Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240712

Patriotic. Vaccine is on to find a amid warnings of a greater resurgence to come. Haidi pretty mixed midweek outlook when it comes to trading here in asia and for the first time in a while, we have seen equity markets kind of take a step back in terms of not headlines. A great deal of activities and commodities. Lets take a check of futures. Contracts trading higher after we saw a lack of conviction in u. S. Markets as we get concerns that perhaps this fourth round of fiscal stimulus will not be forthcoming. We are hearing the republicans are in the midst of crafting their own proposal to take to the democrats and we also heard from President Trump as he resumed his virus presser, encouraging americans to wear patrioticart of a duty. Over in japan, we are seeing outside of point 3 when it comes to trading for nikkei futures in chicago. More earnings on tap along with japanese pmi readings as well. Take a look at gold and soldiers. Pretty much flat at the moment, jumping close to a nineyear high. We are also seeing silver climbing at just about a six year high. Precious metals getting consistent concerns over the drag of the coronavirus on the and the outlook for stimulus worldwide. We had the european stimulus package finally being agreed after five days of talks. Down by just. 1 . The u. S. Dollar cannot find a bid at the moment. Front and center when it comes to the fx story. Take a look at the impact on emergingmarket stories. Really kind of showing the emergence of emergingmarket stories. The 200 daysting moving average since march. We have a strong yuan and high Commodity Prices potentially paving the way for a greater rally in emerging market fx. Resumedresident trump his virus briefings with a warning that the outbreak in the u. S. Will probably get worse before improving. Tone,k a more reserved urging americans to cover up. Pres. Trump we are asking everybody that when you are not able to socially distance, wear our mask a mask, whether you like it or not. They have an impact. They will have an effect. We need everything we can get. On theemily wilkins is line from washington. That aboutface did not go unnoticed. We had Speaker Pelosi saying President Trump. Emily it is definitely a pivot from what we saw today. It was patriotic, when he encouraged americans to do so. The president coming out and really encouraging people to do so at a time that we are seeing cases continuing to rise in the united states, particularly some areas of the country such as the south and the west. Trump was very pragmatic. Things will get worse before they get better and he asked americans to please stay safe, wear our mask, and avoid crowded indoor areas. Meantime, are we hearing that there may be more progress being made on this fourth round of fiscal stimulus . We saw the markets react amid concern that it will not be very forthcoming at this point. Emily this will be more difficult than previous rounds of stimulus. There is less urgency at this point, more nuanced to deal with. We are on track at this point. Another coronavirus stimulus package. It is something republicans are working on, democrats passed their deal, willing to negotiate with republicans on it, and we are seeing a little bit of daylight between the two parties. Fortional funding unemployment insurance, another round of checks, except this time, instead of going for all americans, it might be a more narrow section of the population that could really use help. Shery the president continued his harsh tone on china, calling this the china virus, coming out of time when the u. S. Has charged two chinese hackers for stealing coronavirus research. This comes about a week after there were concerns about china hacking. After concerns about russia trying to hack the u. S. , something that the Justice Department has said that hackers were assisted by Chinas Ministry of state security. Defense contractors, weapons systems, and it was not just the u. S. The hackers were targeting. There were 11 other nations involved including some like the u. K. Who were spoken out against china at this point. Emily wilkins with us. Still ahead, we get more on the u. S. Claims of chinese hackers stealing trade secrets and stole vaccine data. Our interview with the assistant attorney general for National Security is ahead. In the meantime, bonds are under pressure in china despite the recent recovery. We will be discussing the outlook for the credit outlook. Karina you are watching daybreak asia. Tokyo is considering asking people to stay at home this long weekend as coronavirus levels rise once again. The capital was to be celebrating the opening of the Olympic Games but has seen infection rates spike in recent days. More than 1600 cases have been recorded in the last week with hospitalizations climbing fivefold. Tokyo and the abe government disagree over the severity of the surge. Hong kong is facing a third wave of the pandemic amid fears the citys medical infrastructure may be overwhelmed. New cases are surging with many of uncertain providence. The government has speculation the city will go into a new lockdown following the reports of fake news and rumors. Hong kong has been seen as a model of how to control the coronavirus. A new Bloomberg Survey says casino operators in macau are likely to post a combined loss of more than one billion u. S. Dollars in the second quarter. A pool of brokerages says the Six Companies will have negative numbers when they report soon. Revenues casino collapsed by 90 from april as the coronavirus closed borders and slashed travel. Thailand narrowed the race for the Central Bank Leadership to two finalists as the country grapples with the worst ever economic crisis. Names have not yet been disclosed but one is set to be a bank of thailand official and the other coming from the outside. The new governor will take over on october 1. The bank cut its benchmark rates to a record low of. 1 . Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. I am karina mitchell. This is bloomberg. Haidi, over to you. Haidi karina, lets get to china where the bond drought has added to pressure on the domestic funding environment for corporates, and as illustrated on the bloomberg terminal, we have seen this bomb selloff taking a bit of a breather over the past few days after the 10 year yield ended in oversold territory last week but some analysts say that pbocs reluctance to ease may continue to weigh on chinese fixed income for now. During us with some insight is the Brandywine Global portfolio manager, tracy chen. You see on the chart, we have bounced back down when it comes to being in oversold territory but we know the pboc, given the exuberance we have seen in equity markets will be very reluctant to add to more Monetary Policy easing, so where are you when it comes to chinese i think we are quite constructive on chinese sovereign bonds. I think the Interest Rate differential between chinese 10 years and u. S. 10 years is wide. I think it is a great value both from a fundamental point of view and also valuations, and a market technical point of view as well. China has been first in an first out in this covid19 situation. I think its recovery has been quite uneven, quite incomplete. Most of the vshaped recoveries for industrial sectors. The Services Sector. Airline industry. And hotel. The pboc will keep Monetary Policy very easy and this should bode well for the chinese tenure bond. As the chinese tenure bond included waiting for the bond 10 year bond included weighting for the bond and you will see more Foreign Investors join. That should serve as a great market technical. What have we been seeing in terms of volumes at this point . Emily i think the volume is quite healthy. Right now, i think the foreign bond s share as the chinese treasury bond market has increased higher than 9 . I think that direction has been going well. I think china has tried every means to attract Foreign Investors because its current account surplus is almost going to zero. Physical deficit is increasing almost 13 on the aggregate level and following that investment is also dropping. It needs foreign capital. Shery with the recent bond that we have seen, chinas local bond defaults have hit a four month high. What is the risk of the pboc really holding back on using Monetary Policy too much and too fast at a time when there still seems to be some risk to the economy . Think the reasons are off, mostly driven by the increase in the supply of the bond issuance. Determination to clampdown on the financial market. But i do not think they were premature in tightening the Monetary Policy because they are still trying to balance the versus thesus reopening. Easy monetaryry policy. Shery let me turn to the u. S. , because you are finding some opportunities in a market that some people have been more hesitant about. Commercial mortgagebacked securities where there has been a lot of gloom and doom when it comes to the sector. Yes, that commercial equity market has been the eye of the storm because it is directly linked to social gatherings because of the commercial for social distancing, and many of the sectors have some secular challenges, especially in retail at restaurants. Said, thes you sentiment is a little overdone. I have been hearing about horror apocalypse buthe actually, there are several factors that should prevent a market. Ocalypse in the most of the factors theres no oversupply of the commercial real Asset Properties this time around on the national level. You can have some local level oversupply. The market is maturity is quite tight, quite light, because most of the bonds are 10year majority. In 2010, we dont have a lot of new issuance on the market. The Underwriting Center has been included. That Service Cover ratio is higher. There is another policy, potential policy stimulus that has been under discussion that should be included in the hope at. We have some signs of fundamentals mike Hotel Occupancy has been increasing and also the late payment the speed of the late payment increases have been slowing down. Shery tracy, it was good having you on. You are running out of time. Tracy chen, Brandywine Global per volume manager. Here is a quick check of house over futures are doing because of the rally continuing at the highest level since 2013. Silver futures up in the double digits this month already, outpacing gains for gold. They are being encouraged not only by low Interest Rates but by bets on a rebound in industrial demand. Coming up next, the Hong Kong Government denies a new virus lockdown but speculation continues. We have the latest. This is bloomberg. Haidi a quick check of the latest business flash headlines this hour. Closer to service with regulators calling for new updates by october. The faa is happy with current redesigns. Plane may be able to return to the air in the next few months. That would be welcome news for boeing, although the potential return date would be later than the immediate target that the plane maker has sought. United airlines posted a record quarterly loss of 2. 6 billion through june as the coronavirus slammed air travel. From 11. 5unged 90 year ago. 6000 workers have agreed to leave as the Company Works to cut costs. United describes the period in the worst in its 94 year history. To snapchats parent slumped in late train as fears about user growth outweighed a jump in secondquarter revenue. June roseough as users relied on the app to spread information about the coronavirus p or however, active daily numbers of 238 million were behind snaps own forecast. Shares have closed near a record that fell on the earnings news. Trump warnedent the u. S. Coronavirus outbreak will probably get worse before it gets better, and in a change of tone, he is encouraging americans to wear masks. This as global cases surpassed 14. 7 million while cities like hong kong and tokyo are moving out more stringent restrictions there for now, yvonne man has more on this, and there was speculation that hong kong could reconsidering a lockdown. The government coming out with a statement saying that is fake news. The rumors that this lockdown could be happening in a matter of days are just false. They are urging the public not to spread rumors right now but this is a city that is grappling with this third wave and scrambling to contain this virus. We saw another 61 confirmed cases yesterday. Two more elderly patients have also died, bringing the decile to 14, but overall, we have seen more than 600 cases over the past two weeks, half of which are of unknown origin. Officials are saying the medical system is now critical. They are talking about isolation beds, and the words in hospitals have reached capacity of 80 now and hong kong itself has lost the ability to conduct this widespread testing we have seen in countries like china and south korea. You can see this chart compares at all. 59,000 per million of its population. You compare that to places like victoria state in australia and they are doing four times that amount of 200,000 per million. Victoria itself saying they could do 20,000 virus tests a day. Hong kong is doing about half of that. The government now really struggling to boost the testing, trying to do so as well as the quarantine facilities here around the area. Governor may be urging residents to stayathome over the fourday weekend. What do we know . Yvonne this fourday weekend was supposed to be a happy time where they would celebrate the start of the Tokyo Olympics games which now have been postponed, but now, the tokyo governors saying they are considering urging people to avoid that unnecessary travel outside during this time. Tokyo once again, the number of virus cases rose past 200 now, 237 on tuesday, and more than 1600 cases in the past week alone p of hospitalizations have jumped fivefold, they say. At this point, keep in mind that japan is starting the Regional Tourism campaign as well that caps off today. It does exclude tokyo, however. Not sure how strong the governors calls are going to be. We have seen tokyo and the National Government disagree over the severity of this karen outbreak, so at this point, japan still insisting that another state of emergency is not needed. Our markets coanchor, yvonne man, with the latest on the virus situation around asia. With novartis, it is cautiously optimistic about a vaccine for the virus. The company has a number of therapies under development. Spoke to its ceo bloomberg about what a successful treatment would do for the companys bottom line. Our efforts are focused on treatments. Clinical trials, multiple efforts on going through investigator studies. We have a broad Research Effort to find Novel Coronavirus medicine, but across these medicines, we are not looking at this as a profit driver. We have committed to really do this for more of a humanitarian standpoint. If you look last week, we committed to provide 15 medicines at no profit to 79 countries. The who recommends that for the treatment of coronavirus patients. To methadone. Many of the companies in our industry, with respect to vaccines, have also committed to doing this more on a humanitarian basis. Together, onethis global community, and our industry is just trying to do its part and novartis is trying to do its part as well. Your focus of course is on treatment. We have had plenty of vaccine news or at least updates on progress from Companies Like moderna, astrazeneca, and the oxford trial. Hopeful yet cautious seems to be the way that a number of commentators have described how they feel about the vaccine story. What would you add to that . Would that be a Fair Assessment . What about timescales . Vas my background is in fact as of action all adjust and i spent vaccinologist. It is important that we remain cautious. We see strong immune responses in phase one Clinical Trials that do not translate to realworld efficacy in phase three Clinical Trials so i think the first question is are the immune responses we are seeing in the phase i trials really translating into larger scale Clinical Trials . The second part of the story has to be if we will give it to billions of people, we need a very safe vaccine. The public has to trust it. It is not going to help us if we have a vaccine the public does not have trust in or erodes trust in vaccines over time. That will be very important as well and we need appropriate follows ups with patients, followup studies. We cannot rush it. We need to ensure we have a strong data package to enable that to happen. The timeline, if you look at it, the fdas guidance document expect 50 efficacy at least as well as six months followup on all of the patients depending on the technology being used. I think we can all do the math based on when the trials followup to really have a compelling vaccine that has all the data required. I am cautiously optimistic but also humbled in the face of what it takes to develop a vaccine. Shery novartis ceo vas narasimhan there. We are seeing u. S. Futures really flat after the open, not doing much. There was mixed guidance coming from the new york session. Faltering. Tech surge managing to end at that fourmonth high. We continue to see nikkei futures gaining about. 25 . The japanese yen a little bit stronger today at a oneweek high against the u. S. Dollar. We are awaiting the japan pmi preliminary numbers so watch out for that. Both Futures Holding steady. This of course, those levels we have not seen in a decade or so. Crude prices under pressure, headed towards the 40 a barrel level. This after oil surged to the highest level since march and the new york session. Coming up next, the u. S. Accuses beijing of backing chinese coronavirus stole Vaccine Research from the u. S. This is bloomberg. You are watching daybreak asia. President trump has made a 180 degree turn on the coronavirus, now saying that wearing of masks is a desirable option. He has resisted covering his face for months, saying he did not want to give the Mainstream Media an easy target. Patriotic tois wear a mask in public and he repeated the message during his first Daily Briefing on the pandemic and months which will now continue. Pres. Trump we are asking everybody that when you are not able to socially distance, wear our mask, get a mask, whether you like the mass or not. They have an impact. They will have an effect. We need everything we can get. New york state added more regions to the quarantine list as virus numbers continue to climb across the country. Governor andrew cuomo says travelers from 31 states now face mandatory isolation if they enter new york. More areas may be added to the list appeared the warning is based on the seven day average of positive virus tests in excess of 10 . 34 workers were hospitalized on tuesday. U. S. Lawmakers are edging towards a new virus stimulus package. The two parties remain a part the total. Speaker nancy pelosi says the republicans are in disarray over there delay and tactics and the gops trillion dollar package is not close to what is needed. Republicans and democrats are divided on President Trumps call for a payroll tax cut to be included in the plan. Has unlocked the second chunk of its moonshot bonus. The average market value over the last six months has risen musk 150 billion, meaning can exercise additional stock auctions. We have a strike price of 350 dollars, meaning he pocketed more than 2 billion if he could salvage shares right now. Topped 100a billion. The u. S. Is accusing two chinese hackers of stealing data where hundreds of millions of dollars, including Vaccine Research, on covid19. The two men targeted a wide variety of victims, taking trade secret, intellectual property, and other valuable information with the help of Chinas Ministry of state security. After that indictment was released, bloomberg spoke with the assistant attorney general for National Security. We are announcing the charges today. They continue up to the day of the indictment. We are obviously going to continue to monitor what they do. Even more importantly, continue to work with those private Sector Companies to help them guard against this kind of activity. As we say in the indictment, they come back. They have hacked and they come back for more. Luckily, by working with the companies, by working with the department of energy, we have managed to prevent some of their returning hacks. What are some of the steps the private sector can take to prevent hackers from looking after this important intellectual property . John always safeguarding your data on the most secure Computer Systems you can. That is of course even more important these days when so many people are working remotely on systems that they had to set up overnight. And the second piece is going to the fbi. If you think something went on, do not just think i have got an hr problem, oh, it is a glitch. This could very much be hackers, and you are not going to be able to figure it out yourself. Go to the bureau and get their help. Let me follow on this. For many executives, the thought of having the fbi or regulators come into their board room and have these types of investigations is a significant Reputational Risk hazard. To your point, can you assure them that if they work with the authorities through the proper channels that they are not going from their damage business bottom line but also might ultimately be protecting themselves . John the worst thing you can do is not go to the bureau and then get found about later that you did not try to do everything you could to protect your Companies Data once you saw there was a breach. If you work with the bureau, you can see in this indictment, we did not name any of the companies involved. We worked closely with all of those companies and collaboratively, we have been doing this for many years now. And we will try to protect your identity. We are obviously not there to move around your files. We are there to investigate this breach. And we will try to do it without disrupting the rest of your activity. I know you announced the two indictments from this morning. Theres a lot of concern that the communist party of china might have been supporting these individuals. Is there evidence to suggest as much . John what they are doing is allowing them to continue their criminal activity, instead of acting like a normal government would, which is shutting down criminal cyber intrusions, allowing them to you know it because they are on call for the benefit of the state. They are extorting companies and trying to steal for their own profit. But at the same time, you can see from the conduct that is alleged, they are out there looking at human rights dissidents, looking at clergymen who are not part of the official church in china, so they are doing the Chinese Communist partys bidding at the same time they are making money for themselves. Does that mean there could potentially be additional charges or sanctions placed on chinese individuals who are aiding this type of conduct . John we are always continuing these investigations and we will see where they go. That sounds like a maybe. When you look at congress from a legislative standpoint, do you think there is Anything Congress needs to pass in order to protect the private sector and the supply chain as well as to protect some of these businesses from being penetrated by the communist party . John i think, you know, at this point, we have the tools we need. Obviously, we have a supply Chain Executive order that is meant to protect the supply chain. It is a great question because it is a constantly evolving threat so we have to constantly work with congress to make sure we have what we need and the private sector has what it needs to protect itself from this kind of threat. Shery assistant attorney general for National Security, john demers. We will be joined by citigroup head of commodity and research. We will be asking why he is bullish on silver and gold. This is bloomberg. Haidi Precious Metals are soaring to multiyear highs on the back of consistent concerns over the coronavirus and the outlook for comics to menace worldwide. Gold futures surging to a nineyear peak and silver also touching the highest since 2013. Our next guest expects gold to continue to shine. The Citigroup Global head of commodities research, and morris, great to have you without spirit let me get started with gold. If you are bullish on gold, what is the best way to get exposure to the metal . Are we talking etfs . Are we talking about bullying . Oullion . The best ways talking about an etf. It is great, but how do you store it . Its a financial instrument that provides your convenience by not having to deal with the physical material. Shery a few of the elements that seem to be boosting bouillon also seems to be helping silver. When it comes to silver, how much of the industrial demand rebound optimism is playing to it as well . John it plays to it. Plays to it. Silver is the poor mans gold. All those other things that go into the gold market, the depreciation of the dollar, the currencies continued world of ratesisk and low interest , but in addition to that, you have the industrial uses of silver. You know, that boost should really change the relationship between silver and gold. In terms of looking at the next year or two, we think you have got a combination of factors. The underlying factors that are boosting gold and silver and the industrial factors that should change the ratio between silver and gold. Ask the ageold question. Right now, given the unprecedented year that is 2020, do we look at gold as a commodity or as a currency . What do you advise investors to shift their perspective into . We have never thought of gold as a commodity. It is not like other commodities. It is not consumable. You never really lose the store of gold in the world. It is more like a currency. It is more like an asset that fluctuates with a lot of other things. And this is the kind of moment where gold really works in terms of the yield you can get from it based on all other things that are happening. Happening in the global economy. You dont have to worry about deterioration consumption. Othersomething unlike commodities which gives you a sense of where the world is going rather than a snapshot of the world as it is currently. Is the momentum and bullishness we are seeing for the outlook for gold unprecedented to you or is it comparable to any other period of financial history in your experience . Comparable to is other periods. We have a couple of unique things happening. If you look at the price of gold and a whole bunch of currencies other than the u. S. Dollar, it has never been more than it currently is. If you look at the nature of the world we are living in, we are going through a critical environment that can be compared to something so far worse than the great financial crisis when gold etfs pay into being in a big way for investors. The dangerous precipice of being Something Like the great depression. 1928 to 32. There is something unique about it although we have seen the in 2009. Old there is risk in the global system. Something nobody living today as an adult has ever seen before. Shery you are pretty bullish on Precious Metals. What would actually make you change your stance if at all . What elements would you take into account . John the biggest one the biggest one would be if there really were inflation rising in the World Economy somewhere. You can think about inflation in terms of food and fuel. U. S. , a just in the very limited in terms of recent history, amount of acreage for the cultivation. We have very adverse weather conditions. If you look at the main food staples, soybeans, wheat, and corn, they look like they could with theionary, and dollar depreciation, inflationary across other countries. Similarly, with energy, so it is food and fuel that lead in place, and reflation could be a damper. It could be a headwind. That is the biggest risk and we do not think it is a huge one. When you are taking a look at energy prices, and you see oil and gas prices strengthening over the next two years, will Oil Companies eventually bring back spending on upstream or will investors and also bank concerns about limit change and so forth hold capex back . Theres a whole bunch of things happening, and yes, the Investor Community is wary for climate change. Reasons about hydrocarbons in general. We think it is more complicated than that. To begin with, we have to look at the efficiency of capital rather than the total amount of capital being spent. Of capital,iency five years ago, seven years ago, the average cost of fighting and developing a barrel of oil was 30 a barrel. The last three years through 2019, it was under 15 a barrel with downward momentum. Has twice theent amount of efficiencies at hand a half decade or so ago. Thate tend to forget about when you look at the gross amount of capital being spent on it. The other thing is the cost curve for oil which has flattened tremendously. And i think we have to remember this. For 160 years, most of the oil and gas that was exploited in the world came from reservoirs, pockets of accumulated material in a reservoir. The technological revolution in the last decade was to go beyond reservoirs and to look at source rock, and then, with new technology, to bring the cost down tremendously, and in fact, if you look at that reduction barrel ino 13 per 2012 to 2019, it merely meant that the lead, other than some parts of the middle east, of lowcost material was in shale rock, and this is novel. It means that at a price hundred 50 a barrel, you can probably grow Oil Production over a fiveyear period of time at 18 Million Barrels per day which will be greater than what oil demand is. That is one factor. Another factor is that we want to find a world which is less carbon intensive, less methane intensive. That world requires pricing carbon. We are seeing carbon being priced in an adequate way these days in europe due to the Carbon Pricing system in europe. We see it in california. We see it in the eastern part of the u. S. The world really needs this carbon price in order to get investments, pricing carbon in order to get rid of it. We have technologies that can be developed as long as it is the price of carbon, which enables Financial Markets to invest in deke organizing the planet. Can have Companies Big and small, whether it is shell, bp, and the like, where they have the technology to d carbon eyes and invest in various processes. There are dozens of different processes to reduce carbon. Then we can have transportation fuels based on hydrocarbon while reducing the carbon element of it. Oil orot the end, big smart oil. Work,are many factors at and yes, covid and its epidemic ,as spurred on regulation europe in particular, spurred on oil as at to reduce transport fuel and to reduce coal land to some degree natural gas as a powergenerating fuel. They are not going to go away for the next 30 years. Now, we think as of have seen 24 u. S. States remain committed to the Paris Agreement targets despite of course the broader federal level reticence in policy that we have seen. Does that mean theres going to be harder compliance duties for Companies Like bp and chevron as these states try and meet the targets through some of these policies, you know, like higher taxes . Does that eventually result in an erosion of demand as well . Sure it does. Regulation in europe is more to the point then regulation in the u. S. , although california and new york are moving in the kind of same regulatory direction as the European Union is. That is to say coming close to banning internal Combustion Engine used in large cities, making it difficult to do that, and promoting through public fording power points charging electric vehicles, boxes ontomoving natural gas and onto electricity, so we are seeing that momentum. That momentum still has within it some of the forces that are working the other direction. If we look at the demographics of the globe and look at the next 30 years, and we know, certainly, who is going to be 30 years and older because we were born 30 years from now, theres going to be a surge in transportation and fuel demand in africa more than in any other part of the planet. So demographically, the demand for transport fuels in that continent will be counteracting whatever is happening in the advanced economies and to some degree in china, where the demographics work in the same direction as they do in the u. S. , japan, and europe. And there is a price issue. If you get oil in abundance at a relatively low price, which it would be, as it is eliminated from the transport fuel sector in advanced economies. It would be cheaper. We have to remember that, you know, we have got over one billion vehicles in the world and in a healthy economy, 80 million vehicles are being made that are ice vehicles, may be 5 million vehicles that are hybrid or electric vehicles. The life of a new ice vehicle is 12 years. It is going to take a while reach thateally does inflection point. Very quickly, we are hearing that sinopec is looking to Current Operations with a result of the floods in china, and of course, we are talking about iron ore and oil. There is a lot of supplyside implications. Are the rallies we are seeing really do to supply cuts and disruptions as opposed to true demand . Ed it is a combination of factors. The supplyside has led the increase in prices, the recent price increases over the last couple of days are a function of themism of vaccine for coronavirus, optimism about stimulus packages in advanced economies, stimulus packages in china, promoting demand. Curbs onok at the production from the opecplus countries. In addition to that, their curtailments in drilling, particularly in north america, where already, we have around 3 billion Barrels Per Day on the production side taken out of the market. U. S. Production is around 11 Million Barrels per day. It was at its peak six months ago. We think it will continue to slide because there is no drilling activity taking place in the u. S. The count went from close to 700 oil directional drills in january to 180 right now. We are going to see declines continuing through the middle of next year on the production side. Canada has shut in more than a million a day. Some of that is coming back but the Capital Spending is not there. Phenomenonply driven. We see demand picking up. The refining side and it is a reflection of what has happened in china in april and may compared to what is happening in europe and korea and japan. India even today, we have had refinery utilization really rising week after week. This will probably be the 10th week in a row. Haidi i am sorry to jump in. We really appreciate your time. Ed morse joining us to not more to come. This is bloomberg. Joining us. Lots more to come. This is bloomberg. Haidi United Airlines reported a record 2. 6 billion dollar quarterly loss after the close. It also showed it is bracing for a choppy recovery from the pandemic related plunge in travel. Su keenan is tracking the after the bell action. The airline is lowering its cash burn to 6000 employees. They have agreed to quit. What is the outlook looking like . Su the airlines did say it plans to cut its average daily cash burn to 25 in the Third Quarter and that is down from burning 40 million per day in the second quarter. A lot of the numbers were brutal but that was one of the positives that pushed the stock a little bit higher ever so slightly after hours. And those voluntary departures, the 6000 workers who agreed to quit, they likely received much bigger layoffs in october when the federal payroll protection money runs out. Underscoring just how bad it was, united reported that a loss of 2. 65 billion. They described the past three months as the most difficult financial quarter in its 94 year history. Adjusted loss of nine dollars. 31 9. 31 per share was much worse than projected by analysts. A bright spot. United said it is shoring up its cash position and says it plans to have 18 billion of liquidity by the end of the Third Quarter. Shery. Shery su keenan with the latest on United Airlines. Coming up on daybreak asia, the outlook for chinas tech sector with the senior analysts, david day, who joins at the bottom of the hour, but first, the opens in sydney, seoul, and tokyo. We will discuss what is ahead for stocks with the strategist, eleanor cray. This is bloomberg. Good evening from bloombergs global headquarters. Markets have just open for trade. Welcome to daybreak asia. Asian stocks set for a first aquinas week after a mixed session out of wall street. Investors await clarity on a virus stimulus program. Global infections approach 50 million. 610,000 deaths. President trump says wearing a mask impeach riyadh it. The worlds biggest food delivery at says orders are taking off and robots may be able to help. Lets get straight to the Market Action with Sophie Kamaruddin in hong kong. Stocks are opening to the downside with more earnings on tap. We are keeping an eye on pharma a coronavirus treatment. The yen back below 107. Jgbs expected to climb for a second day on a strong twentyyear option. Curve flattening anticipated. Fund predictsnd the yield curve will steepen on heavy bond supply. The kospi under pressure. S k discovery soaring this morning after south korea signed a letter of intent with astrazeneca to participate in a global vaccine production network. Aussie stocks are under pressure after rising on tuesday. A bullish signal. At an april 2019 high. The dollar is under pressure. The bloomberg dollar index is extending losses at a march low and heading into oversold territory as markets anticipate a stimulus package from the u. S. Pressure on the greenback. Real rates grind lower, lifting precious metal. Off futures less than 100 of a record high. Gold etfs are the best way to get exposure to gains. Silver leading the charge this morning. Futures rising more than 5 , trading at a 2013 high. Nextr will see 25 in the 612 months. Analysists get more with eleanor cray. A tradinging situation as we await more news flow. Is there anything stopping the market from continuing to rally higher in the absence of any fiscal or central bank tapering worldwide . To the when it comes fiscal stimulus package, which is very much needed in the u. S. , the Crisis Response that we have seen over recent months has proved that policymakers are in. They are making some backandforth before we reach a deal, on what the next round of pandemic relief will be. We certainly see that risk assets are oscillating with the prospect of that fiscal support and the plateauing Global Recovery alongside the mounting virus toll. With that backandforth, we could see a test of whether we could see fundamentals catch up with market sentiments. We would hesitate and how long that would actually last. Its clear that momentum and liquidity, alongside the huge amount of centralbank support, remains a big driver of this in risk assets. We could see some uncertainty on the fiscal front. Bankshave central pledging ongoing support. Best attaching asset prices from fundamentals, continuing to green light the hunt for yield. Correct giverevent corrective moves. Much does the dividend slashing weve seen in asia play into the sentiment . For the msci asiapacific, 22 . A quarter of Companies Listed in this part of the world cutting their dividends. Does this matter in this kind of trading environment for investors . Eleanor dividends will be cut. The income return for the fx will certainly fall in the coming year as Companies Look to insulate their balance sheets. Thats the right thing to do whilst we remain in the midst of this health crisis. We expect a substantial amount of companies will lower their payout ratios as earnings are materially impacted. For investors, there are several dynamics at play here. Fallen,ck prices having its important not to chase high dividends at the expense of capital losses. The deteriorating capital base will be far more painful for longform longterm portfolios. The dividend yield is well below the 10 year average. The premium remains elevated. Therefore, attractive. Thats the dynamic that continues to support inflows into equities. Its a real picture painted that the alternatives lack appeal. Multiple expansion will remain a driver of continued upside with this low Interest Rate environment set to persist. That lack of alternatives providing a premium for future castles. Cash flows. In valuation boost we see this low Interest Rate environment alongside that centralbank backstop is to provide ongoing support. Haidi another dynamic we continue to see is this pull and push between growth and value. Already, you started adding some of that value exposure into cyclical sectors as well. Tell us why. Certainly, right now, the growth factor is at an extreme premium. Due to earnings picking up this week, we do have some rationality in that premium that reflects the ability to capitalize on the covid19 acceleration of trends like working from home, cloud computing, digitization, ecommerce. Those companies are wellpositioned for the new paradigm, the postpandemic world. It allows investors to value the sector more richly. What we are zooming in on a speculative caution of the recent melt up and stocks, which we think could be due for some sort of breather, particularly with expectations being so extended. Companies have a high bar to beat those expectations. When it comes to more cyclical sectors, cyclical positioning is very low. Theres also an incredibly lowered bar when it comes to meeting expectations this earnings season. Some capacity for those Companies Potentially to generate individual outperformance as they meet the lowered expectations. We have to add that this is somewhat of a more tactical play, particularly given that there remains a lot of uncertainty as it relates to the virus. We also have the flattening recovery curve that will continue to weigh on the economic recovery. Whilst we have that dynamic in play, the Building Blocks for true cyclical outperformance is just not there yet. Haidi we have a lot of earnings coming in, especially mega cap tech giants. What will you be watching out for that could potentially move the broader market, especially across asia . Eleanor when it comes to earnings, looking at those highflying tech companies. These extended valuations with very little margin for error. If those expectations are we could see that chasing on the downside as well. That could have the capacity to spillover into broader sentiment throughout the earnings season. Shery always great having you with us. Thank you. Still ahead, a bright spot amid the coronavirus people. Rush toi discusses the chinese internet stocks. London and washington against beijing. The western powers discussing forming a coalition to resist china. We get the details, next. This is bloomberg. \ karina youre watching daybreak asia. President trump is doing a 180 on the coronavirus, saying that the wearing of masks is eight a desirable option. Patriotic tots wear our mask in public. He repeated the message during his first Daily Briefing in months, which will now continue. A new survey says can see no operators in macau are likely to post a loss of more than one billion u. S. Dollars in the second quarter. The Six Companies will have negative numbers when they report with mgm china leading the declines. Macau says casino revenue collapsed by 90 from april as the coronavirus closed borders and travel. Thailand has narrowed the race for the centralbank leadership to two finalists. Names havent been disclosed. One is a bank of thailand official. The other coming from the outside. The new governor will take over on october 1. The bank has cut its benchmark rate three times. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im karina mitchell. This is bloomberg. Haidi the u. S. Has ramped up its antichina rhetoric, including beijing of backing hackers who have been targeting coronavirus faxing data. Lets get the details from Derek Wallbank in singapore. What do we know about these attacks . [inaudible] this is the second time in a week that a foreign nation has been singled out for vaccine related hacking. The u. K. And others said that russia had been trying to do a similar thing. Department dide release an indictment against those individuals. It said that it knew some of the people that they were working with but did not release those names as well. This is a shock in the larger u. S. China construct. The u. S. Has said for a very long time that it thinks that a core fundamental strategy of china is to try to plagiarize the research of american and other firms and then take it and use it for its own needs. Just shortcircuit that entire process to gain illicit market advantage. Segmentld be a larger of that overall dispute. Right. Intorms of how this plays the november election, how do we expect that this will be a part of the policy . Weve seen the president returning to these white house virus press briefings today. Well, two things of note. Backd trump is going to go and do these virus briefings daily. One of the things you learn quickly watching donald trump is that he has difficulty staying on one subject. While the briefing might be about virus, the opportunity is there for him to sound off on anything thats happening. If there are additional tensions, you could get rapid escalation. You are getting the issue in front of the president quickly. In this Campaign Going forward, both trump and joe biden are trying to signal that they are going to be tougher on china. Biden is wasting no opportunity at all to attack trump for being soft on china over the virus for initial comments he made at the very start of this effort, when he said that china was doing a good job in trying to tackle the virus. If anything, biden and his whole campaign are going to push trump to be tougher on china as we go forward over the next couple months. Coming up next, hong kong faces another wave of the coronavirus pandemic. Critics say the city is not ready this time around. Thats next. This is bloomberg. Shery lets get a quick check of the latest business flash headlines. The 737 max is one step closer to operation. The announcement indicates the faa is happy with current redesigns and that the plane may be able to return to the year in the next few months. That would be welcome news for boeing. The potential return date would be later than the midyear target the playmaker has long sought. United airlines posted a record quarterly loss of 2. 6 billion for the three months through june. The coronavirus land air travel. Revenue plunged nearly 90 . 6000 workers have agreed to leave as the Company Looks to cut costs. United describes the time as the worst in its 94 year history. Postedrs india unit betterthanexpected profit for the quarter, boosted by a merger and customer stockpiling amid the worlds biggest virus lockdown. Unilever reported a 7 rise in revenue up more than 4 . World markets were more resilient than urban ones. Global coronavirus cases are approaching 50 million. We watching out for figures out of australia. Lets get over to hong kong now where our markets coworker yvonne man has more. Theres been speculation that the city may be considering another lockdown. The government says this is fake news. Yvonne yeah. They came out with a Statement Last night. They are saying the rumors that hong kong will be shut down in a few days are false. The city is struggling to contain the third wave. Another 61 confirmed cases yesterday. Two more elderly patients have died. The death toll now reaching 14. Overall, 600 new cases. Half of which are of unknown origin. Officials are saying the strain of the medical system is now critical. Isolation beds and wards in Public Hospitals have reached 80 . It lacks the ability to conduct rapid and widespread tasting testing. Hong kong has done about 59,000 tests per million. Australia is doing more than four times that. Victoria is testing 20,000 people per day. Hong kong is about half of that right now. The government is grappling to do testing. Shery in japan, tokyo was supposed to be celebrating the summer olympics. Instead, people are stuck indoors at home. Yvonne yeah. This is what we were thinking of. Now with the tokyo Olympic Games postponed and virus cases surging in the capital, were ,earing from the governor asking people to avoid unnecessary trips outside as much as possible. Risingcases in tokyo back to the 2000. 16,000 ore than 6000 cases in the past week. Hospitalization has jumped fivefold. Not sure how strong her call to residents will be. Weve seen the tokyo interNational Government disagreeing on the severity of this current outbreak area outbreak. Another state of emergency is not needed. This is the day that the domestic Tourism Campaign kicks off. It excludes tokyo. Antibody fade quickly in patients with mild symptoms. What does that tell us about the efficacy of a vaccine and the idea of herd immunity . This is research that came from the new england journal of medicine. It says, perhaps we will not get that long immunity. Some caution regarding the durability of a vaccine and heard meant immunity. There could be anybodys researchers found that antibody levels fell rapidly. It happened more quickly than the sars virus. That coincides with another study from london that showed antibody levels may be undetectable three months after infection. The body does form other immunity responses including t cells which help hunt for the virus. It is still early days. They need more studies to really see what the threshold is. The latest on the pandemic. Coming up next, the Worlds Largest Meal Delivery service seized a man surging. Scientistom the chief about how robots can help. This is bloomberg. 49. 50 i found you good job. Now im gonna stay here and you go hide. Watch your favorites from anywhere in the house with the Xfinity Stream app. Free with your xfinity service. Now any room can be a tv room. Stream live tv, on demand shows and movies even your dvr recordings. Download the Xfinity Stream app today to stream the entertainment you love. Xfinity. The future of awesome. Shery breaking news out of japan. Manufacturing, an increase to 42. 6 from the previous month. The preliminary numbers for july in the Services Sector also creeping slightly to 45. 2. The composite at 43. 9. The manufacturing side of things has remained in contraction territory. Remained ing has low 50s and april of 2019. Still an improvement from the previous month. Services pmi rebounding strongly also from the previous month. June,fter rebounding in now at 45. 2. We continue to see daily resurgence of coronavirus cases with more than 200 a day in tokyo. It could have an impact on the Services Side of things. For now, a quick check of how markets are reacting. Sophie is taking a look at the japanese yen. Sophie yes. We are seeing muted reaction for below 107. Y, trading we saw a shift in gears when it came to dollaryen. The yen staying range bound since march. How stocks areon faring this morning. We are seeing stocks moved to the downside in tokyo. Very modest gains seen in korea while the asx 200 is losing ground after rising to a march hike. To thetocks steady downside after a threeday gain for the regional index. The fx corner. The dollar is extending losses at a march it low. The aussie meeting g10 gains. Supported by commodities price gains which are being led by the Precious Metals space. Silver tearing it up this morning with futures rallying 6 . At climbing to a november high after it be quarterly estimates. Discovery surging after south koreas bioscience signed a letter of intent with astrazeneca on vaccine production. A report that japan has given the nod to a virus treatment. The company manufactures a generic version that is cheaper. Firm is still the best performer this year among all listed japanese stocks. Switching at the board. Up 730 this year with a surge in tele, supported by Retail Investors who had piled in after the Company Announced it was codeveloping a coronavirus treatment. Buyer beware. The company has posted a net loss for seven straight years. It is trading at 180 times that. Shery when we see the open in china, we will be watching those tech stocks. They climbed tuesday among bullish sentiment from jpmorgan. For more on the outlook for chinese internet stocks, were joined by david dye. Great to have you with us. We have the hung saying tech index being announced. With all this focus on these giant tech stocks in china, how fierce is the Competition Among them . Fundamentally, the competition is always there. It has not become any easier. The entire market is still growing strongly and sustainably. Concerned,re not too by and large. Share prices are going higher. Shery we have seen the recovery in china being led by ecommerce. How do they compare to appear Online Services . David absolutely. In q1, when the covid19 situation was at the worst, p or puree services here Online Services were doing extremely well. Everybody was locked at home. Infrastructure was severely impacted. To thed19 started effects started to fade away, we saw Online Services including ecommerce and food delivery picking up strongly, especially ecommerce. People are still shopping online. The biggest growth striver. Services started to fade a bit from the peak. [inaudible] shery does it seem strange to you that you look at the outperformance of amazon in the u. S. , and alibaba in this part of the world, it has not had that performance. Look first of all, if you at the ecommerce sector overall, you would not be performance find has been very strong. The entire sector has done very as compared. Alibaba itt goes back to the first question you have. It has grown much faster than alibaba over the past few years. Now, it is sizable enough. It has become a real concern for bob investors. That has become another concern. I personally dont think this will be a loss for alibaba. [inaudible] shery how strong a positive jewel couldis crown possibly end up being the biggest ipo in the world . David its a great question. Interest inlot of terms of valuation. 33 owned by alibaba. It looks like it will be more than 200 billion, valued at 210 billion at the end of last year. It could have gone up from there. Lets call it 210 billion. Have that inont their alibaba valuation. The current market cap is meaningful to the upside. Haidi really appreciate your time. Tencent expects daily food orders to grow over the next five years. It is the worlds biggest Meal Delivery system, taking 30 million orders every day. In an exclusive interview, their chief scientist told us that the company is counting on ai and robots to help cope with the surge in business. Working on some new things. For example, we are working on autonomous delivery. Moreat we can help much delivery force to deliver more orders to the consumer. , self driving vehicle can deliver food. Were using recent technology to get more information. Were using augmented reality. And we take a picture use our recognition system to know which store this is. What that can see what is thet and best services and dishes of the store. What proportion of the delivery side of business would you expect to be fully automated , and in what kind of timeframe . Gethis will be gradually into our business. Economist delivery still onomous mess aut delivery still has challenges. We are testing in beijing. We have a few vehicles running regularly. Have opinion, we should really Mature Technology in 35 years. We will see a lot of delivery vehicles all around the city, all around the country. Is the end goal for automation to replace the delivery drivers that you employ, or to work alongside those delivery drivers . Definitely not. The goal of Autonomous Vehicles is to help the curious get to deliver more food orchids. For ourw, we saw demand demand service growing very fast in china. 30i said, we have about million orders every day. We are expecting this number to surge three or four times in the next five years. If we do not have any automatic we are using self driving vehicles to help our carriers to deliver more foods. Future, itin the will be in the form of can find combined delivery. Some carriers will take care of the last 100 meters. Streets, we will use vehicles to do delivery. Theres a lot of debate within the u. S. Now about data privacy and security when it comes to china. Also, chinas Artificial Intelligence ambitions. Some companies are in focus right now. Is that a justified set of concerns within the u. S. . Is this a misunderstanding . I think its a misunderstanding. We pay a lot of internet companies. If we do Internet Things or ai things, we will use data to understand the physical world. I believe every big Internet Company in china takes privacy very seriously. They protect user data very carefully. That is statistic data, not individual user data. We take individual user data very seriously. We keep data confidential. I cannot do that. Shery that was the chief scientist. We will have more on the outlook from the chinese internet sector in the next hour with the head of asiapacific Internet Research. Up next, taiwan has been widely praised for its coronavirus response. A big part of that has been big data. We speak to taiwans digital minister, next. This is bloomberg. Shery youre watching karina youre watching daybreak asia. Tokyo is considering asking people to stay at home this long weekend as coronavirus levels rise. The capital would have been celebrating the opening of the olympics. More than 1600 new cases have been reported in the past weeks. Hospitalizations up almost fivefold. Tokyo authorities disagree over the severity of the surge. Hong kong is facing a third wave of the pandemic amid fears the citys medical infrastructure could be overwhelmed. New cases are searching with many of uncertain origin. The government says speculation that the city will go into lockdown is false, calling the reports rumors. Hong kong had been seen as a model of how to control the virus. The u. S. , lawmakers are edging towards a new virus stimulus package. The two parties remain apart on the total. Nancy pelosi says the republicans are in disarray over their tactics. Republicans and democrats are divided over President Trumps call for payroll tax cut to be included in the plan. Elon musk has unlocked the second chunk of his bonus. The companys average market value of the last six months has risen above 150 billion. He can exercise additional stock options. He would pocket more than 2 billion if he could sell shares right now. The first award in may. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im karina mitchell. This is bloomberg. Back to you. Haidi parts of the world grapple with second or third waves of the corroded covid19 infection. Taiwan has been praised for its handling of the pandemic. Taiwans digital minister joined bloomberg to discuss how they did it without the invasion of privacy. At ist were looking challenging the entire Civil Society to discover better ways in order to make the Contact Tracing work. One of the winners specifically developed a nap. A person can install it in order to track their whereabouts and temperature and so on. It is billed as a way to protect privacy of the person, their friends and family. Memories are not reliable and may divulge more than is required. When it is working for the , itvidual and their family has a much higher rate of being adopted. Way, works in a topdown people will be wary of the idea. Tohow is taiwan helping protect and secure its data . Whether its data on citizens or other data it may have at the government level. What are the steps taiwan is taking . Basically, our idea is that the social sector needs to midthe data. Ownership needs to be rested on the Civil Society using opensource code, algorithms. Making sure people can collaborate entirely, managed by an open community, including air quality measurements. Anyone can pay for those air boxes. Its a human right. 4g, unlimited data. Torybody can contribute weather, air quality, water quality, things like that. When the data sources are curated by people, we talk about data competence. The ability to become a producer of data. Once everybody is a producer, they will have to check us the checks and balances rather than relying on a single point of truth. What about things like cyberattacks . How does taiwan protect its information and data from them . , ats an ongoing problem the state level and lower level. Weve had several accounts being hacked recently. Accusations that various places are trying to hack into virus data as well. A few things. Importantf idea idea is virus threat hunting. Hackers, white hat hackers, to work for you to disclose those vulnerabilities and give you a chance to think how attackers would think, in a real drill, without the malicious hackers taking their hands on it. Services,jor public , our owndriving cars Digital Exchange system, in each of those cases for six months, we invited white hat hackers so they could try hacking into the system before we actually deployed the system to a wider population. That, weiscovered would pay them well and treat them well. If youre a white hat hacker, you have a very lucrative career. You dont have to do exercises because theres real cases every hour. You get to meet with the president and minister all the time so that you get treated very well, Like National heroes. You dont fall to the dark side, which always has more cookies. Haidi that was the Taiwan Digital minister. You are watching daybreak asia. We will be back after a short break. This is bloomberg. You are looking at a live shot in melbourne. They are under a second x weeklong lockdown. We are hearing reports from local media that victoria has had a 24 hour record of 484 covid19 cases for wednesday. That would beat the previous record high for National Cases which was 469 back on march 28. This has victoria continues to struggle with ever higher cases even though they have entered that strict lockdown. There have been reports that the next stage would be to enter a stage for lockdown. In the meantime, New South Wales reporting 60 new cases in the last 24 hours amid concerns that asder crossings as well contagious worries. Premier makings masks mandatory a few days ago. A quick check of the latest business flash headlines. Unilevers indian unit posted betterthanexpected profits for the quarter. This is from customers stockpiling. Unilever reported a 7 rise in net income. Revenue was up more than 4 . Markets were more resilient, reflecting a next this from cities. Facebook is adding voting information to post about the upcoming u. S. Election, including messages from President Trump and joe biden. It will tell you to seek official voting information. Facebook is reacting to criticism that its not done enough to combat election in for misinformation. The policy will apply to all posts about voting, regardless of accuracy. A chinese ride hailer is preparing for a listing in hong kong. The move is driven by investors looking to cash out. This will be a Major Development for the company, whose ceo has said that they had no need to go public. The last fundraising drive value the company at 50 billion. Shery coming up, bernstein algorithmic gives us their playbook for the remainder of 2020. Hsbc head of Internet Research is bullish. The market opens in china, next. This is bloomberg. Tom it is not 00 a. M. In beijing, welcome to Bloomberg Markets china open . Inglis, we areid counting down to the opening of trade, our top stories, the u. S. And the u. K. Cant at more action on china, mike pompeo says washington is in for a long struggle with beijing. Tom