Increasing pessimism about growth. More ceos than ever see a slowdown. Sophie chinas mystery virus is spreading through persontoperson contact. Hubs stepping up passenger screening. Lets turn to selina wang in beijing with australian markets coming online. Selina we did see australian markets red hot. We are now starting to see them drift slightly lower, marginally except for the new zealand up. 2 after gaining 3 since the start of this year. We did yesterday see the equities hit record highs when it comes index price and private equity valuations. So, that would be enough to ring bells in normal times but our strategists say that macro backdrop in australia is dire enough to call this rally into question when you consider the massive wildfires that are damaging their economy. With increasing focused on environmentally sustainable investing, that rally is potentially at risk. I want to check on that a little bit more with this next chart. Thelook at that rally in context of the u. S. China trade deal and lower reserve Bank Interest rates that pushed it into overbought territory. As you can see from this chart, australian stocks look overbought for the First Time Since july. 14 days the asx 200s relative index edged about 70. Signaling the markets rally have may have gotten too hot. This week we will see if that starts to pare back even further. Sophie the imf predicts the World Economy will strengthen in 2020, although at a slightly slower pace than anticipated. Cranfeld joins us from wellington. What cues can investors take from this outlook here . Is theye main thing will be encouraged by the fact that the outlook for 2020 is significantly better than it was 12 months ago. If you remember this time last year, the imf was downgrading everything and as it turned out the final result for the year was 2. 9 growth for the Global Economy, which wasnt too bad. They are looking for more than 3 growth this year. They have shaped the little bit off their forecast but in the big picture, its a very small amount. They are still looking for a better year in 2020 than 2019 but not quite as good as 2018. Overall people are comforted by the fact that the Global Economy is going in the right direction. Its a very big week with all the Major Players at davos. We may hear some contradictory views from that. In general, investors are expecting this year, the growth is on the right footing. Intorade wars have moved the background and people are concerned about getting on with business. Thats being reflected in slightly better economic data. Most significantly we have seen a last week with china, Industrial Production and retail sales, investment all going in the right direction. And if china starting to improve thats good news for everybody. So, although the imf is being more cautious, people will see what is happening on the ground as being pretty decent. A situation where if we do not get any major catastrophes, the Global Economy is in decent shape. It should be a good year for growth. Sophie in fact, were adding haidi or hoping to add to that picture waiting for those 20 days of south korean exports due any minute. Not so positive is the latest downgrade by moodys on hong kong. Is that likely to cause any kind of reaction in the equity session . Gradualthink this is a of and for hong kong. People on the ground are not surprised. They could see it coming less year, really since the protests got worse and the third and Fourth Quarter last year. You could already see it reflecting in hong kong underperforming against other places. The data is reflecting that unemployment has risen in hong kong. Passenger arrivals have gone down at the airport. Generally, the outlook for business is a bit worse than it has been for several years. That probably means you will see equities be an underperformer relative to the rest of asia for some time. Its already started to happen. We are seeing weakness yesterday as well. Although the Global Economy, Global Equities are probably going to have a decent year, just means that hong kong will be one of the laggards. There will be some companies that can beat that, because their businesses outside of the territory. Those businesses most exposed to hong kong will feel it. Also, Hong Kong Companies that borrowed outside hong kong, if they borrow in u. S. Dollars or other currencies, they will see a gradual increase in their cost of borrowing. It will not be massive. Hong kong is still a aarated country. But they will see a slight costs. Of widening of if the hong kong situation does not improve quickly, it will gradually be reflected in higher costs to Hong Kong Companies. Ranfield with the latest. You can follow all the days trading on the bloomberg. The International Monetary fund is toning down risk warnings. Can take a look on this terminal chart. Looking at exactly what mark was referring to earlier. This picture of positive green shoots. You can see improvement shipments out of south korea for the first 10 days. Returning to growth as that export number expected in the first 20 days to come to any minute now. Singapore domestic exports were also positive. The china data points have been bouncing off the lows we saw. The question is how does this factor into global currency . Ofs is north american head currency joins us from toronto. Does this mean that we see the e. M. Continue to see strength . Yeah, we think so. Part parcel of that is going to be the recovery story in china. And in the asia economy as a whole. Last weeks phase one agreement subtracted the negatives. You should see some support for growth leverage currencies like the korean won and the Singapore Dollar as well. Haidi where does the u. S. Dollar strength fit into this . Areause most analysts you going to see another europe dollar in the absence of anything else, except for maybe sterling. We are Firm Believers in reflation trade. Part of it is our bearish outlook for the u. S. Dollar. You might get bouts of dollar strength. The move in reflation is not going to be one way. A sporadic bout of strengthen the dollar. Again, if we are looking at a loser military policy outlook combined with the more relaxed fiscal policy and cyclical conversion of economies outside of north america, then to us suggests there will be some degree of dollar selling as the year progresses. Boj decisionve the coming up this. Tuesday the yen has depreciated back towards the 110 level. Long yen. Whats here . When you look at the yen. There are two ways of looking at it. The first one, its a risk off tone to global markets. The second is you see. A stronger and dodge in his picture in japan we think it is going to be more of the latter. You have a government that just initiated of fiscal spending plan. And you have additional tourism from the olympics for the summer. And you also have to look at the backup of yields over the last couple of months. If you look at the spread towards gjb and bonds. This diversions is a temporary thing. We will look at dollaryen 106 levelsthe tactically for the time being. Sophie do you see the yen reaching 100 this year . This year is going to be tough. If we look at the pro risk mood it suggest that the yen will not get the same support. Its going to be a more gradual move as opposed to anything swift and violent. Much volatility do you assigned to, given that this a yen that has given us significant geopolitical bumps already. Even the ones that we do know about, like the u. S. Election. I mean, there are potentially catalysts to drive currency higher. What we should be looking at are the catalysts that could drive global rates highers. Giving the fact that we are dealing with such an expansive environment for global liquidity, we do not see the setting for rates to move higher. Currency volatility a subdued. They will not stay this low forever. We saw similar low volatility before the shock five years ago in the middle part of the last decade. These regimes do not tend to last long. If youre looking for clues, you should be looking in the global rate space. Haidi how do you play the Arbitrage Trade between all the aussiekiwi . The good news out of china will affect the both equally. With respect to that, we think the kiwi shoul outperform. Dwe do expect the reserve bank of new zealand is going to be a little bit more cautious in terms of rate cuts. There are more andogenous issues in australia in regards to the bushfires that will shave some growth there. If we are talking another rba cut we know from prior speeches from the governor that q. E. Might not be that far behind. If that is the cas, it looks like rallies are fading. Sophie lastly, lets go back to your view on the chinese yuan. What kind of outside pressure do you see for the currency given the momentum we are seeing an economic indicators. It is hard to get in the way of an appreciating yuan. There are limited appreciation if we do get consolidation we do expect the yuan will further appreciate. One not just a phase agreement story. It is also the story of loose credit and the chinese economy. Moving towards more activity. A weve been in this downturn in chinese pmis for a couple of years. We expect a gradual upturn an activity which should translate into a bullish outlook for the yuan going forward. Sophie thank you so much. The north american head of fx strategy in toronto. Su that mystery virus in china. It is spreading across asia through persontoperson contact and heightening concern about wider infection. The number of cases is surging on the mainland. From its origins in the central city of wuhan to the north in beijing and self to guangdong. Authorities worldwide are stepping up testing in ports and airports for symptoms that include fever and coughing. Meanwhile, the first day of the extradition case against huawei s cfo has seen her defense team denounced u. S. Fraud charges as a facade. Lawyers say she should not be sent to the u. S. , because her defense to not meet canadas legal test for extradition. The hearings are her first chance to avoid being sent to the u. S. Where she is accused of lying to banks about huaweis links to iran. Civil authorities in iran have released a second report into the downing of that ukrainian passenger point saying it was hit by two missiles after takeoff. All 176 people on board the boeing jet died when it came down outside tehran on january 8. Iran initially blamed technical issues but later admitted the plane had been wrongly identified as a cruise missile. U. S. Have the reached the truth on digital tariffs that will mean neither side imposes duties this year. Tweeted thatron he and his counterpart had a great discussion and they will Work Together to avoid an escalation of tariffs. The accord brings france and the u. S. Back from the brink of a flu boeing a full blown trade war. Global news 24 hours a day on air and on quicktake by bloomberg powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. More onahead, we get the tech truce between paris and washington. Haidi and europe and the u. S. Pulled back from a fullblown trade war. Sophie up next, oil slightly higher with wti staying below 60 bucks a barrel. We discuss the implications. This is bloomberg. Is trading slightly higher after raising higher the world supplies counted libya. S over iraq and it seems like this is a market word takes a high threshold of a shock for it to react. Weve seen a little bit of upside. I think it would be wrong to underestimate the disruption caused in libya. They usually produce about 1. 2 million barrels. This is considerable disruption. And its certainly lending some decent support to the market. As you mentioned at the top, the markets is was applied in weve seen that in u. S. Inventories data in recent weeks. So that will certainly temper any ructions from libya and ir aq, which we have seen in the last few days protests there that have halted some production. Production disruptors are ongoing, there will be possibly some upside. Balancing the supply picture. We will get a clearer picture on supplies later in the week when the u. S. Government does its we can report. Sophie how does iran factor into the equation . James iran continues to bubble under. Reports of more conflict between iran and the e. U. On how they are moving forward with the nuclear talks. It seems that iran is being increasingly belligerent in the face of tougher stance from the u. S. Theres always potential for that situation to flare up. Traders should be aware of that. Politicald, tensions can have an initial price spike. But a longerlasting impact is not as great as it was. Be wrong to underestimate the risks. Ands a very volatile region could continue to be so in the months and years ahead. Sophie the libya noc declared force majeure, meaning it will impact delivery contracts. How long do think this will be happening . James a very good question. We had a meeting in germany on sunday aimed at brokering a truce between the rival factions in libya. The report suggested was a bit of a bust. No agreement respurred and the libby and strong and who the libyan strong man who is holding the oil market for ransom with the blockade he is put on the exports. Hes digging in. No sign of him agreeing to a truce. Thosere this goes on, disruptions are ongoing. That being said, the political volatile. In libya is we could well get an agreement within a matter of days and think and quickly returned to normal. Im not expert on libyan politics. All of the traders are in the same boat. Haidi thank you so much. James thornhill in sydney. Well get more on the outlook for commodities later. Guest will be whether senate are. Do not miss out on a big guests from dom us including the imf chief. Thewell be speaking to u. S. Transportation secretary elaine chao as well. This is bloomberg. China has pneumonia like virus is spreading across asia through persontoperson contact. The number of cases is surging forcing airports to introduce screenings. Massconcerns with the migration of Lunar New Year around the corner. Tom mackenzie has the latest in beijing. What is the breakdown, and what are Chinese Health officials doing with this latest information . Tom it really points to the key reasons for heightened concern. One is that Health Officials have determined this is being transparen transmitted persontoperson. Number two we are in a period where hundreds of millions will be traveling for the chinese new year, potentially 3 billion trips across the country and outside of the country as well. In terms of the numbers, the cases were already at 200, according to officials. There have been cases in everywhere from the source of beijing, quando, south korea, japan and thailand. You see increased screening at airports and ports in railways airports like san francisco, los angeles, new york as they expect hundreds maybe thousands of visitors from Mainland China to be heading to countries around the world for the spring festival holiday. Stepping up the screening. The concern is the transmission rates will pick up significantly as the number of people surges across the country on these trips. How health of 30s are looking at it, wto meeting in geneva on the 22nd. Tomorrow to work out how they should respond. Weve had three confirmed deaths so far. And, of course, the imperial researchers suggest the number 700cases could easily be 1 according to their research. The concern is that this is numbero pick up in the of cases and the number of deaths going forward. Haidi tom, what are we expecting to see in terms of the economic in the Market Impact of this . Tom weve already seen reflected in some of the stocks in china. The pharmaceutical stocks, linked to antibiotics, they surg ed in anticipation there is going to be greater demand for those types of drugs. On the flipside youve seen everything that is linked to two o travel. Air china, china southern, casino stocks as well as restaurants, a food chain. All of these companies are under pressure. In expectation the people are going to be curtailing the trips and staying away from crowded places. Again, just to highlight the extent of the sarslike virus, if you compare it to sars in and that led to 800 deaths significant economic turmoil as it spread across china and hong kong. Were hoping it will not get his bat is that. Officials are monitoring closely the cases are picking up very quickly. We are at a Crucial Point where hundreds of millions of people will be making trips across china. Theres a a lot of concern here. Haidi picking up quickly. As were speaking china report infrom the corona virus wuhan city. We are just getting that across the bloomberg now. As we get further reports of contamination, of contagion and fatalities, a fourth being reported from this a virus, what it we hearing from authorities and what are we anticipating the measures to be put in place . Tom first of all, we do not know what the source of this buyers this virus is or how its transmitted. Those are two questions that need to be answered. We have the president addresses publicly in state media yesterday saying the country needs to do everything to halt the spread of this virus. We will see a step up in terms of the approach by officials, Health Authorities as they try to increase screening around the country and around these ports, around trains and railways and airports. But, of course, china also has a history of covering up and not being fully transparent about these diseases. Sophie well get more details of what could be ahead for, regarding the outbreak of this corona virus, next. This is bloomberg. And they lived happily ever after. The end. The end might not be as happy as you think. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke but the good news is you can rewrite your ending and get screened for stroke and cardiovascular disease. Life line screening is the easy and affordable way to make you aware of undetected Health Problems before they hurt you. We use Ultrasound Technology to literally look inside your arteries for plaque that builds up as you age and increases your risk for stroke and heart disease. So if youre over 40, call to schedule an appointment for five painless screenings that go beyond annual checkups. And if you call us today, youll only pay 149an over 50 savings. Read it again, papa . Sure. Ive got plenty of time. Life line screening. The power of prevention. Call now to learn more. This is daybreak asia. This is su keenan with the first word headlines. Treasurer says he cannot confirm whether the government will still deliver a Budget Surplus given the widespread bushfire damage. Josh fienberg says communities have been devastated and the fallout will help everything from tourism to household consumption. He said the full Economic Impact from the fires is yet to be determined. Hong kong has racked up a 10th street year for the world Affordable Housing market. In canada came in second with sydney and melbourne third and fourth. Hong kongs median Property Price was found to be just over 20 times the average Household Income last year. Vancouver was only 12 times the average income. A new report published at the World Economic forum in davos says a portion of ceos expected Global Growth to slow this year. I should say the pwc survey bossesalf of the 1600 that were questioned and 83 countries are seeing a slowdown. They are asking businesses to do more in 2012. Executives were pessimistic in every region. Confidence, you guessed it, at its lowest since 2009. Air 24 hours a day and powered by 2700 journalists and analysts in more than 120 countries. Im su keenan, this is bloomberg. Davos. S get more from we still see expansion this year, but at a slightly weaker pace than previously thought. Davos, we talk about what is driving the forecast. The small cut that we have is and 2020. In 2019 and it comes from india. Revisions in 2019 and 2020 and that explains the vast majority of the downgrade. What Downside Risks do you see . Issue remains to be an important one. We have had some positive news but trade could spread to other areas. The s p keeps testing new highs. Is there a risk that investors could be disappointed in the months ahead. It comes substantially. Upexplain what is driving stock prices, the very low Interest Rate is probably the number one factor. Three months ago, it looked like earnings forecasts were more pessimistic. Flag that there are some markets that are slightly a value. And if it was a worse financial condition, those might have an impact. There has been a rising call for governments to perhaps have fiscal measures to drive growth growing going forward. Is 20 20 the year where fiscal measures will be of limited by government . They had started them lamenting fiscal measures. The question is, how much should they be doing . Stabilizing at this point. There are advanced economies around the world that need to raise potential growth. This might be the time to do it from a costbenefit analysis. Is an argument that we still make. We do think that it is good for countries to prepare and have projects in the pipeline. This will be a more severe slowdown. If there is a more severe slowdown, that can hit the ground running a little bit faster than in the past. We will be speaking to a range of World Leaders in davos encoding the prime ministers of norway, greece, netherlands, and jordan joining us. Will nudge of japan up the growth outlook. Lets look ahead to the policy division with former doj board member and economics professor. There is little reason for governor kuroda to rock the boat today. Japanhink the bank of just stays where they are because it is moving around 110. It is very good. The index is moving at about 24,000. That is why they did not take action today. And what kind of revision upwards are you anticipating . Will we see a shift of the government target of 1. 4 expansion . Yes. Last year in 2019, the boj will increase the outlook. And partially because of verynment spending, it is strong. , i think the bank of japan may also increase the outlook. It is probably 1. 4 projected by government. We have a labor shortage. And just by increasing the spending, this does lead to lots of employment and higher demand. I want to throw out this chart that extends on what sophie was talking about in terms of the gdp outlook. This is looking at the progress of growth. We have seen a sharp hit from the price slump that has partially or temporarily been resolved between the u. S. , china, and the sales tax activity as well. The white line, you can see the plunging bloomberg gdp tracker with japan. You expect this to be reversed significantly this year . Will the olympics provide that boost . Yes, the Tokyo Olympics will give some boost. But at the same time, the Manufacturing Sector is growing week. Ak. Growing we chinau. S. Trade issue agreement was made, [indiscernible] the Manufacturing Sector remains quite sluggish so i dont think japan can expect that in terms of exports. They are not able to have policies with a surplus, and it contributes to the economic growth. It is very limited. And even though there was a stimulus package, i think we can expect some slowdown in economy growth this year. This is below government expectations, 1. 4 . Wethis is the part where Start Talking about the need for structural reform. Are seeing that impact of anding consumption weakening consumption. Wage growth is still low. What needs to be done now. Have highend productivity to have highend wages. At the moment, no Manufacturing Sector is doing ok, especially in an area of construction where they have been laborintensive. It is not really including productivity. We need the restructuring of corporate sectors. And domestically across the borders. And i think at this low Interest Rate, this side effect is hampering it. They used the word inflation. Yeah, so the government and the bank of japan keep saying that there is a differential mindset. They feel that prices are very high. I think that there will be a differential mindset and people feel it is not going up. They dont have a strong appetite for consumption. I dont think that we should say japan has a differential mindset. It can have limited income. How important will looking at the views be for guidance today . The output gap in japan . We have a labor shortage. Demand. T a lack of we want to have full employment because of demographics. Employment is the issue. Having said that employment isnt the issue. Having said that, what can the government create . Allocate labor forces from the private sector. To think about what kind of economic policies are necessary for japan. Need to increase more employment. Always great to have you with us, former boj board member Sayuri Shirai with us. On cruiseng to stay control today. Later today, we will be formed joined by a former boj board member at 11 00 hong kong time, 2 00 p. M. In sydney. Markets have been trading for about 45 minutes. It looks like the asian markets are lacking a clear direction as the u. S. Equity markets are closing. Some of the markets are getting fatigued by the rally. We see that with the asx 200. Australia plowed through the records and are starting to pull back almost. 2 . We are seeing new zealand gained again about. 2 . See the bloomberg u. S. Dollar spot index after france announced an agreement with the u. S. And the tax dispute. And looking at some currency, the aussie dollar, strategists are going to struggle to break decisively past that. 69 level. Just Holding Around that level, those gains may be restrained. They see the separate Monetary Policy decision at largely a coin toss. Currency we have seen u. S. N buoyant in the dollar powered by strong u. S. Housing data numbers on friday. Levels holding at the 687. The currency seems to have found that stronger footing. We saw that better than expected data. There will be corruption charges meted out to former. Overnment officials this filed under the antimoney laundering and terrorism. Up, a tech truce. This is bloomberg. We want to invest in Clean Technology and green new procedures. We know there is a lot of innovation behind it that we need to step forward with the European Union. The teams need to identify all the Climate Change risks. We will not make the investment. Speaking in davos on Climate Change and about global warming, the blackrock chairman says the fight against Climate Change requires a joint effort between the government and the private sector. The fight against Climate Change will require a joint effort, as he says. Have a listen. This is a major shift that is just about to happen. It is no different than some of the shifts related to the baby boom after the war. We believe it is a fundamental reshaping of finance that will curtail significant reallocation of capital and relevant price changes. Short to mediumterm, this is an opportunity from the investment perspective, to get better performance. Have you been frustrated by the fact it is difficult to ine or to force companies you cant force companies, but to measure the impact Climate Change will have on them . That has been the printable challenge. E have standards, tf t pfd this is the fastest evolving process to make sure that we do have some initial common standards at least in regards to disclosure. The Public Sector has been involved in this as well. Governor carney has been at the forefront of pushing this. I think every year, we will see convergence with some of the standards. A lot of work needs to be done. If we dont have common standards, it is very hard to judge. We are well on the way with these initial standards. Better off not be forcing companies to slow down . There will be regulation. We should have no illusion about this. Ultimately, Climate Change cannot be tackled by the private sector alone. It is a government problem and will require a sustained and coordinated response. There will be regulation and in the private sector adapts. Ofthat is the Vice President blackrock speaking to hilda in davos. And we will speak to more in davos including microsofts satya nadella. This is uber. This is bloomberg. Some breaking news crossing the bloomberg. More positive news out of the regional economy with south korean first 20 days of january exports coming in. Falling. 2 . Chip exports are up by 8. 7 . The first 20 days, rising 3 year on year. Raking that down, exports to china dropping 4. 7 . Looking at the recovery when it comes to the demand side with china, certainly given that the first 10 days were fairly of 5 ve, we saw a growth to south korean exports. The first 10 days saw a little bit of a slowdown. The overall theme of the was almost 9 ns in the first 20 days of the month. It accounts for a fifth of overseas sales. This is particularly when it comes to chinese numbers. It tends to follow pretty closely. Exports falling. 2 . Lets get a quick check of the latest business headlines. Another player entering singapores Digital Banking race. Applying for a consortium that includes a Japanese Trading Company. Sinceave been operating 2017. The listed stock has had a volatile past few years. The European Union says it wont ban huawei when the block publishes guidelines on security. They want to release the report at the end of the month and measures will be strict and vigilant. Boris johnson indicated last the brand name is damaged following two fatal crashes of the boeing 737 max. There is no way for them to retain it. Boeing has been hit ground badly by the grounding of the max. There is a 10 billion loan from a group of banks led by sydney. France in the u. S. Have reached a truce in the dispute over digital taxes. Now from tokyo. This is a pullback. What are the details here . France is reporting that they reached a deal with the united states. President macron was tweeting that he had reached an agreement with President Trump to in theally a cease fire dispute over digital taxes. Tax large moved to u. S. Tech companies. Worry that there was retaliatory tariffs against french wine and cheese. Saw in china a , the broaderrs ago context is continuing u. S. European trade tensions over a whole variety of things from cars to subsidies for airbus and boeing. So you can imagine that this is a titfortat situation and could poison transatlantic trade shadow overasting a the positive outlook for trade that we were just talking about earlier with korean trade numbers in the u. S. China trade deal. We havent had official confirmation for President Trump yet. President trump is scheduled to speak later today. It will be very important for investors to see the attitude there. They will continue with this positive music that they have been getting on the trade front. Out some of the theoric that he implies on campaign trail that europe continues to rip off americans. And you are right, chris. Just a reminder how volatile the trade and politics side of things. Do we need to remind ourselves that we are getting into a seasonally kind of iffy part of the year when it comes to data points now . Verge of thethe Lunar New Year. That is always a distortion particularly for asian trade numbers, for supply chain production, and really across the world given the role of china in the Global Economy. In the trading system. If we take a step back, china trade figures for december were surprisingly good. Becausee effects there december 2018 numbers were particularly bad. There is a broader sign of improvement on the trade front. Chris, thank you so much. Our asian editor in tokyo. Markets open in tokyo at the top of the hour. What are you watching . Lack ofe seeing a direction here as we are just edging into the Lunar New Year. We will see the Chinese Market close and the u. S. Markets close right now because of the holiday. We are pretty much seeing right across the board that futures are down about 2 . We are seeing the nikkei futures and soul futures looking like the markets are set to break three Straight Days of trading gains. And the records we saw yesterday for the year, we will look ahead to see what the reaction is going to be. I also want to quickly remark about the south korean trade data when we see them open, there may be muted reaction because of distortion from the Lunar New Year. Switching boards quickly, we are looking ahead to the Monetary Policy decision from the bank of japan. What we are looking at here is the south korean trading data with outbound shipments pairing those declines. Heidi . We have much more ahead coming up on the next hour of daybreak asia. Haidi good morning. I am haidi stroudwatts in sydney. Kamaruddinm sophie at bloombergs asian headquarters in hong kong. I am selina wang. Welcome to daybreak asia. Haidi out of stores this tuesday, the imf trims its outlook for Global Growth. It still sees expansion in the expansion in thes year World Economy this year but at a slower pace. Sophie longrunning social unrest. A potential plan to address the issue. Engleteve i am stephen in hong kong. Guests a lot of bigname coming up including goldmans head of commodity research. Lets get to the market action. Selina we are seeing three straight gains in the market. Massive equity rally. U. S. Fraud charges. Lawyers say she should not be sent to the u. S. Because her alleged offenses do not meet canadas legal test for extradition. Lying twosed of about huaweis links to iran. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am su keenan. This is bloomberg. They have downgraded hong kongs credit ratings. The agency also changed the outlook from negative to stable. Saying it expects fiscal strength and stability to continue. He joins us now from singapore. Good morning. We have had a response from the Hong Kong Government strongly disagreeing with the provision, citing a high degree of autonomy. Given the constraints on Institutional Capacity identified by moodys, what are the ramifications here . Hong kong government is free to have their own opinion. We have been monitoring the government response to the ongoing protests for obviously the past nine months, and in our view, the lack of clear response or tangible plans to address the very broad range of political socioEconomic Issues has indicated the fact that the institutional government strengths is lower than what we attributed. And with the autonomy issue looming large, what kind for the u. S. Plied Congress Last year . Our view, hong kongs unique Competitive Position as a Global Financial club is driven by the autonomy of the institution. Months and ends of unrest and Capital Market has been largely untouched. Dont think that is necessarily out of scope. I think the rationale for having the outlook set at stable, wed have recognized that hong kongs economy is broadly diversified. It is a wealthy economy. The current contraction in growth is not concerning in itself. At the same time, the Hong Kong Government has a good fiscal position. From a fiscal perspective, the Hong Kong Government has a lot to rely on. Acrossmuch will weakness tourism and retail continue . Are in at think we position to really advise on what kind of policy or fiscal. Timulus would be appropriate i think part of our negative is negative rating reaction because what has been done so far does not amount, in our view, to a holistic, tangible economic addresses the issues hong kong faces as well as some of the issues that have been brought to the fore by the protest. Given the packages the Hong Kong Government has rolled out so far, do you anticipate undermining the fiscal strength of the Hong Kong Government . Not at this point. As i mentioned earlier, hong kong still has a long position in terms of the school reserves. Cash fiscal reserves. In terms of fiscal reserves. Given the response thus far by the Hong Kong Government, do you see any of the pressures being alleviated for the year to come . Well, i think our view is the social and Economic Issues hong kong faces are complex, in nature, and difficult to resolve. We have pointed to we are not saying that there is a straightforward or simple solution but what the Hong Kong Government has done, particularly in the context of social unrest, has not provided us with a very clear vision as to a longterm plan to address these issues. So that is, again, part of the rationale for our assessment of the institutional governance. Is hard to see a scenario where there could be an improvement when you talk about these deeply entrenched issues and the lack of compromise on either side. It is. I think if we were to see some clear a path to resolving the current stalemate, we would also planoking for not just a but a plan that indicates longterm improvement in institutional government strength. That is what we would be looking for, for any upward pressure around the rating. Its obviously a very difficult situation to manage. We are not denying that. Now, morek for clarity around the longterm plan is something that we have not seen. Associate managing director with us. We are in vancouver. Cfoss huaweis extradition hearing begins. Sophie we head to the Goldman Sachs global macro conference in hong kong. We will hear from the head of Commodities Research. This is bloomberg. Sophie you are watching daybreak asia. Guarding a bid for toshiba. Hekei news reporting that ¥3456de a tender offer at per share, a discount to the current price and the fund to spend up to ¥25. 9 billion in that offer. 44 of toshiba machines. We are seeing a marginal response in prices today, gaining 1. 1 at the start of cash trade. Haidi we are going to take a look at oil, which is extending gains as exports out of libya remain blocked. We are seeing moderate gains being held in the early part of the Asian Session but they are countering that concern. Lets head over to the Goldman Sachs global macro conference now. Stephen engle is there with more. Morning. Good yes, and our first guest is jeff curry, global head of Commodities Research at Goldman Sachs. So much to talk about. Good morning to you and thanks for joining us and thanks for having us at your conference. Avoss talk about d first. A lot of the global elites will be talking about Climate Change. I was reading some notes of some commodities traders and they are looking closely at it this year for any signs of initiatives on Climate Change and what that will mean for the commodities markets. In particular, oil. What is your take . One of the points we will be carbon for is really for capture technologies. We think thats got to be part of the broader solution here. There are several reasons for it. When you think about the price of carbon, 100 a ton represents somewhere around 40 a barrel. You had 40 a barrel on top of that. 100 a barrel. We have been there before. You can get half of a solution with 100 a ton carbon tax. You go much higher than that, you start to run into the problems of higher prices creating income equality issues. France,that in movements within netherlands and other parts of the world, particularly the u. S. , when you get Higher Energy prices. Carbon capture becomes an important part of that solution. One way to think about it, conservation is a regressive tax which is why you get the cap on that price. You get Carbon Capture technologies being more of a progressive solution so we are going to be focused on the potential for Carbon Capture technologies. Stephen you have a price target of oil, 63 a barrel . Its around 65 for branch right now. You see yielding much higher as you are bullish on commodities for 2020. Lets take a step back and ask why we are bullish on commodities. We see declining investment across the commodities space. You look at energy, the rig counts, it has continued to fall over the course of the last year. You look at metals and mining investments, off sharply. When you think about commodities as being part of the broader old economy, you look at the old economy, it represents 35 of gdp but it has two thirds of the corporate losses, 90 of the nonfinanced deck. The reason why it is such a large share is it produces physical assets. Physical assets can be collateralized. The third one represents 80 going back to why this will be a big issue. If you look at the old economy, they are overbuilt, overleveraged, and over polluted. All three of these factors create a sharp decline in the ability to invest. Gain redirected. Overleveraged, they have to take most of the cash flow. Third, over polluted because they are the target of emissions. Capital is being restricted from the sector. As a result, investments decline. We started to see a tightening of the market with opec cutting production puts upward pressure on the front end of the forward curve. Because they do not have access to the debt and equity markets, the backend end of the curve. Thats where you get that 15 to 20 role yield. Somewhereading between 64 and 65. We expect it to come down a tiny bit. The return will come from that finance. Could see a ceiling. We have seen it with libya in the pipeline and iraq, a temporary halt. You have the uncertainty with iran as well. Is there a ceiling on the price, do you think . Jeff we have witnessed that in the oil market and you saw it with iran at the beginning of this year. It would have to be a very substantial disruption to push prices above 70 a barrel on a sustainable basis for several reasons. The u. S. Is sitting on an enormous amount of inventory. You go back in the Fourth Quarter of last year, the u. S. Officially became Energy Independent so it has all of these Strategic Reserves it does not need anymore. You also have the emerging markets. We used to go up to 100 a barrel, bringing it back to the issue of income inequality. They used to subsidize prices. The price could go up very substantially and the people and countries would not feel it. The problem is today, those subsidies are gone. Stephen lets switch to metals. Palladium and the focus right now but also gold and copper. Lets start with palladium at 2500. It is up 30 already this year. How much more room does this have . This is used primarily in catalytic converters p or old combustion. Converters. Old combustion. Jeff lets go back to vw. To switch out of diesel cars. Platinum is the primary auto catalyst in diesel cars. Palladium is the primary one in gasoline. We have an increase in palladium. Problems and another thing. That is the genesis of the issue. Think about what has to happen they cause them to happen to cause them to switch. It is still such a small proportion of the overall cost. You need to have physical disruptions that are so large it starts to disrupt the ability to produce these. We are not there yet, which is one of the things we saw on friday. We rallied 10 . Different group of metals, more focused on batteries, on electricity like copper and the electrical part. Stephen substitutions into platinum . Jeff absolutely. Rhodium is another one that rallies. Rush, itf the new gold is the new Precious Metals rush. One of the key reasons is that they are all critical in terms of thinking about these industrial applications more youdly, but second of all, have the monetary demand for gold and platinum, which is helping. Stephen copper is the most most slowing investment in copper as well. His gold a safe haven . Jeff is gold a safe haven . Jeff absolutely. Get wes ago, you dont know if it will lead to supply disruptions, but for sure, gold. The dollarization de dollarization is critical. We have sanctions and geopolitical risk. Owning and gold in gold, when we look at demand, it was 750 tons. The third reason we like it is wecapex is coming out start to get savings. Stephen really quick, including the phase i trade deal and chinese consumption, they we see modest rates of depreciation. We are suffering from lack of investment. We have surprise to the upside. The key issue is stephen rio tinto is talking about upping supply after disruptions last year. What does that mean for prices . We assume it will be stacking prices . Jeff inventories are quite low. China did not rebuild inventories going into the chinese new year. What we talk about and commodities markets, when you have these very low inventories, we go into a demand rationing phase where inventories alone, demand prices have to spike to bring demand back in line with supply. We went to 120 a ton last year. We are thinking there will be another type of spike. You have the environment kicking off the back. Inventory. W jeff, thank you so much. Back to you. Sophie thank you so much. We will have more guests from Goldman Sachs. This is bloomberg. Sophie you are watching daybreak asia. Some stocks on the move in tokyo. As 7. 2falling as much percent after details of a tenure offer were revealed, this fund of office support, saying they have launched an per share. Per share. Bhp under pressure as well. They are attached softer. Chinas mystery virus. This is bloomberg. And they lived happily ever after. The end. The end might not be as happy as you think. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke but the good news is you can rewrite your ending and get screened for stroke and cardiovascular disease. Life line screening is the easy and affordable way to make you aware of undetected Health Problems before they hurt you. We use Ultrasound Technology to literally look inside your arteries for plaque that builds up as you age and increases your risk for stroke and heart disease. So if youre over 40, call to schedule an appointment for five painless screenings that go beyond annual checkups. And if you call us today, youll only pay 149an over 50 savings. Read it again, papa . Sure. Ive got plenty of time. Life line screening. The power of prevention. Call now to learn more. This is daybreak asia. I am su keenan in new york with the first word headlines. We start with the australian treasurer, who says he cannot confirm whether the government will still deliver a Budget Surplus. This given the widespread bushfire damage. Josh wright and berg says the communities have been devastated and the fallout will hurt everyone. He says the full Economic Impact from the fires is yet to be seen. To hong kong now, hong kong has seen its rating as a longterm issuer of debt lowered a notch. Both are blaming the longrunning social unrest with moodys coding and are shut in government and the absence of any tangible plan. There is some hope for the future. Hong kong has racked up a 10th Straight Year meanwhile as the worlds least Affordable Housing market. There you go. There you go. Vancouver hong kongs median property the averagetimes Household Income last year. Ratio for second place, vancouver was only 12 times the average income in comparison. To iran, Civil Aviation authorities. The ukrainian passenger plane, saying it was hit by two missiles shortly after takeoff. All 176 people on board the boeing jet died when it crashed down outside tehran on january 8. But laterissues admitted the plane had been wrongly identified as a crews missile and fired upon. Cruise missile and fired upon. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am su keenan. This is bloomberg. Thank you. For the first day of the extradition case against huaweis cfo, it has seen her defense Team Announce u. S. Fraud charges as of assad. Lawyers say her alleged offenses lets bring out natalie. These proceedings. Natalie we are getting to the nuts and bolts of the expedition case. While her defense is tackling today what her defense is tackling today is does the case stand . Asking entially also considered crime in canada. Not, she would be free to go back to china. They say her case has been dressed up as fraud in order to ease the path to extradition, but it is in reality a case about iran sanctions violations. Lets remember what the accusations are. Lying toaccuses her of hsbc bank and tricking it into conducting transactions that violated iran sanctions. They are calling that a facade and they are saying that it is effectively asking canada imposing on canada the obligation to enforce u. S. Sanctions law. Pillars of theal defense argument are being shipped away. She has this extremely large balance of lawyers that are supporting her and they have been doing an incredible case of sort of pulling up intricacies of extradition law and creating quite a solid defense for her so far, but today, we saw the judge challenge them on one point. There seems to be a little bit of debate of when you actually assess criminality. Her lawyers say, if you look at canadas extradition law, uss that you assess that. Lastwould have been february when canada did not have any sanctions on iran. The judge seemed to challenge that. If so, that is significant conduct tooklleged place in 2013. At that time, canada did have sanctions on iran. It had a full embargo on trade with iran so if you are talking question, then her conduct would have violated canadian sanctions law and the defenses arguments fall apart. Haidi really appreciate it. Sophie japan and south korea lets get a market check with selina. Lacking after are the u. S. Market had them close. A look here, the australia asx 200 really pulling back significantly from those record highs, down more than. 3 . New zealand is leaving those gains. Kospi down after we saw the trading data that came in slightly worse. In terms of the currency, we are seeing the offshore renminbi level, seeingt the yuan at the other level. We want to take a look at toshiba. That has been moving significantly. It is falling after that offer. The activist is seeking a stake. That has a floor of 3. 5 million toshiba machine shares. It is down almost 10 . It is being bid lower with a glut of sell orders after that report. We will be moderating the stock throughout the hour. Switching boards, looking at virus has been confirmed to have caused a fourth death. This originated in the central city. It has spread across china and other parts of the world. Health careng at stocks that have been reacting to this virus. We are seeing this jump. More than 15 jump in the corporation. That makes protective gears. Gain after a 20 jump yesterday. Seeing big gains in terms of a dustacturer for gas and masks. I want to take a look at how this virus that is spreading is impacting stocks. Korea as well, we are looking at a down picture because we are the leisure stocks get impacted. We do not have that board up but just as a reminder, we are seeing the leisure and travel sector to be impacted in korea pretty significantly. Haidi. Haidi we are going to stay with that new virus. Lets bring in our next guest. A Health Security expert at the center for international we have heard but level we are talking about . [indiscernible] we have now seen the virus achieve limited human genome transmission. What is the next thing you will be looking out for. Realistically, we are going to continue to see an increase in cases over the next couple of days, and that is partly because people are becoming more and more aware that the virus is circulating and it is causing illness. It is tragic that people have already lost their lives, but at the moment, the virus is causing mild cases in people. We need to treat the situation carefully. The chinese are already conducting a surveillance situation with people who come into contact with infected people and to isolate those who may have been infected. One of the challenges over the next week is the chinese Lunar New Year celebration. [indiscernible] the who has convened a meeting of a committee scheduled for january 22. They will be assuming the worst Case Scenario when it comes to containing the outbreak . At the moment, what the Medicine Committee will be considering is whether this meets the criteria of a Public Health emergency of international concern. That is ultimately the decision of the committee. Recommendations of the who director general. A Public Health emergency is declared, what we pandemicy to see our plans. They may increase border airports. At it obviously raises the profile of the outbreak and makes governments pay a little more attention. The who requires further resources, sometimes we see governments are more willing to donate funds to contain things like disease outbreaks when a Public Health emergency is declared. It is a little early yet to see how the committee will rule on this. Bemagine the world will watching quite closely. As you noted, we are heading into the Lunar New Year break. Will a travel coronaviruss are the same family that caused the common cold. When they start to spread and this one has achieved human to human transmission potential, its quite challenging to prevent the importation of these diseases. Is there anyway. The Public Health measures are putting in place measures that have orders to screen incoming passengers and then provide people with information that in the event you develop symptoms, then this is a form Number Phone Number or this is where you go to seek medical assistance. This virus at the moment has vastcausing in the majority of people affected. 10 of cases have ended up in critical condition, inhospital, and obviously, theres been for dead. The vast majority of the four dead. The vast majority of cases is mild illness. Given your professional background, would you be more concerned about the possibility of contracting this virus or the possibility of having to be in canberra or sydney when we have the worlds worst air quality . Its probably more of a concern. Whenever you travel internationally, there is a risk that you may be exposed to an infectious disease. There is a chance that people will get exposed to the virus. If people start to feel unwell, they would then isolate themselves and try and prevent spreading the infection to others. We have seen that was ultimately one of the most effective Public Health measures that people could do. A simple quarantine and isolation. The chinese authorities have shared the genome sequencing for the virus which enabled them to develop diagnostic tests for laboratories. We are going to see the International Community continue to move forward and we are expecting further interventions as time progresses. It may be that we will be able to develop a treatment. People have the information of where they can go and how they can Access Medical treatment if they do become unwell. You. Am, thank university of sydney associate professor. More on the coronavirus later this morning. A school of medicine professor joins us to discuss the outbreak at 9 40 a. M. Hong kong time, 12 40 p. M. In sydney. We are heading back to the Goldman Sachs global macro conference where we will hear from the tanks chief economist. Stay tuned. The banks chief economist. Stay tuned. This is bloomberg. Sophie sophie you are watching daybreak asia. Lets check your centralbank policy with the boj expected to stay on hold later today. Back to the conference in hong kong and our chief nordea the north asia correspondent, steve engle. Stephen thanks a lot. Lets talk about japan. The boj is going to be beginning its two monthly policy meeting two day monthly policy meeting. Thanks so much. Thank you for having me. Andhen all economists bloomberg expect the beer data basically have the status quote on hold, on every single policy decision. Is that your decision as well . Maintain the boj to the status quo in all categories. What would it take, what conditions would it take, for further easing, or is that going to exacerbate the side effects . Pay attention to the exchange rate. Stephen closer to 100 . Naohiko i think so. We expect them to have that attitude. It will appreciate significantly. Given the growing concerns about , yes. De effects stephen if the yen goes 100 to the dollar, if it strengthens to 100, do you think may the chances of easing by the boj increases a lot . Naohiko i think so. Yes. Stephen when do we get into a tightening cycle . Naohiko it is very challenging, actually, the situation. Mentioned, there boj pay particular attention. They really want to avoid a significant appreciation of the yen. I the boj are really onto think the boj may need to have another rate hike cycle for the fed and the ecb. Stephen what will kuroda do . Will they raise their outlook like the imf did . Naohiko i think so. We expect the boj to be upright. It is a growth project. Fiscal 2020. By factoring in the package recently stephen huge stimulus package. 120 billion fiscal stimulus. How much of that will triple into the real economy and how much of that is already just kind of repackaged projects . It is already baked in. Naohiko it is true that the headline numbers over the Package Amount to huge. Lot overid, it takes a the existing programs. Right . According to our estimate, that stimulus for the gdp, it is about ¥8 trillion. Other than that, this directive stimulus implemented. Estimates have direct contribution for growth to fiscal 2020. It is a modest one. 0. 3 . Stephen that is your outlook for the full year . Naohiko no, i mean stephen what is your outlook for the full year . Naohiko fiscal 2020. Stephen additional growth. What kind of growth are we talking about . Outlookupgraded its 20. 7 percent growth, modest increase. While they were downgrading the rest of the world, japan was out. That is largely due to this stimulus. Naohiko i think so. Stephen you know, also, we are seeing the vat increase. What kind of dampening effect would that have had . I think it is a bit premature. My impression is that tax hike. It seems to be a bit fragile. Maintain the base case fear that there is a tax hike this time. It is smaller and shorter than the last one in 2014. Stephen we have seen it when they went from 3 to 5 . They went from 5 to 8 . 8 to 10 . We dont know the lingering effects of that. Japan has gone into recession. We are not looking at recession now because it is an olympics year. There is that big stimulus package. But could we come outpost olympics and post vat hike to 10 . Could japan be in serious trouble . Naohiko japans outlook. The relative growth figure for the First Quarter of 2019. One is obviously because of a tax hike in the second one is the financial disaster. The typhoon. Also in october. Afterird one is in demand strong growth in the third quarter. It has an impact for these factors. Of brighta couple spots ahead for japans economy. The second one is the start of implementation for the fiscal package. Particularly after the olympics. To smooth out the demand. Stephen it will be interesting because we saw that shinzo abe did not use the word deflation in his opening address. He is putting less pressure on the boj and the 2 inflation target. Thats forget that for now. Naohiko baba, thank you so much for joining us. We will be back with more, coming up in the next hour. Haidi thank you so much for that. Wejust some breaking news before we get to the rest of what we are expecting in the next hour. We are hearing uber selling out of its uber eats, taking the indian market, continuing to shed assets that are moneylosing, selling the business to the rival. We are looking at an extension of 9. 99 of the indian startup. Tomatoes, a local competitor. On that. E getting more lots more to come. This is bloomberg. E. This is bloomberg. Haidi a quick check of the latest business flash headlines. Bhp says iron ore production rose 4 in its Second Quarter compared with a year earlier, keeping its top earning unit on track to list annual output numbers. Total Oil Production from bhps through december with 68 million metric tons. That compares to a medium forecast of 70 million tons. Sophie Macquarie Group is said to be among those chasing the largest european infrastructure deals of the year. We are told it is among the bidders for portuguese highway operator , a french private equity firm, and a spanish firm. Haidi another player entering singapores Digital Banking ranks. A Chinese Ecommerce Company says it is applying for a wholesale license in a consortium that includes a consortium that includes the Japanese Trading Company and a Singapore Global e trade service. Licenseeen operating a in china since 2017. Lets get a preview of what to watch as mainland markets and hong kong comes online. Fourthre seeing the death confirmed for the virus in china. They have decided to classify it virus. Class b infectious we are seeing Market Reaction around the stocks in the country. We are seeing the pharmaceutical and Biotech Companies jump past at 10 daily limit with the antibiotic product maker jumping. Switching boards, taking a look at the Ripple Effect across in terms of the travel and leisure sector. We have seen them hit hard not only in china but also in south korea with air china dropping more than 7 . Macau gaming stocks dropping the most since august. Sophie later, we will be speaking to carrie lam, live in davos. And they lived happily ever after. The end. The end might not be as happy as you think. After all, 4 out of 5 people who have a stroke, their first symptom is a stroke but the good news is you can rewrite your ending and get screened for stroke and cardiovascular disease. Life line screening is the easy and affordable way to make you aware of undetected Health Problems before they hurt you. We use Ultrasound Technology to literally look inside your arteries for plaque that builds up as you age and increases your risk for stroke and heart disease. So if youre over 40, call to schedule an appointment for five painless screenings that go beyond annual checkups. And if you call us today, youll only pay 149an over 50 savings. Read it again, papa . Sure. Ive got plenty of time. Life line screening. The power of prevention. Call now to learn more. It is 9 00 a. M. In beijing and singapore. Welcome to Bloomberg Markets open china. Lets get to your top stories today. Outlook fors the Global Growth. Still seeing traction in the Global Economy this year but now , a slight slowing. Kongodys downgrades hong because of social unrest and inertia in government. Passengerties impose screening as chinas mystery virus