, we are seeing china not in the market to sell products, but also to develop and sell to other markets. Paul all right, thank you very much. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Kathleen this is daybreak asia. The first word headlines. The u. K. Parliament has again unanimously rejected Prime Minister Boris Johnsons call for an early general election. Lawmakers voted 23946 against the idea. Parliament will now be suspended until october 14, while johnson continues brexit negotiations with brussels. He has repeated his determination to leave the eu with or without a deal on october 31. The matter how many devices this parliament invents to tie to gets, i will strive an agreement in the national interest. Government will not delay brexit any further. Jessica auto sales in china fell for the fourth theme time in 15 months with deliveries down almost 10 to 1. 6 million. Manufacturers are reeling from the industrys longest downturn in three decades with no sign of an end. A similar gloomy picture in india where call sales car sales saw the biggest multidrop on record. Deliveries primed more than 20 while passenger vehicle sales fell by one third. And north korea says it is willing to resume Nuclear Talks the u. S. But that washington must come to the table with what they call acceptable new proposals. Observers say north korea wants the u. S. To offer security guarantees and also extensive relief from crippling sanctions. There has been no official response from washington but the administration has recently said it is also ready to resume talks. Small Cap Investors remain bullish with china. The index gained almost 2. 5 on monday, taking its rise from the june 6 low to 22 and entering able market for the second time this year. Investors have been particularly keen on tech stocks which dominate the index amid optimism of further easing from the pboc at a trade deal between china and the u. S. Day onnews 24 hours a air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is bloomberg. Kathleen thanks. Now we have gone to a market check back to sophie. Asia stockstuesday are trading mixed. 1 ,ei 225 up 4 10 of heading for a sixth day of gains. Samsung and financials providing a boost, up 4 10 of 1 . Checking in on futures for the 1 butains of 2 10 of fairly steady after the session we saw in the u. K. Where parliament rejected Boris Johnsons call for an early election. Checking on how cable is faring early in the asia session. The british pound Holding Steady. This while the yen is eying a two day decline. Checking in on the bloomberg dollar index, we do have it holding at a five day loss. Checking what is going on with stocks that are on the move early in asia. Graphite minor pumping as much as 41 to a february 2012 low after reporting cuts. Softbank rising on reports the group is pushing wework to postpone the ipo. Tokyo century jumping as it is set to buy alpha stake. Tokyo onclimate in reports that it plans to apply for the approval for a gene therapy in the u. S. Paul thanks. The crisis at cafe pacific raising a new question, could the top shareholder take over the airline completely . It already owns about 30 , meaning leaving some to spec late on a potential merger. Joining us now is angus. Why would this happen . Is this due to all the tension in hong kong . Guest we have talked and read a lot about cathays problems. It has been terrorized by mainland authorities, state land firms boycotting cathay flights. Incredibly bearish calls on the mainland. What has not been studied so much is chinas role. Cathay, they own 30 . It has been a sleeper shareholder. It is inevitable with the pressure from the mainland, we look at what air china can do with that investment and its possible role. It is certainly in its interest and will reflect better the balance of power for china to own more of cathay. It is a very tight shareholder registry. It needs to find a buyer that will earn more of cathay. One way to do that is just by, the mainland anyway, squeezing cathay until it becomes an unpleasant place to be if you are a shareholder. That is one of its options, to own more shares. Alternatively, it could keep the status quote. A lot of experience and knowledge from Cathay Pacific. Air china has grown leaps and bounds in the past several years, in terms of know how from observing Cathay Pacific from the board room, operations point of view. How to run a luxury worldwide network. Still some benefits it could reap there. The other option is to pull the pin and get out. It is a toxic asset at the moment for investors on the mainland. Its got all options open at the moment. Paul i wonder which of those three options appear to be the most likely. If air china did somehow become a majority shareholder, what would it look like . Angus i think the least likely action is an exit. That would leave air china isolated. It would not get any knowledge. Of bereftould be sort of all the benefits it gets. That looks to be the least likely course of action. We dont know how long the tension will last. Takeover,f a depending on who you speak to, irrespective of the shareholding structure, it is controlled by the biggest shareholders. It is not really in charge. I think the last few weeks have shown that. We have lost the chief executive, a chairman. Theay complied with all demands of the mainland aviation regulator. China is in charge and most analyst i talked to say it will only go one way. Five years, 10 years down the china oneen country, two systems is open to expire, who knows what cathay will look like . Kathleen maybe this is just an aside. After everything you nicely laid out for us, the South China Morning Post reporting that air china has no desire to get involved with the daytoday running of Cathay Pacific. They are setting an independent director who is saying any beijing led moves that will change ownership will send a wrong signal to foreign investors. Is that just talk . Angus it may well be. It also may well be the case, but the other thing is it is only true until it is not true, until they can change that stance. We dont really know. You are absolutely right. At the moment, at the takeover of cathay by air china, we are slightly terrified Come International investors anyway. It would send a message. You will see a flight of capital out of hong kong and people would think, well, if it is c athay one day, who will be next on the hit list . Its strategically placed at the moment. Just under 30 is at stake. If you go about 30 you are into mandatory general offer territory and it has to make an offer. It is delicately poised. That hass it is there, all of its options open to it. As long as the pressure continues to grow on cathay, weather from the regulator or state owned firms or other sort of mainland organizations or representatives , i think it will be happy the way it goes. Half of what are they were in 2010. So it is not like it has been a great investment. They are still under the level air china paid for them in 2009. Air china is a state owned organization, not a financial imperative if investment makes money, at least not in the same way of other western investors would seem. Director mayive well be right. We dont particularly know air china strategic manners. Kathleen thank you so much for explaining this to us. Now, we are going to take a look at breaking news. Hong kong tourism plunged the most since 2003. Of course, with the ongoing protest in hong kong now in the 15th week. Plenty more to come on daybreak asia. This is bloomberg. Paul get you back to westminster in london now for some more breaking news on the brexit progress. That is the house of lords at westminster. The parliament has been officially until october 14. This amusing, rather pointless theater for the johnson government being routinely humiliated on votes, but never facing a noconfidence motion has now ended. That is it for parliament until october 14. The u. K. Speaker john bercow is saying it represents an active executive fear, and not a standard were normal for the nation. Makes its way out of the building. We will have no more British Parliament until october 14. How we will all miss that. The next hour will bring us chinas latest consumer and producer prices. Bloomberg economics says inflation is picking up more than expected as prices search. Lets bring in our next guest, a china economist with bank of America Merrill lynch. She joins us in hong kong. We are waiting on those numbers for the month of august. What are your expectations . We expect inflation to likely remain at the similar level compared to july. , 2. 8 in july. pork prices have been rising fast but on the other hand, this month we saw Lower Energy Prices and fruit prices helped offset the rising pork prices. In the coming months, we are not so optimistic. We expect inflation will likely see more upward pressure to 3 . Some of the months in the Fourth Quarter of this year and early 2020, we may see cpi inflation to rise above 3 . However, the cpi inflation will ate some momentum to sustain above 3 level for several months, mainly because chinas demand will likely weaken. On thehat is your read chinese economy at the moment because these cpi and ppi numbers will come back after some surprisingly weak export numbers over the weekend. How robust is the economy in china in your view . Xiaojia you can look on the reasoning. In july activity data that came out a month ago, the market was on the downside. Our expectations of a rise. In august after rising 3. 3 in july. In particular, you can see the breakdown of exports. Chinas exports to the u. S. Fell 16 , being a notable. Going forward, chinas exports are likely to be more suppressed because of a higher tariff levels and wider coverage from the u. S. Tariffs. Negative onre chinas exports as well as suppressing chinas investment demand. Chinasrward, we expect economy will likely to see more Downside Risk to growth. We have recently revised our 1. 7 gdp growth forecast to from previously 6 . Kathleen as the risks mount, do you expect a peoples bank of china to announce more stimulus . Cut forgot that triple the commercial banks. People are expecting more, maybe extending medium length facilities, a lot of tools to their disposal. Will they use them . Xiaojia indeed. Chinese policymakers are already on the move. Last wednesday, the state more ofpledged to use the local Government Special bond issuance to accelerate chinas Infrastructure Investment as well as asking the pboc to lower the real Interest Rate as well as cutting. We think cuts alone will be helpful to increase the banks themdity and to help strengthen their credit supply. Boc to also expect, the p cut ratings. We expect a good time will be in september around when the u. S. Fed is going to cut rates. Also, we also expect the pboc will likely to cut benchmark Interest Rates this year, in addition to introducing some about some of the measures to relax financial regulations and guidance to help the banks to expand at a faster pace. Kathleen the bank will spend their credit at a faster pace and there will be more liquidity. Growth,put a floor on keep gdp at 6 or higher . Some people are concerned it may not. Adjustment policy on and we see more easing if you look at the past policy easing, the policy adjustment seems to enough to cushion downside growth in china. Chinas gdpnk growth would show more of a Slower Growth pace and we will forecast the gdp growth in 2020 to fall below 6 at 5. 7 of coverage. Paul to what degree do you see the yuan cushioning things in china . Because we have seen the offshore strengthening and little bit in the past few days. 712. 19. Ly where do you see it from here . Strategist will forecast to continue to weaken by the end of this year. Weakening will be part of the Financial Condition loosening will be helpful to cushion chinas downside growth. Kathleen so, if the trade war continues, how much worse does it get for china . How much more aggressively do they have to provide stimulus . The other side of it, what if a miracle happens and there is some deal at the end of the year . How does that change the picture for chinas growth . The trade war continues to escalate, we think the chinese policymakers will accelerate their pace of policy easing. On the fiscal front, we expect more measures for Infrastructure Investment. On the Monetary Policy, we rate to be followed up by benchmark Interest Rate cuts. Also, the policymakers will likely introduce more measures hopefully to stimulate chinas consumption demands. Those measures would be helpful to push some of the downside growth risks. We would expect the to bet polici measures a relax. Kathleen thank you for joining us. A complicated situation. You spelled out the landscape for us nicely. Bank of America Merrill lynch china economist. Dont forget, our interactive tv function. You can watch us live. Catch up on past interviews as well as dive into any securities or bloomberg functions we talk about constantly. You can become part of the conversation. Send a since the messages during our show. It is for bloomberg subscribers only. This is bloomberg. Kathleen alibaba faces the end of an era today as cofounder jack ma steps down as executive chairman and hands over the reins to the ceo. Chinas Biggest Ecommerce Company has revenue of 56 billion last Financial Year and made ma chinas wealthiest men with a net worth of 40 billion. This is the man behind the story. Jack ma started out teaching english more than 20 years ago for just 15 a month. In 1999, he jumped on the internet train, setting off a platform for businesstobusiness selling. That was alibaba. Ebay,that, he took aim at which let individual sellers trade with each other. 2007 was a milestone as alibaba listed its division in hong kong, only to delist five years later as performance sagged. However, the company made a big comeback in 2014, raising 25 billion in new york with the worlds biggest ever ipo. Everybody should have a dream. What if that dream come true . He leaves an empire that has expanded aggressively. Cloud computing, health care, sport, fin tech and news media, to name a few. The challenge ahead in the face of growing competition and the slowing chinese economy may be sustaining that growth. Hes warned about the u. S. China trade war, saying the impact could decades into the future. He also urged chinese businesses defined opportunity from it. Jack ma has not forgotten his roots. December 10 is teachers day in china. Paul for more on jack mas legacy and challenges facing his success, lets bring in lulu chen. Daniel zhang, some very big shoes to fill at alibaba. What legacy is jack ma going to leave behind . Lulu it will be a very hard act following jack ma. The person is known to be one of the most influential Business People in china. Jack ma has sway over state heads, hobnobbing with peoples like donald trump, xi jinping. The new successor is much more of an on an unassuming, quiet kind of character. , withok at alibaba today jack ma stepping down, it will not be causing as much turbulence to the company as people expected because very much alibaba has already become almost kind of a machine that is automated. It is having its self momentum. Alibaba is a different beast right now compared to when jack ma first created it. The company has evolved from a b2b company that is something much more, including ecommerce, entertainment, retail, logistics, cloud computing. The person who is succeeding jack ma has helped create a lot of this. We will be seeing daniel pioneer a lot of the movement. For the past few years, he has been the person who has sustained execution. Kathleen thank you very much. Now lets get a check on what to watch in the market, going back to sophie now. Sophie lets take a look at what is going on with bonds because we are seeing if all across the curve. 22 basis points this morning. In kuala lumpur, futures are pointing higher. We are seeing shares slipping in premarket trading as the merger has been canceled. In the mainland for hong kong, watching chinese pork producers on news of the government will provide subsidies of up up to 30 of total investment to large farms to boost pork supply. We are also seeing electronics, after upgrading its price target by 90 on more orders from huawei, which is seeking to boost its domestic to product supply. More up next when it comes to daybreak markets. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. A. M. In beijing, shanghai, and singapore. Welcome to Bloomberg Markets open. We are counting down to trade hong kong and Mainland China markets. Mps again deny an election johnson. K. And boris says he will never go back to brussels. And the house that jack built. Its the end of an era for alibaba and its cofounder steps away from chinas top

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