Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20170525 :

BLOOMBERG Bloomberg Daybreak Asia May 25, 2017

Big automaker to be accused of cheating emissions. A soft launch in response. This is daybreak asia, live from bloombergs u. S. And asian headquarters. I am Ramy Inocencio in new york where it is just after 7 00 p. M. Lets go to the development in the nl. In vienna. G7. Ty to come on the look at what is happening with the u. S. Markets and how it could affect the asiapacific. Markets were up across the board. In the s p 500 and nasdaq hitting fresh records, in part of what happened in the retail sector. We will talk more about oil because that was on the downside and by far the biggest loser, down 5 . Our opechat is delivery, but not quite there. Crude struggling this morning. Even though we saw fresh records on wall street. Lets see how things play out in the asiapacific region could be seeing hesitation. Mobile equities on track for a sixth straight weekly gain. We might end the week on a cautious note. Seems the case for australia. 7019. Close to a 5 drop for the dollar. The 49 a barrel mark for nymex crude. 7453 for the aussie dollar. Japan at the bottom of the hour, looking for a pickup in core and headline cpi of the 0. 4 . We are inching closer to 112 territory for the dollaryen. Pretty soft when it comes to the futures on the nikkei. We did see a slight recovery yesterday. A bit mixed up right now. On wall street, seems like the long weekend came early. Ramy investors here are probably breathing a sigh of relief. Especially after the turmoil of the past few weeks. We are heading into the memorial day three day weekends. S p 500 closing at 2415. Consumer confidence is also at a 2001. The highest since lets go to su keenan to break down the markets. A strong friday, likely to see reduced volume. When you have the nasdaq 100 index that is tech heavy, close to a high lets go into those big movers. Ramy mentioned retail getting a good shot in the arm from test by it 21 gains. The stock is soaring, unexpected newnd, and nintendo consoles. They predicted a decline in same source samestore sales, that was up. Phillipsk about konica cophillips. They all raised fares. Lets jump into the bloomberg. Check out the big boost. Trumps political troubles should provide tailwinds. We are seeing open interest. Late april. Since that is after the budget pan by members of his party and fueling concerns of stability to push things through congress, maybe harder than originally thought. Any uncertainty, a positive. Yvonne retailers offsetting what we saw among the energy names. Energy oil still the big mover. Traders wanted more. Su the extension was expected. Check out the chart. What we saw was a better than 5 drop in traded oil futures. They had sunk from a fiveweek high. Oil plunging on the opec deal. Veteran traders on the street, expects the saudis to get more than they got, and it was a disappointment when they did not. We are also trying to catch up with the russian oil energy minister. Check out what he had to say. Disagreement, they have expanded mandates to read it takes a close look at the market. Expanded mandates. It takes a close look at the market. They will are needed, adjust behavior, actions. Su that is all well and good. Lets go into the bloomberg. One concerns new york traders have, the u. S. Oil output, the yellow line at the top, is mitigating against the opec cuts. U. S. Oil production is increasing, even as opec is trying to put a dent in the global glut. That is of concern, particularly Going Forward. Thank you so much, we will continue this conversation on opec. Lets get first word news with paul allen. Lecturedent trump has allies in public, saying they must pay more for security. He told fellow leaders that 23 of the 28 Alliance Members are not paying what they should and that is unfair to the u. S. The president s comments threaten to white indifference differences among members. A setback to his proposed travel ban is a federal court slammed the order. To lift the ban from seven mostly muslim countries. It is likely to run afoul of the constitutions ban on religious discrimination. Cheatsued for software to emissions testing in the same way volkswagen did. It claims gm install the devices in trucks from 2011 to 2016. They said the environmental damage could be worse than that caused by volkswagen cars. Owners of luxury homes in manhattan are beginning to accept reality. Contracts in excess of 4 million says the median price has been the lowest in at least five years. Top and market is overflowing with properties and sellers are founding the discounting is the only sure way to get a deal. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Paul, thank you. Oil traders were underwhelmed by decision to extend output curbs. It was partly unexpected. Wti fell below 49. It will raise pressures in the open later on. Lets get more with our editor, aaron clark. Fast. This rally fading at the market was looking for surprises and we did not quite get them. That is exactly what happened. Opec and its allies announced yesterday they would extend these historic production cuts another nine months. It will go from july through march of next year. It like you said, this is telegraphed, the expectation was built into the market they would make this decision. What people were hoping for, was longer or deeper cuts or both. They did not get that. That is why you saw oil fall almost 5 yesterday. Wti trading around 49 a barrel right now. Clearly there was disappointment. There is a lot of uncertainty. What is opec going to do after march . What is the endgame strategy . Aret of questions unanswered, which is why you sell the market reacted the way it did. Quite some time before the next meeting in november. Opec and its allies said they are aiming to reduce global inventories below that fiveyear average. How come it is taking longer than expected to do this . That was a strategy last november when they first announced the cuts that are underway right now the started in january and go through june. They want to reduce this global glut of oil and get inventories below or at the fiveyear average. It is taking longer than expected because of the u. S. Shale producers. They are not a part of the deal and they are price responsive. As prices rise when opec cuts production, u. S. Oil producers boost supply. In the u. S. You can look at inventories. They fall in the last seven weeks. You can say opec is making progress. They are still 100 barrels above the fiveyear average. There is still a long way to go. Ramy i want to show this bloomberg terminal chart really quickly. Hop into this. What you were talking about with the u. S. Shale is interesting. Ago where that red and blue line intersect, that was 12 of opecs production. Now we are at 30 . It is interesting to see as they take this opportunity to get more market share. What does this mean for the output cut extensions . Does it really matter when we head out to march 2018 . Aaron it raises a lot of questions about what happens after march next year. U. S. Shale reducers will continue ramping up production if prices stay around this high. There is a risk opec loses market share and we will have to see where we are in terms of supplydemand balance globally in march. There are a lot of questions about what the endgame is for opec and what will happen after the First Quarter next year. Ramy a lot of uncertainty despite what is happening today. Aaron clark in tokyo, thank you very much. We are counting down to the latest inflation figures out of japan. Is the economy better than we think . President trump shaming nato leaders as he supports g 7, what to expect. This is bloomberg. Yvonne you are watching daybreak asia, i am yvonne man in hong kong. Ramy i am Remy Inocencio in new york. President trump is headed to italy to meet with the group of seven nations. What is on the g7 agenda . And what is on President Trumps agenda of his own . Kathleen hays is here with the preview, so lets start with the g7 agenda. Kathleen people will be shaking meetings attending g7 for the first times as leaders of their country. You have President Trump, emmanuel macron, theresa may, her first global g7. Have the host. And all the things that happened at the last meeting, u. K. Leaving the european union, donald trump elected. Italy has put security of the top of the agenda. Pledged to get the strongest commitment on fighting terror that they can from this meeting. Donald has been talking about fighting tear since he was president. On this week long trip he has been emphasizing that. G7 onout of step with the climate. He has put the u. S. On review about Climate Policies and greenhouse gases. He may opt out of the paris agreement. And then of course, trade. Back. Trump has pushed he is not answering protectionism. He would not put it that way. He would say, i am for free and fair trade that benefits companies, another key area it has already stymied the finance ministers, the resistance to fighting protectionism. These are things that will be talking about. Given what happened in manchester just days ago, it is easy to see security is something where they can all come together. We will see if they make actual progress. Ramy that is the actual question. If it will go beyond words or if it is just talking and handshaking. Thank you. Lets get more on donald trump and the g7 with our emerging markets sovereign analyst, and former u. S. Department of treasury senior coordinator for china affairs. Good to have you, sir. I want to set the scene. The theme for the summit is, building the foundation of renewed trust. This is a very appropriate theme, especially with what is newening now, with four leaders taking the stage at g7. Lets start with the economic side of things. Anything to expect in terms of deals or pronouncements . First, thank you for having me, it is a pleasure being here. , have to say for investors expectations are low going into the g7 meeting. People will be looking at what theyre going to say on terrorism, given the tragic events in manchester. T will come out on climate the Biggest Issue for investors Going Forward is, who will provide a leadership to the Global Economy and Global Financial system . U. S. Leadership was indispensable in the Global Financial crisis during the Asian Financial crisis, and now where europeriod again is very inward looking on its own architecture. The u. S. Is coming to the g7, proposing to slash foreign aid, and threatening to pull out of more trade agreements. I tell you, you cannot help but compare all this to what happened in beijing a couple weeks ago, when president xi is hosting 28 leaders and talking about financing infrastructure across the globe. And free trade is lauded praised and celebrated at the g7. I have to say with the caveats, butitionally, anything tradition at this summit, especially with donald trump do you think there will be any movement in terms of free trade in that talk . Do you think President Trump , or willge the g6ers those six change donald trump . David you raise an interesting question. The problem is, we do not yet know what the u. S. Trade policy has been. There has been a lot of flipflops on chinese currency and other issues. One thing that is hampering the u. S. Is, it is hard to score goals when you are not fielding a full team. There are key players at the treasury department, at the state department, and other agencies, key undersecretaries that normally play a Critical Role in these it g7 discussions, they are just not there. Yvonne havent we come a long way when it comes to the white house, on this talk of currency manipulation and protectionism and trade tariffs . We see the trade deal with china as well as the u. S. , the first when it comes to restrictions. Absolutely. A lot of the fears that investors had earlier in the year about getting into trade wars, those fears have not been realized. When you take a look at the recent u. S. China trade deal, i know the administration said it ean effort, but when you look at the details, the nnly thing that was herculea was the hyperbole. But i would take that any day over a trade war. We heard china with eight 720 page report about the situation. They were willing to talk about how they were open to u. S. Infrastructure, aircraft, hollow hollywood movies, even. Is that enough to strengthen the deficit . Thinkwo i think two things. They cannot become too complacent on trade. We will reach a point where a lot of the trade agreements and in initiatives are disappointing. Administrations domestic agenda runs into trouble, they will need quick wins. The one thing you can get bipartisan support on in washington is to beat up foreigners on trade. Tcwne sovereign analyst at and quarter nader for china affairs. An interview with Tony Fernandes later in Bloomberg Markets asia at 9 40 a. M. Hong kong time, 11 40 out of sydney. This is bloomberg. Yvonne you are watching daybreak asia, i am yvonne man in hong kong. Ramy i am Remy Inocencio in new york. General motors slumped a most 2 after being sued for defeat devices to foil emissions tests. They have Second Company to be accused of this, since volkswagen. Lets bring in bloomberg legal reporter to get us up to trade up to speed. Is this a cookiecutter version of the volkswagen story . It is, it is funny you say that. It is the same attorney who filed the expedia suit if you remember, for five months ago. Of the committee that filed and litigated the volkswagen suit. These are the same attorneys who are looking for diesel manufacturers in the United States to pull them up, if there is any hand of wrongdoing. Indeed, they have found alleged to have found claims that gm has also crated these defeat devices, software that allows the car to detect when it is being tested for pollution standards. Apparently, while being tested, feigncars are able to certain emissions. When they get back to the road, they go back to polluting. The question is whether gm did the same thing volkswagen is copped to volkswagen back in 2015. Ramy it is interesting, it goes back to the company bosch. Can you explain the relationship . Sch great the platform for calibrating the engines and emissions software. What they were able to do, allegedly, is create a formula that would allow the cheating to a core to occur. Bosch provided the same technology to dime a and the daimleren and fiat and volkswagen and fiat. Whether gmstion is, did in fact do the same thing. Yvonne what does this mean for Diesel Technology . Questions about the credibility of the technology itself. Is there not enough regulatory scrutiny . Kartikay the regulations are there. Question is it is not even a question. This technology allowed carmakers, at least allegedly, testst the regulatorss and sell these cars. The question now is about consumer confidence. Do drivers care about the emissions standards . Or do they simply like the fuel efficiency . If they do, it is a problem for the diesel truck market. Even though vw seems to be bouncing back, maybe this hurts the entire industry broadly, we will have to see. R implications after five carmakers are part of this story. The latest inflation figures for japan are said to cross the bloomberg in minutes. This is bloomberg. Yvonne we are counting down to asias first major market open. Japan futures heading higher after the weakness we saw in the yen overnight after opec failed to meet expectations. We were hoping for deeper cuts. But we are looking at Inflation Numbers, just breaking the bloomberg right now. When it comes to the core cpi, a slight miss here. Rising 0. 3 . Still higher than we saw in march. The headlines, bang in line with estimates, up 0. 4 . We were expecting a pickup, but not as much as expected. The rise in oil prices a year raise thoseng to cpi figures. The big question is, how long can this momentum keep going, now that we see this favorable base from last year start to fade . Ramy especially over the last few months we have been seeing energy prop up these numbers here. Even right now, oil in u. S. Trading fall 5. 5 . The future of the oil price in doubt, we have to watch and see how this plays out over the next few months or so. Spot on for cpi, year over year. Excluding fresh food, it is a miss by 0. 1 . Asia get over to our editor, with a look behind these numbers. Chris, the data shows, yet 2 in, it is way off the target. The you are saying there is there are signs of an economic revival. Chris clearly, the inflation 0. 3 rs are not great at for the core measure. Are probably going to be significantly far from 2 for a long time to come. Most economists are saying inflation will pick up toward 1 by later this year. If you look underneath the headline numbers, one thing we have been looking at here in the tokyo bureau is, a number of underlying there are a number of underlying signs that japans economy has turned a corner. It is not the Inflation Numbers. If you look at a number of gauges, including nominal gdp, the job market, lending figures, it is clear that japan is at a different place than it was five years or so ago. Say we buy this idea that things are not as bad as they at least were. What has driven the change . A number of is things. First of all, keep in mind that while japan is certainly has had a lot of structural problems for the past couple of decades, it has also had a bunch of body blows to the economy. If you think that to the asset bubbles bursting in the 1990s, the Asian Financial crisis, banking crises in the early years, the past five japan has not had of those body blows. You look at how the bank of japan as fundamentally shifted from being a break on the economy before governor kuroda came in, to being a stimulus for the economy. Skeptic of a japan turnaround story for a long time, myself. We have heard japanese politicians say time and again at that japans economy is on the gradual path to recovery and we just never saw in the numbers. If you look at some of the numbers we have been highlighting in a piece we had out yesterday on the bloomberg, and you look at some of these tickers that you can look on the bloomberg back decades, it is quite clear there has been a significant and positive shift in japans trajectory. Yvonne wager labor market is climbing, wages are height climbing. What does it mean for investors . Label of aad the value trap. Could this be a surprise Growth Market

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