tv Bloomberg Daybreak Asia Bloomberg September 6, 2018 7:00pm-9:00pm EDT
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>> 7:00 in hong kong. welcome to daybreak asia. having a look at the top stories on friday. markets are set for a seventh straight decline. chip demand maybe dropping. emerging market stocks slumping to the edge of bad territories as fear of contagion spreads. i'm kathleen hays in new york where it is just past 7:00 p.m. on thursday. investors over the latest act in the trade drama. president trump expected to slap massive tariffs on china and jack ma becomes china's richest
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man. we read -- we may be forced between alibaba's arise. force behinde alibaba's rise. there is one big story today for markets around the world and that is the $200 billion worth of tariffs that president trump may enact on china. the question is how big those tariffs are. 25% tariffs could result in a 5% drop in stock prices. but look at the major market indexes because despite all this, stocks held up well. managed a gain of 1/10. nasdaq it got hit, intellectual-property concerns with china and semi conductors, a concern this could slowdown. that was the biggest loser. just five hours away
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from those tariffs kicking in, tech responsible for declines we saw in new york. looking at what's going on with nikkei futures, before trading gets underway, a little to the downside. we will look again at this red arrow story. kathleen: let's get a closer look at the risk off mood on wall street. heavy selling in semi conductors pushing the nasdaq to its third straight decline. the threat of tighter regulation on social media adding pressure. bloomberg is following all the action. joining us now with the jobs report. >> we have mixed economic data today, with hundred 90,000 plus 190,000 plus jobs. let's look at the snapshot. chip stocks led the decline. look at the semi conductor index down 2.5%. two big stocks dragged down and
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a lot of suppliers. the nasdaq taking a big hit. that is the tech heavy index within the nasdaq, down for a third straight day. tech board dropping the most in several years as companies themselves talk about weakening industry demand that wallops the chip suppliers. twitter and facebook, call it a hangover from the senate testimony. renewedis -- concern is that regulatory firm or has been lit. let's take a look at the other major movers. asia analysts pointing out slowing business activity in macau. below expectations. that is a huge part of profits. one of several online traders has been under performing, dropping to their lowest level in months.
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one of the pot stocks has been on fire, not so much now, tilray. the bottom stock is an international sales company. it has clearly in impacted or will be by these tariffs. after hours, another negative, gamestop, the troubled videogame retailer reporting disappointing profit as pressure to management to manage a sale. more warnings for you. you heard about ubs, this is goldman sachs joining citigroup in saying it's below their market indicators are flashing red. this flashing line is that indicator heading toward the point where it's signals for the next five years, we could see less than returns. that is the latest. rishaad: possibly a bear market for chip stocks.
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regulation.d what else is out there as a key issue? su: em stocks on the cusp of a bear market. they are concerned about contagion. gtv is were you can find our library of stocks. currencies continue to tumble. look at the slide, that adds to atmosphere. a large drop and the concern was twofold. a softening outlook for the rest of the year. citigroup local technology conference in new york and a morgan stanley analyst underscoring the memory chip market demand is weakening going to the fourth quarter. looking at stocks and the supplies, a board of declines here. large declines, 8% some of them. week friday for a
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-- a weak friday. rishaad: can nafta be nafta without canada? the rest of the first word news with jenna dagenhart. that. more on key democrat figures are threatening to block a proposed nafta deal if they win control of the house in the midterm. they say they may reject any rewrite if it does not include canada as well as raise wages for american workers. thes are continuing between u.s. and canada look president trump has already threatened to push ahead with only mexico. who meth korean envoy kim jong-un saying he wants to remove nuclear weapons from the divided peninsula during president trump's first term. officials say can told them he will accept measures to curtail its nuclear program and wants to bring an end to the nuclear -- korean war. president trump responded with
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an optimistic tweet but the state department says much remains to be done. kansai international airport partially reopens friday for domestic flights. airportthird largest was flooded by a typhoon earlier this week after a near direct hit. bridger crashed into the that is the airports sole link to the mainland and it is not clear when full operations will resume. nike shares rose a second day, recovering more of what they its as billboards for introvert -- it's controversial ad campaign go up. nike has a raised $3 million in market cap but now apex marketing is valuing the media exposure at more than $160 billion. they say 40% of that publicity is positive. global news 24 hours a day over the air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jagged -- i am jenna
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dagenhart. this is bloomberg. rishaad: some of america's most prominent tech companies have made a last attempt to change president trump's mind on trade. urged thetter administration not to slap $200 billion of tariffs on china. washington reporter greg sullivan has the story for us. what did they say and other likely to have a receptive year -- ear? greg: tech companies are pushing back on trump as he eyes tariffs on $200 billion of chinese goods. the public comment. on this -- the public comment round of tariffs expires today and trump could be poised to move forward as early as tomorrow. includingompanies cisco and hewlett-packard are pushing back, saying tariffs
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could increase costs for consumers and delay the rollout of new technology. business groups have been opposed to tariffs. that all tariffs -- all businesses are opposed to a tough line on china, but they happen where he of an escalating tariff trade war. once again, we see them pushing back against the administration. negotiations have begun again in d.c. what are the chances we get a deal here? donald trump was saying two days ago that we could get one within the next two. greg: that is right. president trump signaled a deal could be at hand shortly. both sides have signaled optimism. canadian foreign minister chr freeland was negotiating today. she said that progress is being
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made and both sides were committed to getting a deal. there are outstanding issues between the two countries. there is a dispute resolution mechanism within the broader nafta framework. the u.s. wants to do it with it and the canadians say that is a nonstarter. u.s. access to canadian dairy markets has proven to be an issue that both sides are stock over. whether they can make progress remains to be seen. that is what negotiators are trying to break through now. even if they do make progress, any deal would have to be approved by congress. that would likely to be next year, after a new the elected congress takes charge. kathleen: president trump is full of surprises for global leaders and now we have learned he may have a new target for trade tariffs. levied on somebody who thought maybe he was trump's friend. what is going on? surprises everywhere. president trump apparently called james freeman of the wall
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street journal who wrote in opinion piece saying that after he was on fox news giving credit regulatoryident's policies, president trump called him and had a discussion. mentioned that trump himself said that while he described the relationship with japan is a that could beaid threatened when he tells them how much he has to pay. a continued focus on trade deficits on the part of president trump, even with an ally like japan should come as no surprise. president trump has imposed tariffs on japan and threatened automobile tariffs. japan has salt a good relationship. have worked together on north korea but apparently trade tensions still exist. kathleen: with friends like this, who needs enemies? greg sullivan joining us from washington. still ahead, our exclusive with
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rishaad: this is "bloomberg daybreak: asia," i have rishaad salamat in hong kong. kathleen: investors bracing for tariffs on china with warnings that duties could tumble 5%. let's discuss that with clarfeld financial advisors partner and hans.ng director, michael what do you make of that? there could be a 5% drop if tariffs are imposed. -- market they say, if they
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if that larger one occurs, they will be surprised. could it be that bad? jack: michael: i think the more important thing to pay attention to is where's the market this year? this quarter, we have x of the rated as much as 10% -- we have accelerated as much as 10%. as you think about moving forward, we are in a weaker season. september and october 10 to be down. wherecoming into a period we have gotten most of the positive news from the economic data and earnings and it would not surprise us if we were faced with some of these headlined trades. kathleen: ubs says that after buybacktial shock and blackout. , once the earnings season ike country is that with
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the expectation that this tit-for-tat is not going to be over anytime soon. michael: here is another interesting stat. i mentioned september is a -1% month. that has to do historically report markets did up to that point. 1926, look back to markets from january 1 to the 31st were positive and that was a slight positive month four point -- month with 4.5% return. the average return to september is down 3%. if you think about outliers like 2008 or 1987 i could impact things, but very often, what is going on in the summer could impact the markets in september. looking at all this, i want to bring up a chart from our gtv library. it looks really obvious in many regards, but i am going to go
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through this with the audience. turquoisee s&p 500 in and the goldman sachs bull bear market in decatur, which is flashing red. suggesting we are due for a correction. this has reached elevated levels. something has got to give. we probably do need a gut check. we seem fairly healthy at this point. what you see is moving forward post any correction, the direction of earnings, in the balance of the year is still positive. we will likely level loft in 2019 because year-over-year cops become more difficult. there is a 94% correlation between the direction of earnings and overall equity markets. we are recently constructive. it does not mean that returns will continue at the same pace we have seen the past several years, but when you look at the flipside, fixed income, many are concerned about rising rates that ultimately when you look at globally diversified folios, especially balanced portfolios,
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there is yield to be have at a front end of the curve which is a different environment. cash is no longer a dead asset class. if you think about a diversified portfolio, you may see a pullback in u.s. markets were modest returns moving forward, which is the basis of what goldman is saying. flatter return tales but lower returns in general. when you think about the fixed income side of the equation, the opportunity is a little broader for a diversified portfolio because it builds off of a risk-free rate that is not the front of the curve. you can start generating with a -- if weread product start to see a blowout in emerging markets, those spreads are becoming interesting. there will be opportunities for investors and it may not be as robust domestic way, but there are other segments of the market that can theoretically boost
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concerns. -- boost returns. rishaad: john williams of the new york fed was talking about a puzzle. this is something that we have talked about for ages. we have these incredibly strong implement numbers but no wage growth. this is the puzzle. why? michael: you're looking at an economy that has been transitioning, you have had the labor force aging and democratics has a large impact. is, a lot ofment economic theories look at where you seeics inflation pick up once you reach full employment. and we have participation rate relatively low and new entrants into the weber force in conjunction with many retiring higher wage workers, where you have millennials entering the workforce at lower wage levels, that is a big deal. kathleen: concern seems to be in markets about something else. that is the yield curve. it may be that the market is saying, we are pushing that
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aside and saying you're willing to raise rates when wages are flat and inflation has gone to its target. let's look at another chart here. it shows that history can repeat itself. the spread bars -- these red bar s are recessions that happened after the yield curve inverted. this curve is so flat it could invert. we are keeping an eye on the dual mandate, inflation and employment. jen williams says we don't have to worry about a recession because they are pushed yields down artificially. does the market believe that, do you? michael: i think the difference this time is it is very dangerous. i don't think you can discounted because there is validity to it. we have a huge differential between u.s. and overseas rates. there are a couple elements. when we are emphasizing is that
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while you tend to see recession occur after the inversion, we are not there. there could still be some time before we invert and you tend to see after an inversion, it could be anywhere between six and 24 months where you see strong returns. occurs, wenversion tend to see some leeway. this time may have nuances to it because many people discount the fact that foreign central banks will remain at these levels. i saw a little chatter about japan starting to move and all the sudden yields steve and. i'm not convinced that we will invert in the next months. kathleen: where's the s&p 500 in 2019? michael: it should be higher by the end of this year and modest single digits in 2019. kathleen: thanks so much. clarfeld financial advisors cio, michael hans. you can get a roundup of the stories you need in today's edition of daybreak.
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kathleen: this is "bloomberg daybreak: asia," i am kathleen hays in new york. rishaad: i am rishaad. in exchange for an in on the ipo, let's get to san francisco. michael, what is the strategy here? michael: the strategy is to hang a big carrot in front of the banks. an incentive to increase capital. the carrot is the ipo of softbank mobile, which will be the largest ever ipo on the planet perhaps. alibaba's at out
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2014 offering. there were $261 million in fees given to a visor's -- to advisors and the top banks got $40 million each. that is a lot of carrot. that is why they might be willing to essentially -- for a stake in the ipo proceeds -- might be willing to do other business with softbank. rishaad: what about the conglomerate itself? what part of it might be in need of loans? michael: that is a hard one to say. we don't have reporting on that at the moment. part might be portfolio companies in softbank's vision fund. that is a $100 billion fund as we know. there are companies there, some doing better than others. certainly, softbank has had a rowan companies like we work --
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wework. it is important to mention that a softbank spokesman said there is no truth to this. i want to make sure that is clear. kathleen: what are the chances the banks would agree to make these loans? michael: the incentive for the banks is that carrot and a stick, that they do not participate in this program, they might be excluded from it. softbank mobile would be a large transaction that others would be interested in it. episodes, such as snap's ipo, bank of america did not get a share because they do not want to participate in some of the requirements.
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whether the banks can do it also depends on their own internal procedures. certainly, you can't make a loan at one of these banks by saying it is part of a bigger deal. there are standards that have to be complied with inside and outside. kathleen: thank you so much. bloomberg's u.s. editor michael hytha. bloomberg has been told the cbs exit is developing an package for its president. he is accused of sexual harassment. the board is in separate talks to end with its shareholder, nationally movement -- national amusements. gained on the news of the deals. rishaad: british is investigating the theft of credit card details from customers who used its website and mobile app.
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rishaad: 7:30 a.m. in hong kong. 30 minutes from the asian market open. in new york.0 p.m. hot and humid. markets closing a mixed s&p 500 down about 4.4%. wortht for $200 billion of tariffs. i am kathleen hays in new york. rishaad: i am rishaad salamat in new york -- in hong kong. this is "bloomberg daybreak: asia." let's have a look at what is going on with trade. likely to ratchet up in 4.5 hours. hours.counting down the
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try and the u.s. are counting down to potential tariffs. we could see up to 25% to these on $200 billion with of imports. the public consultation period expires at midnight or noon in beijing. the escalation could knock 4/10 of a percent of global growth. ubs says wall street could take a hit at president trump slaps tariffs on china. with the decision hours away, the bank says equities could plunge 5% if the administration does impose those duties. that would be biggest retreat for stocks since april. ubs said such a scenario has not been priced in by the market. twitter has suspended conspiracy theory it's -- conspiracy theorist alex jones and his info wars site. they said they violated
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harassment policies. a related to abusive behavior. apple, facebook and youtube last month purged content from the right-winger. campaigning begins today for the leadership of japan's ruling liberal democratic party, with odds on to win. a newspaper says almost 90% of lawmakers support giving him a third term. on a fraction back his defenseer, the former minister. the vote is ever 20th, with abe on course to become japan's longest-serving prime minister. global news 24 hours a day over the air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna dagenhart. this is bloomberg. kathleen: thank you so much. not to get more on what we should be watching as trading gets underway, adam haigh.
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so many investors, we are finding it impossible to call the bottom of the em routes. who wanted to jump in except for a hedge fund manager who said it is coming to an end. what is he watching? i think at this point in the cycle, with everything going on this week and this year in emerging markets, it is a very brave call to call the bottom in any emerging market. especially. there is so much debate over the valuation discount in some of these markets. certainly, he is calling the bottom in some areas and as you mentioned, it is an interesting call because he was president and his call at the top of the market when the ball had run its course through january. he called the top back then. as you can see, this chart shows
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how well he has done. what he is saying is a comes fed to whether or not the has a foot on a break in terms of the timing of monetary policy. that is beenle, the key this year, but becomes more key now, given how much turmoil we have had. not justen across turkey and argentina and indonesia, it has been across the whole space and we have seen that stability in recent days. still, for a lot of people, it is too early. they talk of catching a falling knife and that knife still can sharp. -- still looking sharp. about some talk assets, gold had a bad time this year. it is not being seen as a haven. tell me about the yen. i think it is one of the few
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currencies to be notching up gains. adam: not the kind of gains you might expect, given how much uncertainty there is. withlitical turmoil u.s.-china trade relations where the emerging market selloffs we have been seeing. the traditional flight to safety that you would expect with the japanese yen doing well and the swiss franc. moreare starting to see with these currencies. we have the greenback being one of the main beneficiaries of the haven trade. generally happen been performing well. as the chart shows, we are starting to see a pickup in yen and the swiss franc. might havee, they been holding back some traditional safe haven moves. u.s. growth is continuing to do well this year amongst heightening from the -- hiking from the feds.
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that has put a damper on some of these traits, so if we see any of that wobble overnight, we get tonight, ita back made move back into some of these currencies. adam haigh, bloomberg markets editor. don't forget to check out our gtv library for those charts. trade and thisto looming escalation in u.s. china trade conflict. president trump may pull the trigger in just under 1.5 hours. $200 billion worth of imports and beijing says only forced to retaliate. north asia correspondent stephen engle is with me now. technologyrominent copies saying don't do it. will it be a receptive oval office? stephen: i find these comments more interesting than any response we would get from china.
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as far as ahead of these tariffs. we know what china will do. they will retaliate. what is interesting is what these u.s. tech companies are saying, what retailers in the united states are saying. they will perhaps get affected most drastically. indeed, donald trump overnight getting an earful. he can't really get in your full from a letter, but he got a sharply worded letter from cisco, hewlett-packard and other top tech companies saying, this is not a good idea. consider this. i'll summarize the letter by oning, increasing duties telecommunications equipment, the administration would raise the cost of accessing the internet and slow next-generation wireless technology. rishaad: why bother at the end of the day? haven't they heard what is coming out of the press lately? this is stephen:stephen: -- this is going in effect to consumers. every thing from semi conductors
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to baseball gloves. a very american thing. the telecommunications equipment. retailers are against this. walmart and the like that have bought these products over the years from china to sell to the americas, it will be a big tax on the americans. the national retail federation has come out sharply against this. saying, tit-for-tat tariffs are counterproductive. they have only produced increased costs for american businesses, farmers, importers, exporters and consumers. rishaad: that is everybody. kathleen: our bloomberg news team in china did a terrific story about auto-parts makers in china and how concerned they are about these tariffs. this market is irreplaceable, they say. is there pressure on the chinese side similarly to take another look, do something?
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we know it is on both sides to save face. absolutely. a lot of these low-margin manufacturers across the border ,nd out the window in china when these tariffs come on, they have to take the hit. or pass it on. auto-parts manufacturers in other parts of the world face this problem as well. in canada, there are a lot of parts manufacturers. that stretches to the nafta issues and whether trump will extend those tariffs on auto-parts from other nations so there is a lot of issues. as far as china's response, they have been tightlipped other than to say they will retaliate to the united states actions if it does happen at midnight tonight. retaliate ing to line with u.s. actions, but the problem is the united states far more products than
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china buys from the united states so they can't necessarily retaliate in kind. they could perhaps to other measures, restrict rare earth , thats, limit purchases would not necessarily work to their advantage. they could do market access restrictions that they will never publicly say that. we will have to see. thanks, stephen engle there. in michael hans, -- let's bring in ethan harris, merril lynch co-head of global economics research. letters to the president will not stop the trade war. what stops it is when we feel real pain here. that could be equity market correction or consumer complaints about rising prices. as we talked about, the key is not so much what china does to the u.s., but how tariffs
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reverberate back onto u.s. consumers. rishaad: and ultimately the ballot box. ethan: up until now, there have been few consumer products targeted by tariffs and now we will have a test. we will find out whether tariffs really only heard the producer or the consumer as well. i think that is the key, why $200 billion is likely. that is also why $200 billion maybe the peak of the trade war. this also has a necessary consequence of strengthening the dollar. claiming the u.s. is weaponize in the dollar. what do you make of that? ethan: what is happening now is u.s. policy in every regard is dollar positive. you have easy fiscal policy, a tight monetary policy and a standard model of the economy that is dollar positive. then you do trade wars, which create global uncertainty, which
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benefits a safe haven currency. the u.s. is fighting its own current because the policies themselves are creating dollar strength. go ond: how long does it for and how does the world of different in six months? ethan: what we should be looking for is less about a commentary in the press and the back-and-forth discussion and more about whether they are visible signs of pain that change the calculus of the trade war. the two sides are going to keep boxing until somebody says i have had enough and we need to reach a compromise. up to now, it has been shadowboxing, particularly from the u.s. there's been no pain in the u.s. economy and the impact on public sentiment has been very small as well. the $20 billion in tariffs is the first real test of that into that does resolve in some equity and someakness pushback from american consumers, that could signal the beginning of the de-escalation. we need to first see the pain
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before the game. , you are ethan harris mentioning what this could be for markets. i have a great chart from our library. it says u.s. equities have been a place to be. the u.s. has birkenau, china going the other way. you have said this trade war is going to be like a cold. i love this, it includes periodic flashpoints but continues indefinitely. if this continues indefinitely, it could and potentially will take this big nice move we have seen in stocks or thwarted. or will it? is the economy war in the senset never completely goes away. he pushed here which is being driven by u.s. trade deficits, that will not change. to learn to live with at least a low-level cold war. the real question is whether we can get through one of these hot phases we are in now. escalatingke we are
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into a hot. with the georgia billion dollars in tariffs in the risk of a follow-up with more tariffs. i don't think it ever goes away. i think it is kind of the new they will beer tensions between the u.s. and its trade partners, with what i am hoping for is the hot phase cools off into the new year. kathleen: the national federation of independent business had one piece of its survey out today. in 45 plans, highest years. you mentioned u.s. business and consumer sentiment has held up well. does this encourage the fed hike in september, december, and possibly next year? it is a striking in the midst of a trade war, that is what everyone is expecting. i think the momentum in the u.s. economy is quite strong. by fed has to be impressed both the strength of the data and the resilience of the
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market. the ability of a market to absorb a lot of potentially bad news. it will take a lot to get the fed off track. a lot of economists talking about all you need is a shock here on the sidelines. i think they are bias -- their bias is to keep going. it is only if the trade war has serious impact, not just a one-week correction in markets to businessding confidence, only if it starts to slow the economy down it will stop the fed. kathleen: where you come down on the yield curve? it wouldiams saying not be worrisome for the yield curve to invert. ,nless something that happens they are watching inflation and jobs, looking good and he says, 10 year yields are lower because they have bought some a bonds. do you agree? is there a warning signal? ethan: i think he is right. this focus on the yield curve is
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overdone. when you look at the impact of monetary policy on the economy, you need to look at a broad measure of financial conditions. the yield curve slope is one of two dozen indicators that i look .t if yield curve inversion occurs when there are other signs of weakness, if that equity market, trouble in the housing market, banks cutting credit, if there tightening,a broad then it is an issue, but as williams says, the yield curve least half the time. the fed can't get excited about can signalr that now trouble halftime. i agree that this is not a -- it is but it is not part of a much bigger set of indicators. rishaad: we have not mentioned emerging markets. what is the danger from a we're seeing their?
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there? what we're seeing sure, they have their own issues at what pointbut does that have contagion come into play? ethan: right now, emerging markets are overwhelmed by three things. one is the fed tightening cycle, which on its own is not a big deal. the fed is hiking up half the normal pace in an environment strong u.s. growth in that is not dangerous for emerging markets. you layer on top the trade war in these idiosyncratic policy mistakes in a number of emerging-market economies and it is overwhelming the em space. i would think the em remains under pressure, because i don't think we are past the worst of it on the trade war. to get it to start to move into
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a broader global shock in slow growth, it will have to get worse. emerging markets don't -- they are a tail wagging the dog. emerging markets and global prices are difficult. it is easier for the u.s. to create a crisis. now, we have only made small changes in our forecast. we are optimistic on the u.s., developed markets, and it will take a good deal more trouble before we do a substantial -- rishaad: quickly, which country are you worried about? ethan: turkey. they have got to switch gears completely here. their policy mix is totally wrong. rishaad: people expecting disappointment which is a an oxymoron, but thank you so much. ethan harris, merril lynch co-head of global economics research. say your ambitions
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rishaad: in hong kong, i am results alone, this is "bloomberg daybreak: asia." kathleen: i am kathleen hays in new york. went from being an english teacher to a world renowned leader and china's richest man. now he is laying the ground for the future after alibaba. our china correspondent tom mackenzie asked him how he plans to make another global impact. i do a lot on education. education is so critical for the future. education, environment, these are the two things i focus on.
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there is no one thing that is the most important. the most important is everybody do something. tom: to what extent do think your identity as an entrepreneur has been forged by your first love, as an english teacher? jack: people to like me to talk china,ecause i speak in all of the forums, that is because i am a teacher. the only thing i can do is share. i learned so much from alibaba. i learned so much from the alibaba journey. it is my responsibility to share. whether people like it or don't like it, agree or disagree, it's ok. the thing is, you have to share, because society gives me so much , so much experience, you should not waste it. .hare with others maybe it is a professional disease i've got, teaching. tom: diniz teaching? would you like to -- do you miss teaching? jack: i miss it very much.
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i started business almost by accident. i think someday soon i will go back to education. this is something i have more confidence, i think i can do much better than being alibaba ceo. tom: that would be quite something. jack: i would love that. it is what i prepared the jack ma foundation. , people withachers their masters, kindergartners, all of these things i've been preparing for 10 years. this is something i to devote most of my time too. when i retire. tom: when can the transition be? jack: very soon you will know that. tom: this is a you stepping away from your chairman role to focus solely on the jack ma foundation with a focus on education? jack: yes. tom: would you work -- would you look at the bill gates model of giving away most of your wealth? jack: there are many things i can learn from him.
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said, irs ago, people could never be as rich as bill gates but one thing i can do better is retire earlier. something some -- unique, different, and something from my mind. i will learn from bill gates, warren buffett, and bought a great people in the world but i want to do something using my own way. not as rich as bill gates, but pretty darn rich. that was jack ma speaking exclusively to our china correspondent. a terrific interview. a lot more ahead. the countdown to the imposition of $20 billion of tariffs by the u.s. on china. watching the market reaction and digging deep into what this means. there is bloomberg. ♪
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rishaad: three minutes until the anding of the nikkei sydney. looking into tech stocks in particular. looking as if we could see regulation in the future for u.s. technology companies. that is the fear that sent some of these investors in tech issues. watch out for those. 6/10, youures up by can see essentially we are looking negative. if we got more negativity, it could be the seventh straight day of declines. discussing the impact of these potential new u.s. tariffs which could get instituted in about three hours. we talk about that with the ceo of export now, frank. joining us later, luca chesky on avoid risk in emerging
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kongad: 8:00 a.m. in hong and singapore, 9:00 a.m. in turkey. welcome to "daybreak asia." it was tech dragging all three down. dropping off. emerging stocks slumping to the edge of fair territory as we appears of contagion spreading throughout the developing world. kathleen: and from global headquarters, i am kathleen hays. next act init the the trade drama. president trump is expected to slap tariffs on china. will settle poor nations with crippling debt.
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open,d: we have got tokyo down .5% as has been predicted. looking with one eye on what happens later today. payrollst non-pharm report. kathleen: it will reinforce the notion the fed is going to hike in september and december. when you look at emerging markets, go back over the month. it has not been just turkey and argentina. ass has been an issue even we are in the midst of this trade drama with tariffs they could be affecting the markets. rishaad: in deed it is. let's get to david. of the headlines overnight, john williams said they should not hesitate in
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inverting the yield curve. it is 25 basis point spread between the 10 and the two. before i get to the equity markets, let's have a look at the sentiment right now, risk-averse, down five this is on the 10 year overnight to where we are. the dollar-yen and the dollar-swissie also down. the dollar is being offered up against the haven assets but in favor of em. gold climbing above 200 -- 1200 and announced. korea, andh australia, futures have declined. timeu measure from this last year, we are on track for the biggest one-week drop in asia, going back to march of this year. have the tech play, semiconductors which we will be fleshing out later. there is eco-data.
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i'm going to ignore that because it will not have that much bearing. 287,futures pointing to down a bit at the open. lead to midnight, that is when public consultation and spirit anytime after that -- public consultation ends. any time after that, we might get an announcement. have a look at this chart. it tells you where you need to look up your looking for signs of stability -- it you are looking for signs of stability. this is the other chart. is it actionable? the biggest discount to u.s. stocks, em. kathleen: thank you so much.
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let's continue with the first word news. jenna dagenhart joins us. we could see 25 percent duties on $200 billion worth of imports. the public consultation expires at midnight eastern. there is every indication that president trump will order further measures. fitch says an escalation in the trade war could not .4% off of global growth next year. ubs says wall street could take a hit if president trump slaps new tariffs on china. with the decision hours away, the bank says equities could plunge 5% if the administration does impose those. that would be the biggest retreat for stocks since april. ubs says such a scenario has not been priced in by the market. twitter has suspended alex jones and the account of his website.
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content posted on violates the wednesday abuse and harassment policies. twitter did not specify which content led to the decision but it did say related to abusive behavior. apple, facebook, and youtube last month purged content from the right-winger. campaigning begins today for the leadership of japan, the ruling liberal democratic party with shinzo abe odds-on to win. a poll says almost 90% of lgb lawmakers support giving him a third term. only a fraction back his challenger. the vote is september 20 with abe on course to becoming japan's longest-serving prime minister. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna dagenhart. this is "bloomberg." rishaad: thanks.
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what are we, three hours away from what could be a germanic s -- dramatic escalation of the trade were between china and the u.s. there is a possibility president trump will move ahead with tariffs on chinese goods. let's get to jodi schneider with me now. as well as tom mackenzie in beijing. what have we got? there is a good chance we will start to see the tariffs take affect today in the u.s. business day. it could be as much as $200 although weariffs are hearing they will not impose everything right away. criticism fromr businesses in the u.s.. that smallre saying
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and medium-sized businesses will not be able to react to make changes. the tariffs, so far, that we have seen, have not had enough of an effect in the u.s. not on the overall economy but business leaders are saying that would change with another $200 billion and they are warning against that. we heard from hewlett-packard and cisco saying it could stifle technology advancements, that it would not just be in terms of the economy. we're hearing from businesses that consumers could be heard. it would be hard to protect consumers. one of our team told me they are estimating the price of a new u.s. car could go up $5,000.
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how are the chinese, when you are behind the scenes, what are they factoring in? what is their bet on how these pressures are going to hit the u.s.? there is a hope, and expectation when you talk to leaders that the corporate lobby will make headway in lobbying the administration to change course. when you talk to people, they bring up the elections and the hope the power dynamic in stanceton may change the on these tariffs. in terms of what we're hearing recently from officials in beijing, they've come out with a similar line saying they will be forced to retaliate if these tariffs go into place. those,ll coordinate depending on the strength of those tariffs.
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they said there are continuing talk said a working level u.s.en their officials and counterparts and that they are planning to support foreign and domestic companies in china that will be impacted by these. as we were talking about, adding to lines on implementation, the focus is on the timeframe as to when these are implemented, whether they're are phased-in and whether we looking at 10% or 25% and how china response. that is the immediate focus. we've got to take into account the impact in china and the u.s. this, i amoking at ,oing to shift and go to nafta a deal expected there a couple of days ago. donald trump saying it was likely to be signed. how can you have nafta without canada? and the would be hard u.s. congress has made that
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clear they do not want a bilateral deal. seems to be using this as a negotiating tactic to push canada into accepting a deal. has a few lines in the sand including this provision language that is in nafta that they want in any new agreement that would allow for arbitration panels in anti-dumping cases. in the first round, they said they had to have that language. andu.s. does not want it somebody is going to have to blink. sticking canada is a point. what kind of deal can be worked out on specific things? china, that idea to where do you see the spot where the chinese can give up enough for president trump to say, we win. my friend and i have made a deal. what is your bet? seems we are a long way
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from any deal. the chinese have said we are ready to ramp up imports, we are certain accelerate sectors, for example the financial sector, the telecom they canhose areas incurred foreign direct investment and encourages companies to play a role in china without doing damage to domestic companies. in terms of its industrial policy, that is where the road lies. some -- rub lies. not been ablehave to come up with a response that have been able to answer concerns about the intellectual property theft and subsidies for these industries, but this is a plan china has been working on.
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it is not something they are going to walk away from. arounds wiggle room trying to address concerns and if the details, the policies they can frame out and whether that is going to alleviate the concerns in the u.s. the trumpthis -- just administration but the democrats as well. rishaad: thanks a lot for that. in frank lavin. he is the former undersecretary for international trade at the u.s. department of commerce. what you have been saying, president trump enjoys being the hero. what can he come up with where he is the hero? frank: good morning. there is in the short run, these trade moves mean extra friction, extra cost, and
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economic pain with where the u.s. is going and china is following. i am an optimist. resolved inhis gets one thing we know is president trump likes victory. oves himpoint, it beho to say i fixed the problem. what would he come up with them what would be acceptable from the chinese side to give a way to mollify him? the trump administration has not been clear in what it is and china has a modern, complicated economy and its ability to move on these issues is sequential or it could take time to fix problems. that tells us it is not going to be the next 30 or 60 days but maybe 90 or 120 there will be
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enough of an offer, i'm looking at things like compulsory ip licensing, the subsidies of steel. there are things like that were china could make moves and the u.s. could declare victory. we do not have an indicator that is what is going to happen but that would be positive. rishaad: how much could be put down to cultural dissonance and politics? perhaps we get something out of the midterms and talks or lack of talks? i will tell you, before we get to the midterms, what is going to happen in the next 30 days is these tariffs come into play. we have to count on the president is not bluffing and the chinese is not bluffing. we are going to see economic
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pain and that has to boil for people to say this is costing us jobs. it is going to make u.s. companies less competitive. that has to ripple through and there will be contentious building that we better cut a deal and we will see the same for the chinese. it will take a month or two for that to manifest. kathleen: another one of your points is that, in terms of positive signals, you note the chinese have not matched the u.s. dollar for dollar in terms of imposing tariffs. ist of the reason that it hard for them to do that is they export more to the u.s. than the u.s. exports to china. is that a positive signal? frank: you are right. amount oflooking at economic hardship they can be more tod, the u.s. has
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play with them china does. imports as aook at cost, meaning when president tariffs, hes imposing costs on u.s. manufacturers and consumers. i would not look at that asymmetry in trading conclude the u.s. has more leverage. both sides have a lot to lose by weting these into play but have got to go down that path before we come to that conclusion. kathleen: a quick follow-up because you also say it is positive that president trump nice things about president xi. said nice things about shinzo abe and today he is talking about tariffs against japan. him credit ande i give the chinese a creditor. neither side -- the chinese
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credit. neither side is trying to turn it into a blanket condemnation. they are both being constrained of what they are doing and keeping it just to the trade remarks and that tells me we are not going to see broad boycotts of u.s. goods or protests or something of that nature. down, lesss we count than four hours note to $200 billion worth of terrace, it is nice to hear the glass maybe half-full. our discussion continues in a moment. a confrontational u.s. foreign-policy spells risk for emerging market debt. theill be joined later in hour.
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kathleen: this is "daybreak asia." i am kathleen hays in new york. rishaad: me were shot. -- me were shot. rishaas. feeling of your clients when you talk to them? frank: we take u.s. brands and help them sell it through the big china platforms. these friction and these words going back-and-forth, the chinese economy is performing well and the consumer sector is outperforming. that economy is going to see growth. the consumer sector will see 30% plus.
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anybody in the market is happy with the numbers they are saying. brands, the chinese consumers like these brands for the same reasons americans do. starbucks and nike do well in the chinese market. these are seeing record numbers. kathleen: talk to us about the midterm election. people assume that donald trump has this attack on china when it comes to tariffs because this will fire up the base and help republicans maintain their hold in congress. whenmost never happens there is a republican in the white house, the democrats win. what is going to happen and how important is it to the resolution of the trade war? frank: the base does like the tough talk on trade. trump ran as a grievance candidate they things are wrong but he is going to set them going to be is
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tough on trading partners and political leaders have not been tough. he has kept to the grievance part. he has not produced solutions or improvements but one of the problems is that other elements of his presidency from his style, his rhetoric, have been offputting. he initially won with a minority of the bow. he -- of the vote. bad but he started from a low point to begin with. he is not in a strong position and most say republicans are going to lose control of the house. rishaad: i want to ask you about the united states and the european union. makeoked like they could a deal on free trade.
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it does make his life more difficult if using gauged in engaged in he is trade arguments with all of his trade allies? i think you point your finger on a central contradiction of what the president is trying to do. sant andchina is malfea we have to be tough. that is accurate. then he says, i've got to be tough with nafta and i have to be tough with south korea. then he said, i've got to be tough on global steel. it is not a national security issue so he decided to pick a lot of fights and that was wrong. he is taking some of these off the table. renegotiated the south korea
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agreement, the mexico agreement and he had positive discussions where theyropeans have agreed to aim toward free trade. all he did was return to the status quo. he has reduced the trade disputes and the only active dispute is canada and china and it does give him leverage. rishaad: always a pleasure. frank lavin, export import ceo. we have got lots more to come including that sinking feeling. equity markets in the asia-pacific down again, the seventh straight session of falls. this is "bloomberg." ♪
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business flash headlines. softbank is said to be asking big banks to put cash down if they want a piece of an ipo. arential underwriters asking to prepare lows for other parts of the conglomerate. banks offering financing are more likely to win a slice of the mobile ipo. there are corporations between hybrid technology. it is in its campaign to increase the popularity of hybrid. it has positions to take the number three position in the chinese market which is the world's biggest. tokyo markets up next, are merging markets teetering on bad terrain and new tariffs unlikely to be a helping hand. that is next.
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8:30 here in hong kong and 8:30 in singapore. we are 30 minutes away from the open of trading. i'm rishaad salamat. kathleen: we're going to get to the first word news. >> key democrat figures are threatening to block a nafta deal if they win control of the house in the midterms. they may reject any rewrite if it does not include canada while raising wages for american workers. and thee continuing foreign minister says parties are working on discussions. the international airport in o socko opened for domestic flights only. the third-largest airport was flooded earlier in the week after eight near direct hit from the storm. a tank or crashed into the
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bridge that is the sole link to the mainland. it is not clear when full operations and international flights will resume. ubs says wall street could take a hit if president trump's slaps tariffs on china. a decision is hours away the , bank says equities could plunge 5% if the administration 25% on duties of up to $200 billion of chinese imports. that would be the biggest retreat for stocks since april. ubs says such a scenario has not been priced in by the market. day,shares rose a second recovering what they lost on colin kaepernick controversial ad campaign. nike has erased more than $3 billion in market cap since the ad launched but now it is valuing the media exposure at more than $160 million.
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about 40% of that publicity is positive. news, following years of warnings about bleaching on the great barrier reef, queensland says it has a positive update. some areas of the reef are showing signs of recovery. 2300 kilometers long, the reef was the first ecosystem to win unesco world heritage status. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jenna dagenhart. this is "bloomberg." rishaad: looking at the australian, finding itself in the company of being sold alongside a merging market darlings such as the indonesian rupiah and the indian rupee. ruth joins us for more. that it iszarre
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being treated like an emerging market currency. not but it is trending down. a lot of it has to do with china, australia's largest trading partner. there are headlines about trade war's escalating and that is weighing on the aussie's. fors a barometer emerging-market appetite. investors look for other places to sell. got domestic factors as well, a widening interest rate differential between australia and the u.s., you have got anemic growth down under and this all playing on the aussie weakness. rishaad: liquidity plays an important role. i have no idea what that position is currently but if it
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is tight, is that affecting things? banks are, aussie vulnerable to this. global funding costs have risen and taking a look at the three-month, it has gone up about 9% this year. what we have seen in the last couple of months is that three of australia's big lenders have raised interest rates on mortgages out of cycle which is keeping rates at a record low. , they are tightening monetary conditions. that is a major driver of some of the weakness for the aussie. other issuesre are in the background like the ongoing u.s. china trade spat. ruth: that is key.
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anything negative to do a china would negatively impact australia. china buys about one third of australia's products. anything that slows down china's growth would negatively impact the aussie. i spoke to the forecaster for the australian dollar and he reckons that because of the outside impact china has on us trillion, he can see the aussie falling -- has on the straley, he can see the aussie falling. aussie, he can see the aussie falling. kathleen: thanks so much. money managers expect actions by china. joining us from singapore is paul luca chesky. welcome.
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paul: thank you. kathleen: you point out people are not familiar with e.m. credit and not e.m. corporate and junk bonds. paul: that is true. the emerging-market corporate classniverse is an aspect and that tends to surprise people when they hear that. it is most often compared to the u.s. high-yield market which is about $1.7 trillion. most investors are surprised to hear that the classes so much larger. most will be surprised it is an investment grade quality universe and globally speaking, over 60% of the bonds are investment grade. when you look at asia, it is over 75%. kathleen: that is interesting. i want to look at hr.
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it is not just a -- look at hr. it is not just junk bonds. what you can see is that after getting narrow, the spread over treasuries, 2017, the first part of this year, has started to climb again this year. no are near the peak when chinese stock markets were selling off but a trend higher. sort out for us what corporate's are doing, what junk is doing. it is fair to call out the high-yield portion has sold off and performance is down about 2.3%. ist we would call out
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fundamentals remain robust. we have seen earnings growing, revenue growth and we have seen leverage levels that are stable and lower than the u.s. junk bond peers. over that same time we have had high-yield bond spreads widening in asia, u.s. bond spreads have remained flat. pickup you can get by owning the same rated bonds in u.s. denominated dollars, that has relation -- that relationship has widened. where we are seeing value is in places like chinese b's and bb's. are you being paid to take the risk and where we did not see value at the end of 2017, we
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think you are being compensated fairly now for taking on exposure. kathleen: you are talking about dollar bonds? paul: yes. just want to get your view as to where we go from here -- looking at the research, we are talking about things people they wereissing and missing what happened last year in china and how that has affected tightening. the trade tensions between the u.s. and china have been getting attention and rightly so. they are not positive for investor sentiment. what has been driving the high-yield markets in asia has been the effects of policy
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tightening in china throughout 2017. skewed the done is balance between supply and demand. when policies were loose, the demand for dollar bonds was insatiable and that helped drive spreads. -- as thehinese chinese have rained that in, what we have seen is that chinese bid for bonds has scaled can bed now concessions as high as 100 basis points and that continues to the spread widening. responsethe natural that the chinese will relax policy going forward. rishaad: fiscally and perhaps monetarily. how does the u.s. situation play into this?
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you got monetary tightening and fiscal loosening. -- you have got monetary tightening and fiscal tightening . -- fiscal loosening. paul: it is important to point out that will we talk about corporate dollar bonds that that is secondary and it falls on us to ensure the corporate's are either appropriately hedged or have balanced out the currency risks. this in companies that sell an international markets, they are hedged to borrow in dollars. what it does impact is the cost of funding are rising and that ,mpacts the investor markets the chinese did utilize a leverage in investment strategies and that has
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contributed to the pullback in chinese bid. can talk about the impact of the fed or the impact of a trade war and the tariffs and what they mean for the market, like junk bonds. junk bonds, corporate deal with individual companies. how do you pick at a time when there are these big waves, which companies can ride these out? that is the challenge and that is our task every day. that yound believe have to understand the underlying companies in you invest in and that requires having a team dedicated to doing research and identifying the winners from the losers. this is what i like to call our
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day job. rishaad: thank you very much. let's have a quick snapshot of what is going on with the trading day. , a bitkei heading south of tech pressure to the downside and it is the old culprits, trade tensions and monetary policy playing out. kathleen: the trading day is young. we dig into the cost of xi jinping's road program. this is "bloomberg." ♪
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kathleen: now for a quick check of business flash news. cbs is negotiating the exit of ceo moonves, the industry titan accused of sexual harassment. the borders and separate talks to end a legal fight with national amusements. it would end and postpone any merger with viacom. shares gained on the news of potential deals. rishaad: british airways is including the theft of data and credit card details of customers who used its website to make reservations. 383,000 payments were breached by hackers. the data does not include travel or passport details. they're apologizing for the disruption and contacting customers. is using aencent database to verify the age of gamers playing its blockbuster. players against a nationwide list in response to
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criticism against youngsters spending too much time in front of their skiing -- scream. tencent shares are hub -- screen. tencent shares are hovering around their lowest level. mostad: it is the ambitious and expensive infrastructure program in modern history, china putting millions into its belt and road infrastructure. critics say the money behind ambitions could lead to debt problems for the rest of the world. stephen engle reports. stephen: one of china's greatest challenges will be paying for. the scope of projects ranges a trillionllion to dollars. -- a trillion dollars.
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>> infrastructure is risky in the early stages and that is why it is so important to have the right finance in the right place in the right time. that is what multilateral development banks do. intentionally try grab the people because it is the decision-making of sovereign governments. >> my conversations echo sentiments around where we need the private banks to purchase up eight. -- to participate. we are not going to fund all these projects. we want these to be viable. the 70 countries china list says partners, the 27 -- the sovereign debt of 27 of them are listed as done. 14 of them are not rated at all.
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a couple of countries, sri lanka is a good example. port.inanced a it is not useful. we will see that in smaller countries. sounds nice but if it does not generate business, it is not good -- infrastructure sounds nice but if it does not generate business, it is not good. first and foremost, that infrastructure should be shaped by the country. that is important. high, youa, you aim achieve something lower. you achieve lower, you achieve the lowest. the people are ambitious. china will be ambitious for the world. kathleen: stay tuned for our special series.
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we will take a closer look at what has become president xi jinping's signature policy. at 7:00 on friday night p.m. hong kong. some good news on bloomberg.com. signs of recovery on the great barrier reef after coral bleaching. the most read stories is the trump white house reeling from bob woodward's book. on tictoc, a victory for gay rights in india, after the top court struck down a 150-year-old colonial law. check out those stories trending or on the terminal.
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rishaad: this is daybreak asia. i'm rishaad salamat. kathleen: i'm kathleen hays in new york. jack ma went from a young english teacher to one of the world' is most recognized business leaders. the alibaba chairman is dedicating more of his time and fortune to philanthropy. tom mackenzie asked him how he plans to make another global impact. >> i do a lot on education because i think education is critical.
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education, environment, these are things i focus a lot. there is no one thing that is the most important. the most important is everybody do something. tom: to what extent do you think your identity as an entrepreneur has been forged by your first job as an english teacher? >> people do not like me to talk about this. i speak in the forums because i am a teacher. i learned so much from alibaba. i learned so much from the journey. it is my responsibility to share. whether people like it or do not like it, agree or disagree, it is ok. you have to share because society gives us, gives me so much resources, so much experience, you should not wasted. -- wasted. -- waste it.
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tom: do you miss teaching? >> i miss it very much. i came to the business field by accident. i think someday, soon, i will go back to education. this is something i have more thendence, i can do better the the alibaba ceo. tom: that would be something. >> yes. headmasters, kindergarten teachers, i have been preparing for 10 years. this is something i want to devote my time when i retire. tom: when could that be? >> very soon you will know that. tom: this would be you stepping away from your role to focus on the foundation with a focus on education? would you look at the bill gates
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model of giving away your wealth? >> there are a lot of things i can learn from bill gates. many years ago, i said i can never be as rich as bill gates. i can retire earlier than him. i can do something from the education field, something unique, different, and something in my mind. will learn from bill gates, warren buffett but i want to do something using my own way. that was an exclusive conversation with jack ma. headlines, softbank is said to be asking big banks to put cash down if they want a piece of the biggest ever ipo. potential underwriters are asked to prepare loans for other
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parts of the conglomerate. banks offering financing are more likely to win a slice of the mobile ipo. kathleen: tell you what it is in talks with -- toyota is in talks with geely on cooperating with hybrid vehicle technology. it is in its campaign to increase the popularity of hybrid vehicles. geely has boosted sales of this year to take the number three position in the chinese market which is the world's biggest. rishaad: a pair of harvard oncologists have joined forces to harvest technology to improve cancer care. the initiative is called driver. they begin signing a patient's in china and the united states this week after a trial. laborde tories analyze patient --ords and clinical trials
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laboratories analyze patient records in clinical trials. howleen: a quick look at markets are trading, downward pressures accelerate a little, the nikkei down more than 1%. hours, u.s. three tariffs to be imposed on china. rishaad: futures on the way down, singapore opens in a few alongside the call of them poor market. -- the kulal lumpur market.
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haidi: 9:00 a.m. in hong kong. i am haidi stroud-watts. this is "bloomberg markets: asia." ♪ haidi: investors countdown to the new tariffs, also said to be threatening action against japan. asia-pacific markets had for a seventh straight decline in the biggest weekly drop since march. slumped-market stocks as fear of contagion spreads throughout the developing world.
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