in sydney. a.m. vote counting resumes in australia with uncertainty in the air. this is "daybreak asia." ♪ betty: mermerger talks. two chinese brokers are set to be in discussion. they have $28 billion of assets between them. london stock exchange shareholders do -- approved the deutsche person deal, but the german regulator is not keen.

and silver touches a two-year high and gold rallies a fourth day on speculation that central banks will step up stimulus. coming to you live from your asian headquarters, i'm yvonne man in hong kong. let's check on markets in the asian pacific. new zealand kicking things off, but we had the u.s. close yesterday for the fourth of july holiday. europe did see stocks falling. it is expected that aussie dollar will hit parity with the kiwi as we see australian political gridlock to continue, and it could put economic reform on hold. it is also rb eight decision day. cash rate is expected to stay at 1.75%. we are seeing that we could see losses today in sydney.

japan, the dollar yen stabilizing around 103 -- below the 103 handle. may be a good time for the analysts to change their forecast, because the biggest bulls or 10% too cautious. watching commodity stock as well, because we saw silver topping $21 for the first time in two years. we see it up at 4.7% right now. old not as much of the move, but still continuing this rally at 13.5 to announce, but we are seeing that oil is on the downside today. may be in the works in china's financial sector. there are said to be early discussions. let's bring in stephen engle. what do we know? reporter: this will be a pretty big merger within the financial sector of china. c built a big reputation as being that chinese invested

thing. -- the chinese investment bank. it was set up by morgan stanley in 1995. they got out in 2010. it is known as the goldman sachs of china. iss is a big company, but it fallen on hard times in the last decade in its brokerage business. china investment securities, it is owned by a chinese investment company. it is not surprising that they strongerg to make companies in the financial space by merging them. they have a history of that. in 2013, they took sydney incurred -- sydney securities and mercy that to create one of china's largest brokering firms. this will be a another step along the way that china wage and and the chinese central government are looking to make a, more sound financial companies. the $20you mentioned

billion in assets between them. is this going to be a good fit? what do investors think? fromter: we were hearing lucas in hong kong saying it is a good deal for cic see -- cicc. they used to be the largest brokerage. it is tied to high net worth individuals and corporate clients, giving it the best banking background. china investment securities does more mass-market brokerage. those two could combine and create a broader client base, if you will. so far, that looks good. stock went up 1.5% yesterday. , you can see were the news broke coming out of the lunch break. it was up more than 2.5% at one point, closing out 1.53%. yvonne: a lot of these state linked investment companies are

intertwined in some ways. what is the connection between these two? mentioned china international capital corp.. it has ties to the son of the goldman sachs of china. chinese investment security is 100% owned at the main parent, of chinaare a unit investment corp., which is the sovereign wealth fund of china, which, by the way, cicc owns 2420% of, coming back. oh. c owns 24% of, coming back circle -- full circle. yvonne: shareholders have approved a deal in the near-unanimous vote. hammering out the details of the deal will prove tricky. issue? the

is it all because of brexit? reporter: briggs it is a complication, part of the issues that are clouding the deal. one of the key issues is headquarters. this probably will be a question regardless of brexit, but essentially regulators do not want to see headquarters of the merged company to be in london. i think they are focusing on frank fort. it is probably a bit -- bring for. frankfurt. on thecurrent plan is that exchanges would keep two parts, and the holding company for the two would be in london. however, there are publications due to brexit. most shareholders voted in favor of the deal, despite this, and the merger would create a mega bannere to compete with

continental exchange, even the hong kong stock exchange, to some extent. the london stockholders have voted in favor of it, despite this issue. yvonne: that could spread through all types of things, companies based in london. is this still going to be a financial sector? what other options do they have? reporter: there is the possibility of putting the headquarters in a third location, which is in the eu, but not in london or frankfurt. the netherlands could be a possibility, however, in order for this to happen, the shareholders would have to vote on the current deal as it stands, and they would also have -- the deutsche parts of it would have to secede and the be completed.e to the deutsche investors have until july 12 to finalize that part of things. the lse has said they are moving

out of the u.k., a bit of a nonstarter. one shareholder at yesterday's suggest the headquarters would not be moved out of london. yvonne: you mentioned brexit, but what other implications could it have on this deal? reporter: if the u.k. does eventually leave the european union, having a tie up between germany and frankfurt and london could help smooth capital flows, but there is also the issue of the lucrative financial service that provides hundreds of thousands of jobs in the city of london. they have area already been circling. france has been saying paris would be a good place for it. germany also pushing in that direction as well. this is the case, the london stock exchange has a majority stake in elsie h, which is a majority player. yvonne: we see france and

germany jostling over that debate as well. to bloomberg's headlines. the pound ended as big as a two week to -- ended its biggest two-week decline in seven years. european officials mitigate the impact of brexit. sterling rose against the dollar for the first time in three days as the u.s. marks the fourth of july. money may be available for companies, and the idea of lower corporate taxes was floated. the bank of england will outline its strategy later today. the decision to leave the eu may not be final after all. thousands are calling for a second referendum, and there are indications the remain campaign would win. and in the last couple of hours, a senior eu officials said the u.k. could stay in the bloc if it changes his mind. the regulation commissioner told dutch tv that such an outcome remains possible. japan's most possible -- most popular messaging app has raised

the target price of its ipo. the hike is due to strong demand in market conditions as it prepares for what could be the largest tech ipo of the year. offering 35 million shares when it develops in new york and tokyo next week, after delaying plans to go public two years ago. let's head down under. the reserve bank of australia met today. expect to glenn stevens to keep the cash rate on hold at a record low one and three quarters. let's go to sydney. among economists was taken before this weekend inconclusive election. is that likely to change things? it is an interesting question, isn't it? if it were after the election, would an economists have answered it differently? it's possible, but the bank might want to let the dust

settle. you have to remember as well that grexit has happened between the last two rba meetings as well. no, unanimously economists do not think there will be a cut. one thing is certain though, the owners will probably be back on the rba to promote growth, as we should not be expecting a great deal of meaningful reform. yvonne: it seems like there is pressure on the central bank now. if it is not july, then is it going to be august? >> yes. the reason for that is three c-p-i,letters -- consumer price index. that is what caused them to cut the cash rate to 1.75% back in may.

we had the first deflationary quarter and seven years. that prompted the reserve bank of australia to cut. the smart money would be that they wait for the next quarter. the next cpi data due out on july 27. there is not huge expectations that that is going to reverse the situation, so that is why we see almost all economists expecting the rba will move in august instead. yvonne: yeah, they've got to wait to see how brexit plays out, how the voting counting is going to play out. much.you very still ahead, warnings of volatile times in the forex markets as currency struggles with the decision to leave the eu. up next, why the so-called brexit appears to be a golden opportunity for commodity investors. this is bloomberg. ♪

saudi arabia was hit by three bombings on monday. one was near the u.s. consulate, affecting's -- sending scores of people across the middle east in the past two weeks. four people died while the bomber killed himself. -- attackers blew themselves up in another city. three former barclays traders have been convicted of raping in 2005 in 2007. the jury could not reach a verdict on two others excuse -- two others accused. a fine for its role in the scandal, which led to an overhaul of the banking industry. it also saw the barclays ceo about $9s job and billion in penalties imposed on the financial sector.

the retirediled president for life. he was convicted in the closed-door trial on monday of illegally obtaining state secrets and abusing power. he is the latest high profile target of an anticorruption campaign that has ensnared more than 100,000 officials since president she jinping came to power in 2014. global news 24 hours today, powered by journalists and analysts in more than 120 countries. this is bloomberg. yvonne: thank you. let's get back to the commodities. advancing as much as 7%, or rise above $21 for the first time in two years. that is a speculation of more central-bank stimulus that prompted investors to save havens. gold also rose to a near two-year high, benefiting from

uncertainty following the uk's decision to leave the eu. silver has jumped 47%, outpacing gold 27% this year. it is really great to have you. i want to talk about this relationship between gold and silver. it seems like silver seems to be one of the favorites these days, much different than what we saw earlier this year. until march, we saw this ratio at the highest level since 2008, this financial crisis back in that time. gold up theith leased by some persons august 2014. why has silver accelerated so much, and why now? >> it is one of those investments we have not looked at in a long time. also, we have had such messy shorts overhanging that market. when you get interesting gold, you expect silver to try and

with gold. really has not moved, and all of a sudden you get a few moves, and you get a very short market trying to turn short into longs. silver has not been in play for such a long time, and it has underperformed when you compare it to gold. do we see silver could be outperforming in the second half when it comes to gold in this environment? how much further doesn't have to go? -- does it have to go? >> when you look at the high for gold, back in august 20 11, 18 .49, and when you look at silver , you still get the sense that silver has a fair way to go. when we have more short in the , i think while we still have those shorts in the market, we will see people move towards silver.

silver has an application as an industrial metal as well as an inflation hedge. why you have the dovish towns and central banks. you still have precious metals being a slave of poor people, but i think people will look to silver because that has been the one that is underperforming, but i think it has more legs. yvonne: not everyone is convinced, because james bevan from cc l.a. says these two metals both have the commodities complex. seeing as both are relatively overpriced, you take a look at the complex of global slow in industrial activities. the floor for these metals are very low. >> people can have those comments, but i guess when you get that investment, you see massive amounts of movement. of the most interesting things is when you look at some of the other metals, for instance, iron ore.

we are predicting more of a slowdown in supply, so when we look at the outside of the equation, iron or should not be at these levels. we had a surge in the last two days. all the analysts are saying it should be around 40 to 45. when you look at it, you look at the context of why we are seeing a rally, and you see people moving towards the market, and when i look at the movements we we have a in silver, major low in place, so dips will be well supported. yvonne: you mentioned iron ore. it seems like analysts can't quite keep up with their 12 month targets. stock has moved much more. the price of iron ore itself, how do you see this, because we are seeing a lot of speculative interest behind this latest rally? when you see what has been

done in china, you get the sense that he is playing the investment side very well. when you see such a strong move, you get a sense that the iron ore sector has paid back its production costs. bese companies will now turning around real dollars and will react to those price movements. you you look at fortescue, see a company that i think is very well managed, and will take any upside in the price of filterties, which will to the balance sheet quickly. a solid story in terms of growth. remember that rio shortage its $20 billion iron ore project, which puts less supply on the market. we are also dealing with low inventory. let's talk about oil, because with this ranks it all out, -- this brexit fallout, it remains relatively resilient.

see more supply disruptions wants china and nigeria come back fully online? >> i think so. when you look at that supply and demand balance, and you see those infantry draws -- inventory draws, we get the sense that as we lead into summer drivetime in hurricane season, there is that chance for seasonal allergies occurring. we have interesting hotspots out there as well. venezuela, nigeria. when you look at the geopolitical side, plus you look at the economics in the u.s. starting to look healthier, you -- the sense that it is mark that it is outages in the market that will propel prices. when i look at the oil market, i think that dips will be well supported, but when i look at the geopolitical, i think it will be surprises, which could see traded through the u.s. $55 or $60 a barrel. could we potentially say

that this deficit, this heightening actually switches back to over-supply as early as next month? think it would be that quick. thething that we did see is recounts actually increased, so that does give us the sense of more supplies coming on. we are seeing the market react to these high prices by putting more supply on the market. the difference between the supply and the emerging outages. yvonne: thank you so much, joining us from mayor's alliance securities. up next, more attention from vietnam and china over naval drills. we will have more on that next. this is bloomberg. ♪

yvonne: china and vietnam are set for another round of diplomatic arguments.

naval drills that start today will take place in its territorial waters, and it wants beijing to cancel them and stop threatening regional security. linda is looking at this for us. what do we know? that the drills will stretch over several days. they will end on the 11th. that is significant, because it is a day before the ruling will be issued challenging beijing's claim in the south china sea. beijing has repeatedly said it the pressuregnize for china to comply. china says it will not. by the way, china's drills will be conducted in the parasail islands claimed by vietnam. the government says the drills will severely infringe vietnam's sovereignty over the islands. it goes against the common understanding of the two

countries, it violates international law, including u.s. convention on law of the sea, signed in 1982. those comments have fallen on deaf ears. they will not stop china. then what is there to lose if violence or rubs in the area? >> we are talking about $5 trillion. $5 trillion in ship or trade across the south china sea every single year. the south china sea is also considered international waters. despite claims from the anon, malaysia, china has built a runway on the site of the largest chinese presence on the parasail's, and u.s. officials say -- tensions have been very high. too,e: could be inflaming, with this hate decision coming

-- with this decision coming up soon. coming up next, vote counting resumes in australia, and some say political uncertainty may not be a bad thing. we will discuss why that is. this is bloomberg. ♪ you guy's be good. i'll see you later [ bark ] [ bark ] bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ] party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th.

bettyyvonne: you are watching "daybreak asia." there is talk of a merger.

>> the planned merger of the london stock exchange have approved another -- have cleared another hurdle. german regulator still have concerns over the plan. experts say a compromise could sue based in the netherlands after the deal is can we did -- is completed. stevens saysn maintaining the record low -- but the rba will ease the month. the prime minister says he is confident of winning a majority but he may be unable to form a government without the help of independents. what are you watching? >> i am watching if my screens are going to move. it is very subdued out there. this really gives you a picture

of what is happening in the currency markets. have a look at dollar yen at the moment. i want to see something more exciting, but not really. andlook at the contract wary we less closed, chances are we will open up a little bit to the downside here, maybe 0.2% if we are lucky. that's your contract at the very bottom. have a look at the market swell. there is only one market open in the asia-pacific. i know it is a bit far away but italy could be your next trigger point. the government is now looking at options.

asia is looking like this at the moment. things we're watching today, it will be a very busy day industrial you. we have trade data due out. the taiwan and the philippines inflation do midmorning. >> dave, thank you. continuing to search. for more on this let's go to the commodities reporter who joins us. >> what is driving the rally right now, and can't last? say, precious metals continue to be the big winners

from a decision in the u.k. to exit european membership. that has driven that flight to save haven. that isriven this point driving the flight to gold and silver. $21aw silver yesterday top an ounce for the first time in two years. gold also rose to a two-year high. we're certainly sing both of those metals profit. the prospects are that this could continue. markets say that continue to price in a lower chance of a fed rate hike in the near term. both of those metals will continue to make advance. >> they were saying it was a matter of time until silverwood overshadow gold.

when it comes to the precious metals producers, are the miners just along for the ride? >> he might be surprised. the mining companies themselves are doing even better than the metals. ,f we look at a bloomberg index 14 of the largest goal companies. that is up about 75% this year which compares to a gold tries that has jumped to 26%. risen just a shade under 60% this year. if you look at the largest primary silver producer that is 176%. it's the best performer on the ftse 100 index. we consider those mining companies are racking up the game. to its highest and eight months after a government in the philippines

warned that miners -- warned minus over environmental standards. when we know about that and the possible impact of this new action? >> quite a different scenario for nickel. this is all about the supply-side dynamics. as he said the president of the philippines is basically warned money copies they will have to meet environmental standards or face potential closure. the country's own environment ministers is only about one third currently meet international standards and the philippines is particularly an important supplier of nickel into china so there really are implications should this policy be followed through. if it leads the closures there are definite implications for nickel supply. nickel was already one of the commodities tipped to be among the first to read and and emerge out of those low-price scenarios we have seen in the past year or so. >> let's take a look at what we

are following on the bloomberg this morning. >> will be watching -- after the unicode brent posted a drop in revenue for the third straight month. people went shopping for summer close. sales increased fell short of j.p. morgan securities estimates of a 5%-10% rise. >> china's postal bank has revealed an 11% drop in profits which could be the world's largest this year. sachs and morgan stanley , china international capital, j.p. morgan chase and bank of america are sponsoring the listing which could raise $8 billion. >> india's top refiner is to spend $6 billion boosting capacity over the next six years.

they join other respondents that are racing to add capacity and -- as fuel consumption rises. the agency expects india the past japan as the world's third largest user this year. that's a is cutting to the historic close encounters. with the juneau spacecraft completing a five-year journey to jupiter. the maneuver will happen automatically with no help from controllers on earth. that was a look at some of the stories making headlines. locale thing is underway again in australia, with the election result potentially some way off. investors worried about the uncertainty shouldn't fear a hung parliament. recent evidence shows that the stocks and economy don't need a majority government to perform.

david has been doing the research for us. we heard some business groups say this is possibly the worst outcome. what is there to like about the situation. >> australians have unhappy memories of minority governments. back on the period from backup performance and equity market returns it was actually a pretty good time. the afx 200 returned an annualized 5% during the government which is the second-best performance and john howard's first-term ended in 1998. or have a look at productivity growth. thatkrugman once said productivity growth isn't everything that comes to the economy but almost everything.

productivity growth under that government was the best in a decade. it was a pretty good period partye having no majority control and the government. >> some say it's affected by political headwinds. isn't it better if the governor has a clear mandate? >> you would expect that to be the case but if you look at the international evidence there isn't really a lot of evidence to support that. if you look in the u.s., the economy tends to perform best when the same party doesn't control the white house and both houses of congress. there is similar evidence relating to germany. 2004 when john howard won a thumping majority and got control of the senate which is a pretty rare incident in australian politics. that led to a degree of overage. he passed major reforms of work waste laws which led to a landslide victory by the party

three years later within completely unpacked those reforms. in the best majority in 17 years. then he introduced a budget which was wildly unpopular. now his success is struggling to cobble a government together. it's not always a great thing to have a thumping majority. >> why don't we see economic performance and politics lining up the way that we expect? >> a thinker of couple of excavations for this. one, in a small open economy like australia. governments are not the engine rooms of economic growth. they're more like the writers of economic growth. they are failing with the prevailing wind. in australia, that is largely commodity prices that drive the business cycle. you saw the us trillion dollar

and the share market turned down and really surge as commodity prices came up during the day. i think there is another reason as well which has to do with the difference between the prescriptions that the business community would like out of a government and really what supports the economy. you look back over the last 19 governments in australia, product analysts had 1% in labor governments and coalition governments. if you get a big majority, the tendency is to introduce sweeping reforms which and creates uncertainty in the economy. i think of reducing the government where you have a hung parliament and a moderating influence of some politicians who are not part of the government, i think that can actually be a strangely .ongenial results for investors >> interesting, a glass half full perspective and as you mentioned in your column, don't

fear the hung parliament. >> coming up, has brexit done its worst? not according to our next guest. this is the volatility getting started.

>> the men of cash that asian countries raise through dollar sales plunged through the first half of the year. asian pond issuance fell by almost one quarter of $77 billion. it's the first percent decline since the 2008 financial crisis. forese copies are looking funding at home. let's give more with the head of global index strategies at jpmorgan. there really taking a tanking

here. why do you think that is? is there a lot of risk? >> not too much. that is putting some people outside of asia in a concern from of mind. demand has been slightly lower for some of the higher-yielding higher risk bonds. assetsit we see risky against a little bit more momentum but then you have safety havens and play. very conflicted picture we see right now. as a bond guy have you seen it all. you do need to look at these inflation expectations and see that there is quite a bit of headwind. >> there is but if you look at the broader picture it is great to be a bond guy. he went up on some of the higher quality assets to balance out that risk in the broader portfolio.

we've had a lot of phone to a t post brexit. bonds inrly government the higher-quality sectors. we think that trend will continue. >> look at the u.s. yield curve. it used to be flat pancake stop are you setting to discount that they could be a chance of a recession or a global recession russian mark >> we're seeing a flattening of the u.s. curve and typically that is a good indicator of recession coming up in the u.s.. likely thisnk it is year but certainly the possibility is increasing as we go forward. we just had a recent investment quarterly meeting where all of our top investors get together and are probability of recession will increase to 25%. that was a couple of days before the brexit vote. post brexit, the chances for resection -- recession have gone up.

we think it is about 33%. >> some say with the treasuries rally that it is a little bit overdone as you continue to see the u.s. economy a relatively solid footing. as you discount this may jobs payroll number so what is the big issue here. >> the concern in the market is about volatility and risk. people want high-yield funds and strange as it seems, u.s. government debt is a high-yield asset class. so we're seeing people desperately want to get into these high-quality markets. at 144 for a u.s. 10 year that it's an attractive arch market stop >> let's talk about australia. itding u.s. treasuries, cannot really beat a 2% yield these days but when you're singing this election uncertainty that could threaten a aaa rating. do you care about that as an investor should mark >> we do,

but don't forget moving from aaa rating will not impact the cost of raising money. the currency may take a small amount of pressure. it actually selloff with very good value. toot of people would want buy into that market and we should see yields fall if we see a continuation of relatively slow growth in australia. >> if we continue to see this defect a minority government, which is his mean for the budget deficit. worrisome for australia. >> that is the key risk. the toty not being in get things done. we have seen that across the world. europe and the u.s. election later in the year.

>> plenty of other things to worry about. what you think in terms of spread? we saw it in terms of the u.s.. the 10 year in the two-year go wide and the narrow. where will it go in the second half? >> we think yields will go lower from here. so we want to be in the moment is government bonds, particularly the government funds that we are seeing central-bank smiling. the ecb is also buying corporate debt in europe. if you think about the bank of japan, they are buying japanese government bond yields and you still have the fed getting the bank of england to reinvest proceeds in programs. that means proceeds, u.s. agency a -- and guilt in the u.s. in the u.k.. they really showing the expectations that the boj could

possibly go more negative with interest rates. >> i think we will see a reaction from the central banks to the chaos post brexit of the we have seen the markets stabilize on the back of that we are in for a long protected route where we will see instability for the next couple of years. i would expect to see the bank of japan ease rates later this month and into next month. we expect to see some action from the bank of england. interestrobably bring rates down to zero before the end of the year. well bring may forward easing from next year to this year so they may the quantitative easing program. they may even increase it by 10 billion euros per month. >> as he said, the start of the volatility is just the beginning.

>> it is 7:51 here in singapore. thetinto's new ceo says minor will keep its head office in london despite the u.k. decision to leave the european union. rio sebastian said that doesn't do politics. but the brexit vote drove the pound to a 30 year low and sent shockwaves through global markets. some companies have indicated they might move jobs out of the country. vietnam said the chinese naval drills will take place in its territorial waters. the exercises run until the 11th near the parasol island. vietnam says that infringes its sovereignty. vietnam says china should counsel -- cancel the exercises and stop threatening regional security. -- ithas displayed

straddles the road and is tall and of to allow other vehicles underneath and the designers they could reduce congestion by 35%. it could cost about $20 million. a fraction of the bill. expected to come into operations next year. powered by more than 2600 journalists and analysts in more than 120 countries. >> thank you so much. -- the decision to push the yen higher. we will be live into you with details -- life in tokyo with details. ♪

>> corporate japan is counting the cost of the u.k. decision to

leave the european union with analyst reviving annual profit or cast because of the surging yen is that bring in the asia conglomerates editor who joins us from tokyo. good to see you. we have seen the yen rising all year, so why did brexit proved to be such a shock? >> that's right, companies had already been trimming their forecast based on the idea that the yen was getting stronger. when the reason it was getting stronger was concern about the prospects for brexit. when it actually happened it pushed the currency to the threshold. we have estimates from nomura ¥100, the aggregate decline in earnings for japan's biggest companies is around 3.6% which is versus ¥105 the decline 0.5%.be just a bear it pushed it through that threshold and made it clear that this is not going to be a positive year for japan inc..

firsts could be the decline of four years for some of these annual forecast if they do come true. what do these declining forecast meet for a been a mix question -- abenomics? >> abenomics was already on the ropes. had been under fire already for a year not having fulfilled its promise of ending deflation. you also has the phenomenon where japanese countries were stock tiling cash. they were not plowing it back into the economy. were doing that is concerned that the yen could rise again. this proof them right. interviewed for a story we have this morning said ava nymex -- abenomics is finished. david, thank you so much.

we are counting down to the open in japan, korea, and australia. this is daybreak asia. ♪

>> gold and silver touch two-year highs on speculation that the central bank will step up stimulus in the wake of are said toer talks be in discussions. they have $20 billion of assets between them and everything on the line. raises theng app price as it prepares to go public in uncertain times. >> look of the daybreak asia coming to you live from our asia headquarters here in hong kong.

straight to the markets in the asia-pacific now, to australia. it is rba decision day. voting resuming and we are sing the aussie dollar take a bit of the debt. rb is expected to keep things on hold just to see how brexit is going to play out. in the cash basis that to be a 1.5 -- 1.75% stop we do see the yen stabilizing here. 100 252 is where we stand right now with shares down about half of 1%. close downsee stocks size across the board. we are seeing this the start of the session. but he flat at the open and the korean won weakening. let's go to commodities now.

there are signs that it may be overheating. >> i have a few charts here. the rally and silver basically 221.ices from 17 .18 when that happened some of these momentum indicators to signal a bit of overheating. when the most closely watched the price of silver is here. my point is, when you look at that chart it goes above 70 and people look at that and say it is a little bit oversold. if the momentum indicator. 70 is your redline here. we are at 87. can we get a close-up? this bit right here is at 87 which puts us at the highest level going back to 2000 11. overbought, it is

the most overbought in five years. the gold, silver cross or pair if you will. this measures the price of gold over the price of silver. how much can you buy with an ounce of gold. the answer is 66 which is the least in two years. a lot of people look at this to keep these too honest. it does tend to indicate that we may see a correction. >> gold as you just mentioned also touching a two-year high. as bring it to our commodities reporter who brings us live from melbourne. david talk about how some of these metals are in overbought territory so can this last? >> as you said, gold and silver have been among the main beneficiaries from the turbulent spark by the vote in the u.k. to leave the european union.

rose above, silver $21 an ounce on monday for the first time in two years, gold also yesterday was close to a two-year high. as you say, the question is, can that continue? >> david presented the bearish case. the contrary view is that yes it can. there analyst suggesting that as long as the market continues to price out rate hikes by the fed reserve in the u.s. that the metals will continue to benefit from that safe haven demand and the prices can continue to gain demand. they are both performing well also on that speculation that they may -- there may need to be further stimulus from central banks in response to that decision for a potential brexit. >> how about the precious metals producers? are they sing the miners, or are

we seeing the miners advance along with their materials? miners are outperforming the metals that produce. there are also benefiting from weaker currencies. if you look in a bloomberg intelligence index of the biggest gold producers that has risen about 75% this year. that compares to gold. the same is true in silver. silver is up just a shade at 60% in 2016. the largest primary silver producer has advanced about 176% so far this year. it's the top performer on london's ftse 100. you can see that those mining companies are getting a huge boost this year. >> let's talk about base metals. we saw a nickel rise into the

highest and eight months after the philippine government, warning miners about environmental standards. what impact would that have? >> what we are is concern on the supply side. warned mininghas companies that they will need to abide by environmental standards or face potential closure. the country's own environment minister says only about one third of miners in that country probably meet international standards and the philippines are an important supplier. it's really an important function on the supply side and we are seeing concerns about possible closures that filter through into the price. it's getting a further boost to nickel but it was already kicked us one of the commodities that will be among the first to rebrand. we saw these collapsing commodity prices in the past 18

months. >> to japan now, the country's favorite messaging app was already on track for the biggest ipo and now it is even bigger. seeing raising a startup price amid all the market turmoil. why? >> the increased their price range to 29 hundred 230 ¥300 which would have it raise about ¥116 billion at the upper price range. the company has cited strong market demand and general conditions. perhaps this is not surprising considering how the japanese markets rebounded since the brexit. it is certainly a show of confidence. priceill set the final

july 11. >> it is a big show of confidence. since they announced the ipo last month, the timing went from bad to worse. >> if they did go to their original plan and enlist in 2014 they could've raised ¥1 trillion. of course 2014 is when facebook bot whatsapp. it probably will not get better on the one hand. the company has 218 million monthly active users. the number has that changed much. on the other hand you have companies like facebook messenger and whatsapp pushing into asia and their territories. you also have we checked which is a chinese giant who has pretty much reached the saturation in their own market. >> you ntioned facebook and we chat.

>> for an average whatsapp user, the line at would be bewildering because they have managed to build an entire ecosystem of services that range from on-demand taxis to be payments. job search sites, not to mention streaming media and various other services. this has been the business model for we chat as well in china stop you see increasingly facebook introducing -- introducing more and more services to come in line with what has already been available in asia. over the next years as more and more people by their first smartphone in malaysia indonesia and india, these three companies will do for the battling for market share. the neighbor'sg singer pop and chairs here in south korea which does operate a back line. good news for investors there today.

looking at some bloomberg first word headlines. the pound and its biggest to a decline in seven years as you can officials flag measures to mitigate the impact of brexit. the u.s. marked the fourth of july. chancellor's idea of lower corporate taxes in an effort to attract big banks from abroad. the eu mayn to leave not be final after all. thousands in the u.k. are calling for a second referendum and there are indications that the remain campaign would win. of hours, theuple senior eu official has said the u.k. could stay in the block if it changes its mind. the regulation commissioner said such an outcome remains possible. early trade down about 2.9% under the unit glow rand posting a jump in revenue for the third

straight month. same-store sales in june rose 4.5% on the year. the sale increase fell short of j.p. morgan securities estimates of a 5%-10% rise. >> but stock more about m&a right now. a big one is in the works here possibly. china international capital core are set to be in early discussions. it's good to stephen engle with more on this. nothing final. talks are private and persons familiar say they are in the initial talks about a potential merger. this would be fairly big news. -- there the big investment bank originally part owned by morgan stanley who sold their stake in 2010. it was also run by the son of the former premier.

it is pretty much known because it was the big deal broker for many of the chinese ipos including the banks as a co-arranger. it was known as the goldman sachs of china. the brokerage business has not done as well. in two dozen five it was number one and ranked number 23 as of last year. they are now potentially merging with china investment securities which is the number 17th-ranked securities brokerage company in china. it is more retail-oriented. link tosee icc is more the corporate client. high net worth individuals. potentially this could make sense. combined assets. u.s. dollars. >> you talk about how one is more corporate and one is more retail, could this be a good fit? we did to the shares of both --

murders on paper if they come to fruition often do look good on paper. we see the first shanghai securities lucas wong telling bloomberg news that this is our would be a good deal for see icc , i guess because of those different client bases that they are going to merge their. because chinese authorities are looking to make stronger financial companies. china investment mers together two of its companies under its portfolio. listed china galaxy securities in 2013. this could be another step along that same line. >> a lot of these big state-linked investment companies are a little related are intertwined in some ways. >> there are a lot of similar interests here.

i can shave the ownership structure of the shenzhen-based china investment securities. it's a hundred percent owned by the shoe agent investment. but they are a unit of the sovereign wealth fund the china. owns 28.4%. there is some interconnection. coming up, time for a turnaround. find out whether ubs believes we may see signs of economic recovery in the second half of this year.

the latest first word headlines. saudi arabia was hit by three suicide bombings on monday.

one was at the u.s. consulate extending a wave of attacks that his killed scores of people over the past two weeks. four people died when another bomber killed himself outside the profits mosque in medina. two more attackers are themselves up in -- blew themselves up in an eastern city. q1 loop says -- hu wan lu says he was convicted -- he is the latest high-profile target of an it corruption campaign that has ensnared more than 100,000 official since she jinping came to power. ping can to jin power. vietnam says that it infringes ,n its sovereignty understandings made between the

two countries and it violates international law. vietnam says they should cancel the exercises and stop threatening regional security. i am haidi lun this is bloomberg. >> asian stocks returned to pre-backs -- pre-brexit levels in monday's trade. but spring and calvin day, the regional cio for southern aipac at ubs wealth management he joins us live from sin of her. see the calm after the storm. you're also calling 2016 the turnaround year when it comes to inflation and exports. where are we going to see this recovery and what will be this inflection? >> we believe the second half of the year is likely to be better than the first half for two reasons, firstly because oil prices have recovered from their lost in january and to the

second quarter for the second death for the u.s. economy has owns been its best quarter of the first quarters in the year. the first quarter has a was been the weakest in the second quarter has owns been the strongest. we are hopeful that the second half this year is likely see an improvement in the u.s. economy. we've also seen a nice recovery in the eurozone as well. clearly sentiment has been affected. >> we still see party of headwind before brexit. talk about china's slowdown. the u.k. referendum this kind of overshadowing those risks and the last couple of weeks. is this the calm before the next storm will stop or a central banks going to be the only defense? >> i think you have made a very

if theint that once and u.k. invokes article 50 we're likely to see volatility returned to the market. we think the debt is likely to be the midpoint. in the last couple of sessions has been talk about more coming in from the bank of england and the u.k. government itself. and it is what is really needed. that'll come down to about 0% and a 12 months. we see the bank of england cutting interest rates to 0% and the possibility that they might start qe somewhere in 2017. if that is the case we think are probably risk assets valued by this point in time given the fact that central banks and governments will have no choice but to putting a lot more stimulus and stimulus is something you are likely to get given the fact that they yen has been extremely resilient.

>> i know you mentioned you see positive returns for u.s. equities and you like european high-yield debt. in this region you're overweight china and india. how does -- the governing the worst performing market this year to the best performer post brexit? we still see some headwind when it comes to pmi data this week as well. isi think were china concerned what we are looking for is the stability where the macro -- we are not going to see a very strong or sharp quick recovery at this point in time but as long as the macroeconomic data does not point to further slowdown the chinese economy than we are fine stop china ironically has become a safe brexit happen.n it was quite stable and up in the last couple of months. we do think that for china to actually become the

best-performing markets in asia, and improvement are the numbers is clearly warranted. at this point the chinese government is ready to extend more stimulus if it is needed but we do not think it is needed at this point. we think the metric data is likely to stabilize. >> when you talk about that manufacturing deal that we did get to see manufacturing deteriorating slightly faster. and services also coming out later today but the official figures you look beyond the headlines, some suggesting this shows old-fashioned credit and investment stimulus. not really a rebalancing for the services sector. will grow likely slide again? >> growth is likely to slow down this year but if you're looking effectuate and numbers we might be missing the picture on a longer-term basis. to be as are likely

little bit more week going forward. unfortunately we do not have org-term data consumers sectors right now. cynthia because the chinese a relatively new. if you look at the overall economy even though the pmi economy is slowing down that only represents 20% of the actual economy. are only 20% of total chinese economy in the first place. that if brexit is not a big hit in the eurozone on the u.k. economy than the chinese manufacturing of us could pick up for the second half of this year. >> that is so much we appreciate your insight. joining us from ubs wealth management. next, with a look at what is help halt the plunge.

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david: these are your fx headlines. it's very quiet so far. the currency market's has major smoothing in a very tight range. the euro is one to watch. the market euros in on the italian banks and the potential trouble that lies underneath the hood. roughly four hours from now, reserve bank of australia is scheduled to announce latest policy decision. it looks like a done deal but i guarantee those guys will be watching for changes in the language, especially to signal that rates may come down in august. more revised forecasts on cable

as hsbc and unicredit's easterling at 120 by year end is very much the consensus at the moment. deutsche bank is coming out with their own forecast. it's roughly about 10% weaker from current levels. together willing stop we've over 80 strata of just strategists and analyst. we take the number and take the median and that is your green light right here. since exitrst time that forecasts is below where the currency is trading. forecasts come in and get revised lower, this should come down as well. storiesthose are the driving your -- yvonne: the seal of approval. the london stock exchange shareholders may have improved stte met -- may have approved

the deal but i look at the hurdles ahead. german regulators are not so keen about this merger, in particular this is after complications of a brexit fallout and whether they should have their headquarters located in london. ♪ get ready for the rio olympic games

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party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. yvonne: we are half an hour from the opening of trading in singapore. it looks like a down day for stocks. there is a cut back after last week's post-brexit rebound. with silveradvance jumping as much as 70% -- 7% for the first time in two years. gold rose to a two-your high as precious metals benefit from currency falling due to u.k. voting to leave the eu.

there is talk of a merger between two chinese brokerages. china international capital core is an discussions with china onestment securities strategic cooperation and business opportunities. there is no certainty of a deal between the two companies. cicc raised more than $800 million from a hong kong ipo in november. japan's most popular app has raised its target of the ipo to $1.1 billion. the hike is due to strong demand and market conditions as it prepares for what could be the largest tech ipo of the year. lion is offering 35 million in newwhen it delays york next week after delaying to go public two years ago. global news powered by more than 2600 journalists in more than 400 countries. this is bloomberg.

dark it's our -- our kids are warming up. we are seeing the opposite of what we saw yesterday. it is hard to find a driver. it is busy in australia. we are seeing a pullback. the overall benchmarks are pulling back after hitting roughly a three-week i on monday. the story within these markets when you look at precious metals, have a look at where gold is an silver at the moment. gold is 28% higher for the year, $13,051 -- $1351. it is back at 2011. the momentum of the by has pushed up prices too fast. that might be indicating a

short-term correction. that is what it is signaling. a few things we are watching. you have a lot of data coming out. australia, things like retail sales, trade, the little thing called the rba requisition coming out midday. and about 1:15, we get the pmi.t from china have a look at some of the big movers we are seeing in australia. you see the likes of bucharest mining. gain of 1.5%. western areas, another thing you want to follow when it comes to commodities. nickel prices. that is a nickel producer in australia. we are looking at an eight-month high. the new philippine president coming out and warning mi ners in his country to follow the rules or he will shut

them down. it just so happens the facility is the largest supplier of nickel ore in the world. supply concerns pushing up prices and stock. yvonne: thank you. the planned merger between the london stock exchange and deutsche bursa has been given the green light after a near-unanimous vote. hammering out the details of a deal is proving tricky. really, brexit was the reason why things are complicated. founders is one of the of the work, but it is not entirely. one of the sticking points is a headquarters location. finley has said german regulators said they do not want the headquarters of the combined company to be based in london. they prefer to be based elsewhere. preferably, probably in

frankfurt. unfortunately under the current plan, the idea is to have operating headquarters in london and in frankfurt for the two stock exchanges to have a holding company based in london and a german ceo, the current head of the german stock exchange. that was the plan that they were voting on. that does not allow for the headquarters to move to another location. deal and14.3 billion shareholders did overwhelmingly vote for it. yvonne: 99.9%. rosalind: which is pretty much all of them despite the competitions thrown up by brexit. they did decide to go ahead, which shows that overwhelmingly they thought this is a good idea. even though this issue of headquarters has not been resolved. it is something that needs to be hammered out. yvonne: you mentioned frankfurt as one possible location. where could we see a

headquarters location? rosalind: it could be somewhere else in the eu region. the netherlands comes out as a possible option but this would only go ahead if the deal is voted on and goes ahead in its current form. it goessche part of forward to investors, who will vote on it to succeed and they have until july 12 to do that. done,they get that they cannot consider a move to the netherlands yet. this issue will hang over the entire deal for a while. moving the headquarters out of the u.k. could be a bit of a nonstarter for some shareholders. at a meeting yesterday, one investor asked for reassurances the headquarters would not be moved out of london. this could be a big sticking point going on. yvonne: thank you so much. take a look at what we are following this morning. : the new ceo says the

merger will keep the head office in london, despite the u.k.'s decision to leave that european union. the so-called brexit vote drove the pound to a 30-year low and sent shockwaves through the global markets. move outand hbc might of the country. announced an 11% drop in share sales which could be the biggest in the world this year. it shows a net income of $1.9 billion. sachs, bank of america, and jpmorgan are fronting the listing which could reach $8 billion. wants to raise.

production by 30% to about 2 million barrels a day and join other refineries who are racing to add capacity as consumption rises. expectsrnational agency india to pass japan as the third-largest oil user. too completes its visit jupiter. in the next few hours it will slip into orbit around the planet. the maneuver will happen automatically with no help from earth. juno's mission is to map the surface below. that was a look at the stories making headlines. yvonne: the reserve bank of australia meets today and all that got from the survey by bloomberg is expected them to keep the cash rate on hold. let's go to paul allen in sydney. i know the story was taken before this weekend, the

inconclusive elections kind of begs the question if that is going to likely change now. paul: it is an interesting hypothetical, isn't it? the survey was taken after the leave theted to european union and has firmed up. now we have 100% of the 27 economists surveyed expecting to keep the cash rate on hold at that record low 1.33%. we had a confusing election on the weekend. vote counting is resuming today. wait for theant to dust to settle around that before it includes it in its policy statement. one thing is certain from the electoral mess. it looks like the onus to promote growth will be on the reserve bank. yvonne: fiscal paralysis as some call it. if it is not july, i guess it is

august. we have seen positions reversed with economists forecasting a cut. paul: that is right. the reason is we will have the latest consumer price pattern out that entered if we think back to may when the rba cut to it is because a few days earlier we had first-quarter consumer price index and that showed a contraction of 0.2% for the quarter. that was the first deflation in seven years. the rba is an inflation-targeting bank and they felt they had to act. the next cpi readers on july 27. the next r.b.i. meeting is august. that is why economists think if we see a cut, that will be when it is. yvonne: thank you so much. menacing maneuvers in the south china sea. vinam objects to beijing's latest military exercises in the

region's disputed water. ♪

--nne: china and vietnam naval drills will take place in territorial waters and they want beijing to cancel them. china flexing his muscles again. muscles: flexing its and making tensions up. the drills start today and and on the 11th and that is the eve of the ruling in the hague. tribunalnow how the sees the spat in the south china sea. we know though that whatever the outcome, beijing has said it will not recognize it.

talk about flexing its muscles. conductedregularly exercises in the area, part of exerting its claims which override those by several other brunei,s like malaysia, and thailand. they are the parasail islands. vietnam has called foul and said china is infringing vietnam's sovereignty which goes against international law. if you think china would take heed, think again. yvonne: china not backing down. it's a south china sea fast becoming a flashpoint? haslinda: there is a concern it is. there i concern it will be global consequences should or when that happens. countries have fought for territory in the south china sea for centuries. what is new is increasing tension.

china has been conducting naval patrols. it has been building islands and runways in the south china sea. some say it has become a game of chess somewhat and that is because the countries rivaling china are backed by the u.s. the u.s. says their interest in the area is to protect the area as u.s. trade comes to the water may. you can only hope that cool heads will prevail. yvonne: thank you so much. a lot on that international court ruling coming out from the hague. heidi: three former barclays traders have been convicted, but the jury could not reach a verdict on two others. four years ago, barclays but a 385 million pound fine for its role in the scandal. that led to an overhaul of the

banking industry. ceo bogdanovich lost his job. supply outweighs -- taking second quarter jane's close to 7%. they fell almost 16% last month after their lowest in five months. elevated displayed an bus that could be the answer to crowded streets. it straddles the road and allows people to pass underneath. it could reduce congestion by 35%. it runs on rails which would cost about $20 million, the fraction of a bill for a subway route. the bus is expected to come into operation next year. day innews 24 hours a more than 120 countries. this is bloomberg. has not been a good

year for hedge funds. the $3 trillion industry is heading for his worst performance of 2011 due to to japan'stility due moved to negative interest rates and the brexit. what are we seeing here? start to is a tough the year for the hedge funds. marks are down. it has been a roller coaster ride after the brexit decision. we are seeing hedge funds overall in asia down about 2.4%. it is heading for another good year. some strategies are performing well, but it is not a good first half for the hedge fund industry. some hedge funds are particularly affected. capital,em is street based in tokyo.

he lost 25% in june after the brexit decision, the unexpected outcome, bringing his year to date returns to -50%. how did that come about? this is a fund that amplifies the movement of japanese leading .opics by the use of options the hedge fund was caught offguard by what has happened. it was down 7.3%. the hedge fund capital was up 64% last year, so definitely it is hedge fund writing on high volatility. other hedge funds have performed very well on june 24 the day after the, exit decision. singapore, he gained 6.2% that day, mainly on good performance by bonds. yvonne: we are also hearing that

hedge funds are joining platforms. tell us more about that. hedge fund needs a lot of infrastructure. they need compliance officers, they need the space itself. there is a lot of cost for those hedge funds. they can save a lot of costs by joining a platform. through this platform they can delegate or outsource most of the functions of those capabilities. hedge funds can save as much as 80%, 90% of the cost. if we estimate annual costs coming in for operating for a $700,000 pert is asr so they can save as much $550,000. that is quite a lot of money. the other thing is why hedge funds, and we are seeing bigger hedge funds joining the

platform. the other thing is platforms are gaining a reputation. young, fromve been 5-10 years ago, and are often seen as a refuge for smaller hedge funds that cannot survive on their own. big institution investors are seeing hedge funds platforms as stable right now and that is why they are seeing this development gaining traction. bigger hedge funds are joining platforms yvonne: in asia. yvonne: is it something that is only specific to asia? klaus: we are seeing that as a global trend. we are seeing platforms in the united states and in europe. there is one specific to asia. especially southeast asia. different environment which makes it difficult for a hedge fund to operate in and the platform can

help a hedge fund a lot by dealing with this different and complicated legal aspect. this is a complicated aspect for asia which might make hedge funds a bit more amenable for the hedge fund in asia. yvonne: a little bit upbeat. thank you so much. corporate japan is already counting the cost of the u.k.'s decision to quit the eu. ♪

yvonne: commodities doing better than stocks today as post brexit bing a little bit. we are seeing that get erased. we have seensses since the u.k. referendum and it seems like this is become. a further downside in that calm. let's go to seoul. katze seeing a down day, down 0.2%. openes there also will lower today.

corporate japan is counting the cost of the u.k. decision to leave the european union. they are revising annual forecasts. from tokyo.joins us it has been rising all year. why did brexit proved to be such a shock? dave: brexit put us through a threshold at the biggest companies looking at an aggregate rough it as these levels were headed for a decline for the first time in four years. abenomics.ines it undermines the market support that had been based on the idea that profits had been near-record last year. in many of the largest companies, profits were near record levels. a lot of analysts have looked at their structure and said around

105, you cannot get a gain for these profits. if it gets closer to 100, we are talking about an aggregate drop in profit somewhere between 3% and 4%. yvonne: ok. brexit could not have come at a worse time for japan. what does the decline forecast one for abenomics? dave: ics ist said that aabenom finished. they can point to profits. they are near a record. the biggest companies are doing great. they are expanding. even though they were not expanding in japan, the biggest companies had said they had been under pressure by of a -- by abe to raise wages inside japan and they had not done that. they were thinking, look, the yen could go back up. when that has happened, their strategy in a sense not to

expand in japan and not to raise wages has been proven correct. it looks like it is going to be even harder for abe to push these companies to spark growth in japan and they will shift their focus again to going outside japan. likely that surging yen to weigh on japanese's exporters. are some of the companies responding to this in any way? dave: they are. we talked to the company today and said we are looking at moving a warehouse if tariffs go up because of the eu. we may be moving. other companies are looking at moving production offshore. yvonne: thank you so much joining us from tokyo. that is it for us at "daybreak asia."

angie: we are counting down to the rba decision or perhaps sticking with the status quo. and all 27e rate economists polled by bloomberg expect that to remain the same. we are also expecting trade data at 9:30 and the decision a couple of hours after that. china merger, cif. we are watching this. china in possible merger talks with cif. from mergers to ipos. let's talk about it. we have hong kong's number one spot for the ipos in the first half of the year. what about the second half? that and more coming up on "trending business." ♪

angie: it is tuesday, the fifth of july. i am angie lau and this is "trending business. we are going to be live in sydney, melbourne, and others this hour. here's what we are watching. stimuluson on more sending gold to levels we have not seen since 2014. we ve merger talks. two chinese brokerages are said to be in early discussions. they have $28 billion of