Straight tos get stories, these arrests in saudi arabia. What we have his shocking news out of the kingdom. Chart 9472,off with stories not situation normal. Profilest of high individuals. Of. 3 . Gain the chart showing the situation allnything but normal below coverages. Kingdom holdings is the company who wasg to the prince taken into custody. He is the worlds 50th richest man. That stock was down as much as 8 . People looking very closely at the situation there. We will continue looking closely and the implications or investors as we look ahead to this aramco listing. One of our analysts that we spoke to pointing out the domestic perception of what this is is different to the international reactions. We will big deeper into that story. The markets are waking up to a brandnew week. Some pentup demand having been away on friday. Sophie after that three day weekend, japanese stocks mixed to start for the region after u. S. Stocks capped the longest streak of gains since 2013. Earnings an ecodata and play and trumps visit top of mine. The yen following for foreign person falling. 4 as trump says trade with japan is not free, fair, or reciprocal. What is goingat on elsewhere, Risk Appetite on board. Gold falling. 3 . The currencies space, the won sliding with other currencies as the dollar is gaining ground. U. S. Tax talks still in focus. On the retreat, but Energy Stocks on the rise with other reducers across the region. This as crude prices have gained ground amid the saudi crackdown. Some movers in the region. A on a back foot, falling. 3 . It was the last of the big banks toreport, and the only one miss estimates as profit fell 23 . It did see allowances for bad loans jumped. Jump. Checking in on apple shares after iphone x and model eight in stores. Foxconn asked to speed up production. Shares on the way up. Largan sliding. Taiwan semiconductor snapping a three day drop. On the board. Cks must the losing ground as sluggish sales weighing on profit for the rest of 2017. Carmakers on the agenda for trump this visit. Westpac falling the most after its earnings miss. Cited caution amid government policy uncertainty, so financials leading the dragon australia today. Rishaad getting back to one of our top stories. Politicians and moscow ties making headlines. Lets get to first word news with paul allen. Documents from an offshore law form show wilbur ross retains a stake in a shipping company with ties to a russian businessman under u. S. Sanctions and to president putins son in law. The Commerce Department says ross has never known of its relationship with the kremlin. Reports from the u. S. Say bill dudley is close to announcing his retirement. See in bc sides several sources and says the announcement could come in the next few days. The bait is ready to step down in spring or early summer, well before the end of his term in january 2019. The Texas Governor says 26 people have been killed and a mass shooting at a church, the youngest just five years old. A man walked into a Baptist Church a service south of san antonio and opened fire. Youngnmen described as a white male fled in a vehicle and was found dead a short time later, although it is not clear how he died. The red cross said some staff colluded in fraud costing the agency 6 million. An internal order revealed likely collusion in sierra leone along with fraud by a Customs Service provider and overpayments. Red cross plans to reclaim the lost money and hold the perpetrators to account. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad President Trumps First Official trip of asia in full swing after a sunday dominated by a meet and greet with u. S. Troops in japan. He has put trade front and center saying business with tokyo is not fair. Have at the moment a situation where trade is front and center, but also the yen of. 6 . Sinceare levels unseen march. The noiseout that and coming out of this visit the us far. Us far. Thank you. Oneink the trade issue is of the most important agenda the two leaders will be a caged in talking, but the main focal point is the showing quite strong unity visavis north korea. Secondary the trade issue comes in. Since the United States has withdrawn from tpp, so perhaps the United States president would suggest to japan the there will be a good thing to talk about Free Trade Agreement bilaterally between the United States and japan, but we have to closely watch what is meant by Free Trade Agreement. That means if it is really genuine free trade eliminating lowering thed tariff barriers, that is fine, but if it is too concentrated on balanceduilibrium, the trade in terms of trade accounts , that is not necessarily free trade. It is rather managed trade, so we have to make a clear distinction between free trade and managed trade. We will see which kind of trade that mr. Trump has in his mind in talking to shinzo abe. Know thats what President Trump wants, but what will be the goals for shinzo abe when he negotiates with donald trump . Said this time i before going to china the two leaders, mr. Trump and mr. Abe, would like to show the very strong ties existing between very strongat is a message to china that japan and the United States, the strongest ally in this region of asiapacific, so trade issues should not shadow this bilateral relations. The issue certainly plays an Important Role in protecting the u. S. Japan alliance into the rest of the region of asiapacific. Haidi stay with us. I want to bring in Stephen Engle in tokyo covering the meeting. Before i getng up you to summarize the lines from President Trump today, i want to bring up this function on the bloomberg that sets up the big picture when it comes to trump and what he is focusing on, the trade between countries like japan, china, south korea on this trip with the United States. This is total trade. The next biggest is japan, but take a look at the trade deficit. Is a 69 billion trade deficit with japan. Being good putting up front and center so far on this trip. Absolutely. He has talked about free, fair, and reciprocal trade. Negotiated new a agreement with japan. The issues go deep. At have the value of the yen 114. If it goes weaker against the dollar, that could spark of the ire of mr. Trump. There are also concerns about agricultural subsidies and the lack of a market for u. S. Automobiles. He did run through a few interesting comments. He says he is optimistic about the future of Economic Hardship with japan, however trade with japan is not fair and is not open. Trades. Has suffered deficits with japan in 2016, 60 9 billion, the second largest after china. , in as donald trump speech to u. S. And Japanese Business leaders this morning in says he has no doubt a trade agreement with japan can be negotiated quickly and in a friendly way. Is doestion for japan they have the time and the Political Capital to invest in doing this type of deal with donald trump. Obviously preoccupied with the renegotiating nafta, and of course the south koreau. S. Free trade agreement. Steve, we will leave it there. ,e continue to cover this trip President Trumps first trip to asia. He will be heading to seoul, korea, then beijing, that big meeting with xi jinping. Lets get back to our guest. Just talking about what constitutes fair and open trade, we were touching on it earlier. That deficit have to look like for President Trump to go back to his constituency and make it a success . He has built his reputation as the dealmaker to get these wins the United States. I think the japanese percentage of trade surplus with United States is less than 10 . To be precise, it is Something Like 9. 4 in 2016. 70 ,ed to be in 1981 above so over time japanese trade surplus has been consistently reduced. To the United States has been skyrocketed, so what actually happens in the area, such as automotives, japan exports only 1. 7 Million Units of cars to the united , while japanese manufacturers of automobiles are producing in the United States well above 3. 8 Million Units of cars, so that means we have a very good trade and investment relationship. I dont think it is really sensible to look at bilateral trade surplus or trade deficits. I think we have to look at more onlyof entire picture, not trading goods, but also services where the United States has services, and also Japanese Investment to the United States and u. S. Investment to japan. We have to look at the wider spectrum of bilateral economic relations. I think it is not wise to look into the trade balance in terms of trade in goods only. Rishaad that would be a great sell it thatld way, as opposed to just trading goods. If he wants to get rid of the deficit with regards to goods and services, he would have to them a trade deal with which would be massively skewed in favor of the nine it states wouldnt he . Yes, indeed. If the United States administration is interested in making japanu. S. Bilateral Free Trade Agreement, they should be reminded that we are have already negotiated sidebyside with the tpp negotiations, and the United States got better Market Access and Agricultural Products as well as other products and trade in services, the tpp negotiation provided a very positive platform for the United States to forge bilateral trade relations even far better than it used to be, so i think it is very important that this tpp marriage should be reminded to the current u. S. Administration. Rishaad thank you very much indeed. Later in the show, we wont have special coverage of President Trump and shinzo abes joint news conference. It kicks off at 1 00 this afternoon hong kong time. Midnight in new york. Ahead, sounding the alarm, Chinas Central Bank chief issuing a blunt warning of rising risks in the Financial System. Next, saudi arabia sweeping crackdown leads some investors encouraged, but others rattled over who could be next. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. Makes arrests as part of a sweeping anticorruption drive. Oil on the way up. Crown Prince Mohammed bin salman moving to consolidate power. We have more on this. Is there any significance in the timing . Not so much the timing, but kinger part of the move by salman bin Abdulaziz Alsaud to remove any obstacles to ascension to the throne. We saw a little of that play out last month with the removal of another prince. Moving so that he can get towards the throne. Rishaad sorry. Haidi i was going to ask the same question. We spoke to an analyst earlier and she said you can look at it as a purge, removing any potential obstacles, but you could also look at it as an anticorruption crackdown in line with reforms. If you are an International Investor looking ahead to the listing of aramco, how would you look at this . Crown prince is backing the ipo next year. There is stability there. If the crown prince has more power, then more confidence the ipo will go ahead. We have seen a director of aramco be arrested. Ipoe are no indications the or arrest will affect aramco and the markets. Oil is so important to the saudi economy. They would not want to jeopardize that too much. Haidi absolutely. Are we expecting it to have ramifications when it comes to the oil price itself . We saw an initial gain this morning, a spike, but at the moment, the market is taking this for granted. The good thing is the crown an extension to the opecled cuts come so that does not look like any change to policy there, but this is saudi arabia and it does throw a bit of geoPolitical Risk into the market. There may be nerves, but prices are coming back and it seems like business as usual there. Haidi all right. You can continue to track this story and all of the days trading on our markets live blog, mliv. There is commentary and analysis from bloombergs expert editors. This is bloomberg. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Dbs shares, this is how they are trading. , off. 6 aftert southeast asias largest lender reported thirdquarter profit that missed estimates. Losses overshadowed gains. To says net income fell 23 602 million. Was 835n forecast million. Dbs is the last of singapores big banks to report earnings. Rishaad lets check in with westpac shares in sydney. To 2. 3 , fullyear earnings rising to a record, bad debt on the way down. The banks Net Interest Margin 2. 3 . Wo point bad debt charges dropped by a quarter. Westpac filed a dividend of 94 austrian cents per share. Haidi japanese regulators have become an inspection of nissans kyoto plant checking measures introduced during the inspection scandal. Nissan suspended Domestic Production and is recalling more than one million vehicles. Slow asroduction will plants relied on uncertified inspectors. Some lines on this Broadcom Qualcomm deal. Braced for a fight, opposed to the deal and that 70 a share is to cheap. This is bloomberg. Rishaad there we go. Victoria harbour. We0 9 a. M. In hong kong as count down to the firstday day of the trading week. Hang seng marginally up. U. S. Stocks providing a tailwind, the longest streak of gain since 2013. Yen at the lowest level against the dollar since march. A saudi crackdown on billion theres and politicians sending oil prices higher. Donald trump his asia trip. Trade dominating headlines. U. S. Payrolls a curious egg. How much was it skewed by those hurricanes . Haidi absolutely. Were seeing that play out when it comes to earnings. Impacted bythaway the natural disasters. With all of that happening last week and that this week, volatility still at record lows. Of Central Bank Decision out of australia, new zealand, thailand, and sri lanka. Lets look at how markets are joining this monday trading. An interesting start to the hong kong session. The hank hang swinging, now down. 6 . Large caps falling for a second session. Back below 4000 points. The pboc has weakened the daily fixing since october 22. The offshore rate falling for a second day. Some movers in the open it hong kong. Financial stocks after the pboc governor renewed concerns around Financial Risks. He said Financial Institutions are not competitive and pricing of risk is weak. The pboc chief said china should toughen regulations. Chinese developers after reports that china is cracking down on Developers Financing down payments from purchases and the misuse of consumer loans for mortgages. Reportedhe radar sunac a jump in october sales. Of theurpassed vanke number three developer in october. Seng, hans saying hang all Industry Groups on the back foot. Staples the biggest laggard. See icc saying mainland funds boosted their holdings in hong kong tech shares and discretionary while their exposure to financials and utilities dropped. There was pressure across the board today. Shanghai shares dropping for a third day there. C saying mainland stocks may in the nearterm buy a lower than expected october pmi data, bond yields, and deleveraging of financials and real estate. Rishaad thank you. We saw president xi jinping cement his position as president of china. In saudi arabia, the crown prince seemingly doing the same thing. Lets get the first word news from paul allen in sydney. Paul saudi arabias crackdown has put Prince Mohammed bin salman within touching distance of the throne. Since 25th teen, he has launched an unprecedented shakeup of the economy and society. Those detained include billionaire alwaleed bin talal, a prominent investor and Global Companies including citigroup and twitter. Busy day trump faces a in tokyo, including meeting the japanese emperor, talks with shinzo abe, and the state dinner. North korea will behind on the agenda as it will be in seoul, korea and beijing. Analysis is a Ground Invasion of the north would be the only way to locate and destroy kim jonguns nuclear weapons. Critics say so, korea would already be under attack. Toppled catalan separatists leader is to be released on bail and belgium after surrendering voluntarily. 15 catalan political figures are now in detention, sparking protests from independence supporters in barcelona. Similar rallies took place in the basque country. Airways has agreed to buy a stake in Cathay Pacific, making Cathay Pacific the thirdlargest shareholder, over 660 , just million. This is qatars first deal with an asian carrier and will help it gain a toehold in asia and help Cathay Pacific fight rising competition. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad the pboc governor has warned that chinas Financial System is facing mounting risks to do to higher leverage. He is flagging threats to the economy and calling for deeper reforms. Lets get more from beijing. What is being made of this warning here . This is a fairy lengthy article published on the weekend on the pboc website. It is about the third time in as many weeks that governor zhou has spoken out on this issue. That he is on the way out after 15 years of the home and that he wants to cement his legacy and have a say on the direction of where china goes in terms of its economy and Financial System Going Forward. This debt pileg almost three times gdp as the key thing china needs to tackle in the next couple of years. Haidi it is quite a handover list for his successor. I dont indicate that person. There is speculation over who of the the next head pboc. We thought we would get an indication of that during the congress, but whatever the case, it will not be a simple process. Thats right. A link see a laundry list really of interest tots Foreign Investors is that he is advocating for opening up the Financial System and the economy to nonchinese Financial Institutions and opening up the markets, some of the biggest in world, to wider investors. That will be a key task for his successor. It is not automatic that he will be replaced, but he is four years over the official retirement age. We will be looking for the meeting of the Standing Committee in december. The name could come out in, but if it doesnt, we will have a nomination and more information at the National Peoples congress sometime early in 2018, around march probably. Haidi one of the points he , sayings the opening up regulators are lagging international standards, but these points how internet financing, which has been a government focus, saying this often turns into a ponzi scheme and financial innovation sometimes means laying the groundwork for a bubble, a real problem for regulators in china. Thats right. They have taken the approach of letting things develop, then cracking down or regulating them, which is as good as any approach really. He is saying that these areas that happen allowed to flourish, internet financing, shadow banking, there needs to be a concerted and overall approach to them to dealing with them and protecting consumers in the end. Great stuff. Great piece, a onestop shop when it comes to some of the systemic risks facing china at the moment. Lets head over to singapore. Dbss trading a little lower. A big disappointment when it comes to thirdquarter earnings. Asias biggestst lender with net income of 822 million singapore and dollars. Printing 3 Income Growth and says it will expand into double digits and 2018. Our banking analysis joins us now from singapore. What happened . Think it is well known that the oil and gas issues led to some of the allowances that caused this decline. The sector has been causing stress for the singapore banks. Singapore being the largest dominanceer and its offshore, i think it should not be a surprise. We would be kidding ourselves if we set the banks are ok. I think it is a good thing that dbs made these allowances now, otherwise it is better than kicking the can down the road road. I think it is a good move. The problem could have been much worse. It is a smart thing to do because if they would not take these allowances to the income statement, they would have to be shifted to shareholder equity, and no one likes that. Rishaad with a stronger oil price helping exposure to the buts lending in singapore, they have a lot of proms with Oil Services Companies and beyond. There is a common perception that oil and gas, it is the price that will make the difference. That is just the surface of the problem. The question is about a sustained improvement in the Oil Price Outlook for which we have not seen yet. What this boils down to is how much capital spins the big majors make an oil drilling, and that means demand, the charter rates for these vessels will go up. That is an indicator that should help material improvements in the singaporean banks assets situation. The higher leverage of some of the Smaller Players, that is a real issue. It is not just the oil price. Rishaad exactly. All doom and gloom when we get earnings . I would not say that. The margins are a piece of the puzzle. The flow through to the fed rate hike has not come through for the singapore banks. Saw competition eroded some of the margins. That thenews is lenders have been able to diversify earnings sources. We have seen Wealth Management doing very well. Dbs wealth income is up 21 this quarter. That is all going very well. The distribution of income has then good for dbs s well as well. Lending has been picking up , so it bit, so has trade is not all doom and gloom, but i hope the oil and gas situation we may see some pain in the Fourth Quarter as well. Thatad qualcomm is saying the bid from broadcom does not value the company fairly. It is a common way to back off initial approaches, arguing 70 a share is to cheap for this deal broadcom is currently proposing. Thats what we have coming through. We have more on this story as it develops. We will look at the asian Market Outlook and why japan is lgts top pick. This is bloomberg. This is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Logitech expects continuing growth in china will see the mainland become its biggest market in the next 510 years. Targeting 1012 growth for 2018 as it transforms towards cloud enabled offerings. The ceo told bloomberg that the popularity of gaming is the key driver in development with china leading the way. We are starting to develop products in china for china. I believe those in china for china products we develop, not just gaming, but generally, will move around the world the way they used to happen in the u. S. Chinae u. S. , now it is in for china. Rishaad chinese regulators are investigating an Internet Company for suspected fraud involving its ipo. If confirmed, it could result in a delisting from the board. Shares have been suspended since mid april. Selling itsiguel beer and liquor ventures to its pure foods unit. The move will consolidate its food and drinks businesses into one company and differentiate them from other interests. Will list on the philippines stock exchange. Look at the Oil Price Trading higher. Saudi arabia resting dozens of people, consolidating Prince Mohammed bin salmans route to the throne. It includes alwaleed bin talal, the worlds 50th richest man. Lets discuss the turn of events with lgt bank asia. I was stunned. It is a dramatic move. It is part of a generational shift in power that is taking place. Importantors the most thing is that the oil price has in moving higher well before this. The oil price is a function of very strong economic demand around the world. You got another confirmation of that coming from nonfarm payrolls on friday with u. S. Unemployment at a 40 year low. Rishaad we have seen that when , that above 62 a barrel is when the shale guys come in. This is when we get the ceiling. I know you are not an oil expert. Cost ofarginal production is very high for certain players, in particular shale. As prices move up, they come back online. For wtitill looking around 55 for the next 612 months. A reasonably elevated oil price, not excessively, but a well supported market. Turn to want to equities and throw up this chart that gives us the conundrum the markets are facing. This is chart 5085. This is the vix index hitting that record low. We have record low volatility. What does this gauge tell you about the kind of market we are in . Should we be concerned . Is this normal . A lot of investors are taking note that the vix is at low levels and the equity market keeps climbing to new highs. In europe, we are seeing a which rebound from spain, had political issues regarding catalonia. I come back to the point that we are in the middle of an earnings season that so far is basically so far, so good. The u. S. Is more or less done. Most companies have reported above expectations. If you get an earnings season inch is around that 5 level terms of quarter on quarter earnings growth, these levels can be supported. Low, but Consumer Confidence is high and credit growth is up. We have eight virtually circle that can tell us why we have low volatility. Here . Where do we go from where do you find value in a market like this . Use of the japanese growth story is still intriguing . Reasonthe particular that the rebound or Strong Performance in earnings was despite earlier headwinds from a stronger yen, so Japanese Companies have become a lot more shareholder friendly and have been boosting dividends and share buybacks. That is something new for the japanese market. I would also point to europe. Is a lagging recovery story relative to the United States. Germany is booming, frances coming from behind. There are a lot of pockets of value out there. Rishaad the u. K. Has not had anybody on the show for ages saying this is worth a look. The u. K. Is another story. It is under owned. Investors across the board are underweight. With the u. K. What it is about is that as brexit discussions and drag on and become maybe more complicated than less complicated, the natural safety valve for the u. K. Market is a cheaper pound. We see a very nice fit. When the pound falls come exporters tend to do well. In poundyou lose money terms. You have to be hedge. That is a trade that works well and is similar to the japanese story. Rishaad what is the most compelling story this week . I think it is japan. We have the gambit that paid off for shinzo alvey, a continuation of policy. Governor kuroda will be reappointed head of doj. A policy continuation, but that has paid off for investors and will continue to do so. Rishaad thank you very much indeed. You can catch up with palmer interviews using our interactive function, tv. Watch us live and dive into securities we talk about. You can become part of the conversation as well. Send us messages during our shows. This is for bloomberg subscribers only. Check it out at tv. President trump has begun his tour of asia with warnings of challenges to the u. S. Military dominance. Whereis the other area the president wants to show strength. Donald trump is now in asia. The longest trip of his presidency that takes him through these five countries. This is chart for a 34. He landed inthe longest japan. His first stop where he played golf with shinzo abe before formal talks on north korean containment and u. S. Japanese free trade. After that, south korea, china, and vietnam, and possibly meet with president putin. In the wrap up his trip philippines and a oneonone with the filipino president. Trade will be a major point of discussion, as well as friction. It turns out that four of the five countries are also on the with alist of countries trade deficit with the United States. R functione ect looking at trade deficits. , then japans here at number four, vietnam at seven, and south korea at number nine. Lets look at u. S. Japan trade. This is 7827. In blue are you as of japanese goods. In white are japanese imports of u. S. Products. The worth of u. S. Exports is roughly double that of japan. In red, the u. S. Deficit stands 5 billion. To balance that out, the white house hopes to get japan to agree to a bilateral trade to deal to take place in part of tpp. Despite any friction over trade, trump did call japan an Treasury Department and crucial ally. Those are your three charts to know as donald trump starts is asia tour. Rishaad we will move from japan to corporate singapore. Were trying to get an idea of what the country is doing their and how the economy is faring. Singapore Big Bank Earnings and who meets the cut. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Rishaad i am Rishaad Salamat. President trump saying it is time to renegotiate terms. Prince Mohammed Bin Salman consolidating power and saudi arabia. The worlds 50th richest man in detention. Haidi also coming up, first apparent business connection between wilbur ross in the kremlin. This is Bloomberg Markets asia. Haidi a big week ahead when it comes to geopolitics and trade and security. President trump continues his first asian trip of his presidency. He is continuing that trip in japan. He said trade with japan is not fair come and not open and he needs to renegotiate. He is optimistic negotiations will be quick and friendly. , want to call up a quick chart 4775 on the bloomberg. The trio of deficits front and center. U. S. Trade in china the largest with japan at 70 billion. South korea third. At theee relationships top of the agenda as he meets with regional leaders. He will be wanting to talk security as well with u. S. Allies in this part of the world , wondering if the u. S. Can be relied upon in case of a threat from north korea. Rishaad north korea is the other one. We will have a chat about that. Not least in seoul, korea as he stops there. In the philippines, a oneonone with the philippine president. Lets get a look at market action. Not a good day for the over 1 . , down real estate, financials dragging the index lower has the pboc governor renewed concerns around Financial Risks. Chinese stocks falling and chinese lawns on the up. Mixed, but mostly lower. Japanese stocks are a bright spot, the nikkei two to five gaining. 2 helped by earnings momentum in tokyo. We have trumps visit on the radar. Then exporters may be riskiest shares this week as trump discusses the u. S. Trade deficit with many of economies in the region, saying it is not fair. Take a look at what that has done for the yen. Dollaryen at 114, breaking through that key level. Governors comments also weighing on the currency. Jgbs are catching a bid. Governor kuroda said that easing will continue and there is a long way to go to hit the 2 inflation target. Dollaryen at the highest level since march, the line in blue on iss chart. The line in white the u. S. To your treasury yields moving in tandem with the dollaryen, pushing higher. Gmm,k at the gm in, the won losing 5 . Finance minister flag concerns around the currencies excessive strength. Check out brent gaining. 4 , extending gains after closing at a july 2015 high friday amid signs inventories are shrinking and traders are assessing the political purge and saudi arabia. Alas look at some movers in asia, hna holdings falling 4 . Losing ground,ia and Cathay Pacific sliding after Qatar Airways agreed to buy a 9. 6 percent stake in the carrier for 662 million. Rishaad thank you. Go, lets find out what is going on at the boj. That yen tumbled to its weakest since march after governor kuroda said it is crucial for inflation to beat the 2 target. He said there is still a long way to go before the goal will be achieved. Weaker yen has been a boon for exporters. Since shinzo 26 oblique came to power five years ago. Leak documents from an offshore law form show wilbur ross retains a stake in a shipping company with ties to a russian businessman under u. S. Sanctions and to president putins soninlaw. The Commerce Department says persons never met the and does not know about the relationship with the kremlin. New yorks fed president will dudley is close to announcing his retirement. The announcement could come in the next few days. To be ready to step down in the spring or early summer. Such a move would raise questions about fed policy under new chairman jerome powell. Ou has renewedzh his warnings about the dangers of corporate debt, saying the system is becoming vulnerable. Writing late saturday, he said ands were accumulating, in so e some hidden, contagious, and hazardous. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad president Donald Trumps First Official trip to asia is underway. Sunday dominated by a meet and greet with u. S. Troops. He is saying business with tokyo is neither fair nor open. Stephen engle is in tokyo. Putting it out, isnt he . Thats right. He wants free, fair, more reciprocal trade with the five countries he will be visiting over the next 11 days. They have trade surpluses with United States. Has the secondlargest after china at 69 billion. Came of the main a talk today ahead of the meeting he is having i suppose right about now because the helicopters are circling overhead. He is meeting with the emperor at the imperial palace. Security is out in full force. Hethis breakfast meeting, talked about the need to make trade between the two countries more equitable to the u. S. Side because of that big deficit. He says right now trade with japan is not fair and not open. He is optimistic they can find common ground. He said no doubt a bilateral japan can beth negotiated quickly and in a friendly way. He said he would like to see japanese automakers sell build more plants in the United States. They already employ 800 50,000 u. S. Workers in the United States. President to quote the as saying, hey, try building your cars in the u. S. Instead of shipping them over. That is not too much to ask. Is that rude to ask . Those automakers were in attendance this morning, mazda, nissan, monda, mitsubishi heavy, bridgestone, and the electronic car parts maker. He did praise that company for planning to invest 1 billion in two their tennessee plant as they go forward building autonomous driving cars. Haidi i wonder if prime isister shinzo abe thinking about a reiteration of support given the need to defend against north korea. That will be front and center as well. There are two channels here, the economic and security channels. , as will be this afternoon series of bilateral meetings at the state guesthouse followed by a joint press conference. Yesterday, soon after stepping off air force one in western japan, this is what donald trump had to say to the u. S. Troops there. One, no dictator, no regime, and no nation should underestimate ever american resolve. Every once in a while in the past they underestimated us. It was not pleasant for them, was it . It was not pleasant. Asia, heump is here in faces pressure back home with the escalating investigation into the allegations of collusion with the russians. He has mentioned he will likely meet with Vladimir Putin on the sidelines in the philippines in the coming week. He says we would like president putins help with north korea. Obviously he would try to get chinas help when he meets with xi jinping in just a couple of days. Going to say that is going to be an interesting meeting, one that is probably the most scrutinized out of this trip. Absolutely. Both on the security front and of course on the economic front. Haidi haidi haidi thank you so much for that. Covering President Trumps first asia trip. Asias ahead, southeast largest bank has posted results short of expectations. We will try to get behind the mess at dbs. Saying unseen leverage is the biggest headwind for the markets. We hunt for real yield. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong with the latest business flash headlines. Beginningegulators inspections of the nissan kyoto plant amid allegations of uncertified in sections scandal. Uncertified inspection scandal. Nissanstimated production will slow a japanese plants that relied on uncertified inspectors. Haidi shares and westpac trading like this in sydney after the banks fullyear earnings rose to a record, bad debts falling. A downside of 2. 4 . Dollars. 2 billion u. S. And the Net Interest Margin fell to 2 from 2. 3 . Quarter. Fell almost a westpac will pay a final dividend of . 94 a share. Rishaad lets have a look at db s shares, off by. 9 . This is southeast asias biggest lender. ,hirdquarter profit missed credit and of their losses overshadowing gains from interest and income. To says net income fell 23 602 million, compared with the average forecast of 835 million. Of singapores big banks to report earnings. Haidi lets find out what went wrong withdbs. The Vice President and Senior Analyst at moodys Financial Institutions group. Moodys has a stable outlook on singaporean banks. Only one that this is, so what went wrong . Results look at announced today, it is a mixed picture. You are seeing pretty good momentum in terms of the core Business Revenue. Frome seeing growth developed nations business. On the other hand, youre seeing a significant pickup in credit costs, particularly from the banks oil exposure. Dbs we are seeing is that is undergoing cleanup and accelerating recognition of the troubled exposures within the portfolio. If you look at the entire , what weh performance can take away so far is that the Book Business the business momentum is getting traction and youre seeing growth in loans and revenue. Take fromat we should the results is that there is theaps more clarity on asset quality outlook for dbs and the industry over the next 1218 months. Haidi how long will it take for the that exposure to Energy Assets play out . We have seen a stabilization of Oil Price Since late last year. Stableces have reached a level, but this is an industry still undergoing stress. You are still looking at an industry that is faced with overcapacity. So at the same time, the companies within the sector have yet to regain any pricing power. Expect these conditions to persist over the next 12 years, sue you can expect cash flows for these companies to be strained. When we look at the singaporean expectortfolios, you can some nonperforming loans to show up over the next 1218 months, but the main point is the incremental issues from the oil and gas exposure have been manageable and will be for the banks Going Forward. Banks aswe have other well. Which one of these cuts the mustard for you . The think the results for other banks come if you look at what was reported this week, the results are similar. Dbs. Rends are similar to the core Business Revenue growth and loans Growth Continues to be healthy. On the asset quality front, that is where we continue to hear cautious optimism amongst the banks that perhaps the worst is over. Time, you can expect incremental issues to show up over the next 1218 months. Rishaad absolutely. What are the future problems you are foreseeing . Some of those known unknowns that they could end up facing . Thef youre thinking about singaporean banks over the next 1218 months, clearly the issue is the asset quality front. More clarity over the asset quality outlook, but one area we will look at continuously is how the oil services exposure will evolve. Our base Case Assumption is that the incremental issues will be more manageable than what we have seen in 2016. The next one for the singaporean banks, we have been looking at the profitability of the banks. It is clear that Economic Growth in the region is picking up, Competition Among banks picking are already seeing competition in the same sectors that the banks service, particularly the overseas markets. We will be looking at how banks will improve adjusted profits. Rishaad im looking at United Overseas Bank and the dividend plan, also dbs. 2. 8 gross yield is not that enticing. There is a lot more yield elsewhere, isnt there . I believe if you are looking beyond the banking system, then there are other sect ors that sectorsrhaps provide that would provide a more favorable yield pickup compared to the banks. When we are looking at the banking system, what we are taking from recent developments is that the outlook continues to be stable, and we are seeing a gradual recovery in profitability largely driven by continued momentum in the core businesses of the singaporean banks. Over the next 1218 months, the growth aspects will be very helpful healthy for the Banking Industry in singapore. Rishaad have a good one. Having a look at these three big banks that have reported earnings in singapore. Softbank look at facing tough decisions on sprint. They can get the telco back on solid ground. That is next. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. Softbank shares down after the collapse of merger talks between sprint and tmobile. Masayoshi son and deutsche toekom ultimately failed agree how to share control of the combined operation. This deal is seemingly in tatters now. It was teetering for a while, wasnt it . What is next . Softbank and sprint, they have some backup plans. They may be talking to some Cable Companies in the u. S. One of them is the fourth largest cable operator in the u. S. So maybe using the Sprint Network to provide wireless telecomas the u. S. Market is heading towards convergence. At the same time, sprint may be able to leverage Fiber Broadband to strengthen its network. It is not the end of the day. Shareholders are probably disappointed that the deal didnt work out. Im sure that the chairman has other plans. Rishaad he certainly has a lot of plans, doesnt he . All these ideas, the vision fund that Masayoshi Son set up. How is that doing . The vision fund is apparently doing quite well. Bear in mind that the tech shares in general have done quite well this year. Holdings at the vision fund is nvidia. The share price continues to do well. We expect the operating income contribution from Softbanks Vision Fund to increase, which could possibly offset sprints losses in the latest quarter. Haidi earnings from softbank, what are we expecting . Sprints losses is not a good thing for softbank. Be belowrnings seem to expectations. The vision fund could give some positive surprise to help offset losses from the main operation. Haidi thank you so much for that. The launch of apples most important new device and years, some buyers say they couldnt make it work. Social media carried multiple complaints the iphone x would not connect to a wireless carrier. Apple has yet to issue a statement. Activation delays were easily fixed. Apple stock remaining at that alltime high. Against the backdrop of equities in this part of the world mixed. The hang seng is leading the charge down over all. The yen also making itself felt. The nikkei 225 now unchanged. We find when the wind you cans , equitieskens normally on the way up, but perhaps that trade is getting tired. That is a look at seoul, korea and singapore. Saudi arabias corruption crackdown here how markets are reacting to the palace power play. Saudi arabias crackdown has put Prince Mohammed bin salman within touching distance of the throne. Launched a he has shakeup of the economy and society. Those detained include billionaire prince alwaleed bin talal, a prominent investor and Companies Including citigroup and twitter. President trump faces a busy day in tokyo, meeting the emperor, talks with shinzo abe, and a state dinner. North korea will be high on the agenda. Washington says they crowned invasion of the north would be the only way to locate and destroy kim jong owns nuclear weapons. Critics say seoul, korea would already be under attack. The catalan separatist leader to be released on bail after surrendering voluntarily. 15 catalan political figures are in detention, sparking protests in barcelona. Similar rallies took place in the basque country, which has had its own separatist movement for hundreds of years. Says 26s governor people have been killed and a mass shooting at a church, the youngest five years old. A man walked into a Baptist Church service south of san antonio and opened fire. The gunman described as a young, white male fled in a vehicle and was found dead a short time later. It is not clear yet how he died. Staffd cross says some colluded and fraud during the west african ebola crisis, agency 6 million. An audit revealed likely collusion between staff in sierra leone, along with fraud and payments in liberia. The red cross plans to reclaim the lost money. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi geopolitics dominating as President Trump is in asia for his first trip to the region. Japan today, seoul, korea overnight, leading up to that key meeting with xi jinping on wednesday. We are seeing this decorrelation when it comes to Japanese Equities, stocks lower today despite this weakness in the yen. Rishaad absolutely. When the yen falls, the equity market goes up. It is not happening. Lets look at Japanese Equities as they have turned tail, flat to down now. We do have japanese stocks closing the session flat for the morning despite the rises earlier in the session. Earnings momentum there, that the mood has turned sour in the equity markets. Hong kong dropping 1. 4 . We have the kospi deepening ,osses, losses across taiex sydney, and the chinese mainland. A busy start to the week. Gold easing its losses. Trump talking tough. Investors assessing the fallout from the Saudi Arabian anticorruption drive. Earnings in focus elsewhere. Boj governor kuroda said easing will continue and that etf buying will carry on. Check out the yen dropping to a march low following governor kurodas comments. Trump said trade with japan is not free, fair, or reciprocal. Is 16 above the 30 day average and the hang seng , losing the most ground in weeks. Cathay pacific falling 3. 5 after Qatar Airways agreed to buy a stake in the carrier. Financial and property stark stocks weighing the most on the hang seng. Hong kongs real estate players are also being dragged lower after a measure of home prices fell the most in 10 months as borrowing costs rise. Hibor, the onemonth highest level in nine years. Outlook as to pressure for hong kong costs to catch up, but sustained drives in borrowing costs would make a sharp reversal for the Asian Financial help. Financial hub. Falling as much as 7. 3 amid concerns around the Property Market in china and hong kong. Rishaad nice one. Lets take a look at these market moves. ,he shakeup in saudi arabia mark cudmore is normally in singapore. He is here. What is going on . Jump on this news, but im not sure it is a valid move in the oil markets. This may be a classic head fake formation. It is big news domestically. Im not sure this should be driving domestic markets. Rishaad it has driven the market up. Brent at 62. That tends to be the ceiling. Absolutely. This is the highest level in some time. The ranges are very small. There was a large range on friday. This is only a small move at the moment. The oil market is dominated by the supply story from the shale side. Mohammed bin salman, who is supposedly driving the policy, so this should enhance the policy moves we have seen already. Its unlikely we will see a change in direction and saudi arabia. People might be trying to play from the short side, some mean reversion in the range, so now the market will probably be more vulnerable to the downside this week. Haidi does that mean more volatility . It is a jampacked week last week. Athave it end with the vix record lows, what can wake up these markets . Asian markets are trading weaker this morning, thecularly the hang seng epicenter of pain at the moment, based on the deleveraging out of china and that trump is taking a hard stance on trade. Asian markets are looking vulnerable this morning. Beyond the trump headlines, the deleveraging story and china is a long story. Be an ok weekuld for stocks. I dont think we will get anything wild caught but who knows. There could always be a black swan. Haidi there could always be a black swan. Thank you so much for that. You can follow more on the story and all the days trading action on our markets live blog on bloomberg at mliv get that market run down and commentary and analysis so you can always find out what is affecting your investments right now. The republican tax bill should be slowed down after the socalled Paradise Papers leaked , exposing potential offshore tax avoidance by Companies Including apple and nike. Lets get it over to jodi schneider. What is the potential connection to this process of tax overhaul being considered in the u. S. Congress and this latest leaking of the papers . Some advocates are saying taxe papers, which detail avoidance strategies by big companies, including apple and nike, mean they should give a longer look to the tax overhaul process. Administratione not to move through a tax overhaul quickly and would like to have something passed in the house by thanksgiving. They are saying lets slow down and look at this given these allegations. We will see. That could further complicate a tax reform, which is a complicated process in any case. Rishaad what could be the involvement of some Trump Administration members according to allegations coming out in these reports . Commerce secretary wilbur ross and Economic Advisor gary cohn have business ties to Companies Mentioned in these has beeno gary cohn one of the key players and tax reform. He is said to be staying in the administration largely to be able to push through tax reform. They are very involved in the process. To wilburhen we get ross himself. He has to face some serious questions. What specifically are they . According to these papers, he has ties to a shipping company that has ties to the soninlaw of russian president Vladimir Putin. These were apparently not disclosed during the confirmation process. There are calls now by senator Richard Blumenthal for an internal investigation by the Inspector General of the Commerce Department. Democrats at this point are starting to call for this. We will see tomorrow when Congress Comes back in session and they are supposed to start looking at tax reform. Kevin brady said dont worry. We have this covered. You might think there will be other calls given this will be a complicated fact. Rishaad it seems like it is getting complicated politically. Is probably quite grateful to be out of washington, d. C. At this point. It is a distraction at this point. Rishaad what will he achieve their . Already this morning he was talking about his meeting with Prime Minister shinzo abe in japan, had some tough words on trade, the japan needs to do more, that they dont make cars in the u. S. And need to be much more open. Of course japan is still smarting from trump and the administration pulling the tpp, and they want broader access to u. S. Markets. It looks like President Trump is willing to consider that, but he wants a big give on the japanese side in opening for markets to the u. S. Rishaad there we are. Some pictures there. Thank you so much. There we go. Donald trump arriving in tokyo. Meetings with shinzo abe. There we go. That is the scene being set for the president to arrive. Powellhat does jerome has fed chair mean for american bonds . We will look at that question in our real yield segment. This is bloomberg. The u. S. Yield curve keeps getting flatter, now at levels not seen in a decade. What does this say about the Economic Outlook . It depends on who you ask. Let me throw up this chart, the yield spread between the fiveyear and 30 year treasury, 5080. This is the flat is curve since 2007. Er blackrock saying crazy pricing when it comes to Long Duration treasuries. Bill gross is gloomy. He is saying this could pretend some major negative economic event. Where do you sit on this argument . Thatrst place, i do agree there is a tremendous demand for long called protected, highquality in the dollar space. That is going on. That has been present for quite some time. Is principally from the liability matching of long dated duration come up of which is corporate pension. Now, bill gross has a point in , but this is reminiscent of. Ast times prior to the storm having said that, it has been off and on reminiscent for the last 56 years. Od you are looking at a peri of time where any measure of volatility or spread is at alltime lows and showing stability, except spreads are slightly narrowing more. Those of us who have lived through history are reminded that this is a tricky time because you want to push, push, push for yield and you are being paid less and less and less. So that is where the caution comes from. It makes it more than somewhat difficult to run money. Ou can do it it is a lot of little stuff. Bedi the consensus seems to that you buy duration. Do you see any Duration Risk in this environment when you have the fed even under governor continuewell, we will to tighten and there will be continued low inflation . The continued low inflation part of it i think is subject to some question. I dont know the detail on this new thing that the fed of new york has, the inflation measurements. I see the output of it, which indicates that may be inflation is going to be a little bit higher than for a longer time than we might think. Inflationords, the trend might betray and in more up and be a bit stronger. That is not the general consensus that the fed, but that is what the model shows. Quiet. It is peaceful. The only centralbank of the majors that is showing, of the three majors, showing upward pressure, upward rate pressure, is the u. S. In japan, that is not the case, and also in europe, that is not the case. Somewhats. Fed is ahead of the pack or you might say isolated and that regard, and that presents a problem on raising rates, because we already have a currency that not this past year, but prior to that, was reasonably strong and showing some signs of strengthening again. This raise rates in context, and we ought to for domestic reasons, then that attracts money from overseas, so that his the bind the fed is in. I think next month we will see a quarter of. They would do their best to make sure of the fundamentals before they raise rates next year, which i do expect they will. The u. S. Economy is strong. There is no two ways about that. Measure it however you want to measure it. We have some social problems that clay out in the labor force as to the availability of labor, but there is no shortage of jobs by and large, and the economy is strong. I can go into more detail if you would like, but just look at the numbers. It is strong. Rishaad you have three conviction trades. Tell us about them and give us your rationale. , my major conviction is there is much on offer. You have to go out, the major thing we are doing is not extending. As a matter of fact, we have cut substantially. Several years ago, the average maturity was 13 years. Note i am using maturity, not duration. When rates change, duration can mislead you. However to maturity is about 6. 4 years in the bond fund. We have cut it in half. The average quality has gone to single a three, just about into single a two territory. You say that is well and good, but how would you make money . It is a lot of smaller things, some on the credit side, but credit spreads are very narrow, not always though. There are the sectors on the credit side where the spreads. Ill narrow and wide and the best example of that is in the energy area. There are some others and i dont like to get to specific and spread the word on it. You can add a surprising amount of value that way. It is not a great longterm strategy, but a way to deal with this. The temporary dislocation on the credit side, the rare, rare anomaly on the yield curve, which doesnt really happen in treasuries, but does incorporates in corporates. Then just the one by one by one things, which bonds are going to , a lot of guesswork on that. Surprisingly if you do your homework, you can pick a lot of these up. I would like to focus on one thing happening here, a lot of u. S. Corporations are looking at the current array of things and saying it is a good time to pay down our debt. So they will tender and then come out with another public offering. If you are paying attention, you can add a lot of value there. They are not longterm conviction things. They are shortterm tactical. Rishaad we have to leave things there. Just going over to tokyo. Trump,ctures of donald having a look at this greeting he will be getting here. This is what we have at the moment just coming through. He is talking trade, trying to get unfair trade with china as he puts it sorted out and made fair. Also this tpp pullout as well. He did tell a gathering of Business Leaders that the country has an unfair advantage on trade that he intends to fix and make sure that in balance imbalance is fixed. Onlier on we had a guest suggesting that if we look at goods and services, we have this huge deficit, but if you take everything including the amount of money japan does invest in the United States, it looks a lot more even than that. That is the scene we have at the moment. Thats right. Setting up that meeting with the emperor. One of the interesting things when it comes to trade, automobiles is one area that is sensitive. Donald trump asking is it possible to continue to import , butese cars into the u. S. Have been manufactured into the u. S. That is certainly at the top of the agenda when it comes to trade. The itinerary will be jam packed. He is flying to south korea this evening. Keenly awaited meeting with xi jinping taking place in beijing on wednesday. There is the Common Thread that goes through a number of these this need onde, trumps side to get down that trade deficit with south korea, with china, and also seeking alliances and guarantees, pledges, when it comes to overcome and deal with north korea. Rishaad that will be one of the other things we will be discussing. Something to discuss. Just to say that donald trump has been outlining his complaints about how japan treats the United States unfairly, at least in his opinion, saying few American Goods are sold in japan. Like americanse cars is another matter altogether, but he has made a plea for japanese carmakers to build more in the United States. They do build many vehicles. Here trying to get at is the 69 billion trade deficit. , iis the second highest visited the biggest with china. By americanfueled imports of Electronics Goods and other consumer is cautionary staples and of course cars. What is interesting is that typically feeding into these high level bilateral ofits there is quite a lot concern and volatility when it comes to whether this will result in trade tensions or a trade war. There is usually a war of words, but when you get to these meetings, some of these relationships emerging, even on this trip, deepening these ties hasu. S. Has with japan and largely kept a quite friendly, trump saying he wants to renegotiate the terms of trade and make it more fair and more open and things these negotiations can happen in a quick and friendly way. Defending theally tpp which he drew the United States out of. Referred toe have it as an abandonment of japan and asia as well. Donald trump saying he is eager to negotiate a bilateral trade deal with the u. S. With japan. Bloomberg markets continues next. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Its almost 11 00 in hong kong. We are in the middle of the first trading day of the week. Welcome to Bloomberg Markets asia. David President Trump is in we have live pictures there in tokyo as he prepares to meet the japanese emperor. In the country, and he says trade is neither open nor care and says its time to start again. The boj governor says it is crucial that they hit the 2 inflation target. And in the middle east, oil on the up as Prince Mohammed is consolidating his power in saudi s fifth the world richest man is among the dozens detained. It is early in the week, but there are a lot of marketing to follow. We will talk about all of it in a moment. This started about midmorning here in hong kong, except kicked off. Have a look at the hang seng. We will look under the hood was sophie in a moment. It is quite a big drop, not the biggest this year, but compared to where we usually see decline. Declined here in hong kong. We talkedthing a 1. 0, about saudi, look at that welker. At the oil curve. This tracks the spread between your forward or near Term Contract and something further down the curve. It shows you the spread is near the highest level on record when you go by this measure, the highest level since 2013, when there was a 2. 4 u. S. Dollars. This is a signal that supply might be tightening, as well. We will be talking about that later. As i promised you, here is sophie with a look at what we are targeting here in hong kong. Sophie a peek under the hood. Hong kong stocks falling the most in two weeks, financials and property on the back foot, new World Development leading the drop in the property space. Did consent over home prices, they fell the most in about 10 months in hong kong. Financials also on the back have investors might concerns about what the pboc governor had to say. Take a look at energy players, one of the loan bright spots things to an uptick in crude prices perhaps. Galaxy entertainment up 2 10 of a percent. Enough to help hong kong today. The biggest laggard on of the hang kong hung saying seng. Qatar airways agreed to buy a. 6 in cathay another deals for the moves, you rising infoods manila. This is the group plans to sell shares in a food subsidiary after consolidating its beer and liquor ventures. A quick roundup of other notes in asia. Losses falling almost 1 , while the korean won is up. Treasuries are also following across the curve as kuroda backs easing entrance complains about unfair trade with japan. That is back below the key 114 spot. That is an important technical break to watch out for. David absolutely. We talked about oil a little bit, is get you an update on oil. Our special guest here with the news. Saudi arabia arrested dozens of Common People in a crackdown on excess. Now withinmmed is touching distance of the throne. He has shaken up the saudi economy to wean the nation off of oil. Those detained include a prominent investor in Global Companies, including citigroup, apple and twitter. The Texas Governor says 46 people have been killed and a mass shooting at a church. The youngest, just five years old. Officials say a man walked into a Baptist Church service south of san antonio and opened fire. The government is described as a young male, in flood in a vehicle after the attack and was found dead a short time later. It is not yet clear how he died. Catalan separatist leader has been released on bail and belgium after some after giving himself up voluntarily. 15 leaders are in detention. Rallies took place in the basque country, which has had its own a separatist movement for hundreds of years. His governor has renewed morning about the danger of corporate debt, saying the Financial System is becoming significantly more vulnerable. Writing on the banks website late saturday, he says the latent risks are a key lighting, some of which are seven, our cheerleading, some of which are seven and treacherous. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am yvonne man. This is bloomberg. David thank you for that update. Lets get you back to tokyo, said President Trump has business with japan is another fair nor open or cheap. Stephen engle is covering the president strip and is what is right now. President hass. Been taking his possession his position quite early since his arrival and asia. Of using thes kind iron fist and the velvet glove on both hands. Once i come a saying in japan is a critical ally and a good friend of the United States, but on the other hand he is also saying, you have been cheating us all these years with this huge six 9 billion trade surplus with the United States, why arent you buying more of our cars, more of our products,. Hings like that they believed donald trump wants to break down some of what he calls protectionist tariffs. He also doesnt want to see too much more weakening of the yen. Looktomobile front, you around here, and i have been here all morning on the street, you do not see any u. S. Cars. In that sense, he is right. Same thing and south korea, almost no u. S. Autos on the streets. He might have a point there. He said the u. S. Has suffered trade deficits because japan trade has not been fair, nor has it been opened your interestingly, he did praise and autoparts maker in japan, which in october announced a billiondollar expansion of its tennessee plant in adding 1000 workers. On the other hand, honda, toyota, many japanese automakers have big plans in the United States. This is what donald trump said , try that, he said building Japanese Cars in the u. S. And set of shipping them over. That is not too much to ask, is it . In fact, the japanese automakers have a hundred 50,000 u. S. Employees. Some of the math is odd. He would like to see some of the barriers come down to u. S. Products here. David help us understand what is next couple what we are watching for the next few hours or so. He was just getting down from his car at the palace, at the guesthouse, he will be meeting them for after that. What will be happening after that . Stephen bilateral negotiations with the japanese perhaps Getting Started or pushing the ball forward on a potential bilateral trade agreement with japan. Keep in mind, donald trump is pretty much preoccupied on that front with nafta, renegotiating that, also the Free Trade Agreement with korea. Getting onto a japaneseu. S. Free trade agreement is something you have to add to the agenda. But he is very clear in his is nots today that tpp the right way. Here is what he said. We will have more trade than anybody ever thought of under tpp, that i can tell you. Idea, not the right probably some of you disagree in this room, but ultimately i will be proven to be right. You will have much bigger trade with the way we are doing it right now. Stephen we will await further clarity of Donald Trumps jointties for asia at a press conference with shinzo abe today. And time work tomorrow morning, he will fly to south korea. David and you will be following him, as well. Stephen engle covering the president s asian trip. I just a much for joining us out of tokyo. Later on Bloomberg Markets, we have special coverage of the joint press conference, as stephen was pointing out. It is scheduled at the moment for 1 00 p. M. Hong kong time, after the night if youre watching in new york state. We will continue our focus on the president s asian tour. In a few moments, we discussed the geoPolitical Risks President Trump will need to address as he tours the region, and later on an hour, Qatar Airways looks for cathayold through pacific. What that means for travelers and investors. This is bloomberg. Most of the japanese issue, it is not some of the asset [indiscernible] far, mr. Abe is going to put more emphasis on [indiscernible] if japan wants to emphasize more relevance geopolitically, to truly in the asiapacific region, is going to be hard if not impossible to do that if it economy and corporate sector is not thriving, is not profitable, if not competitive. I think the governments piece is absolutely crucial in ensuring Growth Continues to be stable and sustainable. We have to make very clear distention distention between free trade and manage trade. We like to see what kind of trade that mr. Trump has in his mind and talking to mr. Abe. A universityas professor, among the voices you heard there talking about shinzo abe and President Trumps priorities. He has kicked off his asian tour in tokyo. Join us for more is the eurasia representative. For coming on the program. Were going to start with the president strip. While these official visits turn out important agreements, there is often very little tangible things to left onto as far as Financial Markets are concerned. This is an unpredictable president , do you think there is anything specific that should be watching for . Callum a couple of things from my side. First of all, President Trump has saved the best for first. Clearly japan is likely to result in the most number of positives, whether it is japan buying military weapons from the u. S. To defend themselves against north korea, or commercial memorandums of understanding in terms of investment deals. Japan is likely to be the best results. E thereafter, we moved to other countries, china, vietnam, the field beans the philippines. Very little in terms of concrete deals is expected to come out of that. From a market perspective, most important is not what is said but what is not set. If trump continues to say nothing about the japanese yen or foreignexchange policy, the yen will continue to fall, the market will take the view that the u. S. And the trump want to give japan a free pass, because japan is the main ally of the United States, a center of the u. S. Asian strategy, if there is one. And that it gets a free pass in terms of foreignexchange, policy potential for an exchange david . David when he makes exchange. When he makes his way to china, will he be talking about their . There . Korea will be top of the agenda. Also u. S. China trade relations. Clearly xi and trump get on fairly well. Trump has said positive things after the party congress, trump will congratulate him on his second term. That should be a relatively cordial meeting. Whether anything concrete comes out of it seems unlikely. David you mentioned north korea. Generally speaking, when you look at markets, they learn to Political Risk as a whole. Im not sure we are looking in the right places. Equity benchmarks remain resilient. The benchmark yesterday, bouncing back from most. You look at yen, you look at gold, nothing seems to be bothering these markets. Is there something deeper i should be watching out for . Callum i think the role with korea this year is the korean asset markets have generally ignored Political Risk, and ignored the escalation in rhetoric from north korea and theu. S. Up until the moment chinese data started to slow down. When that happened, suddenly the correlation, the sensitivity of korean assets to Political Risks spiked. Its not just Political Risks in the absence of anything else, its Political Risks plus the culmination of some moderation in the economic cycle. When that happens, suddenly asset markets are more sensitive to what is happening in the political space. David let me bring up a chart right now, one of the bigger debates taking place across global bond markets is the flattening yield curve and what it actually means. You look at the five and 30, the two and 10, a further depth of about 2030, neither one of these take you back to 50 basis points. Its not a sign of good things to come. What do you think this means . In the open normal, if you will, as opposed to the new normal, the markets learned that flattening yield kurds or eventually flattening yield curves, or eventually inverted signal recession. It remains to be seen whether we can take the same issues this time same message this time, because the flattening is happening in the wake of unprecedented easing from the federal reserve, and other central banks, but certainly the potential message down the road is some degree of moderation from the relatively fastpaced growth we have seen so far this year. David so we should not worry about it . Well, it depends on what asset class one owns at the moment. Longly, the market is very higher sensitive assets like credit, they should Pay Attention to the message from the yield curve, which is moderation and growth further down the road. David one thing that could actually boost risk assets ahead , our deeper tax cuts in the u. S. The Eurasia Group only offense one third chance that the u. S. Congress is able to pass this this year. Why such a low figure . Callum obviously, this is a very complex tax bill. It was just a simplistic tax cut, it would be easier, but the window for this tax reform bill being passed in both houses and endorsed by the president is narrowing by the day. We attribute a 75 chance it will be done by the end of the first half. Much stronger chance it will be done in the first half of next year. If it is indeed done. Two things will happen, first of all the markets will look for repatriation of u. S. Corporate profits, who also look for a significant increase in u. S. Treasury supply. Both of those should be positive for the dollar and higher u. S. Yields, but it has negative spillover in terms of emerging thists, from which some of profit will be repatriated, and some spillover from u. S. Yields. David in case we do get something on the repatriation tax, help us understand which currencies might get hit the most. Callum you look for lower tax rates around the world. We are looking at countries such , and youd, singapore look for currencies such as the euro, perhaps the end, perhaps the Singapore Dollar to get hit to some extent. We compare what might happen of thear with 2005, with homeland investment act, and certainly european currencies got hit quite hard. The homeland investment act and partly because the fed was hiking at 25 basis point or meeting. David absolutely. Thank you for coming on the program. We appreciate you and your solid info. Just in case you missed the interview, you can catch up with everything with our interactive tv folks in, tv. Watch us live, watch previous interviews, any of the charts for bloomberg functions we talk about on the show. You can become part of the conversation, send us instant messages during the shows. A lot is coming up in the next two hours, become part of the conversation. It is for bloomberg subscribers. Check it out, tv. This is bloomberg. Is Bloomberg Markets asia. But have a look at shares of Cathay Pacific. Not as bad as about 90 minutes back. We were down as much as 5 at one point. A lot of this comes down to this deal with qatar air, acquiring 9. 6 . The price tag come 662 million. Lets bring in our aerospace reporter, she joins us out of singapore. Tell us more about the deal, and why now. I mean, this deal comes at a time when Cathay Pacific has been getting into a reform plan. As you remember, they embarked on their reform plan to sort of up from so much competition facing from the chinese and middle eastern carriers, where they have reported very bad losses in the first half of this year. We will see what qatar butbrings to the table, there are more questions than answers of the moment. David i know it is very early days, what have we heard from Cathay Pacific . A merit, theye is agreed for this to happen. Doess absolutely this actually helps their Competitive Position . We dont know quite sure whether Cathay Pacific was told about the investment, that people were selling their stake to qatar. Were trying to find that out right now. It comes at an interesting point, if you look at qatar and cathay, they are part of the same oneworld alliance. It does sort of bring the argument of probably this will help ring more synergy between the islands the airlines. We saw this with british error, which qatar has bought a stake in the parent company. That has generated a lot of synergy between rich air br itish air and qatar. We will have to see what more we can find out about the acquisition itself, but if the airlines work together, they could bring more synergy. David and hopefully benefits a lot of their passengers. Thank you for joining us out of singapore. Lets get you a quick check of the latest business flash headlines. Softbank in the mix, news out on the weekend, the company is preparing to boost its stake in sprint after the collapse of its mercantile merger talks with tmobile. They could not agree on who would retain control of the operation. Investors welcomed the prospect of merging the third and fourth largest wireless carriers in america to challenge at t and verizon. Japanese regulators have begun an inspection of missiles at the kyoto plant this morning. Amid a quality complaints scandal. More than one million vehicles need to be rechecked. Production will slow at japanese plants that rely on uncertified inspectors. We will be watching a lot of the shares when tokyo reopens later on in just over three minutes from now. Softbank among the list of corporate reporting earnings. That is next. This is bloomberg. 11 29 in hong kong. The latest first word news. The yen tumbles after governor kuroda says it is crucial for inflation to beat the 2 target. He said there is still a long way to go before the cold will be achieved. A weak yen has been a boon for exporters. Since primen 26 minister Shinzo Abe Shinzo abe came to power five years ago. The documents reportedly show wilbur ross received a stake in a shipping company with ties to a russian businessman under u. S. Sanctions and connected to president putin soninlaw. Congress Commerce Department says wilbur ross did not know the relationship with the kremlin. Bill dudley is close to announcing his retirement. Several sources say the announcement could come in the next few days. To be ready to step down well before the end of his term in january 2019. Such a move would raise questions about fed policy under jerome powell. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Sophie a check on the markets, shaping sentiment, trump kicking off his asia trip, talking tough on trade. The dollar has jumped and climbing against the korean currency. The yen reached that 114 level has governor corrode his comments added to pressure. The pboc governor may have spooked investors with new concern around Financial Risks on the mainland. Fiveyear chinese bonds are sliding along with stocks on the mainland. Oil prices extending gains amid the saudi crackdown. San miguel leading gains in plans. Under share swap Cathay Pacific sliding after qatar agreed to buy a near 10 stake. Joining that brought downturn over 1 . The epicenter of pain is the hang seng, tumbling the most in two weeks, volatility at a december hike. Home prices fall to a maker low. White or around deleveraging on the mainland affecting hong kong and china. A weekday for the hang seng as we head into midday in hong kong. David thank you. There is the yen, china. News, we get inundated by let me point out one thing. Is to 300 onhis the bloomberg. We did hear from the boj governor. They put out the text of his speech. This is a fiveyear look at dollaryen. Bottom panel is your net short positions close to a twoyear high, a triple top recently, and did rake below that. Im not sure how clearly you can see that. There we go. We have retraced lower in tokyo. Something to watch, as well as twoyear yields. Lets look at china. The pboc governor morning financialat the system is facing mounting risks due to high leverage. Threats to the economy and calling for deeper reform. Lets get more on this story in beijing. The way he described those risks, quite toxic. Detailot into a lot of and has been talkative on the subject. This is the third time in as many weeks that we have heard him talk on this issue. Projectit is a passion at the moment, talking about chinaebt situation in with levels almost three times gdp. He could be doing a number of things. Obviously this is a priority of the authorities. We have seen that rhetoric all year, but this does signal a ramping up to the markets that this is going to be a thing Going Forward. He could also be setting the priorities for his successor. He has been in the job for 15 official is over the retirement age, so maybe he is putting it all out there and giving his successor some tips for what they need to be focusing on. Are telling the situation like it is. That being said, could he defy speculation and just stick around . Anything is possible. In 2015 we expect that he might go out, but was reappointed. There is less of that speculation this time. There is the expectation that he will be replaced. We could get an idea of who will be nominated in december when the Standing Committee meets, but we will definitely know early on in 2018 when the National Peoples congress has its annual meeting when the formal nomination will take place. David do we have any names being floated around about who might be in line to replace him . Few possiblea contenders. One of his deputies at the pboc, a number of regulators, and the vocal head of the Securities Regulator has also been thrown in the mix. Chief of one provinces in their, so a few names out there. David thank you for wrapping everything for us. No latest warning shot coming out of the pboc governor. Atpite that, when you look Asset Backed Securities, they are making a comeback as Real Estate Developers are looking for a way to raise money. Bloomberg gadfly columnist has been looking at this for us. We just talked about despite not seem to be dampening the animal spirits. It is remarkable. About the same securities the cause the great financial crisis. It is quite remarkable. Chinas home prices have been rising too fast in the last six years. Up in the 30re largest cities. They have doubled. China has so many Migrant Workers and University Graduates that they cannot afford buying chinese apartments, so the government says we want to develop the rental market. The developers dont want to do it, so the government says will let you do Asset Backed Securities. That is the rationale. David generally speaking, what is wrong with rental Asset Backed Securities . Sure, china his just starting with this, but chinese Real Estate Developers are notorious for having so much defaulted, few have badhat if a package really rental assets and sell them . Hisas onshore bond market is not priced very well. Investors may not understand the risk involved in assetbacked securities. David why is the rental market so underdeveloped in china . I would imagine a Property Market manages to put together a relatively decent rental Property Market. Developers dont want to do it because the payback period is too long. Rental properties take 68 years , whereas if you sell apartments, the payback is immediate. There we go. Thank you so much. Up, billionaires and top officials arrested and saudi arabia. We go live to the kingdom for reaction next. This is bloomberg. I think we are entering an interesting era, a different phase of longstanding competition in the region, and i think Mohammed Bin Salman wants to put on a firm, strong face for the kingdom in the face of what iran is trying to do in the region. I think there is some added instability to come, especially in traditional battlegrounds where we see saudi arabia and iran challenge each other. The scope of the purges surprising, the number of princes, ministers implicated. Is thatthe message alwaleed bin talal or other private sector participants, Mohammed Bin Salman will require loyalty in terms of assets and the investments proper. Mostr investors the important thing is the oil price has been moving higher, so we did have a pop, but the oil price is a function of fairy strong economic demand around the world. Got another confirmation in the nonfarm payrolls friday and unemployment at a 40 year low. Demand a strong. Right, so big story we are following. We talked about the oil price at the top of the show. The most bullish signal, the spread the front end contract and the backend now at the whitest in years. Equity markets reacted in saudi arabia. This is a simple today look. 2 thatn initial dip of quickly reversed into the close, and then some. Out 22 points at the close. We will see how this market moves. Market at the highest level in two years has Prince Mohammed bin salman moves to consolidate power. Yousef gamal eldin is an riyadh. It was a massive weekend. What is happening now . Riyadh, this is a Country Holding its breath. Rush hour traffic lighter than usual. What is one of the most sweeping reforms and one of the most comprehensive political changes in the history of this country, it is incredible. This is the crown Prince Mohammed bin salman who keeps surprising a lot of people and skeptics out there. Princes andof officials is unprecedented in scale. These are some of the biggest names in saudi business arrested and Long Associated with getting in major deals domestically or different parts of the world. This does raise key questions for this country Going Forward because of the pace of change, we have heard everything from allowing women to drive, to ripping up the rulebook when it comes to Capital Markets and allowing Foreign Investors into that trade. The question is whether the kingdom is moving too fast with some of this stuff. So far investors do not feel that is the case. They think this consolidation speaks to and necessary centralization to do the kind of transformation that they are setting out to do. Absolutely. It reminds me of xi jinping and wind china embarked on its anticorruption crackdown. How is it being received so far . I know you were covering this on the show on sunday. How is it being received to mark received . Nothing short of shocking. These are some of the biggest businessman around world. Alwaleed bin talal was picked up at his farm and taken in. This is a man who is the 50th richest man in the world. The crown prince sending a clear signal to pretty much everybody that he means business. Specialointed to this pointed to this anticorruption committee. It will be interesting to see how we tread from here and terms of how they will survive or view reconciled Going Forward. They are very influential and he will be seeking their support, but this is a story about trying to rally as much force as you can around the flag so you can push forward with sensitive economic reforms. Then coming back and the nonoil economy has not been growing. , evenp has been lagging with some of the reform changes come up which will take some time, so there is a lot of pressure on the government, and the signal they are sending is one side of this. David do we think we will get more . Is this just the start . Everything is on the table. Think what happened over the summer. We had the big political surprise where the crown prince was put to the side and Mohammed Bin Salman is the crown prince. We have had surprise after surprise after surprise, so if you are asking me if we will get another surprise, you cannot rule that out. David thank you. You will be joining us at the top of the hour with Bloomberg Markets middle east in about 13 minutes. Stay tuned for that show. In the meantime, lets get caught up on business flash headlines. Trying to fend off the unsolicited approach from broadcom, saying the bid undervalues the company. Is seen as anfer opportunistic attempt to force the deal on the cheap. Give thet said it will offer consideration, but probably asked shareholders to reject it. Downhares doing this, 1. 1 after thirdquarter profit missed estimates. Higher provisions for credit overshadowing gains from interest and wealth. Net income through september million,to 602 compared with a mean forecast of 835 million. Dbs is the last of the countrys big banks to report earnings. Continuing growth in the Chinese Market has the mainland becomes the biggest market in 510 years, targeting 12 growth and transforming its product portfolio. The ceo has told bloomberg the popularity of gaming is another key driver of development. China is leading the way. We are starting to develop products in china for china. It is early days for us, but i believe those in china, for china products will end up moving around the world, the way that used to happen in the u. S. For the u. S. Or in europe for europe, now it is in china, for china. David u. S. President trump started his trip in asia with the warning against challengers to the United States, underlyi g underlining the nations military dominance. Has the bloomberg charts we need to know. Asia,ald trump is now in the longest trip of his presidency that takes him through these five countries. Over the weekend he landed in japan. Before formal talks that are expected to be heavy on north korean containment and u. S. Japan is free trade. After that, south korea, then china, vietnam, and possibly meet with president Vladimir Putin. Theill wrap up his trip in philippines with the oneonone with the philippine president. Trade will be a major point of discussion and friction. Four of the five countries are also on the top 10 list of countries with a trade deficit with the United States. This is the function for trade flows. This year is looking at deficits. Billion,tops with 327 then japan at number four, south korea and number nine. Lets look specifically at u. S. Japan trade. This is 7827. In blue are you as imports of japanese goods, but in white are japanese imports of u. S. Products. You can see the worth of u. S. Exports is double that of japan. In red, the u. S. Deficit stands 5 billion. The balance that out, the white house wants japan to agree to a bilateral trade deal to take place in part of the tpp. Trumpe friction on trade, did call japan a treasure partner and crucial ally. Those are your three bloomberg terminal charts to know. There is that, and also earnings. We are looking at merger talks between sprint and tmobile collapsing. What does it mean for softbank . Softbank earnings ahead as well. Stay with us. This is bloomberg. David this is Bloomberg Markets asia. Update. T an softbank shares down 2. 6 . Afterapse of shares collapse of merger talks between sprint and tmobile. On how toot agree share control of the combined entity. For more, lets bring in peter elstrom. What is next now . Thats right. They have been talking for years about this merger. Sprint,k lot control of and shortly after that began talking about combining with tmobile in the u. S. Sprint would have been the thicker company at that time and Masayoshi Son would have had control over the combined entities. They restarted talks as sprint fell below tmobile, the Smaller Player in that combination, and softbank would have had ended up with less than 50 and Deutsche Telekom the controlling stake. Sources as told by that there was a Board Meeting in tokyo where softbanks board asked Masayoshi Son whether he wanted to give up control over thent if he believes in vision of technology where we will have interconnected devices, cars, and human beings, and he began to have second thoughts. Deutsche telekom did come to tokyo and try to come up with a creative solution, but in the end they could not agree with any way to split that control. David we just have to all move on, dont we . We do get earnings out of softbank. Take us through what to expect, and the vision fund. Earnings will be the second priority. What people want to know most is what does this mean for sprint and what kind of Financial Investments will softbank make in sprint. Sprint has 20 billion in debt in the next four years, and it needs to invest another 20 30 billion into its network to be competitive with the big players. It needs to make some heavy investments. Its finances are not Strong Enough to do that on its own, so one thing investors will look for is whether Masayoshi Son will increase his financial commitments to sprint or there is some creative way to move forward with the company, so earnings will be second. The vision fund, it is pretty early days, but Masayoshi Son he is putting out the idea that will be a second vision fund. David thank you. Bloomberg markets middle east is coming up. A quick check on the oil metrics. Have a look at my bloomberg. A quick takeaway, the premium on ,he shorter end of contracts now wider premiums compared to those further down the curve. That me shift to this, there we go. Very clear bullish signal there coming out of the oil market. Bloomberg markets middle east is coming up next. This is bloomberg. Yousef saudi arabias night of long knives, the path to power. The worlds 50th richest man among those detained. We are live in react. David President Trump slams the deficit with japan has unfair. We will be live in tokyo. Buys a 9. 6ar
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