♪ rishaad: it is thursday the 30th of june. this is "trending business". i am rishaad salamat. ♪ rishaad: going to take you to tokyo, sydney, and beijing. blow to the revival, the yen heading for its best month since 1998. a tumultuous first half after a crazy january. we are back to where we started. brexit is threatening the city

of london status as a premier financial center. us know what you think of our top stories. follow me on twitter at @rishaadtv, include #trendingbusiness as well. and aboutg underway 30 minutes from now. markets coming online right now. david is having a look at what is going on. it is a relief rally that seems to have some legs. david: we are back to levels early in january. thursday is looking like this, are busy.ion, volumes looking at the knee-jerk reaction friday into monday,

tuesday, wednesday, valuation plays. you're seeing the tale wind from wall street. we are looking at australia, 1.5% there. you take the group of commodity producers there, one of the main drivers there. to 4%. i mentioned commodities. have a look at oil prices. a lot of this has to do with weak dollar dynamics. this was the best a in weeks for -- it hit 50.rely we are seeing a retracement right now.

we are trading at higher levels than yesterday. brent, very thin spread. broadly, the commodities space, we are up not quite recovered mistake,e-brexit -- my we have recovered levels pre--brexit vote. we are looking at a 3% pop. gold has been bid up quite a bit, plus the dollar on the back foot. copper above its 200 day moving average. all of that is fitting this up -- bidding this up. best day in eight years, a little bit more and it takes us back to the best day since 1998 on the japanese yen. .ishaad: thanks a lot

some evidence that the chinese economy has improved. property leading the gains in the second quarter. we are in beijing with more on that. how much weight can we put on what is essentially anecdotal evidence from cvb international? yes, it is a new york-based research group. they put out these quarterly china beige book reports. this one is showing signs of improvement. actually saying that services in particular returned with a boardnce, and across the we saw strength from the previous two quarters. speaking, the chinese economy has returned to the same speed we saw about a year ago. we have gone through that pain and stabilization, yes, it is anecdotal evidence, but

basically it is saying that we are seeing a pickup in growth. services in particular, revenue, hiring, capital expenditure, and profits all and profits all in proved on a poor first quarter. it is also seeing improvements in construction and property, with improvements seen and all the cities, in particular the largest cities, but also property gains, construction as sustainable longer-term than what they are seeing in services. services now making up more than half of the economy right now, so that is going gang busters. it is not out of the woods. we are seeing another number of risks, and particular older and steel,like coal which have severe overcapacity, and new orders and other key elements within the sectors are still weak. it also highlighted the risk to

brexit. i will read here, the continued risk has a potential serious downside risk to the chinese economy, talking about brexit. pressure on export sensitive sectors and financial decision-makers. that is the copy, but the overall theme of this china is the economy has returned to a pace of growth that we saw a year ago. i will call it stabilization plus. rishaad: thanks a lot for that. japan's industrial production declined in may far more than forecast. our economy editor joins us now from tokyo with a look at what is driving these declines. i think we have to put in a caveat here that this number can be pretty volatile. >> that's right. there is a lot of volatility there.

at the economy, exports week, domestic consumption week, so it is not surprising that industrial production is being pulled down. we had eight months of falling exports, including double-digit drops in april and may. in aprilles were flat and may, so it is not surprising that manufactures are cutting production. is we alsoe thing have the yen strengthening 8% against the dollar. that is likely to hit production in the future. a lot of these japanese companies do have foreign factories. right, domestic production is deftly going to be affected by what has happened with the yen since they brexit vote. at 106-110 trading and may, now at 102 after what happened in the u.k.

that will be of factor in production for june and for july. japanese companies do have overseas factories, but it is ironic that a lot of those factories and europe are situated in the u.k. there may be an effect on their production from the brexit vote as well. the stronger yen is not going to be good for japanese production and will probably have an effect on exports in the coming months as well. rishaad: what about korea? better, didn't they? why is that? output numbers were forecast to be a small contraction. be small forecast to growth. korean production fell in march and april, so this is a rebound

from those bad numbers. slackeninglso been a of the drop in next sports. korea has seen exports falling for more than a year. weekend inein has may, and that basically helped production to increase. the ministry is saying that they expect their reaction to today's good numbers next month, and expecting not a decline, but definitely a pullback from the good day today. rishaad: thanks a lot. let's have a look at some other stories we are watching for you today. also, well, we have the aftermath of that brexit vote in europe starting. juliette: france's president has taken aim at london saying it won't be able to run euro -denominated clearing. it is a direct threat as europe's leading financial

center. the governor of the bank of france said clearing could not be carried out in london under eu rules, despite a court ruling that it is legally possible. president said he would make a key part of the negotiation. forpean leaders have called an orderly withdrawal from the block. to minimizey want instability and uncertainty and have pledged to learn the lessons of the brexit decision. the german chancellor has also reiterated that talks won't begin and tell london gives official notification of departure. let me warn everyone, because this is a very serious issue and also a new one, not to neglect the necessary steps. i will not enter into a detailed discussion on anything. people meantly what when they speak of indirect negotiations.

juliette: morgan stanley has stumbled through the second part of the fed's annual stress test. it is the only major u.s. bank not to receive a full pass. the u.s. units of deutsche bank and santander failed. morgan stanley plans to repurchase 3.5 billion dollars in stock in the coming four quarters. ofia is giving millions government workers and pensioners a pay rise. it is expected to boost consumer demand. the finance minister admits it will be a mixed bag, risking higher inflation. 4.7pay rise will go to million workers and 5 million pensioners in the next year through to next march. the total cause could rise to $15 billion if other allowances are pass. a concern that this

will spur inflation, which economists say will rollout scope for further rate cuts. rishaad: we will be speaking to a danish pharmaceutical company. a diabetesing explosion. are we out of the woods when it comes to brexit? ask if it is only a corner. ♪

rishaad: you are back with "trending business". asia-pacific markets extending the global rally. visit mean that brexit turmoil has passed? does it mean that brexit turmoil has passed? we have seen the market so volatile, like the end of the world. is there a realization that it

ornot the end of the world it is essentially windowdressing as we into the first half. >> markets realize it is not the end of the world. it was obviously a surprise of the market, because before the referendum, the market was moving up, so everybody was thinking there was a remain, and so there was a surprise to the downside. there will be implications. rishaad: that anxiety match the complacency going into the vote, right? someybe there was positioning different from the outcome. if you look how we position the portfolios, there was a lot of downside risk, so we went underweight into that situation. we are glad that markets are recovering. rishaad: you must have to make judgments as well. with the pound where it is, that

must bring up some opportunities. are you surprised about how well the euro has held up. >> talking to people, they want to go to u.k. and do some shopping, right? is $200 a burberry coat cheaper than last friday in london. fed will start to hike later, and that is why the interest rate differential between dollar and euro is not that strong. rishaad: what happens to the euro? look at some companies, i think there is such a long time until they come to the final conclusion. they willell be that

invoke article 50 or wait forever, but that would be quite a disaster. they need to take a decision. , you would to invest rather wait, so there is some implication. ,ishaad: tell me something let's look at portfolio considerations. your all about minimizing risk really, isn't it? how you position into such a yes or no referendum? there are more downside than upside risk. there are sectors that profit. there are sectors that have an issue with that. that is how you need to reposition a portfolio. the currency impact is the most obvious. who is profiting from a weak pound and who is not? second, we see lower growth in the u.k. mainly in the next year

, not so much this year. you can't get much slower, can you? >> to give you some numbers, we have reduced growth to 1.3% for this year, and probably a little more next year. there is still some growth, which is good news. rishaad: let's take a look at the implications for this part of the world. would you seeing here? we are relatively immune here, aren't we? we see money flowing into asia because people don't want to be in europe at this time. i think that is wrong because there are some opportunities in europe. stimulus in of china, now some credit tightening, which is weighing on growth, so our forecast would be 6.3%-six .5% for this year. side, the currency

implications might be the most important one. as long as you don't see a super strong dollar, china might be ok. old warren is the buffett maxim, isn't it? is it time to the greedy? >> why not? this is not the end of the world. think that all this uncertainty will lead to a higher level of volatility. there is higher volatility, and you need to use that, but you cannot say that markets are going up forever from here. there is a brexit, and there are implications. rishaad: thank you very much. >> the latest first word headlines. the number of people known to have been killed in the istanbul airport bombing has risen to 41. turkey has deployed anti-terror forces as the government struggles to contain the spill

over the fight in syria. the premise to her blamed the so-called islamic state for the attack, which is a further blow to turkey struggling tourism industry. a ruling on china's claims to one of the world's busiest waterways is due next month. of permanent court arbitration in the hague will issue its decision on july 12 in the case brought by the philippines. the cell china sea hosts trillions of dollars in trade he year. the collapse of the mongolian economy has handed the opposition a landslide election victory. the mongolian people's party returns to power after four years. the election was seen as a referendum on the $12 billion economy, a dramatic slowdown, and the doubling of external debt. to just 2.3%mbled last year.

a day news 24 hours powered by more than 2600 journalists and analysts and more than 120 countries. this is bloomberg. chinad: coming up, leading diabetes cases. we will hear from one of the pharma companies at the forefront of the fight. ♪

rishaad: we are back. this is "trending business". scourge of china's rapid urban development has been an explosion in diabetes. we caught up with the china head of novo nordisk. the estimation at the moment is that we have 110 million deal -- people with diabetes in china. >> that is a third of the united

states population. , only 40unately million know they have diabetes, so there are a lot of people out there who have not been diagnosed yet. treatmente a new which is doing well abroad, but how about china? is it too expensive for china? >> in many other countries of the world, it is reimbursed. it is not yet reimbursed in china. reinvestment window and china has not been open for many years. privatew it is on a payment basis in china, therefore it has not been taking off to the same extent it has another countries. we do expect and hope that for to future we will be able get it in the reimbursement list. we have seen that it can make a

big difference to many patients, so we have a plan of bringing more new products to china in the long-term, but we also understand the government needs to control the cost of diabetes in china. we estimate that approximately 10% of the social costs comes the medication, whereas 90% of the cost a related to long-term complications. it is about trying to avoid that. >> what are the other challenges in this market? there is the issue of regulatory environment. pharmaceutical companies have come under increased scrutiny over price issues. what is your assessment of the regulatory environment? >> the government is very focused on improving the quality of drugs. we welcome that. the higher requirements are in place to get products improved. if the quality level can

increase, it is only a good thing, and we are ready to also make sure that we deliver on all of that. at the same time, we are also very eager to make sure the new product can be brought to the market, especially with the disease like diabetes. there is a strong need for that. new products come to china five years later than the eu and u.s. , so that actually could benefit chinese patients. diabetes in china. get more on that story and all the others at bloomberg.com/asia. we will be asking why there is such a big gap between forecasts and reality. premarket auction coming to an end for hong kong.

we are seeing the extension of this relief rally taking place. premarket up by 1.5%. the open proper is coming along and about three minutes. ♪ you guy's be good. i'll see you later

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x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. ♪ rishaad: a look at our top stories. asia-pacific stocks extending a global rebound as resident -- brexit anxiety diminishes. regaining momentum a week after that u.k. referendum shock. central banks around the world signaled their readiness to act. output dropping 2.3% may -- in may. it is a sign of sluggishness in

the world's third biggest economy. to concerns that japan's recovery is faltering after it did return to growth in the first quarter. -based book showing economic strength, a sharp reversal in the previous six months. foundivate survey services and construction helped to spur a return to moderate growth. services, revenue, hiring jumping on the quarter, and also on the year. we have the open in hong kong. shanghai coming on stream. the bulls are out. david: they have their hats on today. we are poised for a weekly gain. the hurdle was not very high. we went into monday at low levels. at a strong rally midmorning across the asia-pacific. hang seng up 1.2%.

we get the latest retail sales report this thursday. it is another bad number we are expecting, -8.8%. the number does include a holiday at the beginning of may. it doesn't exactly bode well. we are looking at 18 straight months where retail sales have fallen. it is pretty bleak. that number comes out when the markets close. overallooking at gains from the cross we hit on friday after the brexit vote. we are about 1.2% try of complete the racing those losses. -- completely erasing those losses. pound sterling flat after a two-day rally. the average i'm looking at is

1.20 by the end of this year, similar -- so more downside here. that is the forecast. , we had a fixing a few minutes back. let's look at offshore first. i was speaking with the head of rate strategy earlier, what is fair value at the moment? they are looking at seven. call it a range for the onshore spot market. valor-yen is where the action is, 102.75. we are at session lows. where theyen is action is, 102.75. we are at session lows. thanks a lot for that.

fedsecond part of the stress does not make it easy for morgan stanley, the only major u.s. bank to not receive a full pass. the u.s. division of deutsche bank and santander failed. we have more from new york. past phasel 33 banks one last week, that was not the case this week with phase two. 30 pass, to failed, and one has to resubmit its capital plan. togan stanley, the bank has resubmit plans for managing its capital. with the deadline six months from now. the good news is that a gothic and approval to make payouts to its shareholders. -- is that it got approval to make payouts to its shareholders. failed for a third

year in a row. deutsche bank also failed. santander failed to present an after-hours trade. several by beck plans have come in already. j.p. morgan announced a $10.6 billion buyback. point $6 eight billion. bank of america, $5 billion. morgan stanley and american express, $3.5 billion each. rishaad: right, when it comes to analysts havea's not been this wrong in some time. how have they been so out of step? it is wreaking havoc on projections when it comes to china equities. industrial companies undergoing this massive transition, dealing with excess capacity, debt, overall reintegration -- reorientation to services. take a look at this chart.

this is big gap we are looking at, a 33% gap between what was expected and what we got. we have not seen it looked as wide since 2009. often state owned companies dragged the benchmark down almost 20% year to date. it is a painful adjustment that takes place over a number of years. simply aren't capturing the changes in their analysis. out of the companies it reported q1 earnings, 68 to the downside. hosting its first ever loss. the biggest gold producer seeing income falling 85%. is other side of the story that they are more expensive than face value.

will be based on aggressive estimates and analysts need to be more conservative and discount everything. you can't blame the analysts entirely. even these companies themselves can't get their earnings right. , optimismnd yet remains, doesn't it? indeed. analysts seeing 28% growth over the next four months. again, saying it is unlikely we will see this target met. it is the nature of the market. of fivehe maximum points on a bloomberg scale, companies have an average rating of 4.4, representing almost unanimous by calls. hang seng at four. s&p at 3.9. you would rarely see local brokers in china put out a cell report. report.

the structural reforms taking place will threaten growth, and it is unlikely we will see these targets being met. rishaad: what about chinese equities? they have been enjoying haven status after that vote from the u.k.. haidi: it is interesting. it is one of the best protected markets because it is dominant nine did -- dominated by local traders. it is actually up 1.4% since friday. it has rebounded somewhat. having said that, a volatile shanghai,it comes to down 44% from last year's peak. market see here is a that is semi-close. d. semi-close

not so easy to get your money out when it comes to chinese a-share. the in in central bank government leaving his post in early september, and it could be a critical time. the latest financial stability report shows that india's bad loan file is rising sharply. how bad is this situation there? >> it is actually pretty horrible. when you look at the latest stress tests for the state-run banks, which dominate credit creation in the country, you ofe something like 40.5% their advances been classified means that, which either they have already turned into nonperforming assets or they have been restructured, which is in the indian context a way for them to be allowed to go bad in a more gentle manner.

14 .5% is actually quite a bad number. if you look at some of the subsectors to which these banks are exposed, then for metals, seconde a stressed asked -- asset exposure of 34% and construction. it is also bad for textiles. aboutwhat is remarkable is thatt report put out the problem r.b.i. has identified to be a problem of an unhealthy mutual dependence between some large corporate borrowers and the banking system as a whole. just to give you an illustration, if just three of the top bar ring groups at some of these banks -- top borrowing groups at some of these banks go

bust, you will have banks going below the minimum regulatory capital requirement of 90%, which means they would turn into zombie banks. that is a fairly alarming state of affairs indeed. rishaad: what are the concerns about -- is becoming a bit of a bad loan mess. how might it turn out? >> yes, it is indeed a mass. also, it is perhaps going to become messier still. is the banking regulator as well. changell see an abrupt of guard at a critical juncture. we don't know what exactly is going to be the strategy of the successor.

we don't know who his successor is going to be, but there is a , which is the rounds to use some of the excess fortal off the central bank the government to take that excess capital out of the rbi and in fuse it in some of the patron banks to solve the problem. quite agoing to be bizarre way of dealing with this problem. everybody understands that the indian government is strapped for cash. if it were to actually use public money in a transparent , then perhaps the bond market is not going to like it much. to do it in this roundabout manner, our investors going to be happy with that or will we see it as an abnegation of the central-bank authority?

that really is the big question for the markets and the investor community. rishaad: thank you. right, what was he thinking? our next guest says he was baffled by david cameron's decision to call a referendum in the first place, which led to his lyrical downfall here it -- his political downfall. that is next on bloomberg. ♪

>> while the circumstances of brexit might be unique to the united kingdom, the frustrations people felt are not. of brexitterm fallout can be sensibly managed, but the of dislocations and division, those can't be ignored. >> i actually believe that brexit will lead to more uncertainty. it will lead to modestly slower growth. that iter the opinion is highly probable that they will not do any more tightening this year. >> what we see over the next two years is we had growth rates of 2%. now we have less than 1% and are forecast. it is based on the uncertain outlook for the regulatory environment and the legal

environment to the trade relationship with europe going forward. take a severewill toll on domestic investment inside the u.k. let's get more on the political and economic crisis enveloping europe. thank you for joining us. did you pick yourself up on friday scratching your head? >> not really. i stayed out of it because everybody had an opinion. i had no idea how this was going to go. this going on all is a little premature. the whole process will take an awfully long time. i don'treally know, and think anybody knows, what is going to happen. the most amusing thing about this is that financial markets and masters of the universe who pride themselves on being able to deal with anything basically want to hide behind mother's

apron. it is quite an interesting situation, don't you think? rishaad: before we look at, how is this in your view likely to play out? think it is not an economic matter. it is a political crisis. it is both the mystic in the u.k., but as we have seen in recent days, it will affect countries like italy, who are trying to use this as an excuse to recapitalize banks. spain still does not have a government. we have elections in france, and i don't think the position of many leaders in the european union are actually guaranteed. and there is lots of division, so there will basically a political situation that has to be dealt with. the economics are irrelevant. the vote was not based on economics. it's a great win you have people googling to try to understand

what it was in the first place. rishaad: let's look back and look at the six things you pinpointed, but just very briefly. six things that historians will be pondering. hell didthing, why the they call this referendum? never ask a question to which you don't already know the answer. basically tarnished his own legacy. the whole debate was farcical. you had everybody from the pope to give opinions on how the vote should go. i find that this belief among the british people and comprehensible. the divide in british society is palpable, so i don't understand any of those. i don'tr thing is that

know whether this is a knee-jerk protest or a fundamental shift against things which are economically rational like globalization, but don't benefit the bulk of people. whether thisng is is just a one-off or basically part of a longer term trend. my feeling is that it is part of a longer term trend of the barbarians or the populace, the intelligentsia, saying we don't like this anymore, and the only , so ite have is to vote could be any one of those things that play out over the next probably year to three years. rishaad: absolutely, one thing that seems to be a parent i its absence are the predictions that if we had a leave vote, they would be lining up in europe with their own ideas of having a similar referendum. suggested a few

of these as well. we are not seeing any of this, are we? >> i don't think you will see that i immediately. moment, europe is circling the wagons and trying to keep everything together, but the basic issue, the issues of the finances, the debt, the fiscal transfers, immigration, the banking unit, none of these are solved. willything, the pressures now bubble along, and whether they leave, i absolutely have no idea, but it will come back in some shape or form. the best way to think about it is that there is a lot of tender lying around. whether it will take off or not, i don't know. rishaad: stick around with us. we will have more from him. this is "trending business".

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on that we have more political and economic crisis in europe. thank you for sticking around with us. about, you mentioned the schism in british society. what about europe generally? thet there a feeling that yo eu itself is not part of their lives, and that allows them to push this what is for them and ephemeral concept away? >> i think you are right. they think of themselves as french, english, spanish, portuguese, or whatever. the european union overreached. it got to its feet in the middle 1990's when there was free trading, then they mistook the success of that for something

more, which is a social, political integration, and we have people with disparate backgrounds. you can see that in every decision. i think that is at the heart of this. unless the european can retool itself to adjust to the gap in expectations, i don't think they can actually continue on this path. rishaad: right, what about britain? i will through this very important caveat in. it is probably quite difficult given the leadership the countries have had. this could actually be good for britain. thatthink ultimately britain has survived several wars, the end of empire, several terrible leaders. they will survive. i will give you a good example of that. anybody who thinks the financial services industry is.

dependent on britain being part of the european union is insane. people are saying we will move to paris and frankfurt, and these are people who have never run a financial services business, and it is very difficult. they are very different cultures. meave someone who worked for who invoke a human rights treaty when i wanted them to work over lunch. so i think britain will come out of it well. won't hurttion britain, and time will tell whether or not the retooling a very successful, it is emotional-political decision. on how it would depend the british political establishment take this and how they try to reengineer the country. rishaad: well, absolutely, but the caveat is providing they have decent leadership. you have alluded that it has been lacking -- has been lacking sometimes.

i think one of the theamental things is that currency wars, which central banks say is not happening, has happened. the interesting things here is the strengthen the dollar and yen. underminingletely the actual strategies of both the united states and japan in terms of trying to resuscitate their economies. i think we are going to see competitive interest rate cuts and the currency wars back, which will be terribly destabilizing. the second thing is the interest rate market. i'm not sure whether we have seen a short-term flight to bond marketsat the are saying, and i suspect it is what the bond markets are saying, is that global growth will be low, inflation low, and then we will get grinding debt deflation concerns come back.

rishaad: thank you so much for joining us. , what up, slow down slowdown? a rebound in china's economic growth, details behind that, next. ♪

♪ announcer: from our studios in new york city, this is "charlie rose." tonight, we begin with the continuation of the coverage from britain's exit from the european union. eu leaders converged in brussels today to respond to the referendum decision. prime minister david cameron told the press that britain would not be turning its back on europe. prime minister cameron: i want to process to be as constructive as possible. i hope the outcome can be as constructive as possible, because while we are leaving the european union, we mustn't be turning our backs on europe. these countries are our