♪ it's 9:00 a.m. in sydni, still awaiting results from elections in australia. this is "daybreak asia". ♪ >> an election too close to call, malcolm turnbull remains confident, but business leaders say uncertainty is the worst possible result. uncertainty in the u.k., top rm says brexit cannot happen without a vote in parliament. china will be forced to bail out

banks if bad loans continue to grow. coming to you live from bloomberg's asian headquarters. happy monday to you. let's go straight to new zealand. we are seeing slight gains. the s&p captain's best four-day rally on friday. kiwi dollar gaining, but flat right now as the brexit fallout fades. we are seeing political limbo, malcolm turnbull falling short of a majority. stocks expected to take a dip. we are seeing japan futures shadowing a pullback. , some-yen weakening stabilization in the yen. 102.61. indonesia and the u.s. markets close today. home, the election has

delivered no clear winner. prime minister malcolm turnbull remains optimistic, but a hu gg parliament is looking ligh likely. when might we have a result? who knows. it could be days or weeks. you mentioned that the prime minister is confident he can form a majority government. he feels that way because pre-polling and postal voting does favor the ruling coalition government. parliament is looking likely as well. the prime minister has been speaking to some of those micro parties. they neither vote in a minority government situation. yvonne: the currencies slipping

on the result. questions about whether fiscal policy and the government will be paralyzed now. what other economic impact might there be? already we do have analysts warning that australia's aaa credit rating may be at r isk. it is incredibly difficult. a moreention was to get compliant senate. indications are that it is even worse this time. a couple of senators from the altar right one nation party, looks like a comeback. personalityer media . life will not be easy for malcolm turnbull, even if he

does form a government. yvonne: the polls were split ahead of election day, but bookies were confident the government would be returned, so what went wrong for malcolm turnbull? there has been a lot of criticism of malcolm turnbull that he was not campaigning hard enough. some of those on the campaign with him were pointing out one or two events a day. in the last three days, he did seat.sit a critical at the end of the day, the ruling coalition narrowly lost that, so there are questions why malcolm turnbull did not go down there. he took this job by promising a poll bounce back in september. he has failed to deliver that. this is handing a lot of ammunition to his enemies in the

liberal party. even if he does form the sixthment, we may see our prime minister in six years. yvonne: quite the revolving door there. top stories on the bloomberg, one of the biggest law firms in london says the uk's retreat from the eu cannot legally happen without a vote in parliament. a group is threatening action against the government if it invokes article 50 of the lisbon treaty without consulting mps. the uk's position is that it is a decision for whoever succeeds prime minister david cameron. france and germany jostling for position, each aiming to steal london's crown as the financial center. years, but will take parents are drawing up plans to challenge -- paris is drawing up

plans to challenge frankfurt for the role. frankfurt would be a big question in terms of organization, but i think we have much more players now in paris that in frankfurt. we have much more deep marketplace in paris. that is something to be negotiated definitely. i think it does make sense. baghdad's worst attack in a year has killed 115 people. a truck exploded in a mostly shia neighborhood, underscoring the ability of extremist to strike despite heavy security and multiple checkpoints. the area has many stores, restaurants, and cafés. streetst came when the were filled with people after they had broken their ramadan daily fast you can get more on this story and daily headlines

on a website 24/7. a survey says china will have to bailout out its banks within two years. to our china correspondent tom mackenzie looking at the story for us. this prediction now, and how big would such a bailout be? banks likeg spoke to standard charter and the conwell bank of australia, nine out of 15 respondents expect china to initiate a bailout of its banks within two years. the number most of them are pointing to, $500 billion, the average at the top of the range, some are predicting $3 trillion. it is still way below what they fund manager carl bass critic at the beginning of this year,

which was a $10 trillion bailout , but it does point to the concern of the rising level of debt. nonperforming loans in default as well. what is the extent of the bad debt, and has the pboc said anything? >> so we know that the number of number of nonperforming loans is at a record high. for the number of loans nonperforming, 1.75 percent of the total. many analysts say you can't trust that data 100%, some economists saying that the number of nonperforming loans could be 10 times that level. the pboc did not respond directly to our questions about this. they have set the banks here are well capitalized and can withstand shocks. they had a report that came out last month showing that the

capital ratios of the banks would dip below certain levels, around 10%, if there was a severe shock, but would still be in good standing. china wants its big four major banks to have capital reserve ratios of 11.5% by 2018. this potentially could weigh on markets, but could a bailout be good news for the economy longer-term? right, we have a president china stepped's into bailout its banks when nonperforming loans hit 40%, and they use things like bonds to do that. they set up a bank that took on some of those loans, so some economists are saying that the sooner this is done, the better. the they expect is that system here and policymakers will print money or issue bonds as well to clear out some of that bad debt.

they said that will create an initial market shock, looking at a selloff, particularly banking stocks and the renminbi, so that would face more pressure. china's credit would face agrees , borrowing costs would go up, but would prove positive in the long-term. what china has to do is clear out a lot of their debt. : the latest u.s. carg with show concern deliveries trailing estimates in june. we have been going through the numbers. a bit of a mixed bag, really. >> let's look at how many vehicles were sold in june, 1.5 one million, 2.5% year on year rise. if you look at the annual sales pays growth, which is what the

indus he looks at, that came in at 16.7 million vehicles versus estimates of 17.2 million, slower than made and also than may last year -- may and also may last year. 2015, they are asking if the auto industry has peaked. fueling that concern is jobs growth. in may, companies added fewer jobs in the last six years for the month of may, and also concerns about brexit and the uncertainty caused by that. willsts are now thinking the pace of growth and sales in the u.s. slowdown in the future. if we don't see a bump up in july, it could indicate that there will be more falls and possibly declining u.s. auto sales in the future. will watch how the

japanese automakers react to this. how did the asian carmakers do? >> it is a mixed bag. nissan sales rose by 13% in june, but honda, toyota, hyundai, kia, they missed estimates. sold 255,000s vehicles, a fall year on year, 6.4%or did very well, si rise on the back of light truck sales. some u.s. automakers doing --ter, and this slightly slightly clouds the outlook for the coming months. they are unsure about how the rest of you will pan out. yvonne: the uk's decision to sean the eu has made aussi

set up and take notice. one business group calls it the worst income, austria's deadlocked election. this is bloomberg. ♪

yvonne: it is 7:15 a.m. in singapore. tesla missed delivery targets for the second straight quarter. it was 15% below its goal. tesla says that was due to ramped up production in the final weeks of the quarter. tesla has had trouble getting vehicles to customers, expected to live 50,000 cars and the second half, meaning it made fall short of its annual target. the diplomatic rapprochement between israel and turkey has

allow the passage of aid for people in gaza. to deliver food, aid, and toys. has announced the six days of naval exercises in waters disputed with its neighbors. wargames start on tuesday and run through july 11 in the south china sea. beijing said ships from the other countries will be banned in the area. this comes ahead of arbitration on the disputed waters from the hague. china has said it will ignore the outcome. dayal news 24 hours a powered by over 2600 journalists and analysts in 120 countries around the world. this is bloomberg news. yvonne: thank you. with no clear winner in the us train election, malcolm turnbull might need to work with independent lawmakers now to stay in power.

what is at stake for him and his party? great to have you. is brexit allit over again. do you think this is a fundamental shift in australian politics, similar to the u.s. and u.k.? look, you have a comparable populace amongst part of the population. you don't have a general rejection of the major parties. we have 70% of major voters aiming for the major parties, but a major portion have shown their distaste and dissatisfaction. the two major leaguers are not that popular, but still it is

not on the magnitude of brexit. let's put it that way. even if malcolm turnbull wins, you will have to rely on independent lawmakers to form a government now. what does this mean in terms of the friction we have already seen in the conservative party? is it only going to get worse? >> yes, yes. for the media and academics like myself, it will be more fun and games over the next three years malcolmving how markha turnbull will negotiate the lower house, where it looks like he will have a minority government, and with the upper house, the senate, so he has to do a lot in negotiation across a number of independence and small parties in order to get policies through. that means he is not gog to be able to get through radical policies. it means he will not be up to get through let's say dogmatic

free market policies. and not respect, you have something similar to brexit in as much as a rejection of really right wing free market policies. it's going to have to be much more centrist and more government involvement, so that's going to be a difficulty, especially with the right wing of his party over economic policies and with social policies like the same-sex marriage issue, which is an ongoing sore in austrian politics. yvonne: you mentioned fiscally that he will be paralyzed for three years or so. what do you mean by radical policies that could be under threat? budget passed, proposing the tax-cut he had planned, will all this pressure be shifted away from the government and basically to the central bank now? not so much that way.

fore is limited room maneuver for the australian bank as for central banks around the world. what you will have difficulty getting through is let's say very strong cuts to government and increases in taxes for the middle and lower classes. those things are going to be hard to get through, so it will be hard to cut things like health spending, what we call here the medicare system. it will be hard to cut education spending. the policies that really affect ordinary day to day living for people. we have had sections of business who have been saying that we need to cut back on the sorts of things. that will be very hard in this new political environment for the markham turnbull government, so that's what were going to see

over the next three years, continual turmoil over the issue of government spending, what to cut, what taxes to increase, what tax concessions to get rid of, things like certain concessions regarding our pension funds, certain things , so you have got those sorts of issues that are going to continue to fester both before the election and after this election yvonne: for the next couple of years. -- election for the next couple of years. yvonne: when it comes to malcolm turnbull's credibility, where are we now? could we see a return of tony abbott? never say never in austrian politics. we have seen prime minister's before down and out for the

count. never wither say ambitious politicians, and tony abbott has always been an ambitious politician. he does not need to excite things at the moment. he can play his time, sit in the background and wait, and maybe with the back agitation on the right wing of the liberal party, so we are seeing some of the dissatisfaction arising in the wake of the election results, and this will be a problem, because as you said, malcolm turnbull has a credibility problem. he came in in september as a man to deliver victory for the liberal party, and the one thing you have to be in the liberal party as a leader is a winner. all will be forgiven if you are a winner, and he is not seen as a winner, so this will be a real problem in the coming months. yvonne: thank you so much.

appreciate your insight. up, are we in for a bond bubble? we will hear from the fed next. this is bloomberg. ♪

yvonne: welcome back. you are watching "daybreak asia" . brexit has pushed back expectations of a rate hike for the fed. the president of the st. louis fed has said expectation has "gotten old." he spoke about bonds, the economy, and brexit. >> i certainly see low bond i see an environment where that is likely to continue into the future, but there will come a day when productivity in the u.s. will pick up, growth in the u.s. will pick up, and

interest rates will go up and when that day comes, investors have to be prepared. this is what they get paid to do. things thatof the has happened over the last 5-6 years is the continual prediction that rates will go up -- the story has gotten old, let's put it that way. they have always been trading as if rates were about to go up. it just hasn't happened. these regime ideas will give you a better sense of how to think about this. >> when you look at what is happening on the political scene in the u.k., it is clearly goes back to the heart of globalization. trade, immigration, that's probably what kicked off this brexit vote.

our countries wanting to become less globalize? >> i don't think so over the long run. a trade has relationship with the eu, and now they're saying they want other trade relationships. what would they be? beould like a focal point to named here, one of them would be canada. canada just negotiated an agreement with the eu. it took seven years, but if you have that focal point you could say we are on a glide path and that is what we are working towards and we know it will take a long time, that would reduce a lot of uncertainty about where the u.k. and globalization is going. yes, at the end of the day, you would not be a member of the eu, but you would have some relationship and know what the tariff arrangements are going to be and what the migration is going to be and you would know how that is going to work. bullardthat was james

speaking to francine lacqua. mitsubishi workers and suppliers are bracing for layoffs

shery: it is 7:30 a.m. monday in hong kong, and we are happen open -- have an hour away from the open of treating in japan. a little bit of the blues as a begin trading in hong kong. australia will have to wait and see until tuday who won the election. galloping has been caused and mainstream parties are recording the lowest since 1943. the labor position is leading. they will hinge on six undecided electorates and deal with independence. michael turnbull is still confident of victory. chinese banks will receive a

government bailout within two years. stance are at commonwealth bank of australia are among nine of 15 respondents in the bloomberg survey who say they expect to move. the cost of recapitalization will be half $1 billion. chinese art grappling with a growing mountain of debt. latest u.s. car sales, a mixed bag. market concerns that the is slowing and putting purchases on hold. nissan and ford, big productions. toyota, fiat chrysler, in the below estimates. one reason for the sales slowdown is that, based on the few which jobs created in almost six years. back to the markets, trading week is ahead. let's look at how the asian markets are shaping up. here is david. david: it looks a little open.

the handle coming from the u.s. and europe, slightly positive. we had some growth in the weekend, a little slower to the futures. i will get to those nikkei futures in just a moment. look at europe. it is all good. as of the markets have no -- actually all of them have not retraced markets. this is how friday close in the u.s. mildly positive, volumes are quite low. that is something to mention. keep that in mind as we go into the first trading week in asia. new zealand, a touch higher. australia will be very much in swing, but you see weakness with the aussie dollar. if we trade upward, we are just about at the midpoint of the trading range when you look at the aussie. that being said, it is mostly a week dollar story against the yen and pound sterling. have a look at futures from the

chicago and nikkei futures. flat, looking at slimming negative open, maybe one third of 1%. if i am being honest, 0.5% lower if things not change. one other thing i want to mention, you look at the bond market over the weekend, it seems far away from what happens, but the 10 year touched the lowest level -- level on record. you see 138.137. we are back at 144 on the 10 year treasury. one last thing, before we go, we into the second half. this is reading the story. who are the best-performing commodities, best rates? have a look at oil, $49, gold, second-best, as far as precious metals, $14.43. but this is opening the bottom of bullinger -- bottle of

bollinger. look at the year to date chart. thank you very much, 1996 right now. yvonne. yvonne: thank you. the historic brexit vote in the u.k. may be a wake-up call for aussie on to work with ordinary people. -- asean for ordinary people. that may now change. let's go to the southeast correspondent haslinda amin. is brexit dean seen as a warning? -- being seen as a warning? haslinda: the worry is that asean faces the danger of being a product of the elite. the egypt trade minister said exactly that, and he said, not enough time, money, and assets spent on socializing it to the people. the people they are supposed to is 10ing, asean

countries, 600 million people. trillion.dp of $2.5 you can appreciate these are a different state than development. but the recent bonds, asean removed terra founders -- barriers -- tarriff barriers. the goal is to remove more by 2025. the integration process has not been without its challenges. it has been difficult. yvonne: that is true. there are constructional changes you can compare with asean. they have separate central banks. how closely has aussie on tailored itself to the eu? haslinda: we cannot say the eu has been a source of inspiration, but it is made clear on several occasions, the eu is not the model asean has taken.

the model is unrealistic, even utopian. brexit is a warning that aussie on should be careful. -- asean should be careful. yvonne: you talked about some hurdles as well this integration has. aussie on itself has faced internal dissent. haslinda: that is true. more recently in china and the south china sea. if failed to come together to stop china's expansion there. beijing pitted this against asean members. it has to withdraw a start statement on writing tensions in the south china sea and the need to respect international volume. you have got to remember, asean based on consensus, a members have to agree. no matter how you look at it, a blessing also a setback. yvonne: an brexit could be a reality check as well.

thank you so much. let's take a look at what we are following on bloomberg this morning. reporter: one of china's largest property developers is trading later for the first time this year. this was halted in december as the two biggest channels in sports control. anday, the bank rejected request from the largest founding group for this meeting. the new ceo of rio tinto will focus on steering the company through the main -- mining industry downturn. new fields are not part of the agenda, and he will develop existing projects. rio is battling the slowdown in china, which is trying to set prices and create supply stock. tried is up -- trade is up for china. they hit a record last week at the slowdown has failed. they were searching back to

jd.com, they lost about 50% in the last 12 months. they are burning through cash and revenues growth, falling from 63% last year to 40%. and korea wants to build a shipyard and marine place in saudi arabia. they have discussed this with the oil minister. the company has been hit by mounting losses and falling demand and has a $3 billion plan to sell and cut jobs to stay afloat. that is a look at the stories making headlines. yvonne: thank you. mitsubishi motors has been allowed to resume making many cars at its main plan. production was halted in april after the company admitted manipulative fuel economy tests. but good to the asia correspondent editor live in tokyo. i remember when investors were

so jim related the thought of nissan -- jim related the thought of nissan taking on mitsubishi. what is the thought of this factory? for nissan.mportant it is really get many new car models. nissan and mitsubishi have not been able to make cars, new car models from this plant since april when mitsubishi motors made public they were really committing fraud related to their fuel economy the way they test and reported their figures to the administer here in japan. it were manipulating figures, not using the proper test procedures. , these many really car models were the first indication of wrongdoing. it was not because mitsubishi motors down problems itself, nissan was taking over the next generation of those mini car

models development, and found the fuel economy was amiss. what you have is a plant that even before that scandal was already in trouble. ofpeaks in 1993 in terms production with about 725,000 units, and last year you saw the factory make sort of 310,000 cars. it is really a situation we have where a townown, in a prefecture is highly dependent on the plant, and is troubles him this is a company and a factory that has been going through real challenges, and away. yvonne: craig, how has nissans received?on -- been craig: there was a feeling of relief or you had mitsubishi motors president saying this was wastive essential -- this

an existential crisis, a fear and a valid one that mitsubishi motors a go out of business as a result of this. nissan came in and is investing or plans to invest more than $2 billion to buy 34% stake in mitsubishi motors. this is so going to the diligence ross s. -- process. you have a situation where the workers, the suppliers in this town and factory, are aware of the fact nissan was able to turn itself around as a result of painful restructuring here in japan. they closed several factories, cut a lot of workers, and they regret breaking up the supplier network here in japan. earning hisos nickname the cost killer from his time at renault before nissan. they are happy to be rescued, but they are fearing what is next for us. yvonne: joining us live from

tokyo, craig, thank you. up next, australia must wait for result, and business uncertainty is the worst possible outcome. ♪

♪ is 7:44 a.m. in singapore, the stories making headlines around the world. china's media has completed 25% stake in a german carmaker or more than $1.3 billion. this went through after assets to get it european suitor failed. they back to the view on the media, they will be saved until the end of 2023. and they pledged expansion for household robots. the gulf has confirms bank, creating a powerhouse with assets worth $175 billion.

ge shareholders have 32% of the combined entity in this national bank. this will help them compare with regional rivals like qatar national bank. china has warns of severe flooding on the yangtze river. authorities at flood control facilities have been improved, but rising water levels rose a serious threat. -- pose a serious threat. some of the places are already overflowing with 17,000 people at risk if the dam collapses. by 2600 journalists and analysts and more than 120 countries, i'm haslinda amin. yvonne: thank you. let's return to the australian election, with the voters are still waiting for results. business says the uncertainty is the worst possible outcome.

michael turnbull says they have to get on with it. michael turnbull: while the counts take the number of days, probably to the end of next week, i can promise all australians that we will dedicate our efforts to ensuring that the state of the new parliament is resolved without the vision or rancor. -- division or rancor. the prime minister will have to get on with the job. yvonne: joining me is the chief australia and new zealand analyst at capital economics. great to have you. malcolmheard from turnbull. as if we needed more uncertainty, now we have a cliffhanger in this election result. we responded to australian politics, but we see the drag on the australian dollar. are we in for more volatility? >> i think we probably are in the next couple of days.

i would stress i think that volatility will be relatively mild. you might see some further falls in equity prices, the dollar. this could be short-lived. the u.k.'s experience with the recent brexit vote is a good example here, because it was a surprise to the markets, as is the astronomy and federal election result. -- as is the australian that a election result. but they regain composure quickly, and after a week, losses have been reversed. we will see something quickly like that in australia. whether there is reaction in a few days, things calm down. we realize when it comes to the economy at least, nothing much is changed. yvonne: so you think about the economic implications that could be, you it will not be that big of an impact? not dealing with politics but policy as well, that may be

adrift now. paul: i think that is perhaps the big picture, is that the fiscal outlook is going to remain uncertain for a few more years. but let's be honest about this, it was not the case the fiscal situation was going to help the economy anyway over the next few years. anyone that thought that was getting themselves. -- kidding themselves. this is on the shoulders of the reserve bank of australia, but that was always the case. and the economics say that the bank cut interest rates further, not at today's policy meeting, but certainly in august with a reduction of 1.5%. yvonne: so we could be seeing something in august from the rba , but there will be a lot of treasure on the central bank to act now, now we have seen this fiscal policy cannot deliver. longer though, what does that mean for the coalition's party

policies, notably when it comes to trade deals like the tpp? paul: i think the big issue, really, is that from this no party seems to have a mandate for what it wants. so we are in a situation where i think there is going to be a political paralysis, continued physical uncertainty for a number of years. although that hurts the economy in the near term, over the next year or two, it does not have an impact over the five and six years. the australian economy is in a situation where it has the mining, and it needs to move to something else, probably services. the services sector. that can happen on its own, but you need policymakers to make sure those are allocated efficiently. policymakers, say politicians can't control the economy very well -- certainly

not to say the central observed bank can, but it does generate more uncertainty. it does mean australia is not as strong as it could be if we have one party, whoever it is, with a mandate to do what it wants. yvonne: does it change your forecast for growth forecast? we had the fed raising rates. what does this mean for the aussie dollar as well? paul: i would not change our forecast taste on this. no, i don't think this political uncertainty has a big effect on the economy. it will have a short-term effect on markets, i don't think it will last long. are not expecting the economy to be much stronger or worse over the next year or two, and i'm not expecting the us trillion dollar to be stronger or worse because of this. -- the australian dollar to be stronger or worse because of this. this will weaken over the next

18 months, and is based on our view that the reserve bank of australia will cut interest rates all the way to 1% next year. at the same time, the u.s. fed may raise interest rates to 2% next year, so the australid the5 u.s. cents i the end of next year. i want to end with one last question. the other minority government or a slim majority for michael tombo -- turnbull, if he is still able to move forward and bring the government and the country forward into raising growth? this is an independent consultancy, so we don't want to comment on who is the best person for a political job, so why do want to say we will are not going to be in the ideal situation where any policy has a clear mandate. as a majority government, to actually make changes. the worst is when you get no

changes at all, because in the government just drifts, and unfortunately, as i said over the medium-term, the economy just drifts, not going where it could go. paul, really appreciate your insight. chief australia and new zealand economist at capital economics. still ahead, driven by the sun. first solard out is cars, charging on the road. ♪

♪ yvonne: welcome back. are you ready for cloud anxiety? triesinese solar maker its new sun powered cars. is's go to stephen engle, he following header to his troubles, and they are betting on a solid solar powered vehicle

now. stephen: it was their big fall from grace, but right now they have unveiled for solar powered cars, technology with solar cells. at least the chairman has talked about putting these things on a number of different products, including umbrellas, bags. now he wants to put them on the hoods of the cars and the tops of cars. it could be cloud anxiety. if it is cloudy, you cannot charge the car. you get five or six hours worth of charging, which will give you 80 kilometer, in the most ideal situation. that is 50 miles. but in china, they have cloudy, smoggy so guys. -- monday skies. so you only have 80 kilometers on the ideal charge, but you also have clouds. but they are putting in lithium batteries as well to you can do

traditional charging on days you have to travel longer distances or it is cloudy. that, we arep of dealing with the investigation with the regulator. what do we know on that and the suspension of shares in hong kong? stephen: not a lot. we can bring up the chart and see the rise. a lot of chinese companies boomed last year. this company represented the crop of the stock market. they tripled in value, and then the big half-hour plunge, 47% down, $19 billion wiped out. hong kong innovators looking into product manipulation, but that long line on the right is suspension. it has been suspended for more than a year. we know that investigation, we don't know it is what it is investigating or how long it will last. yvonne: that chart begs the question, is hannity even a viable company? stephen: that is what they are

trying to do, get back to viability. the chairman did reside in bay. -- resign in may. it is a large shareholder of appearing company, chairman of appearing company. -- a parent company. but he is still in power. they did announce last year i got a loan from the china development bank for about $97 million to build a new solar the keyane, and that is to make this product, the solar powered car, liable, because they need to make them in mass quantities to lower the unit price. you also have to have mass demand. yvonne: thank you so much. we will watch that one. we got just moments away from the open of trading in japan, south korea, and australia. seeing from the boj, japanese companies see a 1.1% year on year inflation in five-year

time. that is half the level three target.ter the boj's we also see five-year yields falling to

♪ yvonne: they could be another week before australia knows who will lead. business leaders say uncertainty is the worst result. a survey says china will be forced to bail out the banks as bad loans grow. mitsubishi motors resumes production, but bracing for layoffs. liveme to "daybreak asia" in hong kong and streaming on mobile and bloomberg.com. happy monday to you.

let's head straight to australia. the election has delivered no clear winner. prime minister malcolm turnbull remains optimistic, but a hung parliament is looking likely. let's go straight to paul allen in sydney. how long is this uncertainty going to last? >> quite a while. the australian electoral commission has to wait 13 days before all postal votes can be counted, so it could take up to that long. they won't resume counting until tomorrow, so it could be a little while, although they do tend to favor the liberal parties, so this is why the prime minister says he is confident that he will return to majority government, but it is more likely that a hung

parliament will be likely here. of that, the government has also been speaking to some of those smaller parties and independents. in terms of the reaction to the currency, the australian on this lack of result could what other economic impact might there be? >> the aussie dollar deadfall. it has recovered some losses over the weekend. is fractionally off. analysts are saying that is it for australia's aaa credit rating. government will be able to reform in any radical or meaningful way, so it is three years of drift now. thisurpose of calling

election, malcolm turnbull dissolving both houses of was t clean out the senate, so he could pass legislation. you could argue it is worse now. there is a very eclectic group on the benches. austrians will be familiar with some of those names. i will leave it there before i say any more. so a real mess on the senate cross bench. yvonne: it raises the question why he did trigger this double dissolution vote. let's talk about the polls, they were split. what went wrong for malcolm turnbull and is his job on the line? copping a lot of criticism in the wake of these results. a lot of people are saying he did not campaign hard enough,

plenty of analysis around that. he was doing one or two visits a day. the coalition did not win a single seat in tasmania. took the job from tony abbott, he blamed poor polling for want to move on the prime minister's position and promised he would deliver a strong election result. he has delivered anything but, and this gives ammunition to his enemies in the party. he has plenty of them, so difficult times for malcolm turnbull in head. -- ahead. yvonne: thank you so much. how this is playing out on the markets this morning. in and trading, how is it looking so far. best start, the benchmark down a quarter of 1%. gaining backr to

all those losses. we might have to wait a little bit longer. we will wait for markets to get warmed up. early on, fairly sharp declines on the nikkei 225. let's wait for this to really get under way. open, gold miners up 4%, not surprising where gold is right now, 28 month high for spot gold. silver is pushing levels not seen in a few years, the best-performing commodity, 20 dollars announced, so a lot in the mix when you look at markets right now. i want to talk about japan. it is early days, but again, the same story. yields pushing

lower and lower again, so two-year, from the five year, and 10 year at record low levels. let me get you an update on how the 10 year is doing. -26, 27 basis points. u.s. 10 year fell to a record low before retracing back to 144. korea, 140,at south and australia there, we just talked about the higher risk that they lose their aaa credit rating. go, have ay before i look at these forecasts from the boj. survey corporate japan, where they think inflation will be at these times. suffice to say nowhere near the boj's target of 2% by this time next year. bee years on, we will still at half that level, something to keep in mind as we start the new

trading week. yvonne: thank you. the top stories on the bloomberg, a south london law firm says brexit cannot legally happen without a vote in parliament. is threatening action that the government starts the process without consulting mps. the uk's position is that it is a decision for whoever becomes prime minister. thousands march through london, protesting the referendum. germany jostling for position and a post-brexit world, aiming to steal london's crown as europe's leading financial center. there have been calls for a euro clearing to be removed from the u.k. once the process begin. paris is already drawing up plans to challenge frankfurt for the role. you have frankfurt as a big question in terms of organization, but i think we now inch more players

paris than in frankfurt. a bigger marketplace in paris, so that is something to be negotiated. i think it does make sense. yvonne: baghdad's worst attack in the year has killed 150 people, a truck exploded in a mostly shia neighborhood, underscoring the ability of extremists to strike despite heavy security and multiple checkpoints. the area had many clothing, jewelry stores, restaurants, and cafés. the blast came when the street was filled with people after they had broken their ramadan fast. of economists says china will have to bail out its banks within two years. let's go to tom mackenzie looking at this for us. how big of a bailout are we talking about?

to economistspoke and banks for this survey, and the majority, nine out of 15, said china will have to bail out its banks within two years. most said that bailout would exceed $500 billion, the average, but at the top and there were estimates of a $3 trillion bailout. that is well short of the $10 bassion forecast by kyle earlier this year, but does point to the growing concern about china's debt. yvonne: this will weigh on markets, but what extent does this actually add onto this bad debt pile, and has the pboc responded to these reports? that the totalow debt file for china is 240% to gdp.

the system has been flooded with credit and now the cracks are starting to show. there have been a record number of defaults this year, and we have a chart showing that in the 12 months ending in march, nonperforming loans shot up 40%, billion the total, $210 . that is according to government data, and many economists say the true scale of nonperforming loans is likely to be far higher. the pboc released a financial stability report last month saying banks are able to maintain relatively high capital levels even if they are hit by severe shocks. a stress test they did of 30 banks showed that capital ratios fell to around 11% from just over 13% and a worst-case scenario, and china is pushing for its biggest bank to have a ratio of 11.5% by the end of 2018. look at theou

economy longer-term, could a bailout be a good thing? well, in the short-term, if the bailout happens, the economists surveyed reckon it would hit chinese markets, pull down bank stocks, the renminbi, pushing up government borrowing costs and the credit risk profile of the country, but in the longer-term, a rescue would be positive. we have seen this before when china bailed out its banks in 1990 when nonperforming loans hit 40%. they recapitalize the big four set up and state-run run bank, setting up breaknecka decade of growth, so economists saying that if this happens, there will be pain in the short-term, but longer-term could prove beneficial for china. yvonne: we will see what that does if it does happen and what impact it will have on bank stocks.

thank you so much. eastern exposure, which investors should bet on as brexit and the fed weigh on markets in the west. this is bloomberg. ♪

yvonne: it is 8:14 a.m. in singapore, the latest first word headlines. has announced six days of naval exercises in the south china sea. wargames will start on tuesday and run through july 11. beijing says ships from other countries will be banned from the area. the exercises, head of arbitration on the disputed waters from the hague on july 12. china has already said it will ignore the outcome. traders are betting against the company seen as the craigslist of china. a record last hit week as the slowdown ways on sales. by baidu, tencent,

and jd.com, shares losing 50% and 12 months. ,t is also burning through cash revenue growth falling to 35% from 63% last year. diplomatic rapprochement between israel and turkey has allowed aid for gaza. a ship caring food, clothing, and toys will be distributed this week. the split between israel and turkey was triggered right an israeli commando raid on a turkish aid ship. dayal news 24 hours a powered by over 2600 journalists and analysts in 120 countries around the world. this is bloomberg news. yvonne: thank you. i look at the prospects for the markets -- a look at the prospects for of the global markets. great to have you. brexit has not

faded. we have a raised losses since last friday, but we continue to see bond and stocks painting a different picture. >> this is puzzling with the strong rebound of the equity market and bond markets with yields depressed. is a stronge conviction and a strong conviction in the market that further easing measures taken by central banks, the bank of .ngland it also raises a strong expectation of an easing stance from the ecb and the fed, so it is probably one of the reasons why yields have been depressed. yvonne: if you look at before brexit, we were already raising the questions of whether central banks can deliver more. now it seems like we are relying

heavily on them to add liquidity into the market. do we still have fundamental questions on whether they can help rescue markets? >> i think it is a bit of surprise, at least for us. there is still a strong belief that central banks are up to the task of propping up economic growth. brexit isw, the u.k. going to be a asymmetrical shock . the most hard-hit economy will be the u.k. economy, so we do not think rates will be such a big deal for the eurozone and the u.s. economy. disconnectre is a the between equity markets, and i think equity markets might be too strong considering the impact of the u.k. brexit. a littlee are seeing

pullback today in the early start of trading in asia, but we continue to see an accommodative fed, risk off. will this benefit emerging markets, particular the asia? >> as a matter of fact, emerging markets in asia have been quite resilient since the beginning of the year. we are clearly considering emerging markets will continue to benefit from stro growth, stronger productivity gains,nd changed.rop has the fact the fed will not be extremely aggressive in monetary policy normalization, and also the yen hasnced come to an end. areas are you looking at?

you see some places and southeast asia that have high exposure to the ok -- u.k., malaysia and singapore. equityrefer from an standpoint to concentrate on markets that can be driven by strong domestic demand. india, we are keen on one of the markets we tend to prefer. on top of that, we do consider indonesia and the philippines, both countries are going to do well, brexit or no brexit. yvonne: indonesia just entering into a bull market last week. i have to talk about japan. we are close to this meeting of ae boj, rba as well, but survey was surprisingly optimistic. this was before brexit happen, but does that mean the boj can pause for july? >> that is a big question. we do think the boj is pushed to

act in order to curb the yen strength. i'm not sure they are going to do something in july. i think they will decide , and it is abably necessary passive action to continue to prop up inflation expectations. the latest readings, as you mentioned, are a bit or positive than the markets could have expected earlier, but there are still risks of an economic downside in japan. further action, fiscal stimulus and monetary easing, both are very much needed in japan. yvonne: you are saying that both of them combined, you're still not sure if this could lead to a successful exit from inflation. >> markets are really challenged since the beginning of 2016. in the middle of the half

an ex from deflation, theyi need tot do more, especially monetizing measures to push inflation expectation and drive the country out of the deflationary trap it we have had a bit of success over the past three years. , moreructural reforms needs to be done in order to ensure a full exit. yvonne: thank you so much. coming up, resilient, but how long? why some analysts are betting on further volatility. this is bloomberg. ♪

david: here is a look at how

majors are moving early. not much happening here. apart from the aussie dollar and the news australia, flow is limited. note, this lower open in the currency may be attributed to a higher risk that the country may be stripped of its aaa rating. says the election results diminishes the prospect of a new legislative agenda. we are looking at the yield on the 10 year aussie up a few clicks. the bank expected to stay put during its rate decision

tomorrow. recent relative stability may not last long according to multiple analysts. traders have told us that the rebound last week had more to do with short covering. it action failed to recover its june 24 add to this negative risk events ahead, options toiring this month, spanning as low as $1.25 based on data, and you have the prospect of the bank of england moving to support the economy sooner rather than later. let's take a closer look on pound sterling. we have been looking at this chart for three days now. in red, the spot price and green the index, the median forecast, over 80 analyst and strategist

were asked where they think the pound will be. they have played a lot of catch up already. $1.32edian forecast of comes at the end of this quarter. let me get my keyboard back in place. have a look at the spot price of the moment. this takes you back 8-9 days. that's where we are at the moment. this is the level you want to watch. we are quite a bit far from that. it depends on what your perspective is good that is what is driving your forex markets this morning. yvonne: thank you. big events we will be following greateek, the rba decision on tuesday. economists expect the central bank to hold the cash rate at one point 75% after

the .25% basis cut in may. we are are also waiting for the election result as well, which may prompt the central bank to pause after a shaky first quarter. aartphone makers will have first indication of how the second quarter ended up. analysts expecting a modest 6% gain in operating profit for samsung. current account balance for may, a 16 $.8 billion surplus expected, the narrowest from japan in four months. to the theaters now, pixar finding dori the top of the box office. the finding nemo sequel took $42 million ahead of tarzan and the bfg. fourth of the biggest

july weekend ever with box office receipts at $190 million. sales in the car u.s. hit the brakes, what it says about the state of the market. this is bloomberg. ♪

>> it is a 30 a.m. in singapore, half an hour away from trading there. first word headlines, australia will have to wait until tuesday to know who won the election. accounting has been pause with mainstream parties reporting the lowest support since 1943. currently the opposition labor party is leading. prime minister malcolm turnbull says he feels confident of victory. toction uncertainty led declines for the aussie dollar, with the country's triple a credit rating under that.

rba due toth the meet tomorrow to make its latest rate decision. also down as a stronger yen ways on exporters, opix jumped 4% last week. will receive a government bailout within two years, economists predict. and commonwealth of china art nine among 15 respondents to say they expect the move. believerity of those the constant recapitalization will exceed half $1 billion. chinese lenders are grappling with a growing mountain of bad debt after years of funding the market with cheap credit. global news 24 hours a day powered by over 2600 journalists and analysts in 120 countries around the world. this is bloomberg news. markets trading in the asia pacific today, a bit of a pullback in stocks today. the nikkei 225 down. we are seeing the yen

stabilizing, but analyst can't quite forecast and catch up with this yen surged. . kospi up a fifth of 1%. the countrydown as is still an election limbo. online car marketplace two years ago was attracting support from hedge funds, but now that's against the u.s. traded stock have hit a record. this one time tech darling has seem to have the brakes. it seems investors feel it is underwhelmed right now. despite theis namedy, it was actually

among the 14 highest-rated names. we have short bets going up as the price comes down. two years ago, it surged 120%. in 2013.340% gain tiger management made a $600 15% stake in on a this company within the span of two months. 20then reduce its stake within the span of a year. interest of a different nature now, short interest climbing to a record high a few days ago despite shares having lost half of their value over the past year. cash flow turned negative in 2015, spending more to compete with his major chinese rival. goingts also bearish

forward, revenue growth projected to trout 35% this year from 63% last year. the ceo of adr investment strategies has been covering chinese stocks for 10 years. investors are not excited about what the company has managed to achieve because it has been so much hype. also at play is the economic slowdown. haidi: yeah, if you bring up the , over the past four years , this does truck the slowdown we have seen in the chinese economy, which affects consumer spending. slowdown is adding another layer of skepticism over the outlook for this company.

you do have this operating environment where the economy is growing at its slowest pace in the car category has high exposure to the economy in particular because investors may not see a long-term potential, but don't have high hopes for returns in the short-term. there is still one of vote of confidence. it does have the support of $50 million from each of china's .iggest tech companies together they hold a 34% stake and analysts say that to some ofent this is a seal approval, particularly as the company is trying to shift its growth focus from online to off-line. yvonne: thanks. let's take a look at what we are following. one of china's largest developers resumes trading later

for the first time this year. it was halted in december as its two biggest shareholders fought for control. e rejected a request for an extraordinary gentlemen meeting aimed at removing 10 directors. he hento's new ceo says will pause new mergers and acquisitions to focus on steering the company through mining's downturn. jean-sebastien jacques are not "top of the agenda." rio is battling the slowdown in china, which has lowered prices and created a supply glut. reports from korea say hyundai heavy wants to build a shipyard plant in saudi arabia amid a slump in global ship lease. hyundai heavy has discussed the deal with the new saudi oil minister. the company has been hit by mounting losses and falling demand and has a $3 billion plan

to sell assets and cut jobs to stay afloat. tesla misdelivery targets for the second straight quarter, selling 14,300 cars, 50% below its goal. to rampys that was used up production in the final weeks of the quarter. gettings had trouble vehicles to customers and expects to deliver 50,000 cars in the second half, which means it may fall slightly short of its annual target. that was a look at some of the stories making headlines. thank you. the latest u.s. car sales have raiseconcerns about the state of the market, with deliveries trailing estimates in june. a bit of a mixed bag, what does this all mean? >> if you look at different june variedsales in from maker to make her. .- maker

in june, 1.5 one million vehicles sold, a 2.5% year on year, but if you look at the annual sales pace seasonally million versus 17.2 million. is also slower than may last year, when they sold 17 million. in march, there was a drop to 16 points and -- 16.6 million. there is a concern that we will see more drops below 17 million. feeling that concern is the u.s. economy, weaker job growth and than ther jobs added last six years in the u.s., so that is a concern going forward. also, the general uncertainty around the brexit vote, although

it may not directly impact u.s. car sales, the feeling of and certainty may impact the general economy. this is after a stellar 2015. we saw the annual sales pace up more than 18 million for the last half of that year. this year, the average slid betrothal -- a low 17.7 million cars. we could start to see declines seeales, saying if we don't figures bump up in july than we could start seeing lower numbers for the rest of the year, and generally a good outlook for the auto industry as a whole. yvonne: what about the asian automakers? well, riseid pretty in sales of more than 13%. yarder, kia all missed estimates. yota, and kiar

all miss estimates. in the u.s., for did well, better than gm. withinntioned, even regional automakers and within the auto making industry as a whole, very different results. for analysts, this is a concern because it may prove that there are clouds ahead. yvonne: thank you so much. let's stick to autos, mitsubishi iniors resuming making many cars. production was halted after the company admitted falsifying test. what is the state of play at the factory right now? >> the factory we are talking

plant that faced a huge setback in april when the company admitted to manipulating its fuel economy figures for two cars and its lineup and two models it makes for nissan under a joint venture, so this was a huge blow for this factory and for the surrounding economy. town in whichc ,he factory is at the center that town and civilization built around it. sinces the factory open 1943 and was where mitsubishi motors built its first car. where thisuation plant was already an trouble before the scandal broke. in 1993, when production at this factory peaked, it was almost

725,000 vehicles they made a year. last year, they may just short of 310,000, so you have a situation where mitsubishi .otors is in dire straits this scandal has really tested their ability to continue. some manufactures saying the real challenge is just starting now. how has nissan's intervention been received so far? it -- in the immediate aftermath of nissan coming in and saying they would buy a 34% stake in mitsubishi motors, it was a huge sigh of relief for many suppliers and government officials in this area because it meant that mitsubishi motors was still going to be around, and that was a real open question when the scandal was at its height. you had the president of the company acknowledged inc. as it was annitially

encouraging sign, but you also have in the back of heads of people in this area a real concern about this nissan rescue because you know what nissan has done to get to the point where it is at. it has gone through a painful restructuring in japan, closed five factories, about 14% of its workforce. this was the plan that nissan 2000's, so the early you really have a situation where they are glad to be rescued, but also fearing for what is next in this test of their competitiveness now that nissan has come in and is offering a hand, the thought being that they will want something for this investment in keeping mitsubishi motors afloat. ofnne: "le cost killer"

course. up next, china's postal savings bank pushes ahead with its ipo despite market uncertainty. we will ask if it is the right strategy. this is bloomberg. ♪

>> it is 8:45 a.m. in singapore, the latest first word headlines. 25% in a robot a maker for $1.3 billion. the deal went through after efforts to find a european super failed. the natural bank of all blue dobby has confirmed a regional powerhouse.

hold 52% of will the combined entity, but will operate under the natural bank of abu dhabi name. it will allow the bank to better compete with regional rivals. china has warned of severe flooding after days of torrential rain. authorities said flood control facilities have been improved, but rising water levels pose a serious threat. singapore news says a reservoir is already overflowing with 70,000 people at risk if the dam collapses. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. yvonne: the uk's's direct decision to leave the european union has pushed back expectations of a rate hike until 2018, but the president of the st. louis fed has said speculation has "gotten old."

he spoke to france in nepal. lacqua.rancine >> i see an environment where low yields are likely to continue into the future. there will come a day when productivity in the u.s. will pick up, growth in the u.s. will pick up, and interest rates will comes,and when that day investors have to be prepared. paid towhat they get do. i think one of the things that has happened over the last 5-6 years is that the continual prediction that rates were going , the up has made people story has gotten old, let's put it that way. then trading as if rates were about to go up. it just hasn't happened. i think these regime ideas would

give you a better sense of how to think about this. >> when you look at the political scene in the u.k., it is clear he goes back to globalization, and we understand because of tde and immigration, that's probably what tipped this brexit vote. countries wante to come -- become less globalize question mark -- globalized? >> the u.k. has a trade relationship with the eu, now they're saying they want some other trade relationship. what would those other trade relationships be? beould like a focal point to named here. one of them would be canada. canada just negotiated an agreement with the eu that took seven years, but if you have the focal point, we can say we are on a glide path and that's what we are working towards and we know it will take a long time,

that would reduce uncertainty about where the u.k. is going and globalization is going. you at the end of the day, would not be a member of the eu, but you would have some relationship and would know what the tariff arrangements are going to be and what the migration quotas are going to be and you would know how that was going to work. yvonne: that was james bullard speaking to bloomberg. is pushingtal bank ahead with its ipo despite recent market turmoil and concern about bad lows and other chinese lenders. the listing is expected to be the world's biggest this year. it looks like they are still moving forward for this. what is driving this ipo? like the china postal savings bank has a need for capital. the last time they reported anything. when they file their

perspectives, they had numbers from 2013 and 2014. capitald their situation was 9.5% of equity and thatdinated debt, so what means is that they are below the requirement from the authorities. expect the big banks in china to have 11.5% of capital set aside by the end of 2018. has 670a bank that billion dollars in assets. having another 2% of capital set aside is not a small amount. it is a lot of money. that can come in the form of equity or subordinated debt. they are clearly going the equity route, during the ipo.

i'm not surprised they are going ahead. is there a problem of nonperforming loans? >> not for them particularly. all of china's nonperforming loans are going up, but this bank in particular has the lowest nonperforming loan ratio among the big banks in china, 0.65%. from the endbers of 2014. they have not updated the numbers yet. everyone expects an update once they come up with an updated perspectives, and then we will see what the nonperforming loan situation is. again, they have less numb from and loans -- less nonperforming loans another banks. yvonne: thank you. up next, hoping sunshine's on its solar powered car, whether it is the future of motoring or a fad, next.

this is bloomberg. ♪

yvonne: are you ready for cloud anxiety. thing if onecome a chinese solar maker has success with its new sun powered car. as they going to work sun king of solar cars? >> this is a troubled company. i will talk about that in a

second. they just unveiled or bad new solar cars we have known this is in the pipeline. photo. this this is one of them. cloud anxiety is going to be a problem because there is range anxiety and cloud anxiety. you can charge this car by driving and a will hold a 5-6 hour charge. you only get about 80 kilometers in ideal charging weather. that it alsog is has spare lithium-ion batteries in the car, so you can do the traditional charging method for isger chips or when it cloudy and smoggy, which is often in china. bring up the stock chart. that rose uppany last year, tripled in value.

there is still an investigation under way. the hong kong stock regulators are still investigating possible stock price manipulation. a huge run-up, then a 47% collapse and half an hour. it has been suspended since. no word on when it will be unsuspended. the chairman quit the listed company as chairman, but is still the largest shareholder. we will have to turn the page and see what is next for hanergy . yvonne: is this even a viable company? they are rolling out this technology in a couple of products, including cars. "trending business" is up next. littlein australia, a

voters leaveory as the political landscape in limbo. talking all politics about australia, what it means for that nation. also, nine of 15 economists surveyed by bloomberg expect some sort of china bailout depending on who you ask. to 10 tree inp dollars, kyle bass is a famous short seller. all that and more, coming up on "trending business". ♪

angie: it is monday the fourth of july. i am angie lau. this is "trending business". ♪ angie: we will be live in sydney, melbourne, and singapore this hour. we have asia-pacific stocks recovering from early losses. japanese equities are the second worst performers among developed markets.