Xerox lines up the bridge loan hp. Und its pursuit of citi, and bank of america are cash. Ding the and a checklist and change at the federal reserve. Former new york fed president dudley makes his case for a shakeup strategy kathleen, we are just getting news. Tle bit of breaking taking a look at the south korean economy. Were getting the south korean ovember surplus coming in at 5. 97 billion u. S. Dollars. 7. 39 goods trade surplus at billion u. S. Dollars for the november, falling from just over 8 billion in the previous month. Well be looking at that breakdown for a little more information in terms of how deteriorating exports would have played into that number. In the meantime, all the markets just opened in that open. Hong kong taking a look at the us. For were seeing some flaunk wagses in cash trade in sidney. . S pushing higher by. 1 while we are seeing futures looking higher for the nikkei led the after japan region lower on monday. You see the Retail Benchmark fall the most since august. To retrace that to ine, and when it comes some of the movers, were watching in sydney, we want to keep an eye on gold miners. T led the advance in sydney yesterday. New crest being cut to sell at morning star. Risk off moves being eased overnight, checking yen, just trading at 108 to 538 this morning on the back. Wti under re seeing pressure this morning, slipping kathleen a barrel, sophie, thank you very much. To ridica gupta. I know shes going to be delving into the bush fires in sydney fires than 130 bush continue to rage across much of outheastern australia with towns and cities, suffering record high levels of air pollution. 835 separate fires are still burning, with 24 people known to have died and more than half a animals killed. Light rain monday brought some relief, but weather conditions in the coming en days. Former National Security advisor he is willing to testify if sipped during prumps trial in the senate. Mcconnells plan to proceedings with no witnesses. Democrats say he is raising Senate Republicans to allow additional testimony. Assembly et to hold elections in the capital new delhi on february 8th amid slowing growth, rising and mass protests against Prime Minister modhis nationalist jaebtd. Students protested monday night the st attacks of prestigious delhi university. Lawmakers blame the violence on a group linked to the government. It was a clash between rival students. Harvey weinstein has been sexual with additional assault crimes by state prosecutors in california. And as his trial for rape Sexual Assault opens in new york. The charges come two years after he was first arrested and related alleged assaults on two womens in their teens. Weinstein denies wrong doing and says any Sexual Activity was consensual. Actors sers include Rosanna Arquette and rose mcgowan. Hours a day on air on bloomberg powered by more journalists and analysts in more than 120 countries. This is bloomberg. Heidi. Heidi thank you. Were continuing to get the International Response to the of the top iranian general by the United States. South korea now reacting saying that the middle east unrest risks to the markets and to the economy. Finance minister is speaking in a speech being delivered today. Also saying that the middle east unrest is unlikely seeffect oil imports, as we that surge in crude prices. The our next guest says killing is a game changer in relations between the u. S. And iran and for the entire middle east. Of s cross to the dean middle east studies. He joins us now. Professor, great to have you. That prump, the United States, has miscalculated moves in whats happened and in terms of whats going on in iraq now as well, and how does meaningfully change the middle east strategy . Well, i mean, thats a huge uestion, and people think that prump has a strategy for the middle east, but it really logic. Any United States target a commander a military iran . Nder of because he was not a rag tag leader. He was not a person like bin laden. Represented the state of iran. Targeting such a highranking a mander is really declaration of war on iran. Rump would have known and his advisors would have known that this is going to have major epercussions that iran is not going to take this lying down, lot of iran has a friends in the region in the proxies. Ts lebanon, militias shia in iraq and yemen. Disposal means of hurting the United States. Now is if the u. S. Prepared to really escalate and the conflict with iran . Expectation your f what that retaliation and reprisal will look like . Well, the retaliation, a lot of anger, as you ave seen in the report in iran because he was effectively a national hero. He was celebrated as the roviding defense for iran by defeating isis in iraq and syria could come into iran. So he was celebrated as a he had a very and successful track record in terms of defeating isis. A lot of pressure within iran to hit back at u. S. The iranian ime regime is aware that hitting back at u. S. Is going to really nenned a direct with the united tates, and iran just cannot afford that kifr direct confrontation. Iran is put in a bind now. On the one hand, it really needs to respond. On the other hand, it needs to be very measured in its response doesnt want to risk its a question of the regime if it really attacks the u. S. Directly . Professor, its kathleen the ofew york, and course, the trump team is claiming they believe that olamani in his role as iranian Major General in the Islamic Revolutionary guard corps, a powerful man, has been responsible for all kinds of acts that killed americans and others. Division primarily responsible for extraterritorial military and clandestine operations. Are you saying that of all the that iranians have been have done, including tankers, he had nothing to do with that, because if he did, i can understand why trump and his team would have made the argument that it was assassinate him well, of course, he was thelved in all of that, and extent to which he was directly i mean, thats an open question. Had re not denying that he a major role in expanding irans region, providing training, providing strategy to who also ia militia engaged the u. S. And other isis. S, including and there was a time we have to also keep that in mind. Time that forces and also ani trained offered advice to were fighting the side of United States against isis. The battle of mosul was very forces. Ght by the he has a really bad factor, no denying, but does United States the can go in . Thats the question. An the United States go in and assassinate people with really horrible track records without threat . Nent prump and mike pompeo have been saying that there was an threat against the United States and this was an act of selfdefense. That this only way would be acceptable and Legal International law, but there is no evidence to suggest that. We can know tever about that remains to be seen, i think, and in the meantime, this happened, and so the question is, what happens next . How does iran react . Does iraq go ahead and say are out , u. S. Forces of here . Potentially east on some kind of conflict, some war, some conflagration like weve seen in the past . This is going to embroil the United States in in the region, situation. The whole President Trump has been promising to withdraw u. S. Troops from the region. Iraq were from supposed to be leaving. Ow we are seeing an injection of additional 3,000 troops on top of the existing 5,000 u. S. Troops in iraq. To react . N going i think the most immediate shortterm is e a lot of attacks by to iran on u. S. Access in iraq. Raq is going to be now the new theater of proxy conflict. Now, the u. S. Would choose to shia militia the the conflict pand as trump has threatened, expand back at iran directly is really a matter for new administration. It puts the whole region on a very dangerous trajectory. Heidi thank you for joining us. I hope you join us again in the events unfold. Have more on the middle east in later shows. Jason morgan Scott Darling gives his outlook for oil and gas. Hen controller Partners Joins us from dubai. Still ahead, well assess how the tensions in iran are affecting bond markets. Theresa kong from Matthews Asia joins us next. Plus, the rally will be whether theres more room to run in 2020. This is bloomberg. The market is going to follow he fundamentalses of the economy . The market are coming down effective s deterence. Kathleen worries about how markets would react in iran monday, and n theres relative calm at least for now. We want to discuss all of that with theresa kong, portfolio and head of fixed income at Matthews Asia. Have you ts great to back. So what has it been, what, four days . Where are we . Really changed the picture, particularly for bonds just, you know, an early 2020 event that everyone is going to sort of settle back wait to see what happens . I think the markets are muted response to the latest rise in geopolitical tensions in the middle east. At the , if you look tenyear treasury, it really moved from 2 down to about 1. 8 . Has rallied. These are not one or two events. I think the market is really picking this up at the moment as noise. Ow, whether or not this really escalates into more of a temporary or even more of a ustainable conflict will be seen, and the market has certainly not priced that in. A efinitely see this as potential risk going forward. Though what i wonder, when i watch the bond market, the fed has, you know, stopped rates. Theyre on pause. They dont expect to raise rates either. You wonder, is this finally the year after four or five years of people getting it wrong. Something like this happens and bonds are quick to rally, i know its standard safe haven action. Does it show that the bond tendencytill have that to have the ball in the drivers seat . This point we need to focus on the fundamentals. If you actually look at in the United States, we believe that has bottomed. Wage e started see some pressures going up, and we do going to the fed is be on hold. With that dynamic, were probably going to see the yield up a little bit here. It actually bodes quite well for Financial Institutions like banks. In the shortterm pressures will about 2 . Ound and plus or minus 50 basis points up or down. Over the longer run, so talking about more of a fiveyear time frame, the first decade, were xt still solidly in a secular stagnation. Know, Monetary Policy is not going to be able to push higher, and so at this point we think that u. S. Will ries, Interest Rates neither be a huge risk on the up side or down side heidi are you a little more to asiawhether it comes then . While many Central Banks in this part of the world have really, adjusted at the end of last year, and were just looking at transmission effects coming year, there are still a fear that had some work left to do. Are there opportunities that are asia . R in certainly. You know, im so glad that the ight has finally shifted away from asia now into another region. You know, all the talk last year was really about the escalation trade, and now were really talking about escalation in a know, po type of, you tshlly even military escalation or proximate why i war through means, so i think that actually does bode well for asia for many reasons. Ou know, from a credit perspective, we do still see room for credit to run in. In yield of about 7 , we think that this could be another mid to high single digit returns. Asian currencies are also quite especially when you look at fundamentaled. Coupled with relatively heavy dollar, we u. S. Think that asian currencies have room to appreciate relative dollar. Rates ready talked about being relatively on hold here. When you add all that together actually quite a the ive picture of asia as region. On the it keeps a lid u. S. Dollar. Of ou see mild levels appreciation for asia effects . What real drives the u. S. Ollar is the combination of fundamentals as well as technicals. He key question that investors will be focused on is the differential in growth. Ast year u. S. Surprised on the up side. U. S. Growth was very solid while both europe as well as most of the emerging markets were not to hit the very high targets. As a result, u. S. Dollar rallies. What weve seen thus far has been somewhat growth out u. S. , especially with the pmi numbers we saw last week. As a result, we think there is the rest of the world, europe as well as dorging markets, to actually slightly better than what the market is currently pricing. With that differential, we do asian currencies have room to appreciate. Weve technical side, already seen some of the u. S. Dollar positioning being unwound. Now, that is the shortterm that certainly, you know, not been the case of the last few days because of this rise in geopolitical tensions, but i focus on the longer term. We think that there is still technicals to unwind and u. S. Or asian to outperform. Where is asia then, the sweet spot for Bond Investors . Continue to like u. S. Dollar and asia high yield. Last year, you know, i talked a the opportunities in china real estate. We still see that as one of the opportunities. Now, i mentioned that 7 is going in yield. He key here is that there really arent that many bonds that are going in at 7 . 5 or e either priced at they are actually in 10 , 13 range. That means that theres a lot of in the market which means its going to be a security selection type of market. And buy the in bond market, but its really important to make sure that you right bonds. He there are several issuers right now, especially in the china space eld industrial thats pricing in distress. Now, these bonds could easily points or down ten poinkts, and thats going to actually determine the ultimate andult rates in the region, whether or not there will continue to be Risk Appetite for these peripheral industries that have been idiocincratic in the movement. The question is quite rosy for asian high yield . Well, what a great way to off the new year with you. Thank you so very much. Portfolio manager and head of Matthews Asia. Up next, xerox has made a deal pursuit of hp. More details on that. Lus, the outlook for merger opportunity this year. This is bloomberg. Kathleen were moving on to a story as xerox arranges a massive 24 billion loan with bolster its nks to pursuit of hp. Its the biggest ever bridge and in the tech sector, xeroxlso a strong message long giving up owes future merger. Hp questioned whether the maller company had the financing. Show me the money. Ell, they are showing the financing and then some. Intent in d his putting the 24 billion bridge all together was to remove doubt and, if take a look the at hp, the bigger company, they had a lot of hp shareholders hat did question xerox financing ability. It was also worded in a letter ceo puts out that hp had some question of the financing. Likewas kind of how do you them apples. Banks thating at the put this together. It was a group of banks. Ity had initially put together financing for the offer that xerox made in november, which bank of america and mizuho financial that are in here together, and this is really a shot in the arm to kick activity for 2020 the historymaking size of the loan itself. Other fs pretty much in ge loans that weve seen tech, right . Compared to the top ten. It was a abillion deal. Massive at deal is the time. 20 billion back in 2018 was billion. 5. 6 deal last year was billion. Its massive in size. Its certainly welcomed by the m a community. T signal that is there will be a lot more financing available a lot more activity. Heidi coming up next, u. S. More than 9 above their term. What comes next . Our next guest says consolidation could be ahead. We are discussing that on the panel next. This is bloomberg. Day break asia. For killingn cities of top general by the u. S. Military. Ali led the service repeating that the generals death would be avenged. E was killed in baghdad and reports from there say the u. S. Army has told iraq its lead. Ring to however, pentagon sources say troops are being moved. Over the killing of general sizesing the ted force of unilateral action. The United Nations called for maximum restrantd and insure security in the middle east . That the vious of taking risk the united ions of states violated basic norms of the International Relations u. K. Opposition labor party will hold a threemonth contest to find a successor to corbin with a winner to be announced on april 4th. Already put have themselves forward with calls aying the Party Spokesman is currently leading the race. His main challenger is likely to be a business spokeswoman long bailey. Global news. This is bloomberg. Heidi. You. I thank lets get to hong kong now. Taking a look at the markets for is sophie. Sophie collecting in on gold, 2013 seeing prices from a futures, and silver falling for the first time in hovering above 18 right here. After topping r monday session. We are seeing the aussie dollar twoweek low. There is an impact of higher oil and Global Growth and the rba policy. Y the probability of a rate hike n february 4, the Australian Central Bank has seen above 56 . Now, checking in on the aussie seeing gold, we are miners giving back some of mondays advance. . S up nearly 1 rising then for a fourth straight session while aussie yields were seeing slightly track the u. S. Yield gain that we saw overnight on monday. We jump real quick to check in on the dollar yen. A trading at around 139. Just Holding Steady here after we saw tuation that is on monday until the dollaryen back above the 100 Day Moving Average. Side tops the 200 Day Moving Average today, kathleen. So very thank you much. The socalled santa claus rally was 3 for the s p 50000 in december alone. If you take the trolley back for to the october lows, the s p 12 through the end of the year. The driving force may be driving according to Goldman Sachs who is cohead of global foreign emerging Market Strategy joining us right here in our new york studio. All, thanks for joining us. A nice point to make. Are you just saying theres not going to be any more liquidity because the fed is going to keep rates . Theyre still going to be adding lots of money through the repo markets . Its not so much about Monetary Policy or liquidity. Its about growth both in and for 2020. The surge in the equity market that you had in the later part reflected an upgrade in growth expectations along side the improvement in the trade news. Think thats just going to be very hard to repeat. Ow, i emphasize were constructive on the economy. We think s p 500 makes further 3,400 by the end of the year, but on the pace that we were going in december, we would the end of re by january. We still think its going to be more of a grind. Its a choppier year. Growth just is not showing that vshape recovery that was ontinued gains and equities like we saw in december. Kathleen i want to get to byron weem who was at blackstoning now. He writes his big forecast, his predictions for the coming year. That the s p will top fed0 because he expects the to cut rates. Do you see anything to that argument . Well, if the fed were to cut rates into an economy thats doing pretty well, the stock may well get to 3,500 or beyond. The message from the fed, though, is much more cautious. They want inflation to be a higher. They want growth to continue. They are not aiming for a big overshoot. Not trying to juice the stock market that much. We dont think theyll be again due to the kind of macroeconomic back grop that we see . Asia you have a handful of Central Banks that have more ammunition. Is that going to be supported year . We do think in a couple of places. Articularly in australia where we think that they do rba does cut rates in february. That is likely to be supporting growth in australia and might weigh in on the aussie dollar a from current levels. More broadly, the macropolicy from e is turning away Central Banks and towards other efforts to stabilize growth. Fiscal laces thats policy. In other places the dialing back of the trade conflict may be growth. Ive of Central Banks generally, fed included, but with a couple of centralns like the rba, banks generally should be moving to the sidelines this year very active 2019. Heidi is it a year that of an s have more enduring effect because over the past few years its really trumps with president election and breaxit, youve sen them ride volatility, and none of them have stuck on the market. Is that going to be, i guess, a headwind thats sustained . Its always difficult to tell ith these types of political developments, but i would lastinge that we do see effects from political changes on economics and on markets. Examples would be the trade conflict, brexit. The elections around the world consequences for markets and so we think fx markets, rate markets are going to continue to the factors even though its very difficult to guess, you know, for any individual conflict whether it simmer down quickly or continue boiling on for weeks and months at a time . Just putting ere up the best years for the s p 50000, the chart from the gives, you and it know, from 1954, 45 gain runs to 2019. Ay 28. 9. Thats a huge, huge case. Theres another chart ready. This will show what happens in 20plus percent and it seems that that being one of those years really ets the following year up for an increase. In fact, s p performance president ial by cycle, actually the fourth year of prump. Of win thiss a lot back from history for the stock market . We think the outlook for the not market is good but great. We think that, you know, the s p 500 is headed 3,400. Our equity strategist target, and we are confident economy, the. Global economy. Youre not going to continue melting up in a Straight Line rally,ou had in the santa the socalled santa rally hrough the balance of the your unless you have exceptionally helpful policy. A period of consolidation after gains that we saw in december i dont think should be considered too surprising . Were showing the years after of, you know, looks like pretty big. Pretty good. Heidi was just asking about asia, and you know, one thing weve seen also is a lot of money in the past few weeks emerging markets broadly. If the u. S. Is kind of like on a some urner now after really good years, where are some of your favorite spots or some of your favorite trades looking at asia . Within asia specifically, we do think that there is pretty opportunities both in some equity markets and in equity and fixed income and currency markets to collect some of the more attractive carry. Couple of the markets we like are i understand new eza and yielder, more her domestically oriented markets of asia. Two of our favorites of trade. Of ont think theres a lot spot appreciation for those currencies ahead. India would be a good example. Not showing a lot of appreciation in the last couple of weeks, which were very good for em exchange rates. A lot urrencies produce of carry, particularly when with a lower yield made type of carry trades 8 to 10 in 2019, and we think theyre on track for something 10 return in 2020 as well. Kathleen where are we at in terms of the trade war . Of commentary that the trade deal gets signed in january, and if it gets igned its a shortterm mandate, a pr fix almost, right . Its good for both sides to be saving face. It meaningfully change things when it comes to the emerging market complex given it was such a big issue for all those currencies and Asset Classes last year . Going to ainly is not change the growth picture this ght, but it reduces big down side tail risk of a major conflict between the u. S. Nd china, which would have had big implications for the domestic economy, the Global Economy, trade flows, and for emerging markets. I think putting it behind us at least for the time being, the one deal, it takes away the risk of a bigger escalation. For the s that risk time being. Focuses the white house on the upcoming president ial election. It is quite important for emerging markets even though the conflict itself is still in the around background. Up next, former u. S. Fed dudley says l policy makers need to overhaul the repo regime to prevent crunch. Liquidity other interview is coming right up. This is bloomberg. We are counting down to asias first major market open this morning. This is how japanese futures are up ahead of the tokyo open. Were seeing still a little bit of weakness when it comes to nikkei futures despite edging just higher. Were seeing the extension then into the safe haven story start to fade. Not much of a move in u. S. Treasuries, for example, in the year, and also seeing a bit more stability. This, though, as investors watch and expect further developments out of the middle east. The following new york fed bill dudley says policy makesers should adopt new measures to support its framework for Monetary Policy. Among them a standing repo opened to a broad set of counter parties and exemptions for bank reserves. For why these e beneficial. Be the fed had to intervene to funds rate at l its target. Were in a new region im where hey pay interests on reserves, and theres a lot of reserves in the the fed could make it even better. Do is ng they could establish a standing repo facility to make sure that on es no upward pressure repo rates in theres a shock to the system. Second thing i think they could communicate a lot more clearly about why the new regime is better. Operate. Er to it makes the Payment System work better. Most importantly, its better a Financial Stability perspective because theres no conflict between the fed opening openended liquidity backstop versus its control of Monetary Policy. If the fed d regime added a lot of reserves to the system, it risks losing control rate. E federal funds under the new regime paying nterest on reserves, you dont have that problem . I think theyre most worried about the repo market. Money market funds will see outflows this year before sentiment picks up, and has to ns the fed then buy a lot more treasuries or for Bank Regulations to be rolled they n terms of what require. What do you say to traders to fear on this . Think the fear is very over theyre overwrought. I think the problem here is a very small one. A big one. The fed reserve has addressed most of it already just by adding a lot of reserves to the by buying treasury bills and engaging in a series of open operations. The fed i think makes the system Even Stronger by setting up an repo ight standing facility, which would be available to a wide array of counter parties. F there were upper pressure on the repo rates, people could go to the fed for cash against their securities, and that would basically make the system Even Stronger . Former new york fed president dudley who is also a view columnist of bloomberg news, opinion columnist is what more broadly. Ider we want to continue now on this ssue of the fed and where it goes with the repo markets. Zach, cohead of Global Foreign Exchange and emerging market goldman saks. First of all, lets remind nutshell a repo facility is something that would hold banks who already Treasury Bonds like crazy when they need liquidity not to have repo an operation on the market but say, oh, ill take my treasuries for some reserves, right . Oversimple fewing. How would this work . I would keep it simple. At the end of the day this is no different than what Central Banks are always doing. Central banks were created and lending e business of out cash in exchange for collateral. What we call the discount window the primary credit facility, the old terms that the fed used to use, this is no different that. Central bank is taking collateral and lending out cash. The question is what should be the structure of Something Like that . Normal times of what we have today its a bank thats in distress that can go to the fed exchange for its collateral. What the president is arguing for is something operating in normal times when Interest Rates just happened to be high for certain reasons, and the could mayt of the fed a more active role lending against high quality collateral potentiallyies oosh even nbs. I would just emphasize that this is the business of central banking. Lending against collateral, lending out cash, using its Balance Sheet to stabilize money markets. Thats what they do . What they did, and thats how they set the fed funds rate. Now. Of changes its very interesting that loretta, president of cleveland bloomberg oke with television when she spoke on friday was asked about this. She said its an intriguing looking at the repo facility. St. Louis fed has economists looking at it. She said at this point we can there because things do seem to be settled down on those markets, and to me the kind of tone and position that jay poul had at the last fed meeting at e he said, were looking it, but basically bill dudley is argument, but is it really necessary . Not at the moment. Its sort of a solution in search of a problem at the moment. Its potentially an elegant way to manage shortterm interest the central bank, but jay poulled fed thats already buying securities and growing its Balance Sheet. What president dudley is arguing something for the future. Something that could be used in replace of the recent steps that theyve taken in order to manage the country. At the moment its not really. They are effectively holding rates where they want them. Heidi thank you for joining us. Cohead of global fx and emerging Market Strategy at goldman saks joining us there in new york. Japan is seeing a boom in green bonds. Will it be enough, though, to slowdown in the Corporate Bond market . This is bloomberg. This is day break asia. Head of the new canadas biggest teleco says wau technology is top notch. Montrealbased r ce on monday and says waiwei has been a great partner thus far. He said they will play a leading in the new broadband network. He u. S. Is pressing allies to reject the company. Heidi boeing shares say it may more debt and the grounded 737 faess further issues. Had 33 billion available at the end of the hird quarter, but max related costs are rising. It also found bundles of wiring are too closely packed and in could cause a short circuit that would threaten plane. L of the kathleen general airways says it will be the first u. S. For all domestic flights and to become fully middle of ral by the the year. The carrier declined disclose the off set of the program, but ays it wont increase ticket prices as a result. Jetblue will also begin using fuel on flights from san francisco. Heidi the record rush for bond issuance may be set to slow, but a boom environmentally friendly debt. That have more details on from our credit editor andrew. What are you seeing in this space . Really interesting. Japan is finally getting on the bandwagon for global green bonds. Theres been a real boom in the past few years for global green speaking. Enerally the bond market is a big part of somewhat of an was a laggard. It has finally broken into the op ten biggestish we ares of green bonds last year. That is still rather slow when that its a bond market overall thats one of the biggest in the world. There are increasing signs that japan are ries in coming and looking to finance nvironmentallyfriendly projects through green issuance. What kind of industries are likely to be the primary drivers of the issuance . So far its been largely concentrated among finance companies, leasing companies, toyota finance, for example is a green bond sale ast year, but the place where people expect possible expansion utilities and also some more industrial companies. One very Interesting Development last year, the good points were the development coming forward in the coming year as well is the utility behind disaster t nuclear since chernobyl 2011 came out an interview that will it was looking at possible green bond issuance for a unit that its establishing, and theres nother category of bonds that are called transition bonds. These havent really caught on japan yet, but they are in europe, and theres speculation in they might catch on japan. They are basically are ways of that have notects been so green. Certain power reduction for example, that are trying to add things like covers and cut down on their emissions becoming a green. Re that would be a way that companies that havent been able qualify he hurdle to for green bond issuance might be able to move in that direction the whied is that you will encouragement to those companies that are trying to do the right thing to move ahead. I want to ask you, how is this bond boom fit into the broader outlook for the japanese market . Its been driven largely by of japan super easy Monetary Policy. Theyve held rates near zero for a very long time, and that accounted for a record amount of in japan last year. The companies basically just cheap money l the while they could. Theres some expectation now a bit tes could rise ahead. At the same time there are fewer bonds that are coming due in the japan. Year in that all means that overall bond sales are expected to drop. Hey have already reached a record for the fiscal year in japan that ends at the end of so its been a stunning amount of issuance. It is set to slow. Is one n bond market place where people expect some f that slowing could be eased and offset. Heidi andrew, the prop ownentses have poined tout me that theres a couple of big drivers right now. Are ncorporation bylaws asking or sthir shareholders, we want more green. They have low demand for green bonds, and that younger investors, more and more say they want to know about this green asset. In japan . S that also growing . Kly is that andrew its a very interesting question, and i think there are a lot of different views on that. Demand for actual do is driven by desire to good. There are also things called social bonds that are popping up world d there around the where companies are selling debt o finance projects for things like public housing. Certainly the japanese up in ent pension is funds, and its a big driver, and its asking for more issuance. Think thats thats a very powerful institution. Thank you so much to bloombergs andrew dit editor monihan who is joining us from hong kong. Open ng of japan, markets in tokyo. Also in seoul. At the top of the hour back to she is o find out what watching. Asia. E a rebound in u. S. Futures, though, a change to the down side. To climb extending and greenback strength remaining elusive in the new year. Searching down the board once traders will be waiting on a tenyear auction tuesday. Tepid demand surrounding the tenyear zone. That is looking unfavorable. Morgan stanley expecting appetite for the auction given uncertainty over trumps diplomatic policy. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Haidi a very good morning. I am haidi stroudwatts in sydney. Markets have just open for trade. Kathleen i am Kathleen Hays. Sophie i am Sophie Kamaruddin in hong kong. Asia. To daybreak our top stories, the u. S. Orders more troops to the middle east. Near 70, while gold remains at a sixyear high. Much of australia is choking on bushfire smoke with a devastating cost to people, animals, and the local economy. Tesla. Ig day for we are live at the new production plant in shanghai. For now, lets get straight to the Market Action with sophie. What are you focusing on . Sophie the nikkei 225 and the topix, after the nikkei two its biggest loss for the benchmark, and the yen looking steady after a retreat from a threemonth high, and the 10year picking up just a touch. This is ahead of a 10year auction tuesday. Checking the mood in seoul, korea, checking in on the cost be, adding 4 10 of 1 , while the korean won is firming up against the greenback after sliding to a threeweek low on monday. Gains for sydney stocks this morning, extending a climb for a fourth straight session, but gold miners left out in the cold with a rally in gold beginning to stall amid signs of overheating for the gold market, dollar trading around a twoweek low with the rba Monetary Policy, and we are looking at a rate cut from the Australian Bank in february. Lets check in on how the markets are trading so far this morning. We are seeing divergence and wti below 63 wti back per barrel, while brent is edging slightly higher. Extended declines in keeping an eye on treasuries this morning, the 10year yield Holding Steady after we saw things pick up slightly on monday, kathleen. You,een sophie, thank getting us right where we need to be. With a morningstar director of equity research. Glad to have you back. Before we get into the fundamentals and technicals, iran, u. S. , a major event has taken place. We saw a big selloff in stocks. Now, things seem to have settled down a while. We can get off the worry board, or is this something that will be around for a while . Look atve not if i it this way, i think it could linger longer, because even if there is action, you have an Immediate Impact to particularly the oil price, and, obviously, the Global Economy could be driving that, with a slow drip of issues that come out, but whatever it is, the animosity is there to continue for some time. This is one of the reasons why well, not the only reason, but one of the sectors last year was the Energy Sector globally, and this is where we see more value, both for the fact that it was undervalued and also for the fact that there was heightened geopolitical risk that will Keep Oil Prices slightly elevated. With the u. S. And asia, friday, last week, there have been a number of strategists who seemed to have said, history shows things like this cause markets to be volatile, and then it settles down, and other people were saying as recently as yesterday, this is not going to affect asia much. This is for the u. S. And the middle east. Have we seen both of those assumptions put the line . One thinghink is we do not expect a huge spike in oil prices. If you do not have that, then you have less risks to the Global Economy. The issue for the Global Economy still remains the trade war concerns and also the fact that china has been slowing a fair oil so if we look at the price in isolation, it sort of hovers around its current level. We do not expect to see it have a huge impact on confidence, but it does bring up, as i mentioned, opportunities for the Energy Sector. Lorraine, if you take a look at valuations, certainly does not seem like the u. S. Is a good value, but with the trade war, it has been largely priced in, and if so, where do you see value and yields this year . Aine yes, when we looked at it at the yearend, the u. S. Is slightly overvalued by the fair value estimates on the whole. Asia, in contrast, is slightly undervalued by about 5 . A lot of the trade war, initial somewhat reflected in share prices already. Having said that, people are still somewhat skeptical to the could of the tariffs that come through. I think the expectation is that the tariffs are here to stay in some form for some time, and that is basically the basis of our expectations for earnings forecast at this stage, as well, so if we do have better news that comes through on the trade front, we could have room for summer earnings revisions. We think that could actually uplift the have room for some earnings revisions. We think that could actually uplift things. Haidi with the u. S. And iran, it is interesting, because energy is already one of the cheapest sectors. Does it make it more appealing or less appealing . It is moreor us, appealing in the shortterm, depending on how this pans out, but we do think, looking at the situation, we think or at least i see some geopolitical risk will remain heightened for some time, so we will see Oil Prices Stay around 15 above the normal interim sort of forecast, which is about 60. This is favorable, particularly to the upstream producers, so one of our stock picks in this area that we liked prior to what has happened is one we still think is going to strengthen for the near term. When you look at mgm china, it looks like youre making a bet on macau, maybe not in the near term, but down the road. Nonetheless, macau had a bad year, certainly the second half of 2019. We had a guest earlier that was pretty upbeat on 2020. Even so, is this a good time to jump in to a company like mgm . We are looking at mgm china obviously as an opportunity to jump in at this stage, because as you mentioned, with the protests going on in hong kong, that area has been beaten down. We think that area will recover, and the reason we like mgm china is because we think there is going to be some scale advantage ofwill get with the opening their facilities, so that is one of the main reasons. We do think it is an opportunity time to jump in. Recovery. Lorraine, we have had a couple of guests on recently who are very upbeat on japan. I am curious, broadly, how you look at Japan Equities this year. It does not look like the boj will do anything if ever, and there is fiscal spending. Are you on board with Japan Equities . Well, we like some aspects of the Japanese Equities for the past year, and some of the sectors we really liked were some of the inventory plate sectors, so this would be things like robotics. Previously, last year, we did one that has gone up very nicely. The issue here is what is left in terms of value, and we still think that with the inventory cycle, we are going to see a better first quarter, for sure, calendar year, and certainly the first half. The way we are earnings wise, i think some of that is reflected in valuations. Where we are seeing value in some companies all right, lorraine, great to have you. Lets go to first word news now ritika gupta. Ritika towns and cities in australia suffering record levels of pollution, fires burning with 24 people known to have died and more than half of one billion animals killed. Light rain monday brought some relief, but conditions are set to worsen in the coming days. Former National Security adviser john bolton says he is willing to testify if subpoenaed during the President Trump impeachment trial. This injects fresh drama, complicating the Mitch Mcconnell plan for swift proceedings with no witnesses. Is raisingay bolton pressure on Senate Republicans to allow additional testimony. The opposition u. K. Party will find a successor leader to jeremy corbyn, the winner to be announced upcoming. Some have put themselves up, and there is one currently leading the race, and his main challenger is likely to be rebecca long bailey. India is set to hold elections in new delhi on february 8 amid rising unemployment and mass protests against the Prime Minister, his agenda. Against therotests famous university. They blame violence on a group. Police say there was a clash between rival students. Global news, 24 hours a day on , air and on quicktake by bloomberg, powered by more than 2,700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Kathleen . Kathleen thanks so much. Some big movers, and one big mover that sophie is taking a look at. Tokyo, thisng 4 in after some stock ratings. We are seeing overweight at morgan stanley. Stockr has upgraded the at ¥7,000, this as the company has a partnership with xerox, one which they say it was see them gain during the transition. Haidi . Haidi well, still ahead, tesla customers are set to receive the first made in china cars, and elon musk is expected to be there. We will be live from the tesla gige factory in shanghai. Gigafactory in shanghai. Kathleen this is bloomberg. This is daybreak asia. I am Kathleen Hays in new york. Am haidid i stroudwatts in sydney. Talking to Francine Lacqua about the strategy in the region the media is suggesting because they dislike trump and everything he does, that means when he talks about 52 sides and sitesabout to strike and he is about to strike iran, we can talk about how american alliances have gotten a lot weaker, given america first, right . He does all sorts of things that they cannot stand. We can also talk about how the power symmetries have been moving more towards the United States. The u. S. Does not need the middle east as it did historically, the Largest Energy producer in the world. These Technology Companies are world champions. The allies are nowhere on this. The americans spend more on defense. The allies are not, so even a president that maximally antagonizes the allies, it reflects the degree of the change in power. Oni heard it from others friday morning. Where is the strategy . You go right into this, and if there needs to be a recapitulation, reinvigoration of american strategy in the broader middle east, is it out there somewhere . Is no, but i think there more of a pivot with the middle east. Can we afford to leave the middle east . To leave thefford middle east more than our allies can afford to have us leave the middle east. Iran, theyere hit by were so stunned that the United States did nothing to back them up, but they started negotiating with the irradiance. That was the interesting with the iranians. That was the interesting thing. Even their economy takes a major, major hit. The middle east is clearly going to be a more unstable place going forward. How much of that is going to affect the global marketplace is likely to be reduced. Why . That is because the u. S. Is producing more energy. Would russia or china not take its place if the u. S. Leaves the middle east . Ian lets be clear. The russians and chinese do not have allies in the middle east. They do try to work with everyone, and in the case of the chinese, these are not military arrangements. They are largely economic and commercial alignments, so the chinese perspective in reaction to the americans on iran has been, everyone, lets calm down, but we will work with you, syria and uae. The chinese want to stability. Having said that, lets keep in mind that the media response to trump has been that this guy is in putins pocket, does everything he wants, but he just killed, assassinated, the most important military figure in iran, something they would not have supported, so where is the response to that . Lets stipulate that trump is not great at Foreign Policy, but we still have to have some common sense analysis about what is happening on the ground. Kathleen the interview with ian bremmer who spoke with tom keene and Francine Lacqua. Lets get the latest check of the business flash headlines. Car production germany has fallen to the lowest in nearly a quarter of a century. Automakers, including volkswagen, bmw, and daimler had the weakest since 1996. Decline is ae 9 result of declining demand in markets. Car, withlying hyundai working to develop a fleet of air taxis. The Companies Plan to show off a fullscale model this week at the ces event in las vegas. The aerial taxi will be able to take off and land vertically and carry people up to 200 miles per hour. Kathleen citigroup is recruiting programmers this year at the unit that houses its traders and Investment Bankers as technology reshapes banking with about 75 of their trade orders last year being electronic. Global banks are investing billions to apply tech to make Front Office Staff more efficient and keep trading moving smoothly. Haidi coming up next, critics on australias influence some items have come back to hurt them as the bushfires rage on. This is bloomberg. Kathleen this is daybreak asia. I am Kathleen Hays in new york. Haidi and i haidi stroudwatts am in sydney. Stark contrast to the traditional photographs of blue waters and the landscape of the country and the iconic wild love wildlife, the qualities, wallabies, with a wakeup call to how the country has reacted. We are starting to see the International Response now, not just looking at the recovery and sympathy and fundraising for those affected by the fires, but really heavy criticism of this lack of willingness to draw the connection between emissions and how severe the fires have been this year. I think this is right. I think one thing that sometimes outsiders do not appreciate about australia is how little our exports count. We had Scott Morrison at the yuan General Assembly last year, talking about how australia of globals 1. 3 emissions at the u. N. General Assembly Last year. But we are the third biggest fossil fuel exporter in the world after russia and saudi arabia, and if you add that in, that is about 1. 2 billion tons you are getting close to 5 of global omissions for a country whose population is north of 3 of the Global Global emissions for a country whose population is north of 3 of global population. Largest be one of the emitters of the world after china, the u. S. , and japan, so we are a significant contributor. Or the carbon counting, exports are generally not counted towards australias totals, but they do not care about carbon accounting or where the coal is burned. It just cares that the carbon is in the atmosphere, and i think what we are seeing in australia, and i think we will see more and more as time goes by, is the methodology does not matter. What matters is the carbon in the atmosphere. Ministerth the foreign to Russell Crowe at the golden globes, calling for a more coherent Energy Policy that reflects what we are seeing behind us, what we are seeing in the news is there an opportunity for a shift to renewables . How easily could that be done without impacting negatively the economy . It ishink with australia, very simple. I think renewables are cheaper in australia, significantly cheaper than burning coal. The costs of renewables well below 50 per megawatt hour. In australia, we have some of the best resources for that in the world. If you talk to major utility executives, none of them think there is any the existing assets that we have got our aging and are falling down. I think the bigger issue though that we do need to confront is, as i say, what happens to our exports. I think australia could quite rapidly see a transition, and even the government says they could see a 50 reduction in emissions domestically by 2030. Exports, three quarters of the emissions that this country is responsible for. David, there know, is many people who fight back against this conclusion, that this is all to do as you are saying, the fossil fuel exports, etc. , but i do have a question. Sothis has been building for long, and if these bushfires do happen occasionally, why did they get so bad this year . Is it suddenly the weight of Climate Change, and these exports from australia suddenly get so big that they started, or is there Something Else going on this year that made a big, big difference . David there is a natural variability, and australia has a very very your bowl climate with theable climate, eastern indian ocean or the western indian ocean, with very little rainfall in the eastern indian ocean, and that affects the whole of australia. This has been a hot summer, one point four degrees above, also the driest on record. 1. 4 degrees above, also the driest on record. Things coincided this year. But this has been highly predictable. There are government reports going back to 2008, predicting that we would be seeing the effects of bushfire weather of this sort as a result of Climate Change by 2020. The predictions have been there. We have chosen not to act. Haidi we have chosen not to add to, and i know there are the economic implications of coal being a main contributor to our exports, but there are implications of fires on business, on tourism, on the australian terrain, which we have been talking about . David i think that is right, and tourism is 3 of the economy. Three quarters of that is actually domestic tourism. Domestic tourism is down. They have seen some of the bad bushfires over christmas and new years. We talk to people, property owners, people in the tourist industry down there. They expect to make most of their money over the school break. Obviously, that is not going to happen at all this year. We have an economy that is slowing, so that is a risk for all of. David, innk you, sydney. This is bloomberg. And they lived happily ever after. The end. The end might not be as happy as you think. 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This is going to be a disappointed for people more bullish on japans economy, because it came in at 49. 4 in december, just below 50, which is the line that divides expansion from contraction. Youre, it was at 50. 6, so can see there is a bit of slippage there. What it means with the purchasing managers, they put this together, and you have a composite index with a pity pretty big drop. This is from 49. 8. Now, bank of japan and some others expecting a slow down at the end of the year, and there is always hope that there may be some progress on trade and more certainty for investors, with the people who do investments, corporations. This could make a difference, but for now, we are seeing an end of the year that was maybe a bit weaker than some had expected. So now, we want to take a look at the markets. Sophie kamaruddin. She is standing by. Sophie bonds are mixed while 10year treasuries are holding basis points, and jgb ahead of the 10year auction. This is ahead of pmi data from japan after mondays swings for the currency saw a retreat from the october hi, trading at 41 against the greenback from the october high. Higher bybeing led samsung this morning, and stocks in tokyo retracing some of the climb we saw on monday. The nikkei 225 had the biggest drop since november, and fujifilm leading after some ratings. Lets get it quick check on commodities. I want to highlight new york crude, falling back below 63 a barrel after hitting in april hi on monday. Markets are considering whether there is a destruction to supply, and gold stalling this morning, off 1 10 of 1 , with signs of overheating and gold markets. Haidi . Haidi thank you, sophie. We have the latest on the market tensions. Ritika gupta. Theka people are mourning killing of general soleimani, saying that the death would be avenged. He was killed in baghdad. The u. S. Says it currently has no plans to pull troops out of i people that the iraq still want to u. S. Presence in the country. Some are criticizing the use of force and unilateral military action. The beijing ambassador called for maximum restraint and dialogue to assure security in the middle east. Thet is obvious that , theteral risktaking military actions of the united norms ofhe basic relations have been violated. Is ready toos ghosn name the people he says are behind his arrest. Some spoke to him over the weekend, and he revealed he has evidence that proves his arrest was an attempt to destroy him. He has denied any contact with his wife, and he planned his dramatic escape from japan. Additional Sexual Assault crimes by state prosecutors in california, harvey weinstein. The charges are two years after he was first arrested and relate to an assault on two women in 2013, which he denies wrongdoing, saying any acts were consensual. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2,700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Haidi . Haidi thank you, ritkia. Aade talks and the signing of phase i deal next week, lets with a policyt and program director. Happy new year. Absolutely. We have got interesting events unfolding in the middle east. At the same time, we have to remember that the u. S. And china are about to embark on the socalled phase one agreement, which President Trump has tweeted about, signing it on january 15, and we are expecting a chinese delegation to come to washington, even if the final text of that agreement has not been released completely in both languages. Broadly speaking, i think it is positive, unlike what is happening since 2018, where the two sides broadly agree on what they agree, which has not always been the place, and this is much more of a purchasing agreement rather than a freetrade agreement. That is to say it really revolves around china committing to buying another 200 billion worth of imports from the u. S. , which would make donald trump very happy. There have been commitments from china, as well, that seem to address some of the u. S. Grievances about Technology Transfer and the respect for intellectual property, but these are commitments which china has always made, so the implementation exactly, they are vague, so we have to see how this works in practice. It is one thing to come up with these principled commitments on paper, but their execution in practice is often different, and there in lies the details, but it is clear that donald trump is keen to sign off on this as a major victory ahead of a pretty brutal Election Campaign in the u. S. China has been a bit more muted about celebrating this as a at least the gaze of donald trump and the white house has shifted away from the tray dispute with china and moved towards the middle east. Haidi yes, but does that surprise you though, that we started out the year with this aggressive move, this hawkish move, not the killing, per se, but this rhetoric from President Trump, saying there will be retaliation if iran does anything, talking about what they would potentially due to reimbursementng if u. S. Troops have been removed . As a lot of analysts have been saying, it leaves the middle east strategy in tatters. Tactic ins is a search of a strategy, really. No one is clear. Clear if either side has been particularly rational here, so there is an element of unpredictability. What it does mean though is that the u. S. , despite wanting to commit itself towards asia, towards Great Power Competition with china, seems to be to continue to be embroiled in the middle east, and that will continue to be the center of attention in washington for a while to come, which is also why i think russia and china must be privately relieved that thisiran dibacco that this taken emphasiss away from other areas. Kathleen with the clouds over donald trump, and we just had ian saying that people are assessing what trump has done, and there is some positive aspect to this, but will china use this against the u. S. . Wants toll, china paint itself as a good citizen. Iran as an example of what not to do and how much more responsible china is in terms of being rule abiding, so this plays into that narrative very well. Russia that china and both see themselves as protectors of, you know, adversaries of the u. S. Wherever they are, whether that is venezuela or iran, and they are playing that role. Kathleen ok. I want to ask you about something you were saying, about defending the coal industry in the face of global efforts to cut greenhouse emissions is significant, broad, and so far in calculable. You are putting out a danger beyond the bushfires themselvesh. Erv themselves. Herve yes, i think this is going to bleed into other areas of Australian Foreign policy. Basically, there is an unholy trifecta, three things merging here, and the world has woken up to that, so one is obviously the bushfires, which has made global media for weeks now and is not selling australia particularly well, australia known for its pristine natural beauty, and now the western country most ravaged by Climate Change. Then, there is the unhelpful or diplomacyss of australia at the climate negotiations process in madrid a few weeks before the bushfires really started off, which were seen as unproductive, and australia was ranked among other countries like brazil and the u. S. As one of the biggest inhibitors of progress in madrid, and then there is the fact that the Australian Government clearly is trying to protect its coal industry and its coal exports, so those three things i think will complicate australian diplomacy when we are talking about the euaustralia freetrade agreement that needs to be ratified by the Eu Parliament and also by others in the european union. There is a much darker view know of australia and australias this eupolicies, and freetrade agreement will be put to the democratic test in the Eu Parliament, and i think we can expect more of a backlash towards australias climate policies, similar to what france did towards brazil, when they were talking about ratifying their freetrade agreement, so i think we can expect more of this climate diplomacy from europe, which will complicate australias freetrade diplomacy elsewhere. There are other implications, as well, so Scott Morrison of australia has had to cancel trips to india and japan, very important trips for his Foreign Policy, because of the bushfire emergency, though australia is becoming a more inwardlooking country, focused on the immediacy and the urgency of this disaster here in australia and the cost of its Foreign Policy abroad. Haidi all right, thank you so much for joining us, herve. He was joining us in sydney. Coming up next, we will be live in shanghai at the new tesla car park, the Company Rolling out its locally made, made in china, that is, model 3. This is bloomberg. You are watching daybreak asia. I recorded a new high of 122 billion. Lets bring in our tech editor. What areas were badly hit at all, and what are the areas that did so very well . Reporter well, as you said, the year was quite surprising in the sense that they did increase. The first was down half of last year, it is still a considerable improvement. One of the areas that did well, obviously, was smartphones, at least in terms of shipments domestically, but to look at a problem area, you can look at the business unit. Targeting 8 billion in sales, up to 8 billion in sales, and what happened, in reality, it just achieved half of that. While that is not a very important unit for the company overall, it does indicate what sort of impacts the trump ban could have and is having on specific sectors, but in terms of overall impact, i would Say International smartphone sales were the ones that took the biggest hit. Any way 2020there would be different then . Colum well, we are sort of expecting it will be more challenging, and the company itself in a recent memo said more or less the same thing. One reason, of course, is that it had been stockpiling very important components in the course of last year. Those stockpiles are now running out, so the question would be how do they resolve that. Another threat obviously is the actual nature of the ban. There could be movement whereby washington decides to actually tighten the screws on huawei even more in 2020, so we see this year coming as a real challenge for the company. It may have survived somewhat in 2019, but the real challenges are in the 12 months ahead. What would the focus be than in terms of the myriad difficulties we see continuing into 2020 . Colum right. I think one of the things they will have to address obviously is the supply chain and how they can wrestle that away from alliance on american components to include more international suppliers, for example japan, south korea, but also to build their own inhouse capabilities in terms of, for example, their operating system, so we will see a doubling down on efforts in that regard, and more investment in innovation, especially as it relates to 5g technology. We think that in the year ahead, the determination of huawei will be even greater to build a solid base in 5g technology so they can continue to control and be successful in this sector. Yes, they are nothing if not determined in their response. Great to have you with us. From chinese tech to tech in china, tesla boss elon musk is set to attend a ceremony marking the first delivery of the made in china cars to customers. Our china correspondent joins us now from the tesla factory in shanghai. What are we looking to see today . Right now, i am about a 90minute drive from shanghai, and as you can see, i am outside the gigafactory. Their we are waiting for first deliveries to customers. Our sources say elon musk will be attending, as well as high level government officials. Now, that is very significant, because government has been critical of tesla, particular when it comes to fast approval for manufacturing, construction, receiving the necessary permits. Tesla has also received subsidies for these tesla model be exemptl as there from a purchase tax. Appearance shows how critical this is for them to truly become a global carmaker. Elon musk has said before that the template for this gigafac tory will serve as a model for expansion in other countries, and they are planning to ramp up in germany for production there. Again, this is teslas first car making plant outside of the u. S. And chinas first. Salina, was another tumultuous year for elon musk and tesla. Was another tumultuous year for elon musk and tesla. Slewa there was a whole of global automakers, like mercedes, bmw, audi, all markets, bute. V. Arguably, the bigger challenges the global backdrop in china as we have seen electric vehicle sales slow as government subsidies have been rolled back. We also have the issue of the auto market being in an unprecedented slump, predicting the third annual Straight Year of decline. Have obtained about 5 of the market, but, again, we are starting to see that slow. Some predict that the sales of as model 3s could be as low 21,000, based on the challenging environment and the his lee and the history of the tesla production delays, but 100,000 chinae model 3 made in models could be sold this year. Kathleen one of the reasons for sales for tesla is elon musk. They connect with him. They relate to him. Will this have an effect in china . Absolutely could. Elon musk is already a largerthanlife figure in china. In fact, he has been on this Charm Offensive as they have been ramping up for this big facility. They have made appearances in china. He has been seen hanging out with government officials and also at a local dumpling shot, although twitter is blocked in china, which is a very big part of the marketing factor in the United States. Tesla has done other things to boost up its marketing ahead of this big launch in terms of buying big, large spread ads, so elon musk already larger in life. This event today is just going to boost his image in china, as well. Kathleen he is quite a showman. I think you will have a great time today, selina. Wang, at the tesla factory in shanghai. Skyhigh property prices, next. This is bloomberg. Kathleen you are watching daybreak asia. With antigovernment protests taking a toll on retail and tourism, and we are joined now from hong kong by our guest. What is the forecast for the famously skyhigh rents, which some say have been driving these protests, one of the things . Obviously, it will be a very tough time for landlords in hong kong. Not only offices and retail shops, so analysts are saying a 50 drop in retail rent, over 10 of a drop in office rent in the coming year, so already, we are seeing luxury blands pulling out or scaling down their operations in hong kong since the protests started were seeing Luxury Brands pulling out or scaling down. Some have decided not to renew their lease, like prada, and was setlier this week to up plans to close its store in the same area. Landlords have cut their rents for these stores in order to attract tenants amid the ongoing protests. Ongoingther than the protests, which have continued into the new year, what are some of the other factors playing into retail rent levels in hong kong . Obviously, there is a decreasing appetite from retailers in hong kong, and it is largely due to the antigovernment protests that started last year, so since the protesters, there have been a lot of largescale demonstrations in prime shopping areas and a slump in tourist numbers, which have made it very, very difficult for retailers, so going forward, retailers will be very cautious in expanding their operations in hong kong and directing retail rents in hong kong. Haidi our reporter there. Lets give you a preview of what we are watching in the markets. Soph . Sophie the benchmark in taiwan, after their biggest drop in weeks, the biggest rags on monday after Companies Reported weaker december sales the biggest drags on monday. A mere 13 drop in sales last dollarand the taiwanese flipping. The floor has been set for the currency around 30 after seven weeks, this as we count down to the president ial elections to take place this weekend, and across the board, we will be getting some december data from taiwan. Trade balance seen widening from the previous month, while trade growth is seen moderate on a yearly basis, but, kathleen, inflation is forecasted at a faster pace of 1 year on year. Kathleen . Kathleen sophie, thank you. Coming up, i strategist will be on Bloomberg Markets china open, and we will have more. Haidi plus, more on the middle eastern tensions that are continuing to preoccupy markets. A guest will give us his outlook when it comes to oil and gas and controlled risk. We will be joined from dubai. That is just about it for daybreak asia on bloomberg. Our coverage continues be at we are looking for the opening in hong kong and more. And they lived happily ever after. The end. The end might not be as happy as you think. 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