Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20180222

Betty one longstanding story we are watching is treasury yields and where they are headed, and i want to pull up a is behind thethat volatility we are seeing in equity markets, 10year gilts yields. Key level of 3 , and we have been watching that like a hawk, it is almost like a movie. Once you get to the big box somee opening, but for will hit that at three years time, what happens after that . We have seen quite a bit of volatility headed as we have been seeing yields had towards this level, but afterwards is the question. What are we going to see in the markets . Yvonne it is interesting you mentioned this earlier, and the markets have changed. They are not buying the dip anymore, and the 10 year yield edged lower, so whats shifted and what hasnt. Lets take a, closer look to Investor Sentiment and what happened with u. S. Stocks. Stu keenan has more. What we are seeing is the technicals of the market which can show underlying weakness. Does the second day of reversals, it is green across the board and stocks look active or having a vigorous rally and then as you get towards the close, a complete reversal and everything almost everything turns red. Lets go into the snapshot. The dollar has changed direction again and we are focused on bond yields and he talked about how we have had more than 250 billion in bond action this week, it shows you the strength of the demand and also the Treasury Department pumping up their issuance. Lets look at the big movers. Earnings has a lot to do it this but we are also seeing some very large size moves. The auto rent a Car Companies are in the spotlight this week with avis coming out with strong results, hurts reporting as well hertz. One other thing big focused his trade. Have had major news of the recent gun shooting tragedy, there were a be many will take this event and it is counterintuitive, gun stocks move higher because bands will make them less available, but what is interesting is we are seeing them move lower. We are seeing that trend developed which shows a significant shift not just in the way the stocks are trading, but also the demand. Perhaps a sentiment shift as well. Yvonne one of the hottest debates in the market is how e treasury can we, and if we go to 3 will repeat or retreat . I want to show you a chart that addresses that question. A curve flattening during the last five major tightening cycles in each of these boxes. Questionget to the ask whereh we go, we it is moving going forward. It is a mix of news. If we go into that, it tells us an interesting chart about the most immediate question for the traders. Rate . Go to that 3 and where is the positioning is taking place as long that line. Its implications can make a big difference, and many alice say we get closer to the 3 level, people are going to get more nervous. I want to bring it up on the and what we can see in this chart is the anticipation of the volatility as yields approach that 3 range. Said hehe analysts expects flows to pick up as we get closer to 3 , and a lot of choppiness in the market. We talk about is the market out of the woods with the recovery of the big selloff, and a lot of analysts say yes. Not just the stock market bond market as well. Expectedpiness particularly as we approach these levels. Lets take a look at how things are faring in asia, to new zealand we are seeing shares up. A resilient market in new zealand amidst weaker greenback we have seen today. Underway asustralia we see shares up fractionally at a quarter of 1 . Heading lowered here, 2. 85. The day will be inflation at the bottom of this hour, and we could be seeing just a little bit of a backcheck when it comes stocks. The biggest gainer among the dollar the anchors, it seems to be a headache for the boj as they meet next month. Betty. Betty lets talk about bond market yields. Bring in strategist, terry weissman. Give me your take and thoughts. Unfortunately they werent positive on inflation coming up, i was surprised. Data. It was prett it was and they did have about some businesses saying they are seeing improving Pricing Power but they are constructive about the inflation story. Betty is it hawkish . It is pretty hawkish but the direction as to get more hawkish and i expect inflation to pick up in the u. S. Even more than has been evident. And the other aspect you mentioned that was surprising was complacency in the fiscal outlook, is that right . You had a discussion among the policymakers that suggests they are not sure what the effect of fiscal policy would be on inflation. It was a stimulus, it would be inflationary. Debate the sized about the direction, and it seems in the discussion there wasnt much. Betty what do you read into it . Conflict, there hasnt been much in inflation and this is widendabout way to reverse there were no signs of inflation despite the fact it was many weeks past the tax reform passage. Betty maybe they are overlooking . Mistake,k they made a they made in the statement but not in the minutes. Want to show a chart to our viewers, it is a great chart that sibley shows you how yields on the 10 year are rising into that 3 . We have heard 70 voices come out talking about how 3 represents this key level, and question is when that happens, now what . But what happens . What do you think happens . Me why 3 is important to a lot of people, it is probably because it is a nice round number. Betty it sounds good. Top of themarks the range since the crisis, so i think it is a test it has tested that level twice since the crisis, but other than that doesnt have much significance of this people to get has significance, and therefore it might have significance. I dont big from a fundamental perspective it does, but as mentioned, a lot of trading at the time it hit 3 , but that should probably died out in a week regardless of it passing through percent or doesnt. We keep asking you at what point correlation between bonds and equities when we see the tradeoff and when the bonds become more enticing for investors. Yvonne the less time we saw the threshold broken in the 30 year, we saw the so called smart money institutions jumping him again. I will put our bonds a buying opportunity . I dont think it will happen again if that is what you are asking me. Of annt have that Strong Economy and inflation in the house as it is now in the u. S. Theres going to be a lot more aution with regard to willingness to buy the bond at 3 and stay with it. Somethingt seem like that is wanted or wise, in my opinion. It is inches think to because we heard from the white house a press briefing that the u. S. Can go to 3 without boosting inflation much. What did you make from that comment . Is that a signal from the fed they dont have to hike aggressively . Trying to is influence said, and i agree, if the u. S. Is trending at 3 this productivity a strong, it doesnt have to be inflationary. My view is based on what happens over the next three to six months. It is in the numbers, your yeartoyear michael as high as two point seven or to predict percent, and we might see and overshoot to the bond yield before it comes down. I am concerned about the next few months. Betty lets talk about the dollar because you are saying we saw is like today, and you see bullish traction under the greenback . Tom might see a bot in january largest the dishes were selling bonds and reallocating away from japanese bonds. The reason they may be doing that is because they see attraction of yields elsewhere and that ultimately supports a dollar if investors do it. Investors have done it yet, but alternately the fx market catfight a large shield differential between the u. S. And the rest of the world. Lets go to first world news with courtney collins. Former Trump Campaign chairman Paul Manafort and they want to associate have been indicted for a second time. New charges including failure to report to tax authorities. Manafort and rick gates were accused in october of laundering millions of dollars are while acting as unregistered agents of ukraine. They face new charges of tax evasion and bank fraud. President trump called for teachers to be paid bonuses for carrying guns and class and offered praise of the National Rifle association. He told state and local officials that you can hire enough security guards to ensure safety and that teachers would undergo rigorous weapons training. He also celebrate the nra as patriots will help make America Great again. Ecb communications is back on track with a january policy meeting. The euro state, after publication in contrast of decembers meetings, and that rock market suggesting the bank might accelerate withdrawal from stimulus. U. K. Growth has been revised down to the Fourth Quarter as consumers and businesses suggested rising inflation. China says it is investigating claims of a shift chance for directed by late should sanctions on north korea could violate sanctions. They show a north korean flagged tanker and a smaller vessel carrying Chinese Markets and beijing has a great to post tough measures and has explicitly banned transfers. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. Coming up, we look at japans upcoming inflation data and ask what it means for kuroda and the boj. And just ahead, how Donald Trumps infrastructure push can get a helping hand from australia. This is bloomberg. Yvonne this is daybreak asia. Betty we have been talking about australian Prime Minister meeting donald trump at the white house on friday, and the Transpacific Partnership high on the agenda. The nymph raleigh as part of this australian delegation and joining us now from washington, of experience in Financial Services and is the former head of blackrock australia. How is the trip going so far . I came down to washington today, and our premier of queensland in australia accompanied me yesterday in new york. We met with blackrock and they came down today and attended a lunch with lucy turnbull, who is the Prime Ministers wife. It sounds like a big, highlevel welcome rolled out for your delegation. What do you want to achieve out of this . What will be a success out of this trip . There is a lot of talk in the u. S. Around infrastructure and are has been for some time. The head ofns and interest that your business and real estate business we are interested to understand where the debate is going terms of infrastructure in the u. S. There is no shortage of capital around the world, and particularly in australia we have invested in interest such are domestically but globally for many years. The u. S. Obviously is a perspective market, so there is a lot of work to do here in the u. S. With policymakers to ensure that the framework is set up to deliver that infrastructure to the population, but also present that opportunity for investors such as ourselves to be able to participate in investing in those assets. What can the u. S. Learn from australia from this program . This is controversial policy at home, this perception that you old andally privatizing for such are assets in order to pay new ones. Are you concerned about opposition . In parts worked well of australia and the narrative that underpinned that strategy worked very well, whereby some of the infrastructure was being privatized. Being sold to create new infrastructure and muchneeded infrastructure for the population in the cities of sydney and melbourne. Government, we as a didnt participate in the recycling process, however, there is great green field opportunities in places like queensland to participate in investing and if researcher in infrastructure. The narrative that underpinned it, the population engaged with in the end, and you have to look at particularly sydney or theres an enormous amount of infrastructure building. Infrastructure that frankly, as i said before, is muchneeded and overdue. How can the u. S. Federal government emphasized and change that mentality by either selling assets and recycling capital, and you think there is a pitch here that they are missing . Interestingly, a lot of the infrastructure is held by communities or state governments. That is the real challenge for the federal government, to ensure that there is a framework that delivers the if researcher that is required in the states and local councils. I think it is not going to happen i dont believe by the federal government. Effectively, working in isolation, i think it is critical that all layers of government work towards an outcome that delivers the need of infrastructure but also creates that opportunity for investment. Many of these assets, ultimately the government is the regulator, and i think that is the other important point in australia. It supports the notion that this asset recycling was a very good idea. Incentivizes state governments and local governments to get on ath it, but it needs to be conversation, it is to be a policy. Betty it is a challenge though, these local governments and municipal governments, and you think it would make sense, but there has been lots of debacles in investing in infrastructure on the local level, so have you had pushback during this trip so far . We havent opened the discussion yet. Well spendthe day a bit of time with various governments from around the u. S. Who are participating. We get a wonderful opportunity to interact with them and talk to them. Beeni think there has australia around infrastructure. We in many years in australia have developed a process now whereby the government still has a degree of control over the building of infrastructure. An interesting beast because we are government on but we are a large investor around the world. I think the proper framework is what is required. As i said before, it is not going to happen in isolation. We appreciate the time. Plenty more to come on daybreak asia. This is bloomberg. Yvonne a quick check of business headlines. Barclays reports the amount workers make half as their colleagues. Bankays is the first major if u. K. Operations to disclose. Saidhair of the committee the pay gap is shocking. Restructuring on one core bank and revolving todit line delivers a blows go surviving, and it means ing is one of the nobles core lenders to support the restructuring. Datae awaiting inflation out of japan next few minutes or so, and will get the immediate market reaction. Stay with us. This is bloomberg. Betty welcome back to daybreak gloomyhey can see it is out in tokyo, to make a showing a higher open as we are awaiting inflation data to come out of japan. By now i am seeing national cpi up about 9 10 of 1 , suddenly about what economists estimated. The headline number for the month of january accelerating care, up 1. 4 , slightly higher than what economists surveyed had expected of a gain of 1. 3 . May continue to put that upward pressure on the japanese yen, and of course yvonne, to complicate that picture for the boj, they continue to say they are not going to get off of stimulus. These Inflation Numbers makes it slightly harder there. Yvonne the question is how deflationary the yen is. We were expecting the core inflation that excludes fresh foods, but it edges down. It is a positive thing though that we havent gone the other direction, and higher, slightly edging but still very far away from that 2 target. Immediate reaction to the young, not a whole lot. Not much reaction to the yen after its biggest time in two weeks. Andicularly with the euro aussie against the japanese currency, keep an eye on these levels. Average 200 day moving after the french elections, and a aussie has fallen to its lowest levels against the yen after breaking through february. After inflation data, lets check the futures board and see continued losses for tokyo stocks after wednesdays decline. The executive may be the case there. Betty and the worst as they may not be over yet. Why is that . If you jump into the theinal, i want to show you indicator that is a technical measure of selling steps to buying strengths on topics, and it has fallen below zero for 17 Straight Days and what that tells us is it is the most bearish reading into years. Happened, it this was within a 200 point range within the next nine months, so the appetite in japan is awaiting singapores wealth fund, which is no stranger to investing in japan. Appetite is what it needs to sustain stock gains. This chart, we had foreigners turning net sellers come at that is the line in white on this chart. Local Retail Investors at to record purchases that we saw over the course of recent weeks. Buying of may resume treasury yields stop rising, and that is what is needed to help japanese stocks to rebound from this correction. Lets go to first world news with courtney collins. Claims of defective airbags in the district of columbia, the u. S. Subsidiary will pay minds of dollars to reimburse authorities for the cost of their investigation and legal problems and to their kinds on behalf of customers. Takata has recalled vehicles and its airbags are linked to 20 deaths around the world. X launched carrying a payload for a spanish tracking Company Including to broadband demonstration satellites and are prototypes for a network that aims to offer internet around the world. It was the companys fourth lift off and is expected to be a record year for 30 launches, including another rocket. Is attempting to broaden its appeal by incorporating what has long been seen as the enemy and will highlight hotels as part of the way it matches people in accommodation. Move aims to attract business bym Online Travel agencies charging much lower fees, and airbnb has raised 3 million since 2008 and is under pressure to go public. And apple is said to be bolstering its wearable business with an upgrade to its wireless air pods. Apple plans to make frequent podovements in the new air version to come later this year and feature a more powerful wireless check. We are told a subsequent model planned for next year aims to be water resistant. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. As you mentioned earlier, paulr trump chairman manafort and an associate were indicted a second time on new charges, including failure to report and come to tax authorities. I want to bring in Congress Editor john saw check. What doesean this all mean . They have been charged with Money Laundering and their failure to register as foreign agents. That is usually a civil charge as opposed to a criminal case, charged withnow money invasion and suggest that the special prosecutor mueller has been developing additional evidence and bolstering his case against the two. The other thing that is interesting is that there have been reports earlier that gates might be negotiating for a plea deal. New charges and a change in lawyers suggest that might not be the case. It may also suggest that muellers investigation is also heating up, maybe a crescendo here . In compiling quite a bit more evidence of indictments against the russians in the last round of indictments in the plea deal that was reached with a lawyer went been working with manafort and gates on the ukraine situation. It suggests there has been a real exploration of gathering evidence and the ability to bring charges. The mueller team has been careful about not keeping their hand. We dont see many leaks coming from the prosecutors office, so the next steps are still yet to unfold. Yvonne we are still not sure where this goes . Are we beginning . I think there is still some way to go. This has been a narrow focus and he has gotten what i guess could be called low hanging fruits. Ukraines work in the had been under scrutiny before the election took place. We now have some indication that there is clear evidence of how the russians meddled in the election. And there are several more pieces and this that have to be resolved, including the roles of the former Trump National security advisor and a few other people surrounding the campaign who have yet to go to trial or come to any resolution. I havent seen a tweet from the president yet. Joe, thank you for joining us. Talking about these new allegations against gates as well as manafort. Talking about retailer woolworths. Another busy day of results in australia. It was a beat. Revenue is up by about just under 4 of 30 billion, and a dividend of . 43, and there is evidence that woolworths might be winning ground in the food fight of a great rival. Although woolworths is seeing we might see migration and food sales growth in the second half, but notwithstanding the rather decent firsthalf result. A big w for the department start that is traditionally a bit of a drag. Versus 27,10 million but will work points out always a big w next to the influence of christmas. There is also the ethical elephant in the room because money coming in from gambling . Pubs and clubs across australia, it is controversial and there is an effort to ban them that is becoming an issue in the state election in tasmania coming soon. Woolworths is the largest owner of those machines in australia with told thousand of them 12,000 of them, and woolworths doesnt seem particularly proud of the sector. You find no reference to it in any company material, gaming is was did under the hotels section and accommodation sales. At 861lf revenue is million, a profit of that sector, up 17 . But you dont find any specific reference to poker machines and the results, so it raises questions about what kind of company woolworths really is. Betty thank you so much paul allen. Earnings now from hp and hbe rallying after hours. Bidding top estimates in revenue. And we have to bloomberg charts we need to know. Lets start with hp first. We are taking a look at the catalysts. One is because of terrific holiday sales and another is consumers are being things that are highend and those are more expensive. We are seeing this pop in after hours trading. Ramy lets flip up the board and show you what is happening in terms of what of those twin engines that are powering the shares higher. Are the personal systems, the laptops and notebooks you are buying from hp. The revenue here, 9. 4 billion. The last time we saw this was in 20 pop, so why seeing this huge pop here. Growth, are seeing this generally in the industry we know this is happening in terms 2011. Sales since turnshat said, for hp, it out they have seen a bump in the 70. 6 millionr from pc sold, so a lot of consumers are going in because of the highend and high gamers and business folks buying these. Its also look at the other engine of growth. This is printing and imaging and we are seeing that the revenue here is 5 billion. The last time it was this time was the Fourth Quarter of 2015, so looking at both of these, both firing very well. Also in terms of tax reform we are taking a look at sink there is a drop of about five Percentage Points from an expected 21 to 16 . All of these pushing hp higher. Yvonne and lets talk about hpe, too. Ramy follow me here, shares rallying, but in terms of what happened after earnings brought is up by 17 . Some of the reasons for this is revenue. Beating all estimates, the billion,timate was 7. 1 billion,nce and guidance big all estimates and returning shareholder dividends as well as buybacks on the order of 7 billion. There is one cause for concern though, this is in the function, i want to show you the headache of what is happening. Look atng margin where it was earlier in the Third Quarter of 2016. The good news is that it is not in the negative anymore and the cfo of hp said it is ok, we are expecting some pressure margins here, but this could go higher as much as 10 to 12 . They are both going gang busters in after hours trading. Yvonne looking good. Infla up next, more on tion data in japan. This is bloomberg. Edges first major market open and japanese futures are looking like this, up 610 of 1 . Shortly after we had Inflation Numbers and generate coming up hotter than what economists estimated,open and japanese fute looking like this, fueling perhe yen gains. This is daybreak asia and i am betty liu in new york. Kurodas fight against inflation continues after he starts another fiveyear term at central bank and japan is posting court cbi stalled at 0. 9 last month but still beating estimates. Its got to the chief economist in japan joining us live from tokyo. What did you make of these numbers . There is a lot of factors to blame here, whether it is a strong get or oil prices falling, but what is your initial reaction . Well, i think we have wage inflation. The bank of japan has any hope of reaching its inflation target, but numbers are rising for the last six months and inflation is gradually rising. However, it is far from target, so i dont think theres any chance the bank of japan will taper its monetary easing yet anytime soon. But there is a growth story that is positive when you talk about a quarters of growth and japan, we havent seen that for some time now. Opportunityissed here for the boj to at least start the path of highlighting what could be coming as we see the fed and the ecb start rolling back some of their stimulus . Central bank has to deal with its own country and its own path, and for the bank of japan, premature withdrawal or monetary easing has been a painful experience. So i dont think the bank of japan was to repeat that mistake. Yvonne what do you make of the strength of the yen . The pmi manufacturing was weaker, is it going to be more strength than the boj is going to have to eventually step in or the government has to step in . At 106 or 105, it is not a big concern for exporters. Japanese exporters are enjoying record profits, and they remain profitable even if the yen rose to 100 or 95, but maybe 95 will be the point where japanese exporters will start to be very concerned. But i dont think at this point they will let it go. Say the bank you of japan is happy to stay here on the easing path while other Central Banks are tightening. How long can they do that before they feel that outward have sure follow along with other Central Banks . I think there could be a point where outside pressure may start to rise, but at this point i dont think so. The pressure can be weakening 130 orth young going to 140 and doesnt seem to stop, but then the bank of japan a field have to catch up, but this is not the time yet. Betty we seem way off from that, but the biggest risk is the japanese economy that you say is external. Particularly here in the u. S. With the fed . Just thendeed, not u. S. But also china. In japan we talk about the capital of china so there is also geopolitical risk. I dont think there is internal risk within japan, but once the global recession starts to be around the corner, i think japans economy will definitely start heading back to deflation, so that is the biggest concern for the boj and japanese government. We are speaking to the former boj policy member and wellknown dissenter during his time at the central bank this week, and he said that renomination of kuroda shows they dont want to reach 2 inflation at a short time at all costs because any aggressive monetary easing youre going to see that generates that 2 inflation is going to undermine the economic recovery we already do see in japan. You think that is actually true . I think there is some truth to that. Hasnt been kuroda the most reflationary choice, but governor kuroda has tamed a little. He is not looking to inflate japan at any cost anymore. In that sense, he is correct in saying we are appointing a conservative choice. Yvonne can the boj change the inflation target from a shortterm one to a softer, longterm target . Think the bank of japan will be afraid of how the market would perceive that. I dont think the boj with want that, i think the Current Situation is fine, inflation is gradually approaching and the economy is booming, so i think the bank of japan will do anything to strong to rattle the situation. Thank you so much. On japan and reaction on Inflation Numbers, and you can get a roundup of that story and many more you need to know in todays edition of daybreak. Available on mobile on the bloomberg at and customize your settings so you only get news on the industries that you care about. This is bloomberg. Yvonne this is daybreak asia. Betty a quick check of the business flash headlines. Reports say fly carriers carrying 24 stake, and a fourth option would be to sell entire interests. The aviation think tank said the government should quit completely of any involving to deter investors and governor interference. Snapchat saw a billion dollars wiped away after kylie jenner says she is giving up on the platform. 7 afternk more than she said she doesnt open snapchat anymore. She has 24 million followers, setting negative reviews of the apps recent redesign. The chickens are coming to roost for angry birds. They lost have to market after seeing sales fall below expectations. There is based selloffs a thirdquarter report that left investors wondering how bad things are at the company that fails to replicate success of angry birds. Nexte coming up in the hour, the rally this year and the Top Performing currency in developed markets. How long will gains continue. Will talk with asia fx strategist and the japan open reflecting those Inflation Numbers that came out better than expected. This is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Yvonne 8 00 a. M. Here in hong kong. We are live from bloombergs asian headquarters. I am yvonne man. Welcome to daybreak asia. Markets said to edge higher after wall street ended a two day slide. Three hikesing at this year. Some Prominent Players have a Different Number in mind. Betty from bloombergs global headquarters, it is just after 7 00 p. M. Thursday. Inflation stalling in japan, highlighting a challenge facing the bank of japan. The 2 target is as far away as ever. And bmw, to bei named one of the best car brands in america. Yvonne i feel like we see the same headline when it comes to japan inflation every month. We are heading in the right direction, but still stalling, still far from that 2 target. The yen will be the headache. G btv 8783. Wheree indicators show the market is placed when it comes to further yen strength. This is the fx pain index for the yen. We can see the loans are back to levels we saw during the brexit vote. Could continue to be quite a headache for the central bank. Especially after they meet in march. Betty absolutely. As we heard from our prior guest, who noted that, despite some of these pressures, the bank of japan is quite happy to continue on that stimulus path, despite the tightening we are seeing around the world. In the meantime, we watch how japanese stocks are trading, reacting to those numbers we just got from japan. Yvonne we did not see a lot of direction when it came to the yen. But some relief, given we are seeing a snap. We did seeeet, selling to the close on the major indices overnight. Lets get the latest with sophie kamaruddin. The yen sticking to a high after making it to the 107 level. Wall street, we did see u. S. Stocks edge barely higher. But it is not dampening the mood in tokyo. Gainingei and the topix nearly 0. 5 . But for japanese stocks to recover from recent corrections, foreign buyers will need to return, unless treasury yields stop rising. 0. 7 . Ul, the kospi adding in seoul we have two keyboard meetings, samsung electronics, and a g. M. Their future operations in the country are clouded. Aussie stocks led higher by materials and i. T. Stocks. Tracking their u. S. Peers higher as it follows a surprise drop in u. S. Supply. Noted,laryen, as you not budging much following the latest inflation figures. Nomura pointed out, the dollaryen looking more volatile. You cannot rule out the possibility for it to retest 105. Betty thank you so much, sophie on reaction in the markets. Good news from the boj, that key inflation gauge not slowing in january. What does that mean for the boj . Lets talk more about that. I want to bring in kathleen hays. Was already to come out and talk about, poor boj. It did not take off, but it held its own. If you interpret all the numbers, you can see they came in. About to give the boj a sense of relief. 0. 9 for the second month in a row. The previous two months it was at 0. 8 . I want to quickly pull up a chart so we can look at this. If you put it all in perspective, you get a better sense what is going on. These are all the numbers we are looking at from the boj. The far righthand side of your screen, a key inflation gauge at fresh food prices, 0. 9 . It was supposed to go down a little bit. Oil prices have fallen, that will slow down prices somewhat. Maybe not as much as you thought. Headline numbers from 1. 4 to 1. 3. This went from 0. 3 to 0. 4. This is a time when we have a stronger yen, which strengthens to do all sorts of things, like dampen import prices. It is a challenge for the boj. Expected to dig in his heels and fight back against all these things making his job so hard. He has made it so clear his commitment to maintaining stimulus until they get to that 2 target has not wavered. Clearly, his reappointment for a second term was done with that firmly in mind. He does keep saying, the labor market is getting bigger. This is due to inflation. A longtimeesting, Economic Advisor to Prime Minister abe did an interview with reuters. He said, buying foreign bonds. The boj, the japanese government, cannot buy bonds to affect currencies. But, they could buy bonds to affect their monetary aggregate. That is his argument. That is something nobody else is talking about. The reflation us and one of the at the boj,overnors will there be more measures considered or talked about . Say there isomists nothing you can do but wait for inflation to gradually rise. More measures will not do the job. Yvonne will those be worth it , as well. A what does this mean as we see surging yields everywhere else . What does it mean for the japanese bond market . Kathleen we had an interesting story today on the bloomberg, if you are looking at the japanese bond market. Japanese companies are issuing debt because they now expect as governor kuroda gets reappointed, it will keep easing Monetary Policy in place. Signede week after abe up for a second term, signed for a signed kuroda second term. A forestryry company will sell shares for the first time ever. Even if then tokyo, boj is expected to make no change in policy, financing managers it should feel they should lock in terms funds for the longer term. It is a cheap time to issue longterm bonds. Why not load up . Yvonne certainly is the case. Thank you, kathleen hays, our economic and policy editor. Lets get the first word news. Communications are back on track with a summary of januarys policy meeting. The euro stayed relatively calm after publication, in contrast to the report of the december meeting. Suggesting the bank might accelerate its withdrawal from stimulus. Separately u. K. Growth has been revived, down in the Fourth Quarter, as consumers and businesses digested rising inflation. China says it is investigating claims of a ship to ship transfer that could violate sanctions on north korea. Japan released pictures of an allegedly oil transfer in the east china sea. It shows a tanker alongside the vessel that appears to carry chinese markings. Beijing agreed to have tough measures against pyongyang. Takata has a settled claims linked to their defective airbags for 44 states and the district of columbia. They will pay 650 million to reimburse local authorities for the cost of their investigation into the lethal problem, and to resolve their claims on behalf of consumers. Takata has recalled millions of the vehicles. Their defective airbags are linked to 20 deaths around the world. Spacex successfully launched a falcon 9 carrying a payload for spanish tracking company. They are the prototype for star linkednned network which plans to offer internet around the world. Fourth liftompanys off and was expected to be a record year with 30 launches, including another test of the falcon heavy rocket. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. Trump Campaign Chairman Paul Manafort has been indicted again on new charges, including tax and bank fraud. Lets bring in jodi schneider, joining us. I guess these new charges were expected, given the first ones did not have anything involving tax. What is the significance behind the latest allegations . Jodi it is a fresh legal attack against mr. Manford and mr. Gates. He was the Campaign Chairman for donald trump and gatesdeputy. Deputy. these do not include mention of Money Laundering or failing to register under the foreign thestration act, the act, charges that were in the previous indictment. By dropping these, it makes it an easier legal case for prosecutors to try to prove at trial. Yvonne perhaps get a guilty plea from gates, at least turn against manafort . How likely is that scenario . Jodi what they are trying to do is to make the case that would allow there to be some legal agreement, a plea bargain, to give them more information, which obviously you would want. That is why you try to do a legal case like a plea bargain. We will see about that. A is a fresh legal attack, path for prosecutors to prove their case more easily. Betty what could this mean for President Trump . Jodi clearly, this shows Robert Muellers investigation is continuing. It is in some ways doubling down. As we saw last week, the indictments of 13 russian prove thereeant to was a Misinformation Campaign that occurred during the 2016 election that was led by the russians. A guilty plea last week by a london lawyer who had done gates. Rk with mr. We could see this continue and heighten. This is something the Trump Administration does not want to see. President trump has said, it was proven there was no collusion, and that his campaign was not involved with the russians. Muellers investigation is continuing. Clearly, they do not think it is over. They are making it clear this will go on. Yvonne jodi schneider, thank you. Just saw some earnings coming through. This is the russian aluminum producer that does trade here in hong kong. For the Fourth Quarter, adjusted profit at 350 million. Adjusted just shy of estimates. 8e estimate was for 578 million. And beating estimates that 2. 7 5 2. 75 billion. Still ahead, our interview. Including his thoughts on if the u. S. Should change his mind. Chartersandard strategist on why he thinks the dollar will fall up to 8 this year. This is bloomberg. Tty this is daybreak asia i am betty liu in new york. Aonne the dollar snapped four day rally as investors saw a new trend emerge after the fomc minutes. Oining us is divya devesh you see the dollar depreciate 5 8 this year. What a call. How do you get to that call and depreciation . We saw a pickup this week and some are saying it is the pentup demand finally coming through and snap. I think some of the traditional correlations between rates and fx markets have broken down. While we see this inch a little higher, it is not going to be sufficient to support the dollar. I think there may be two reasons why we think so. On ourf all, based fundamental valuation model, the dollar is still about 10 to 15 overvalued. Secondly, markets i am not only talking about hedge funds the Broader Market positioning including Central Banks, corporates, real money fund, is still a long dollars. That will probably change of sometime this year. We have had this u. S. Austerity only growth story. But that is not true anymore. We have seen europe pickup. We have seen japans longest expansion in a Global Growth story. You dont want to hold a currency that is both overvalued. That is the broader framework. Of course, the fiscal stimulus argument means the deficits in whichs. Will be wider, means investors will put a lot more focus on fundamentals in the u. S. It is going to be a weaker dollar environment for the year. Yvonne youre still quite positive when it comes to euro dollars. You are expecting 132 by the end of the year. It seems 2018, a lot of people are saying, if you are going to shore the dollar, it is going to be the yen, given how cheap it is. Divya actually, we disagree on that. We still think there is a significant upside for the euro. Had was awhat we reallocation toward european equities. We saw almost a half trillion dollars going into european equities. What we have now is a full picture for the euro area has turned quite positive. We are looking at a situation where centralbank resolve, allocation for the euro, is still quite low. From about 20 six years back now down to 20 . That will provide another to hundred 50 billion of euro buying. The euro has more upside. Yen, they are getting ahead of themselves in terms of expectations from the bank of japan. We do not think the bank of japan is close to changing its policy. They are very comfortable with the way things are. Inflation is picking up. But there is no rush for the bank of japan to change policy at this stage. We still have a wide interestrate differential between the u. S. And japan. Which is some point will look very attractive. It will come back and keep dollaryen a fully supported. We still think euro dollaryen has a lot of upside this year. Last point about Life Insurance companies possibly buying up treasuries in anticipation of more issuance coming out here in the u. S. , that is one of the reasons why one of our guests sees the bullish traction is going to continue for the dollar. He is on the opposite side of you, thinks the dollar will be bid up. Those buying up u. S. Treasuries, happens sooner than later and might have a bigger impact on the dollar . It definitely will have an impact on dollaryen. But the broader dollar is impacted on what happens with the euro and markets, broadly. We are still looking at a synchronized Global Growth. In that kind of environment, the dollar more broadly will struggle. Even if the dollar yen supported by flows coming through from japanese lifers. Betty i am curious about this volatility. We are talking about the major currency pairs. Might that become supportive of emerging market currencies . How might that affect some of those . Divya i think markets have to get used to this higher volatility environment. It is not going to be a Straight Line appreciation for risk 8, ass and 2018, in 201 it was for most of 2017. Banks taking out some of the liquidity they had injected the last few years. Of that should mean across asset volatility will be higher. It means emerging markets and risk assets can perform well. It will not be Straight Line, there will be corrections. But markets will adjust to a higher volatility environment. We saw a lot of asian currencies amidst volatility prove quite resilient. Especially countries with strong current account surpluses. Is that a warning signal for countries like china that spend quite a lot here . Is that balancing fiscal deficit . Divya we think this year will be we are targeting a move lower, toward 618. We are focusing on the dynamics for chinese exporters. Chinese holders are still billion toto 300 400 billion. They missed this rally all the way from 690 to 630. Any up six will be capped by additional supply coming in from chinese exporters. It will be a relatively stable environment for cny in 2018. Yvonne appreciate your time, divya devesh, joining us live from singapore. Get a roundup of the stories you need to know in todays edition of daybreak. Subscribers, go to dayb on your terminal. You can customize your settings to only get the news on industries and assets you care about. This is bloomberg. Betty we are getting breaking news from treasury secretary Steve Mnuchin, saying trump at all theooking fiscal policies, but tax policies, will raise wages without inflation. Says wages can grow without inflation, being problematic. Perhaps addressing concerns inflationary pressures might get out of hand, if the fed has to raise rates sooner or faster than expected. Headline coming out in a conversation with bloomberg news. Steve mnuchin saying it trump policies will raise wages without inflation. A little bit of a puzzling statement. Rising wages is inflation. [laughter] does if that happens, that not mean we are going to continue to have inflationary pressures and they will continue to act . Itnne it is interesting, it keeps in line with a that press briefing earlier. Saying, we can get a 3 growth in the u. S. Without seeing inflation much. I dont know if they were trying to talk down these markets. Or signaling the fed they can go easy when it comes to hikes this year. Betty absolutely. Certainly the fed, as we heard from neel kashkari, does not want to look to the markets to dictate Monetary Policy. That does not necessarily apply to the white house or Treasury Department, where they do watch the markets and how fed policy might be affecting Investor Sentiment. You might be apple to draw that line perhaps, from the steve you might be able to draw that line perhaps, from the Steve Mnuchin comments. We will be live in d. C. Next with more context. This is bloomberg. 8 3 in singapore. Happy0 friday. We finally got there. Half an hour away from trading in the lion city. Betty you are watching daybreak asia. Out. Ve more news coming yvonne we saw the earnings come out. The biggest headline is a bit of a reshuffle in the upper level here. The ceo he has named a new ceo. Saying he stepped down as president. Which i guess is not a big surprise. We said earlier this week he was going to be stepping down as part of a broader three shuffle. The formerll be for cfo, the first time a woman will be leading one of russias largest commodity companies. There were a lot of questions leading up to this news. Deripaska in particular, he is a good ally of putin. He is linked to this conflict with putin and nickel. The company has nothing to do with this, but it raises eyebrows. Betty it did indeed raise quite a few eyebrows. We will continue to monitor that story. Lets get to first word news with courtney collins. First up, former Trump Campaign manager Paul Manafort and a onetime associate have been indicted a second time on new charges that include failure to report correctly to tax authorities. Manafort and gates former deputy rick gates, were accused of laundering millions of dollars earned, while acting as an unregistered agent of ukraine. They now face new charges of tax evasion and bank fraud. Called forrump teachers to be paid bonuses for carrying guns in class and offered whole some praise of the National Rifle association. He told state and local officials that you cant hire enough security guards to ensure safety, and that teachers would undergo rigorous weapons training. He also celebrated the nra as patriots who will help make America Great again. Planning to broaden its appeal by incorporating something that has long been seen as the enemy. It will now highlight hotels as part of the way it attracts people. Ofy will have a strategy morefees. They are under some pressure to go public. Bolsteringid to be its business with an upgrade to its wireless airpod. Introducends to frequent improvements, as it does with the ipad, iphone and watch. It could feature a more powerful wireless chip. We are told the subsequent model plans for next year aims to be water resistant. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am courtney collins. This is bloomberg. You caught upget with our markets are doing this morning. A quick check on the lay of the land across the equity space. We are saying seeing the kospi move up 0. 7 . Mixed,ies are looking given the moves we are seeing with the dollar. I want to highlight what is happening with the yen in particular, making a move toward that 107 handle. I want a full to the board on what is happening with of the most in over two weeks. We do have numerous saying the dollaryen has been vulnerable. The Downside Risk looking intact. That cannot be ruled out. What is key is how japan inc adapts to the firmer yen. Will be listening to what jay powell have to say next week. We are keeping and i on the keeping an we are eye on the euro yen. The euro, flipping a touch against the dollar, after shine was taken off the euro economy this week by volatility. That has worked up, denoted by the line in white on this chart, g btv 9643. It was a key theme for the ecb minutes. About 1 to 1. 5 lower than price moves in the yen. The line in yellow, sterling. The partner says, against the backdrop of the ecb, likely holding back, that could make the euro seem overvalued. It could move lowered. That is it could move lower. Betty we had breaking news a few months ago. Steve mnuchin speaking exclusively with bloomberg news, saying he expects President Trumps policies are going to raise wages without affecting broader inflation. We get to washington with Bloomberg White house editor alex wayne on this interview with Steve Mnuchin. Explain exactly what he is trying to say here. The Trump Administration thinks the tax cuts and additional federal spending the president has signed into law in the past couple months will wage will raise wages without afflicting broader inflation. It is kind of contrary to standard Economic Policy and things we see in the markets these days. Investors are getting nervous that prices may be rising as a result of these politics. Betty is there a sense the white house is nervous . Divya no. [laughter] betty ok, alex. Alex no, i do not think the white house is nervous about that. They have not expressed that publicly. They have not done anything so far to restrain spending. Although i should add at that in the budget they released a couple weeks ago, the president s budget is an aspiration of document. It is not actually policy. They propose some deficit cutting in the future. Addeday be in the budget, to concern the spending increases could lead to inflation. President ,seems the every time the market is up at records, he is very keen on tweeting about it and patting himself on the back. When markets are down, is it his call for cheerleaders to tame things down a bit . Weird he has is not tweeted more about markets, isnt it . I think this is the way the treasury secretary, trying to talk up the markets a little bit or push against that these policies may have a downside. Yvonne the big question, this is a story we just had with the mnuchin interview, still unanswered, if businesses will raise prices because of the increased labor costs . Alex labor costs are rising, we know that. Wages are rising, not super rapidly, but more than we have seen in the past decade, since the financial crisis. Normally companies would have to wait raise prices to pay for higher labor costs. Profits by u. S. Companies have been growing a lot over the last few years without any real increase in wage growth. Ups could be wages catching with profit growth. Companies might think they dont have room to raise prices, that they economy is competitive enough. May be wages will go up without prices going up. That is yet to be determined. Betty it was a more wideranging interview. Tell us other topics the treasury secretary touched upon. Alex he talked a lot about the economy. His view of markers on the can ask did ask him about Foreign Investment in u. S. Treasury bonds. The people who are buying bonds of these days, not just today and in the past, have comprised a lot of foreign investors. You might think under and America First agenda, there would be concern more bonds are not sold domestically. But the treasury secretary said that is not a concern. Alex, thank you, joining us to talk more about this mnuchin interview. We will get more headlines in a bit. They will convene a communist Party Meeting in the next few days. Including monetary and financial regulators. Tom mackenzie joins us from beijing for a preview on that. I think after the party congress, everyone is eying this meeting for more reforms for growth targets. Tom that is right. That is what we are expected to get from the National Peoples congress. We are told by sources they will have a meeting some point in the next few days. This is chinas top 400 officials. They will be tasked with signing off on new appointments, as well as giving the green light to some changes in the structure of the government, as well, prior to the legislature meeting. 5, meeting kicks off march which will rubberstamp the decisions that will be made by the Central Committee in the next few days. It is notable this will be the third time the Central Committee has met since president xi took his second fiveyear term in october. It was formulated officially 40 years ago. It points to president xis attempts to remold the government in china. Betty what key personnel changes should we be looking out for . Yvonne pointed to one of the key ones, the governor, which is widely expected to be retiring. It is likely they will nominate his successor. The we are not clear who that will be. Most analyst you expect Monetary Policy will continue in line. They do not see major changes. We are also expecting changes at the top of the banking, the banking and insurance regular. We also have what is likely to be a powerful Financial Services Oversight Committee set up toward the end of last year. We are expecting to get new appointments to that, potentially. The top economic advisers to may take over. He may also be anointed as a vice premier, which will make am one of the most powerful in that position, since the reformer in the 1990s. He is one we will be focusing on, seeing if any new appointments or titles come out of the committee meeting. We will get that confirmed when the meeting kicks off march 5. That will run for about 10 days. These have significant implications for china to tackle its debt pile, and the delicate balance it has. How these new appointees handle that will be key. Betty tom mackenzie, thank you so much. For breaking news wherever you are, bloomberg and twitter, watch tictoc. It is the First News Network designed for social media, with hourly updated news updated by bloomberg. This is bloomberg. Check of thek latest business flash headlines. Struggling group noble said to have one core bank support its plan for restructuring after they said the generale pulled out of a key loan. They have a 1. 1 billion revolving credit line. It means at ing, the only one of nobles core lenders to support the restructuring. Keeping nned sale, the fourth option would be to sell its entire industry. A think tank said the government should quit air india completely, as any continuing state involved could deter investors. Chickens are coming home to roost. They lost half their market value in helsinki. Sales and profit will be far below previous expectations this year. Thursdays a selloff follows the thirdquarter report that leaves investors wondering how bad things are at a company that failed to replicate the success of angry birds. Chinas internet giants were not spared from the volatility over the past couple weeks. But now they are close to precorrection levels. Lets bring in our analyst. Everyone was saying after these markets corrected, these are the times to buy, because we shaved off these high valuations. How are you seeing them right now . If you managed to buy when it dipped, it would be good. The dip was too short. They are trading back almost at precorrection levels. Valuations,at the tencent, alibaba, there at three or highs. Baidu is not really trading that high. The market because is not so warm. At alibaba and tencent, even though the valuations are rich, it is justified. Their growth is much faster than before. Revenue growth of alibaba and tencent at 65 is the fastest in the past couple years. Trading at threeyear highs is justified. Yvonne just a bit of a shake. Ecommerce companies, you mentioned alibaba. They have been spending quite a bit and making offline acquisitions. This fit into the omni channel, Offline Online trend. We wills we will see more of this. There were a large number of acquisitions. One, is tove, address the bull market and address customers offline. Paymento raise online systems like alipay, and collected their customer data. The integration of offline and Online Services will provide value to customers because it improves their experience. At the same time, it gives Internet Companies a much better picture of the user, because they cannot see on lined online and offline consumption. It is used for advertising. Yvonne what does it mean for Online Advertising now that they have this treasure trove of data . The recent results from Companies Like baidu were quite robust. We can see big data being put to use in the region, in the segment of Online Advertising. Artificial intelligence is now used to serve up content more relevant to users and more targeted. It is a trend we should continue to see the next couple years. Betty what about the trends in Online Gaming . What is going to be the next hit game, the next blockbuster in china . Has been the top Revenue Generating game in china for the past two years. Slowdown is inevitable. It is still the number one game in china. But it cannot possibly be generating a very high level of revenue for such a long time. Seencent quarters we have a new type of game in march, survival, shooter games, Battle Royale games. One is a mover with titles that did very well in china. Ancent recently is launching tie up with a korean developer. I think this genre is something we should be watching. What kind of global ambitions do they have . These companies over the past couple years have gained a dominant position in their respective sectors in china. The logical move is to move outside china. For alibaba, southeast asia. They are putting a lot of focus on the indian market. Tencent, is it about it is about games. Successfulnched a Battle Royale game. We will see a lot more Global Expansion from these companies in the coming quarters. Yvonne thank you, Senior Analyst for bloomberg intelligence. Korean automakers overtaking their german rivals in the u. S. What is driving the demand. This is bloomberg. Yvonne this is daybreak asia. Betty i am and bmw. Audi they have overtaken their german rivals to be named the best car brand in the u. S. Interesting. Quite now these korean car brands are pulling ahead of these german carmakers. How did hyundai pull this off . The main thing is focus. This is a new brand for them, the genesis, the g80 and g90. These are the debut vehicles for that bit fred this rant and they focused on it. By focusing on luxury vehicles, they were able to pull this off against stiff competition. Their rivals had been dominating the list of luxury cars a long time. It was tough to break in, but something they focused on doing. Models, itng two allowed them to focus at the very top of the top so they are not competing with the bigger competitors, the audis, bmws. They are trying to get all the luxury buyers they can. Hyundai went for the top and made the market this time. Yvonne it was interesting, just back in 1994, they were dead last when it came to the quality survey. How important are these rankings for hyundai . Can bet they are breaking out the champagne at hyundai. This is a big win for them. Put some on the map against large competitors. This is their debut showing for this line, the genesis line of vehicles. It is a big success. Hyundai is worth 3 billion. That compares to 100 billion for volkswagen. Theyre up against very big car names. Here we are talking about them. You can see people across the industry talking this up, that gives them a big boost and a focus for the company. It validates their strategy of crating this new brand. It is a big win for them. Not just a win for the german rivals, but maybe the american ones as well. Thank you. That is almost it from us. Time for a look at what is coming up the next few hours on bloomberg markets. What are you watching . Happy friday. Markets. Rkets are we are in a phase of dollar weakness. Yvonne we saw it come back a bit. Bearish. Remaining a lot of people ripping up their previous forecast. Things are in flux, things are in motion. The fomc did not say many things we do not already know before. And the concern for 2018, the Global Growth situation. Where does the u. S. Fit in that, where are we in the business cycles, how does that dovetail in what you have to do with your money and how you invest . Looking at strategy with that in mind. And, korea. Yvonne we have been taking a look at all this, with the olympics. It seems tensions have simmered down. Does that mean a longerterm impact on relationships between pyongyang . Not to stay on top of it, beijing and washington, d. C. , where it is a leave them, and what do they want out of this . Was it really constructive . I hate to use that phrase. But time will tell, betty. Betty it is a good question. That is it from daybreak asia. Market coverage continues. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Rishaad is all about markets with asiapacific climbing. Federal reserve pledges only gradual Interest Rates hikes threat the course of this year. Stocks for every two stocks for everyone full or. And the u. S. Treasury secretary weighing in. Higher wages wont trigger higher prices. In hong kong, im rishaad salamat. Haidi im haidi lun. Also coming up, the state of tech in china. The big