Transcripts For BLOOMBERG Bloomberg Markets Asia 20170704

From bloomberg asia. This is Bloomberg Markets. Asia market extending, u. S. , rashaad oil continuing its best winning streak of the year. China and russia say they are getting on famously and the u. S. Is warned about new negativity. Fits,d if the face use facial recognition to unlock the new iphone. Happened, it left a , a mood oflanned about a billion dollars traded, china Corporate Bonds and government Corporate Bonds. What has been happening in the last few years when it comes to the bond market, it seems to have been grinding to a halt in terms of that growth. This will hopefully get this a buit of a fill up. We may see that spread between china tenure Government Debt and 10 year treasuries, perhaps that narrowing. Is this something to watch out for . Haidi the key is really patience here. Give it a couple of months over the next year or so to heat up because ht we are about 30 minutes away from the open of china and hong kong. Sentiment is starting to pick up globally. That is giving some food for thought. That very strong number coming through from the u. S. Manufacturing sector, giving a good boost to wall street. In asia, you had the dow jones again an intraday trade. Australias market leading again, it was the worst performer yesterday but we are seeing a good rally from energy and banking stocks. Nikkei 200 up. Rba decision coming through as well. 1 10 of oner up percent. Theyen is strong on surprise defeat of the ldp in tokyo. A bit of weakness coming in from koreas market and you see the yuan performing bad. You have seen a bit of a switchout in the oil contracts. Wti down 1 . Sectors, were seeing Energy Players up and just a couple of sectors in the red but only slightly. Tech stocks under pressure. Just having a look at this currency story. The yen leaving the game in the region. Of southome news out korea and north korea rashaad breaking news, the chief of staff in south korea says north korea has fired a illicit missile. Ballistic that north korea may m. Attempting to create an ibc unidentified Ballistic Missile that was fired around 9 40 a. M. Local time in south korea. Japanate broadcaster in and this is being sourced by yonhap. We will keep an eye with developments on that. Lets look at the first word headlines. Haslinda an unexplained some of the worlds Biggest Companies either take off or die in afterhours trading. Amazon and microsoft slumped while apple was up. The dramatic movements triggered trading halts. Nasdaq was unable to immediately comment. Chinese president xi jinping has arrived in russia with the talks for talks with president putin. Beijing will find dozens of agreement to deepen cooperation. Current russiachina relations have been described as the best in history. Xi are expected to meet on the sidelines of the g20. Rtel nations raised collective output. Most of which came from libya and nigeria. Prices rose strongly with oil having its strongest run of gain and enjoying its longest rally since 2012. Analysts of chinese stocks expect the markets to remain steady in the runup to the communist party conquest. Se 3 percent quarterly. Dayal news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. I am haslinda amin. This is bloomberg. Rashaad president xi jinping quote negative turn in relations with the united states. The change in tone just coming ahead of the g20 meeting in hamburg where he will be discussing things with President Trump. What are these negative factors . Xi jinping was mainly talking about taiwan. A couple of actions washington took last week concerning International Affairs. 1. 3 billion arms sales to taiwan, rashaad they must have known that was coming. We are not sure when the shoe is going to drop but on top of the Armed Service committee under the u. S. Senate, they also met wednesday and approved a provision which will make the u. S. Warship set a course for taiwans port. Both had the occasion to stimulate military relations between washington and taipei. Have all the tensions in the South China Sea and that is overlapping this. All of these are contriving together to erode this bond. The most unlucky bromance of the year. Over . The bromance premature to make that conclusion. It is entirely conditional on whether beijing can deliver on north korea. As we can tell, beijing has very limited leverage on whatever the kim jongun regime can do and now we hear north korea might have fired another missile this morning. It is not unconditional love between the two leaders. Doing inresident xi russia . That relationship seems to be much more laughing. This is more than 20 meetings between xi jinping and Vladimir Putin since xi became the head of state in 2013. Agenda,f xi jinpings it will strengthen the strategic cooperation of International Affairs especially in northeast asia and as we can tell from their first meeting on monday they both play to urging the u. S. And south korea to withdraw she says it has already disrupted regional strategic balance. Haidi thank you so much for that. We are watching both of those key relationships going into the g20 in hamburg. Still ahead, rba is expected to hold rates. We will look why the governor may be forced to balk at the Hawkish Central Bank trend. Ubs managements outlook. Rashaad you are back with Bloomberg Markets. Haidi a quick check of the latest business headlines. Is plunging on a potential merger with showa shell. Just ever 12 at the moment. A different story over at showa shell, that stock has been jumping on the news. Idemitsu kosan is facing opposition from the founding family which owns over 34 of the stock. Showa shell would dilute that below the one third needed to block the merger. Rashaad millions of dollars in they have been frozen. It is struggling with a cash squeeze. Goods retailer rb says Shanghai Tang is struggling. It ranks behind european brands like chanel comedy or and beauty. Opec output rising to the highest this year. Member nations exempt from output curves are pumping more. Market going on with the , it is on its longest winning streak in a while and it was a one percent. F is it fundamentals or speculation . I think it is a combination of both. Certainly from a structural point of view it was a little bit more challenged. Shortterm, weve had some shortcoming of what has been a rundown in net positioning from long commercial traders or speculators. Also the cutback in u. S. Production that we saw with a bit of a surprise to the market and that triggered this Short Covering rally over the last couple of days. Libya haveigeria and been big contributors to opec production and we would think that opec would talk about capping the production from those it to producers from note two producers to eroded their traction so far in cutting back on global industries. Longterm were structurally challenged. Rashaad how much will the trading patterns alter from here . A 498 bucksetwen barrel. Have we reached into some other paradigm we will be trading in . The trading of 40 or 60 a barrel top range on a structural basis for some time, what is really going to fire up the 54 barrel mark. A cutback in u. S. Inventories would bring us back to 60 a barrel. That is crucial for the markets to go hide here and everything few days it is going to trade sideways until we see that weekly Inventory Data come out. If it shows a decline, we will see a much higher lift in oil over the next few weeks. Rashaad oil may not be be the us product that qatar produces but if are tensions of their and this blockade you may call it, why is that largely being ignored by all traders and will Oil Investors . D when you think about it, you look about the overall demand picture and that is strong as well. Trade is pushing it down to about 42 a barrel. Generally speaking, the market is completely focused on the u. S. Inventories story. Is on theshale outside as well. In recent time the productivity in the shale producers has started to level off. Productivity is fairly challenged at these levels. Very have been a couple of quality signs for oil but it comes back to you as inventory, if they come down, will prices will go higher by at least five dollars a barrel. Haidi is productivity on the u. S. Side really being challenged . Chart,to bring up this bcb 479 on the bloomberg. Oikll out versus output versus rig count. Were utilizing half the number of rigs used event. This is the shale activity ais side. Is this headache for opec going to continue because that incentive is not leveling off, is it . I think that is very fair, heidi. I think for shale producers to inject more technology and do more r and d and try to improve his vision the best improve efficiency comes as we reach or 60 barrel but it not destabilizing in the last month was a good signal that those 45 a month barrel show these guys are not going to invest. That is the paradigm going forward. If we see a 50 or 60 a barrel mark for oil over a sixmonth period you will see investment going back into the sector in the u. S. If you go back to 40 a barrel were going to see the guys going back on their plans running for cash. Haidi we saw a strong rally in industrial metals. Called feel like we have the demise of inflation story a little early seeing the u. S. Factory numbers and decline in china pmi. The industrial side of the economy is doing much better than most people thought it would at this time of the year. Industrial, the recovery is kicking on and particularly for china where we had expected that china would start to slow by this point. We see credit being typed in china now for about four months. Were continuing to see the Housing Market and titular thats Housing Market in particular holding up. One of the key things on the industrial metal side was a recovery in production. From what we see in the shipment data as an example, we are starting to see production and x works of iron ore pick up. On industrial metals, weve seen copper more of a threeyear story where we have outages from my production has been quite low mine production have been quite low. The risks around production come back in. Always good to chat. Coming up, from your fingerprint to your face, apple said to be working on new technology. This is bloomberg. Haidi apple is said to be working on a facial recognition system or its new iphone due out later this year. That would take the touch out of the fingerprints dan that allows you scan that allows you to unlock your friend. Correspondent apple is planning a brandnew design and plenty of the features. We are expecting a 3d based sensor recognition of so users can scan their faith their faceyes and eyes to log in. Going tophone is not sidesessels around the or edges. Put means they have to the fingerprint scanner on the back of the phone or on the display. Getting the fingerprint scanner under the screen is difficult so they are relying on this 3d scanner to allow people to lock in log in. Your phone will now be more secure. It will be a quick process according to people familiar with the matter. Bloomberg news, and all things will los angeles. Rashaad another bad day for spacex. They have been forced it to defer a launch. It is the second time in 24 hours that it happened. It was a violation of the board criteria. Criteria. The next launch date will be july the fourth. Coming up, we have australia releasing its retail sales numbers. Well break the latest gauge for tumor sentiment for the year. This is bloomberg. Rashaad counting down to the trading day right here in hong kong. Australia with an Interest Rate decision. Three hours from now. Federal reserve on wednesday releasing its aegean policy meeting where officials could raise Interest Rates and announced with the next one is coming. German chancellor Angela Merkel hoping this today g come in meeting g20 President Trump and Vladimir Putin will be there on the sidelines. Day. it is rba we are not expecting any surprise from the governor. He has had a tie in terms of this policy balancing act he is doing with home prices and all of how debt and sluggish growth. 0. 6 percent gains which is better than 0. 2 percent. You see that jump there when it comes to the aussie dollar. Consumer spending, seeing further weakness. Lets look at the rest of the market. Quite a big jump in the rba and we will watch when that decision comes through. Look at what is happening. We did see quite a good day ising through, the hang seng opening a pretty flat. 25,793. We had that record high on the dow jones during the intraday session. You do have to get a little stronger after that 0. 9 percent. We see upside in japans stocks. Nikkei holding above that 20,000 point level. Ax 200 is a little bit weaker the eighth six 200 in the region. Weve seen good rally in the banks and Energy Players and in terms of what we are seeing elsewhere in the currency market. We are seeing upside from this asian currency. The u. S. Dollar was incredibly strong on the back of that manufacturing data, rising the most in two weeks. The index points, you can see toyota leaving the game in the region. It is the story of the australian banks. They are up by 2. 7 . To the downside, we have a bit of weakness coming through. Nintendo up. 70all street journal saying cells are lower than nintendo. People getting out of tech, back into the energy and banking sectors. Rashaad looking at what is going on with reports a little bit earlier of a ballistic bysile test being undertaken north korea. Secretarye cabinet protesting to pyongyang about this saying this is a clear violation of the United Nations agreement and they have asked to convene a National Security council here as well. Lets get some of the first word news headlines. Haslinda reports say north korea fired an intercontinental Ballistic Missile this morning. The joint chiefs of staff say the weapon was fired over the east sea towards japan at about 9 40 local time. North korea says it is close to building a rocket that could deliver a Nuclear Weapon to the u. S. Mainland. President trump has found that will never happen. That theirthe u. S. Relations are taking a negative term. It follows the u. S. Naval control close to a disputed chinese controlled islands. The two leaders will meet this week at the g 20 in hamburg. An unexplained problem at the nasdaq saw shares of some of the Companies Take off or die in afterhours trading. Amazon and microsoft seem to slump almost 50 while apple and was up. Nasdaq was unable to immediately comment. The president of National Networks at fox sports is said to have been tired over allegations of Sexual Harassment. Horowitz. Ure of jamie fox is battling Sexual Harassment and racial bias claims against the company. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rashaad wall street banks have had a tough time in recent years trying to extract revenue out of asia. There is a hope that chinas latest opening measures may result in a return to be the time. Boom time. She says they are likely to be disappointed. The vonta leach reaction could be muted. The bond connection could muted. Is makeon connect does it easier to buy bonds on short. It is more and ease of process rather than an opening up. Hsbc, that was the other big news, hsbc got 51 control. Cannot underestimate that. A breakthrough, Foreign Investment banks have been trying to get control, more fit from their production from their partnership in china. Rashaad we have some Western Banks cheering. Shows inalition data the First Quarter, coalition look at the top 12 western investment banks and in the First Quarter globally it rose. There is a disconnect here. If you look at the reason behind the it is the local banks. They are coming up, the competitors and they are eating into the kind of business the Western Banks have been getting. Including in and day m and a. Haidi you see that reflected in the decline in headcount, arent you . U. S. , headcount sold about 2 and in asia it fell 7 . This is more of a decline that is going to keep going as time goes on. Haidi thank you so much for that. Coming up next, we are watching the rba, the decision there. We will be looking at the Rate Decision and what to look for in the guidance. This is bloomberg. Rashaad your back with Bloomberg Markets. Caught ups get you with a quick check of the latest business headlines. A former barclays executive told a london court that he denies udnspiracy to commit fra over fundraising activities with qatar. They are the most senior banking executive to face charges sense of the financial crisis. Raise 15a deal that billion. Rashaad japans of three biggest shippers are expected to combine a container operation after missing a july date because of approval delays. Haidi ubs is streamlining its Wealth Management business in europe and will expand the role of executives in the operation. They will reduce the number of centers from 10 to about three. Under pressure from general market uncertainty. Rashaad now the bank of holdalia is expected to its rate of 1. 5 . E may see a more hawkish slump lets get to our Global Economics and policy editor. Lots of crosscurrents for the rba, what will they do . There are a lot of crosscurrents and many people are going to argue that if it were not for global Central Banks with more and more tighter policy, this question might not be an issue. Shrinking but in its policy statement, will it show a hawkish tone . What is rba looking at . They are weighing a stronger job market, momentum from the last three months. The Unemployment Rate it has rate hast but even flattened out. Debt to gdp, Household Debt to gdp, Household Debt is the second highest, only switzerland has a higher Household Debt ratio than australia. How do they raise rates and make it more costly . Bloomberg intelligence is a big concern about china deleveraging, slow demand for australian exports. Commodity prices are already slowing. Tilt,y go to a hawkish with that pushes the aussie dollar even higher . That could hurt all the jobs aussie jobs. Maybe they can avoid this a difficult decision. Haidi thanks for that. Lets get more from shane of at tthe chief investment strategies. Is it the same as all the previous months where they are going to hold . They dont really have any options. They are worried about the high debt levels, theyre worried that the markets are still too hot. Recent Economic Data has been a bit mixed. A bit of uncertainty about the and construction of housing, which is starting to slow down in australia. They are between a rock and a hard place but that could make slightly killed in the commentary. Tilted in commentary. Pricesthese major city are expected to moderate a little bit. When there is hiking and borrowing costs going up, are these macro premeasures actually working . I think they will. The big mistake the authorities in australia make is they started that intensively in 2015 and then fell asleep in 2016. That was a big mistake. Three months ago they made actions on this front. It is working but there is still early days. The first time wisely get them more spending power. To raise of the infrastructure rate in australia would be a disaster. We still have a record low wages growth and you have chunks of australia that are not seeing strong house prices, they are actually going backwards in places like the northern territories. Haidi it is confounding how resilient the aussie dollar has been over the past six months. The rba expected that would create a downward pressure on the aussie. I think the aussie dollar will go down. Haidi iron ore has not been impacted as well. It came down, there were times housing was slowing and the aussie dollar stayed. Is argument i could make this is an ideal time for them to let the global Central Banks say that and that will push of the aussie dollar down. If it is holding fast and putting rates on hold been that may hopefully put downward pressure on the aussie. I think it needs to go lower and probably will. They said they would like it lower and that the Central Banks given leverage, given house prices, where would the australian economy be in the last 34 years without iron ore . Thats a good question. The big slump in the iron ore tone, in 2011 it was 190 a and they got all we got to 37 a ton. National income has taken a nasty hit. Flipside is that export volumes have gotten a huge boost because we have ramped up mining production and if we didnt have iron ore you would not have the International Income or the burst. Probably neutral. Rashaad is is still a good gauge of what is going on in such a good is not gauge, what is a good indicative price on the commodity which would be . Suspicious of ore at the gates of what is happening in china. There was a lack of supply. The class in the i the 37 low in 2015 exaggerated the slowdown of chinas economy. Get a handleg to on chinas economy in terms of commodity, i was going to look at metals as a better guide, the london metal exchange. A better guidey to what is happening in china. Beyond that, my favorite in china is the pmi. It looked ok. And on friday looks ok. The secondginning of half of the year, are you looking at your market strategy, how is that involving . Evolving . So far so good the first half of the year. It has been a bit like goldilocks. Share markets went up, bond yields went down. Share markets were responding to Global Growth improving, bond markets responding to very low inflation. As we go through the middle of the year, there is a risk of correction. Whether this temper tantrum will deliver this correction or not remains to be seen. There is now good value to be had in europe. Was wrongly oversold last week. The only reason draghi is sounding more optimistic is because of the eurozone rates are picking up. We still like japan. Japanese yen continuing to do the right thing by japanese exporters. That is helpful and still a bit cautious on government bonds. Haidi it sounds like nothing changes in terms of macro fundamentals in terms of policy going into the second half. You have this convergence and tightening but it is going to be excruciatingly slow. Everything continues to rally . It does, you really worried are goingal banks from neutral. We have been talking about a sitting from ultra Monetary Policy. Qe andey start unwinding then the stocks are up and then you see them reversing some of the qb. Qe. Is gradual andll the economy is improving. In europe they will Start Talking about it and then do something. Monetary policy in four years time still relatively easy. Haidi the key unknown is still china. It is a year of stabilization, we are getting told. On a grassroots level, what was your most valuable takeaway . Is what i normally see, the plane was full, you get out at the airport, everything is brandnew, the roads are full if you want to travel anywhere in life it is 2 a. M. In the morning. China is seen ahead. People in the west say it is not sustainable and how can it be working if it is a communist country, it must be some smoke and mirrors, too much debt, the is managinghe china their economy well and i expect they will keep going at this pace. All this closer to washington and closer to the u. S. Will keep producing is about to crash and then it will not happen. I think it will be tightly controlled. In the westoncern is a they are taking on too much corporate debt. That said, you have to bear in the chinese say that definitive gdp every year. Where do they put that money, the bulk of it goes into the banks. When you give money to a bank, it lends of the money out. What is the cost, debt. The only way to slow down that that communication debt accumulation, is if they stop consuming more. That is going to be a slave price going to be a slow process for that to happen. Everyone says chinas overthetop and this is the beauty of why that debt is being accumulated. Haidi thank you for joining us. Plenty more to come. U. S. Auto sales meeting the stretch. This is bloomberg. Rashaad it was a better than expected month for sales for cars in june after a fivemonth losing streak. You would be forgiven if you expected june u. S. Auto sales to fall. 2017irst five months of were monthly decline after monthly decline. In june, we did get one surprise. June sales did not fall as bad as some analysts forecast. Rd, fiat chrysler, toyota and nissan. Investors pushed shares higher. A two month high and sales contracted there too. There is still demand for higher margin suvs and pickups pretty much across the board. 3. 5 month price is a high. Tesla closed at a session low and there is an is there is a shortage of battery packs to coding cars to go in cars. Coming up, we are talking brexit, a sales merger. Rashaad almost 10 00 a. M. In hong kong and over in singapore it is 10 00 on the evening before Independence Day in new york. Haidi we are in sydney, this is Bloomberg Markets asia. Seeing lots nasdaq of Companies Either take on or died. Apple has rose 350 . Haidi asian markets are extending wall streets rally. We have financials, Energy Surging here in sydney. Shinzo abe under mounting pressure after bruising defeats in turkey. That may mean the end of some divisive policies. Haidi in moscow, china and russia say they are getting along famously. Washington is warned about new negativity. At the be looking special relationship, the trump bromance, if you will. In australia, it is rba decision day. We are expecting the bank of australia too much from the record low cash rate. Take a look at this chart. We talk a lot about the conundrum that faces the israeli central bank. Wage growth at a record low. High. Ges at a record savings ratio is plunging. Thereis some concern that is Systemic Risk in the Housing Market given that we have seen record price gains. That is going to really reverberate. Certainly, the trend has been sluggish when it comes to consumer spending. Were awaiting that decision from the rba but no change is expected. Other global banks moving toward a tighter stance. Rishaad also, they are suffering from the same sort of illness, you could call it, as the u. S. And the u. K. That is the inability to raise wages. Theres a reliance on wage growth that engenders some sort of inflation. Lets get to the markets. Heres juliette. Juliette certainly not suffering in terms of equities. The front runner in the region, up by 1. 6 . We have seen, in the last half hour, largecap stocks which did very well a couple of weeks ago. Down 6 10eing the 300 of 1 at the moment. The nikkei looking very good, hovering above the 20,000 point level, up by 0. 5 . Its really interesting in the currency market because we did hear that report of a north Korean Missile test. You have seen a little money go back into the yen. 9 10 of 1 drop against the dollar yesterday. The dollar having its best run in two weeks on the backs of strong manufacturing. We saw eight sessions of gains on wti and brent. Both of those contracts up by , not helping up the momentum in the energy space, which is rallying on the back of that strong move. Haidi was mentioning that we also had retail sales out of australia. You have seen a little bit of a take up in the aussie dollar. Still, that 76. 65 level. It certainly will be a bit of a headache. The other currency worth watching today is the korean won. We did see a bit of a kneejerk reaction in the relationship when we heard that report of the missile test. Against chart the won the bloomberg asian dollar index , which you can find under adxy index. The won hasthat been underperforming its asian peers. Some recent data out of korea that has seen a little bit of a downturn coming and when you track it against the other asian currencies. Rishaad a glitch on the nasdaq engendering some wild swings when it came to some of these stocks. Lets get over to singapore. The latest first word news. The nasdaq is investigating they saw use of shares of some of the Biggest Companies either take on or die. Almosteems to be up 370 . The dramatic movements triggered trading holds in some commodities. Its on clear its unclear if any trades took asked. Ballistica fired a missile this morning. It was at about 9 40 local time. Fired missile test this year and says it is very close to developing a weapon that could fire to the u. S. Mainland. President trump has ballot that will never happen. China has told the u. S. That relations between the two powers are being negative. This follows a u. S. Naval patrol close to a chinesecontrolled island, and shows that tensions have risen since the april visit to the u. S. The two leaders will meet this week at the g20 in hamburg. Chinese president xi jinping has arrived in russia for talks with Vladimir Putin. They will have agreements. The Chinese Foreign Affairs Adviser calls current chinarussian relations the best in history. Seeking aficials are window for putin to me trump on the sidelines of the g20. Amin. Slinda haidi thank you for that. The reserve bank of australia expected to hold its rate at a record low of 1 today. But we could be expecting a more hawkish tilt. Hawkish tilt, putting the bank in step with its global peers. Weve been talking about how their hands a kind of tied, a lot of our guests saying they dont have a lot of options. They could just sit on those hands. Be raisingnk wed this question so much of it werent for the fact that so are inobal Central Banks the process of raising rates like the Central Reserve or hoping they can raise rates soon , like the European Central bank. Keep the key rate at a record low, 1. 53 . The policy statement will be scrutinized. Move will be towards higher rates, what are they waiting what are they weighing . The labor market is stronger but Household Debt is rising. They expect the labor market to boost inflation. Lets take a look at the chart. You can see the white line, unemployment. That has come down. , that is wages. They continue to soften. The turquoise bars are the rising debt to gdp ratio, Household Debt the second highest in Development Nations around the world. Earlier, we spoke with the managing director at market economics. He says, if anything, the rba has to be on a lookout for a move to lower rates. We hear every day about Household Debt. The willingness of consumers to take on more debt is somewhat limited, too. Not the sort of growth momentum that i think lifting australian gdp to 3 . I felt there is some sluggishness coming through. Bloomberg intelligence is very focused on the labor market being stronger but experts say it may be on the verge of weakening. China deleveraging makeup demand. Youve got Commodity Prices slowing. We will keep rba is. Rba right where it is. Rishaad what are the chances of getting one out of them . Say,een well, i would maybe its a coin toss. They are looking at these global forces. The market in australia is very interesting because bond yields have been selling off in anticipation, just of the possibility that this could happen. National Australia Bank pointed out something that i think is really smart. They have to avoid sounding too upbeat about the economy even though they have to of knowledge that it has gotten better in many respects. Lets look at another bloomberg chart, btv 6554. Whats that white line . Its that key rate that has gone down the past few years and just stayed at 1. 5 since 2015. Look at the aussie dollar, how it started rallying even though the rba has shown no signs of moving its rate even higher. Again, Bloomberg Intelligence noting this question of exports. Could they weaken, how this could hurt jobs, and having the sense that, in the second half, theres this question that maybe the rba is just going to sit where it is. A little more bond market selloff, maybe they will go ahead and see whats necessary about the willingness to tighten. They have to be in step with global Central Banks to avoid pressure later if they will continue neutral and on hold. Rishaad thanks very much. Looking ahead, abenomics under pressure. The turkish defeat quds force the Prime Minister to switch strategies. Will be asking where shinzo abe goes now. Haidi up next, the London Stock Exchange is holding its third annual china conference. Well be live in beijing. Rishaad you are back with Bloomberg Markets. Haidi a quick check of the latest business flash headlines. A former barclays executive told a london court that they will deny conspiracy to commit fraud. Wrote to the most senior became most senior u. K. Bank executives to face charges. Made a deal worth 16 billion. Streamlining its Wealth Management business in europe and will expand the role of senior executives. Crossborder operations will be combined with domestic businesses. Are underagers pressure from record low rates and general market uncertainty. Haidi mexican authorities are said to be widening an investigation into the countrys 400 billion bond market. They say the banking regulator says they colluded to fix prices were securities. They are going through records of online chats and other communications. Lets get over to beijing, where the London Stock Exchange is hosting its third annual china conference, bringing together policymakers and business executives. Mackenzie is there for us. View on chinas moves to open up its markets . Tom ill put that question to our next guest, the ceo of the London Stock Exchange. Start by asking about what weve seen from the nasdaq overnight, this exaggerated price data. I wonder if we can draw any conclusions about the complexity of the Technology Employed and used by the changes. Nikhil great to be with you in beijing. You are right that technology is a huge part of what we do these days. Im not going to comment on any other exchange, but last year, for us, at the London Stock Exchange, we had the three busiest trading days in our history. We make huge investments in technology to make sure everything runs smoothly and that our customers have continuity. You need to have that oversight all the time. Our regulators are very focused in making sure we are monitoring trends and also making sure that the new developments in the markets including highfrequency trading, algorithmic trading. China cut of china, what are the opportunities, how are you trying to carve out a slice of the market whether that is ipos or Chinese Renminbi bonds . Nikhil this conference comes at quite an exciting time in china with the launch of the bond collective and in london, we have one of the Largest International markets in the world. Were the leading offshore fouror been randy renminbi. The Chinese Government is doing the first ever offshore sovereign bond on the London Stock Exchange last year. We have 35 Chinese Companies already listed on our market. Were working on a quite big. Tructural project tom what is it about the shanghailondon stock . How much closer are we to that being put in place . Nikhil were working on an implementation plan, getting that ready, hopefully this year. It will be a matter for the two governments, the authorities, to decide on timing. Were trying to bring our two markets closer together. There are some fantastic opportunities for International Investors. Also, london has the greatest range of International Companies in the world, which will be of interest to chinese investors, too. Were trying to bring those systems closer together. You touched on some of the reforms, whether the bond connect or the transfers. Theres a bit of skepticism about what kind of appetite there is from International Investors to get involved. Nikhil you have to think about it in terms of longterm. China will be the largest Capital Market in the in the world over the next 20, 30 years. There are major opportunities for investors who are looking for high yields that they might be able to get in other markets, too. Looking the other way, the market is growing very fast. There will be an opportunity to look overseas and diversify their holdings, invest in international communities. We are seeing Chinese Companies very active on our market in a and looking to raise capital in international markets. Does that capital raising, changing come a company wanting to raise more money offshore, is the m a starting to slow down . Nikhil last year was particularly active in the renminbi bond market. It has been a little slower this year. , itink over the longterm will be increasing very significantly. Terms of attracting chinese firms to list on the London Stock Exchange, what practical steps are you doing to do that . How are you going to lower them over . Theil in london, we have most International Companies in our market of any exchange in the world. You can see that over the last few months, with 43 ipos in our market, from china and israel, egypt, the u. S. , canada, all over the world, using the International Investor base, to tell our story. Stay with us. We want to get more from you after the break. , thefrom him about china opportunities, the impact of brexit, after the break. Tom welcome back to the London Stock Exchange group annual conference. Im joined by the ceo of the London Stock Exchange. Lets talk about brexit and the impact that is having on your business. Her seems to be, at least up vectorse election, and investors had baked in the idea of a hard brexit. Now we are different tones from the chancellor. Should investors start to rethink how this brexit situation will unfold . Of noiseheres a lot around frexit. The negotiation underway, we will be watching very closely. We are just getting on with building our business. I said before the break that we have seen a large number of International Companies come to the market, especially the last few weeks, companies from all over the world relying on our investor access. The fundamental strength of london and the London Stock Exchange. Its been something of a lift for the lse . Nikhil there are companies where 75 of the earnings are overseas earnings. More generally, weve always been a very international market. Europe comingo in to london to raise 3 billion euros in capital. The bank of cyprus also moving their primary listing. I think youre seeing a very strong franchise. Tom are you or your colleagues putting in contingency plans for euro clearing coming given what we have heard, the proposals to potentially move some euro clearing into the eurozone . Areil of course, we monitoring the negotiations. Our clearinghouse, we have the greatest pool of clearings derivative liquidity in the world. We generate huge efficiencies for our clients. Let me ask you about an and a. Obviously, the georgia deal to tsche didnt come off in march. How much have you set aside for potential buyouts . The market is one of the largest in the world and we have continued to look for acquisitions. Most recently, we announced the acquisition of citigroups income business, which is now underway and pending completion. Continue to grow. Tom one of the big listings that everyone is talking about, potential listings, is saudi aramco. The London Stock Exchange is very much in the mix according to the people weve spoken to. How confident are you that you may get a shot at this listing . Nikhil im not going to comment on any specific company. What i can point to is the strength of our International Listings franchise, the strong integrity we had in london, the International Investor base, in the confidence that people have in our platform. Me get will more question. Youve talked about green tech. Where are the opportunities for how you can capitalize on that . Nikhil green finance is a huge area. China has led the way in green globally. We see huge opportunities there, not just for green bonds, but Renewable Energy is a big part of our market. Weve seen the first green bonds from china, india, another one from the middle east region also coming to our markets. You also see the interaction of crowdfunding and peertopeer lending with the public markets. Tom thank you very much. Rishaad thank you so much. Ahead at chinas great firewall. Its showing his strength. The authorities shut down a popular vpn. With firstlinda amin word headlines. North korea fired an intercontinental Ballistic Missile. The joint chiefs of staff say the weapon was fired towards japan at 9 40 local time. Pyongyang has carried out 11 missile tests this year and said it is close to building a rocket that could deliver a Nuclear Weapon to the u. S. Mainland. President trump found that one never happened. Qatar has given its response. Support remains strong. The saudilet block will meet in cairo on wednesday to plan their next move. Opec Oil Production rose to the highest in june, its members exempt from the output curbs want more crude. Raise collective output by 260,000 barrels a day compared with may. Prices rose strongly come extending its longest run of gains. Brent enjoying its longest rally since 2012. Of chinese stocks expect market steady of the next three months in the runup to the communist party congress. The shanghai composite may rise distance ofsmall 3 . Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. We had a holiday shortened session on wall street, a bit mixed, but we have seen a pickup in sentiment on the back of the china pmi read better than expected, u. S. Factory activity picked up as well, but the nonfarm payrolls numbers and the g20 are a second half of the week if a call for markets to contend with. Rishaad we have that rate. Ecision out of australia g20, xi jinping and Vladimir Putin meeting as well. It seems like nothing compared to what theyve got going on between these two bank. Thats what we have. Swings, a stock market glitch on the nasdaq. We have not gotten to the bottom of it yet. At one point, the nasdaq showing apple shares were up 350 , but have said that was an anomaly. Tech stocks under pressure in the asian session. We are seeing strength in Energy Players. We had that huge runup of crude oil, now weakening today, but asian trade is taking their lead from wall street. Gains, up0 leading 1. 7 . There has been a switch out of largecap stocks, the csi 300 down by. 6 . Japans nikkei on its lunch break, holding onto gains, up. 4 . We have seen a bit of a rebound coming through in the japanese yen. Higher against the dollar by. 1 . This as we start to see inflows into safe havens following that report of another missile from north korea. You are also seeing gold move strongly. Not gold. That is rubber. I love it when the screen does not work, but gold moving higher by. 2 in the asian session. Let me switch that out. There we go. 2 . Wanda film in a trading halt, an interesting story. We did see movement and a lot of these chinese stocks a couple of weeks ago, regulators stepping up scrutiny of prolific overseas acquirers. This is one stock under pressure. The trading halt is due to the announcement of a major matter. Some other stocks moving in the region, tech stocks under pressure, tencent in hong kong down. 7 . Nintendo off by over 3 in tokyo. A wall street journal report that sony shares are of greater value than nintendo, but also downside for sony today. Samsung not moving too much, but reports that it will spend 30 trillion won to expand its newly open semiconductor plant. It is also considering expanding a chip plant in china. A lot of focus on this tech stocks today. Rishaad thank you very much indeed. Has been xi jinping warning of an negative turn in relations with the united states. This is according to cctv. It comes ahead of this g20 get together and hamburg. President trump meeting Vladimir Putin and xi jinping. What are these negative factors . Xi jinping was referring to tionsaiwan ac washington took last week, approving a 1. 3 billion arms deal to taiwan. That was the First Time Since Trump Took Office in january. The 1. 3 billion dollars for smaller compared to the last one obama approved, 1. 8 billion. What theot include government has been seeking come of it because it is a politically sensitive year for xi jinping rishaad we will not get one of those joint press conferences. Also, the Armed Services Committee Approved a provision which might allow u. S. Warships to make regular port calls at taiwans port, which could be provocative because it will mean elevation between military ties between taipei and washington. Rishaad not as close as they were at maralago. That was the high point, that we have seen the relationship cool because china cannot singlehandedly deliver on north korea. This morning, north korea fired another missile. The timing is very provocative. This is a provocation against u. S. And china. Haidi from a fragile relationship looking a bit uncertain to a more established one, president xi jinping in moscow. What is on the agenda there. North korea dominated the meeting. This is the third meeting this year. 20 time since 2013, so the agenda is to strengthen the original regionalion coordination with putin and push against the u. S. Antimissile , which is seriously disrupting the original strategic balance. Certainly a very crucial relationship there. Thank you so much for that. Internet users and Mainland China will find it harder to get around the governments great firewall. Our China Technology reporter has the in following this story. I remember the days of living in beijing and relying on these vpns. What is the story here . Vpnse of the most popular sent a notice to its users it was shutting down, indicated this was because of a regulatory decision and offered to give refunds to people who want to them. This comes on the heels of a government announcement in january from the ministry of industry and information governmentthat the is going to tighten control of the internet and naming vpns as one of the areas it will focus on. What about these Virtual Private Networks as they are called . Phil uses them in china . Is that people who want to look at facebook and things that are banned . Anyone who wants to look at bloomberg. Com or listen to this broadcast online needs a vpn. Bloomberg, new york times, wall street journal, twitter, manyok are all blocked foreign news sites and entertainment platforms are banned in china. People ranging from graduate students who want to keep up with friends on facebook to people in the financial industry who want to know what is being published on bloomberg, to scholars who want to know what they needublished, vpns to access the sites that are published outside of china, but locked in china. Rishaad thank you very much indeed. Loss, up, a key election the economy failing to spark, what is next for shinzo abe, a man under pressure. We will look at that with Martin Schulz from the Fujitsu Research institute. This is bloomberg. Rishaad i am Rishaad Salamat in hong kong. Japanese refiner plunging today on a potential one point billion dollar 1. 2 billion share sale. Down by over 11 . Jumping there. It is facing opposition from the founding family, which owns about 34 . Japans three biggest shippers to establish a combined container operation this week. Because of approval delays. All the necessary permits have been obtained for the combination. Create the will th biggest carrier and still set to launch in april. Haidi a Chinese Court has frozen 200 million of assets belonging to the three affiliates of leeco. After it saw an order. It is per trade as being superior to apple or tesla. With a cashruggling squeeze after a four rate into cars and smartphones. Thanad after a less stellar performance by his liberal Democratic Party in the tokyo election, Prime Minister shinzo abe is a man under pressure to revamp his strategy and dump divisive policy. Lets discuss with Martin Schulz. Blue . Is a bolt out of the how well the mayor of took your did with her fletching party . Veryis was indeed a important wakeup call for abenomics. The popular reception overall, shinzo abe has been focusing on secrecy laws, on trying to get the constitutional gradually change, and forgetting about the economy while cronyism seems to have sneaked back into the lbp, so mrs. Koike was coming up with an old and fresh agenda, getting the bureaucracy moving again, implementing some initiatives to help younger people and coming up with the new, young team, including quite a few women. This is very welcome in many ways. Rishaad it may certainly will be, but what does it do for him politically here . Much does he have to jettison policy wise to get people onside, or is it perhaps something entirely different . Most likely not. Looking atn we are indicators, the economy is doing quite well. Is still in a strong position in the lbp, the critics are getting into the limelight again. Clear on the economic side that little has been done except for what the boj is doing , except for printing money, at least that is the perception, so shinzo abe will look closely at what mrs. Koike is doing and probably shaping his policies in that direction, getting the third arrow out of the quiver and focusing more on Structural Reforms. That will be very helpful. Rishaad people say he has been doing quite a bit and it has not been the third arrow as much as hundreds of little arrows here. Do you buy that . That is certainly true what you do in an old economy, things gradually implemented, and that is what shinzo abe was promising by focusing on monetary expansion, then government initiatives focusing on Structural Reforms in the longterm, but he seems to have been off track on that account not so much focusing on the economy. This can be changed and this is what he will certainly work on during the summer, most likely starting this week at hamburg at the g 20 meeting when he has a chance to announce an fda with the eu, then following up with initiatives domestically. Ithaad as they always say, is the economy, stupid, isnt it . Is he doing a good job, or is a governor kuroda who has been responsible . What about these polls for him to step down and get someone else in with fresh ideas. What you make of that . That at is indeed true. What we have seen of the last year is mostly governor kuroda and his economics. , the boj in particular gradually has to start to taper, has to change course, so there is little that can be achieved by Monetary Policy, so other policies now have to take over, and this so far is not in place and there has been little discussion on that. I think shinzo abe will be careful in terms of replacing governor kuroda, but he needs more coordination and come up with a fresh agenda now. Martin, supporters, proponents of abenomics would say it is not that it is failing, but they need to keep doing it, and many years of the deflationary mindset is hard to thee, but now potentially boj having to revise down its inflation target, so has it been a failure . Not really a failure. Japan has an aging economy as a slow growth economy, and economy where it is hard to raise wages because so many are already old and probably have a product to the problem on that side, while the young are a Smaller Group and have difficulty to get in positions to move up. It is hard to change this on the monetary side, and japanese businesses are well aware of that. Governor kuroda has to shift direction where tapering is coming in and increasing Interest Rates, increasing growth rates, it is actually a good thing. It is a question of whether governor kuroda can do this or it would be too risky to get too fast into tapering in terms of people getting concerned about Interest Rates going up too fast. Throw up thisto quick chart that shows you where we are at when it comes to inflation expectations. Whether it is many years of deflation playing out here. Breakevens the lowest in the g7. U. K. Up there,. , as well as the german breakeven 10year, is this a sense of animal spirits not being revived, or more of a structural thing when you look at japan and you spoke about issues with demographics and technology and the labor market, is it a structural issue . It is a structural issue. What we are seeing in japan is that profits have been going up and companies have been good at getting business rolling again by being costeffective. Effectiveness also in the midsize sector come up but overseas, they are focusing on the eu in particular, whether a major opportunities right now. Amestically it would require synchronized Structural Reforms to create new opportunities come and little has happened on that side, so clearly Structural Reforms and structural issues go together here. Haidi stay with us. We will pick up on that conversation and talk about essentially what options are left when it comes to japanese policymakers. This is bloomberg. Back to theting state of japan and discussing shinzo abes options with Martin Schulz. Thank you for sticking around with us. We have been discussing all the problems he is facing economically and perhaps politically was some talks deputy and the finance minister maybe getting his own faction within the ldp to challenge for the leadership at some stage. What would you do if you were shinzo abe . Has quite a few elements. One is he is one of the strongest leaders in terms of his overseas relations and getting things done overseas. Tpp has been a failure, but that was not his fault. Now going to the g 20 meeting, announcing an fda in the cards for thursday already, plus setting the agenda or balancing , whichina a bit better helps tremendously, then he would have to make clear that japan remains under fire in terms of monetary expansion and , thatg the economy moving helps exporters and investors. Thats why the mood is still up in japan and continues to be throughout this year. So the thing is, do think he could survive all this . Enoughthink he has of a constituency and the people at large perhaps people are also getting fed up, or what is the deal . It is probably good timing, although it is the worst of times in terms of scandals and things getting wrong, but in terms of timing, a good situation because it makes clear that something has to change and some things have to move on. When you look at the ldp, which is always a party having internal revolutions, it was about getting the next election and getting new posts for everybody. Created suche has a kind of revolution, but from the outside bringing in some fresh faces, this is what shinzo abe has to do and voters have been asking for for many years already. Shinzo abe can easily be back on track by focusing on such an agenda. Arrows in other two terms of structural reform and fiscal policy, some of them are deeply politically unpopular, which one assumes it is why shinzo abe has not done them yet. If he loses his mandate or has less of a mandate, we can ask to see this reforms ever happen under abe. Exactly. Strongde shinzo abe so is that we have first the monetary expansion, ringing a lot of money to make people as happy as possible, in particular the policy side and business, to get Structural Reforms going, but then using that capital on constitutional reform, which is highly unpopular. Now focusing more of his capital, getting into the labor market reforms, which are ongoing in terms of making it more easy for business to pay something to people, going into different positions, making the market or flexible. This is exactly what would be welcome right now and the octor hasthat that d ordered for japan. Tokyo was may be a litmus test, clearly not a disaster at this point. We are getting the scandal starting to trickle in. At which point you start to get really concerned . Be that would be if something is not really happening after such a wakeup call when we see an internal ldp go a longs trying to as they are and no discussion in terms of where Monetary Policy is heading in the longer term. Japan in the longer term will for stronger Interest Rates savers, for households to invest in companies to get on their toes in terms of investment and profitability and to spend some of the investment on higher wages. Haidi always a pleasure. We have to leave it there. Plenty more to come. This is bloomberg. Caroline im Caroline Hyde from london in for emily chang. This is bloomberg technology. Coming up, the second half of the markets caps off good we will continue to see volatility . Plus, after google was slapped with a fine from the antitrust regulators