Welcome to daybreak australia. I am haidi stroudwatts in sydney, were markets just came online. Annabelle i am Annabelle Droulers in hong kong. Asia is set for a positive start after u. S. Stocks returned to alltime highs. The feds favorite affirming gauge of rate cuts could come as soon as june. Haidi record single day influx of more than 600 million. A crypto correction is likely on the road to fresh highs. Annabelle chinas top leaders pledge to meet economic targets even with data showing. Haidi lets get you straight to the markets as we enter the friday frame. This final trading session of the week. Looking like we are setting up for a cautious start. U. S. Stocks ending february with fresh highs. More or less net consensus forecast. We are seeing a slight rise at the start of the cash trading session in sydney. We are seeing a little bit of optimism when it comes to japan equity futures. Take a look at what we are seeing with the aussie dollar. Pretty much unchanged at 6597. The yen Holding Gains throughout the course of the overnight session. Dollar yen was down. 5 . A little bit of weakness. Pretty much unchanged after a bit of arise following the inflation data. We are not seeing too much of a heavy session when it comes to trading in fx here in asia. Looking at the set up when it comes to japan. The yen story will be dominant. One of the strongest signals yet about the end of negative rates. We did hear from a bank of japan board member saying the boj price target is coming into sight. Policymakers are looking at a state of readiness. Almost under the 150 level. Futures up by about. 1 . We are looking at potentially some downside when it comes to trading in hong kong and china. Futures therefore the a50, down. 1 . Annabelle you mentioned the pce reading, it was the big focus for u. S. Stocks. We have futures coming online fairly flat. The context of that, we had stocks closing at alltime highs overnight. Yes, we saw it remaining above the 2 target, but it did validate the waitandsee approach from policymakers because it helped alleviate any concerns about a more significant inflation increase. As a single event with risk appetite, we are seeing bitcoin move above the 60,000 mark. We are still sitting around the twoyear high, still under pressure today but a big runup over the past few sessions. That toll fed keeping its rates higher for longer has affected regional lenders and the smaller ones, as well. There is a huge slump for the after the bell, down 20 . It has taken a 2. 4 billion hit. Reinvigorating concerns around the regional banking crisis. As i said, it is the focus on when the fed will start transitioning toward easing rates. Something that could help regional lenders. Take a look at this terminal chart. You can see what traders are pricing in in terms of fed rate cuts for this year. They are aligning with powells december message. The first cut fully by july. Policymakers have reiterated the fed is taking a data independent approach as they set their sights on the 2 inflation target. They want to avoid holding on all the way to 2 and then causing unnecessary downturn. We are agile. We are sitting in what i call the ready position. We are ready to make moves and adjust as the data demands us to do. I think policy is in a good place. It will probably be appropriate if things go the way i expect to see us start to reduce rates in the summertime. Haidi lets get some analysis. Great to have you with us. Do you think we are getting to a point it is the same messaging if you are listening to the fed, the boj, data dependent, patience is key. Do you think markets have gotten to a position where they are not overdoing expectations . Skyler not yet. We are neutral. We finally have gotten to that three fed cuts this year, pricing in may or june. The recent data that have come out to me point to the fed waiting until the fall. We might not see something until september. There are folks that are pricing in the next potential move being higher. I am a 5050 on that. I am leaning toward the fed potentially having to raise rates before they lower rates. I would not get too ahead of what the fed would do, especially if the boj raises race above negative territory. Folks have been riding this train since the late 1990s. 25 years now that jgbs have determine the rates of u. S. Treasuries. There still pointing to treasuries having 30, 40 basis points higher to go and i am in the camp that we might see five handle on treasuries before we c3 handle again. Late 1980s, 1989 is the last time we saw the dk 255 nikkei 255 trading at these levels. Asia is heading back to the 1990s on this . Skyler that is my theme when you are looking at asia, back to the 1990s. If we remember, japan topped out in the late 1980s. It led to the financial crisis in 1997. I think jgbs are going higher. I see strength outside of china. I see strength in japan, india, a lot of economies that are benefiting from deglobalization. Postcovid, the World Economy is d globalizing. I think folks are looking for whether whether it is vietnam or korea people are looking for places to relocate to potentially build outside of china. Focus on the smaller economies and be weary of what will happen in china. I think the real thing that will determine chinas success is how much stimulus the government really puts into their market. We have seen that runup in chinese equities. Some have turned a little bit more positive. Would you enter the market from a valuation perspective because equities are still very cheap. Skyler theoretically they are cheap but i am weary of i think it will be a bob and weave, sort of speak. I think you have to wait for maybe a further selloff in the government to come back in. I think it is fully dependent on government support. Relative to japan, you look at Warren Buffetts investments in japanese trading houses, japan looks extremely strong. We are talking about raising rates in japan for the first time in a very, very long time. I would stick with some relatively safe bets with where the real money is going, more of a korea, india and japan type of trade. Haidi there are other areas you can go into that have low risk and you can get 7 to 10 returns. Skyler no doubt. You are looking at one of the first times in the last 20 years, whether it be highyield corporate municipal bonds, what we fortis on which is mortgagebacks, which can offer well above the five handle yield from money markets. You can put together a portfolio that is yielding 7 to 8 , extremely safe and put on whatever duration you want. Whether you want to take on very little Interest Rate risk or you want to look at the five to 10 year type of debt. Now is the time to be creative and play quarterback on your fixed income portfolio. I want to get your views on a stock we are watching after hours. Nycb. A huge drop after it flagged a 2. 4 billion it to earnings hit to earnings. How concerned are you by that . Skyler banks are in trouble. It is a double whammy on, one, security valuations. If they own bonds, bonds have fallen in value by five points in the last three months. Then, the commercial real estate exposure is in a lot of trouble, as well. Multifamily real estate is down 20 to 30 , office is down 50 to 60 . You have to pick apart the Balance Sheet and where the lending is going but the likes of the new York Community bank that has one of exposure to rentcontrolled apartments in new york and a lot of exposure to multifamily, i do not see an end in sight for a lot of that debt. We are looking at some debt that these folks own work people are looking to refinance at 14 to 60 . Folks are desperate to get their hands on debt at almost any cost. These banks are facing down huge markdowns. Thank you for your time. Cio of reagan capital. Still ahead, we will have more on the nycb news, taking a huge hit to earnings. Trying to navigate the turmoil. A lot to be discussing. This is bloomberg. We are due to get the data in a few hours. Bloomberg economics think this will show activity falling back due to disruptions from the eight day Lunar New Year holiday. Chinas top leadership pledges to meet economic targets for the year and maintain social stability. The 24 Member Bureau will submit a government work report to a gathering of lawmakers next week. Chinas socalled to sessions, the National Peoples congress and a Consultative Congress began on monday. Or correspondent looks at our correspondent looks at the challenges faced by leaders gathering in beijing. The ncp is chinas annual session of parliament. Convened usually every spring in the great hall of the people in central beijing. Essentially the ncp sets the political agenda for the year ahead when the nearly 3000 delegates from around the country get their marching orders on day one in the form of a lengthy work report from the premier. Wellregarded as the highest a power the ncp nevertheless operates under the direction of the communist party of china. The ncp by design legislates and executes the directives of the party. The roughly two week affair is known as the two sessions as the ncp is free fitted by a gathering of the Chinese People political consultant of conference. And advisory body supposedly representing views from the Broader Society and Business Community even though Party Membership is not required to be involved, it is nevertheless completely supervised by the communist party. Haidi that was stephen engle. The political pageantry begins next week. Talks at the trade conference in abu dhabi have been extended to a fifth day. Member nations are struggling to reach agreements on a range of key issues. Tell us about how divisive this is. Very complicated. A lot of areas of disagreement have to do with how the worlds s poorest people are treated. It is about countries buying grains from farmers at predetermined prizes. It looks like a subsidy and smells like a subsidy but from countries like indias perspective it is about Food Security for 800 million poor people. From brazil perspective, it is about not being able to sell fairly. Fisheries is another sticking point. The same sort of thing. A lot of subsistent fishermen who rely on these programs. This is about daily life and death of feeding people. Another issue is ecommerce. Tariffs on ecommerce is prohibited. This is where we get into the interesting area of crossover because ecommerce could be used as a bargaining chip for movement on other issues. It illustrates the depth of what is going on. Annabelle one of the chances this conference ends without an agreement or a statement . Paul that is a very real possibility that we get to 2 00 p. M. Local time friday and there is no agreement or statement. Another possibility is a watereddown statement that notes some of these unresolved issues. There are encouraging signs. We have to remember there are more than 160 countries involved and there is agreement on 17 paragraph so far. Talks are ongoing and it illustrates there is a will to keep on pushing toward an agreement. The director general said some things preceding in a really good way and other things she is not so sure about. Irelands trade minister noted there is some pessimism but said that happens before agreements when you are having these difficult discussions. There is still some hope we might get a positive outcome. Annabelle we will wait and see for that one. That was paul allen in sydney. Lets look at some other geopolitical stories. President biden said he is still hopeful for a temporary pause in fighting between israel and hamas but it is unlikely to start by monday as the originally stated. The white house said biden spoke to leaders of qatar and egypt that are working to moderate cease fire talks. The agreement calls for a sixweek pause in fighting to allow for the release of hostages and prisoners and to get aid into gaza. Dozens of palestinians have been killed or injured in the shooting near a convoy of food trucks in northern gaza. The Associated Press cites hospital officials who say israel has denied his forces were part of the shooting but said the incident is under review. President biden said it threatens to setback efforts to negotiate that cease fire. Russian president Vladimir Putin has warned nato risks triggering a nuclear war if it sends troops to ukraine. He made the comment in his annual address to an assembly of lawmakers and officials. French president Emmanuel Macron has refused to rule out sending troops to ukraine, an idea rejected by the white house and the german chancellor. You can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Terminal subscribers, go to dayb go. You can customize your settings. This is bloomberg. I would say we have gotten to very frothy levels. I would not be surprised to see some correction and consolidation but i am very lows did to pick a very loathed to pick a bitcoin high because this is price discovery. Annabelle that was the galaxy founder. He expects the consolidation to be somewhere around the 50,000 mark before we see the rhea send. A very wellknown bitcoin bull, as he should be, when he is a huge investor in the space. Bitcoin continuing to trend higher. It seems to steady the rally. Around the same level we were at 24 hours ago. Lets get more on the outlook and bring in our cross asset reporter. Bitcoin price might be steady. What was not steady was the huge inflow into bitcoin etfs for another day. How sustainable do you think this is . Isabelle that is the question because every day we have seen record after record. Black rock rockets record. Today we saw 612 billion in inflows. The question is, will investors continue to cash. The answer is probably not. If you look at Trading Volume today it petered out compared to the high the previous high the other day. It is a cycle. I do not want to say a vicious cycle. As prices rise, it drives flows. Bitcoin has steadied. I have had sources telling me today they expect it to correct and they wanted to correct because the market is looking too frothy. The floor we are looking at is around 60,000. Annabelle despite it being widely available haidi despite it being widely available we are seeing holdouts. Vanguard being one of them. Institutional names, bank of america, are making it available. Could this try the next leg of the rally . Isabelle definitely. That is what im hearing. We have bank of america and wells fargo. The have started offering upon request. That is usually the key thing we hear, upon request. It is a big seachange because these big wall street firms have been holdouts for the longest time. A lot of sources have told me imagine seeing this demand and we still have holdouts. What more when the dam opens. We will probably see massive inflows. We know that inflows drive price and price drive the inflows. For now, the demand of bitcoin is outpacing the supply because longterm holders do not want to sell at this price. This is an interesting space to watch. Bloomberg has been reporting banks capitulating. Our bloomberg reporter. We are seeing australian equities hitting that bull market territorial if we get through to the close. Up 20 from its 2022 low. Take a look at how trading is going in the first half hour or so, just to sectors are in the red. Communication services and health care are underperforming. We are seeing strong gains led by the miners. Also technology and consumer names looking quite strong. We continue to kind of see the rise in that is driving a lot of that optimism we are seeing renewed across the material sector. Japans labor market was tight in january. The jobless rate for january holding at 2. 4 from the previous month. The jump to applicant ratio the job to applicant ratio to unchanged at 2. 7 . We have seen manufacturers possibly increasing hiring in response to some pretty good export numbers for autos and the surge in demand for chip related items. There are concerns over Service Providers reducing job availability. We are seeing weakness across household consumption. No surprises out of the labor market data. Bloomberg economics does expect we will see further tightness in that market for several months. Retailers and services probably looking a little more cautious across that period. We have been hearing some interesting signaling from the bank of japan and ex bank of japan speakers and an ex bank of japan speaker. Lift off is likely in april, not in march. We had some strong signaling when it comes to the suggestion that the price target range is coming. They are looking at the wage data, the price target is not yet in sight. Expectations are not high when it comes to chinas growth story. That is right. This is the country that is at risk of socalled japanification of its economy. Japan saw growth for decades and it is now experiencing a slowdown. It has consequences for the rest of the world. Bloomberg originals has been taking a closer look. Chinas Economic Growth was like nothing the world had ever experienced before. For most of the past two decades, the countrys growth has been unstoppable. This is an economy that became the worlds factory floor by driving up tons and tons of expansion and becoming a giant manufacturing powerhouse. But then that boom story came to a halt. The stock market has lost some 6 trillion in value over the last year and a half. There is the property prices, all of the fallout. You are seeing rises in unemployment particularly among the countrys youth. This slowdown means china is cutting back on spending. Everyone from Big Multinational Companies to ordinary people have been swept up in chinas boom story. That is coming to an end. That means Louis Vuitton sells fewer handbags. Apple sells fewer iphones. Chinas funding on railways in april and ports in europe dries up. In short, it is bad for the global economy. The question is, how bad . Annabelle lets get more on the outlook for chinas economy. Joining us in the studio is grace ng, a senior economist at j. P. Morgan. We just heard some challenges that are facing chinas economy. We are heading into the two sessions. This will really set the economic priority for the rest of the year, but it is also the push to try to lift sentiment and repair very fragile confidence in chinas economy. Are we going to get any closer to the lift in sentiment . Grace indeed. This is an important event to watch out for. I think in terms of the general policy expectation, the tone has already been set by the Central Economic were conference in december. If you look at the macro policies, it has generally termed to be more group supportive since august of last year when the reopening of the economy has led to someone of a disappointing recovery. I think what we are looking for Going Forward is going into 2024, the government seems quite likely to set the growth target for the year and around 5 . If you compare it to 5. 2 growth last year, it does not seem like too much of a difference but what is important to note is in 2023, we had the reopening momentum, even though it was somewhat disappointing, at least you have the boost. What it means is it will be somewhat challenging to achieve 5 growth for this year. Therefore we do need to see a supportive growth policy for this year. What that means is for fiscal policy, Monetary Policy, they would have to come in on a supportive side. Budgetary fiscal deficit target to be at 3. 8 on gdp, which in effect would be more supportive than last year. We are also looking for Monetary Policy to be complementary to the fiscal policy side of things with overall aggregate credit growth at about 9. 5 for the year. Annabelle with those sorts of measures, would that be enough to break the cycle of week activity, falling prices in china . Grace yes, indeed. The private side of the economy remains challenging. We are facing a significant slowing in the Housing Market that we have not seen since the Housing Market was being privatized in the late 1990s. We are seeing deflationary pressure in the economy and we are seeing private Sector Sentiment still pretty much on the soft side. Both for the household sector and the corporate sector. What that means, indeed, is that while the private sector, the Housing Market is still very much on a sluggish momentum, you do need to see policy support kicking up in order to offset that affect of the slowing Housing Market and privatesector confidence. In that regard, what we have seen in the past couple of months is some stepping up a policy support, including the one trillion fiscal deficit announced in late october. And the expectation of ongoing policy support on the fiscal side, as we mentioned before. And on the Monetary Policy side, pointing to supportive policy, including structural Monetary Policy tools, such as relending. On the psl side, we see a one trillion yen program to support Public Housing and Public Infrastructure and relending facility to support other parts of the economy where the central bank wants to provide targeted support. That is including industry upgrade, green economy, Digital Economy and so on. Annabelle it is a conundrum because i wonder, how important is the symbolism of that gdp target . China does not miss growth targets. At the same time, they want to inspire confidence by setting a reasonably high growth target. If it is a solid 5 , they could well miss that without a strong physical stimulus effort. Do they give themselves a bit more flexibility . Grace indeed. This is an interesting question. The way we see it is that we do not have meaningful support stepping up, the economy could come in on the softer side on the four handle, around 4. 5 or so. Exactly as you mentioned, the government once to keep the signal the Economic Growth is actually on a stable momentum by setting the growth target at around 5 again for this year, which will be more challenging than achieving 5 last year. What that means is you need at the same time step up more on the policy support front as we mentioned earlier on. The support for Public Housing, infrastructure and so on. A Monetary Policy is a pseudofiscal policy support. If that is not enough, for instance, if you still see meaningful downsizing on the housing sector or privateSector Sentiments and the labor markets we can from here, there would be pressure from policy support to step up. Demographics are also troubling in the medium to longterm. Have you seen much progress when it comes to structural policy efforts when it comes to domestic migration, for example, to try to ward off some of these risks . Grace yes, indeed. The government does put a lot of emphasis on what they call a new urbanization effort to support the Migrant Workers coming in from the rural area to settle in the urban cities. In the very near term, it is somewhat encouraging that some of the Migrant Workers who have left the cities during the covid lockdown period to go back to the rural area have come back. In the past two or three quarters we have indeed seen the low Income Housing spending picking up more momentum than the overall economy. In the longer term, one of the areas of supporting that new facebook urbanization is this new Public Housing program that the policymakers are putting emphasis on to help those low income households, to settle them in the cities and therefore to unlock the potential demand momentum coming on from there. In terms of the asian population issue and demographics, there is the ongoing discussion to issues such as raising the retirement age overall and improving the over urbanization process and domestic demand part of the sector to offset pressure coming from the aging population. Thank you for your time. That was grace ng from j. P. Morgan. Subscribers can watch our documentary on chinas slow down on the terminal or bloomberg. Com. Starting next week we are introducing a brandnew program focused on asias biggest economy. Bloombergs the china show brings all the market news and indepth discussion. The china show premieres 8 00 p. M. Sunday night in new york. We will have more on daybreak australia. This is bloomberg. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh we are taking a look at how new York Community bank shares are faring. You can see the drop of more than 20 at this point in time. Taking a 2. 4 billion hit to earnings. It has named a new ceo to navigate the turmoil. Lets get more. The situation for nycb seems to go from bad to worse. Sally there was a lot to digest. It took 2. 4 billion and changed it ceo. If you look at what a lot of the analysts have been saying, what has been looking like the big glaring issue is finding weaknesses in the review. The banks that it identified a Material Weakness in its internal controls. It said the reason it will not be able to file its 10k on time with regulators. It creates a lot of uncertainty. It raises concerns about what additional issues could be raised as they the new management stops to dissect what has been going on in the bank. This bank lent a lot to the commercial real estate sector. How concerned do we have to be about the broader sector in this sense . Sally when we first heard this bank was facing at the end of january, it said it was cutting its dividend and stashing away more money tied to loans the and analysts ever expected. Is sent shock waves through the market with fears about regional banks, those quite highly exposed to the commercial real estate sector. We could potentially expect to see some of that again although in the immediate aftermath we did not see too much of a dramatic slide among its peer share prices. We felt like things were pretty stable after it initially rattled bank shares more broadly. This will probably settle a few alarm bells. It remains to be seen how the stock market will react tomorrow and perhaps what more we can learn about the weakness is. Haidi sally, who leads our team. The central bank is in the ready position to address rates as needed. Consumer strength is keeping policymakers on alert for sustained price pressures. Consumers have just stayed in the game. They continue to spend. They continue to want to participate in the economy and that has spurred growth and that has kept inflation a little bit higher than for longer than we thought. I still think overall the news is good and we absolutely see the challenges families face when they have to pay higher borrowing costs. What they really want us to do is bring inflation down. There is no place i go i have a very big district, nine states you can travel anywhere in the u. S. And hear the same thing, what is your number one problem . Inflation. The number one issue on wall street is rate cuts. Yes, that is their number one issue. We work for the american people. [laughter] explain it. You have projections but some people think you should have more, some think you should have less. Why are we talking about rate cuts at all with the strength of the economy . We put a projection out about what we think we will need to do if the economy evolves as we expected to. What is the expectation . Inflation comes down gradually . The labor market slows but does not tip over . It would be appropriate as inflation comes down to bring the nominal rate of interest down to make sure we are not holding on even tighter. We want to avoid the following voting on all the way to 2 , putting policy very tight, and then cause unnecessary downturn. You give people lower inflation but cost them their jobs. It is a balancing act that means we need to be calibrating. I want to be clear, you do not see many fed officials including myself talking about rate cuts. Ucs talking about restoring price stability, being data dependent, looking at the full balance, being patient and methodical. I think the message is clear. It is not only what people want to hear but it is a clear message. There is a perception that maybe the fed was a little slow on Getting Started in the rate hikes. You could have started earlier. How do you avoid the problem on the way down . You said you do not want to hold all the way to 2 and run the risk of a recession. How do you know you are on time with a cutting . There is no risk to the economy faltering so we want to calibrate. If we let go of the reins on the economy too quickly, inflation gets stuck and that takes this carving affect we just talked about for people and they have it for the rest of the decade or five years. All those things we do not want to happen. Plus, it is a very painful tax on those who can least afford to bearman. The other option we hold onto long and then the economy tips over. We want to avoid that. That is a delicate balancing act and why you keep hearing me and others say we are data dependent , we are not data point dependent, we are looking at the full complement and we are agile and sitting in what i call the ready position. We are ready to make moves and adjust as the data demands us to do and i think the economy and policy now arm and a good place to do that. Annabelle that was the San Francisco fed president speaking with david westin. You can watch us live and see our past interviews on our interactive tv function, tv. You can dive into any bloomberg functions we talk about. Plus become part of the conversation by sending us instant messages during our show. This is bloomberg survivors only. Check it out at tv. The south korean government has held its first talks with doctors who walked off the job in protest against a plan. Doctors have been ordered to return to their post by friday or face punishment. Lets bring in our east asia government editor. We are talking about more than 70 of doctors across 100 hospitals who have walked off the job. How did the talks go . Was there any progress before the deadline today . Jon it did not look like there was much progress. The doctors are the trainee doctors. Kind of similar to a medical residence abroad. The are key for the delivery of emergency care. We are waiting to see what will happen today. The day has just started. We are trying to figure out if the doctors are still off the job or returning to work. Annabelle i am curious about the punishments that will be made. From an outsiders perspective, the dye seams cast. The government wants more doctors, the people want more doctors but the doctors do not want more doctors. Jon exactly. The government cares. Some of the concerns of the doctors of working conditions, malpractice regulations and hours for the trainees. It is a way to regulate doctors from about 3000 now, adding 2000 more. South korea has a dr. Shortage. The stick is using it to possibly arrest, prosecute and suspend the license of the doctors and even revoke the licenses if they want to. They have a lot of power to give out punishment if they want to. Haidi a lot of the themes we have talked about was working conditions, it is not just south korea. We hear about it, even across here in australia. Has the government indicated it is linked to address any of these structural problems . Jon the government has said it will look at the tough working conditions. South korean doctors have one of the highest level of consultations among all of the members but the doctors are some of the best compensated relative to average pay. There are complaints from critics that the walkout is more about the doctors self interest in health care and the doctors say it is more about working conditions. There are also in balances with urbanrural that they say will not be addressed by the governments plan. That was our east asia government editor. We will have more with the market open in tokyo. That is next. This is bloomberg. I think hes having a midlife crisis im not. You got us tmobile Home Internet lite. After a week of streaming they knocked us down. To dial up speeds. Like from the 90s. Great times. All i can do say is that my life is pre i like watching the puddles gather rain. Hey, your mom and i procreated to that song. Oh, ew i think youve said enough. Why dont we just switch to xfinity like everyone else . Then you would know what year it was. This is e i know what year it is. Counting down to the market open. Haidi, it is the focus on where Central Banks go next. We have the fed coming in meeting estimates. That helps us think perhaps three fed cuts over this year. The boj, mixed messages. One of the ministers of the boj saying something different. Haidi how much will they temper the expectations set up from the previous signaling. The target is not insight but there is that sense, to borrow the words of mary daly from the San Francisco fed, the readiness is coming into sight for a number of Central Banks. Lets look at how markets are deciphering this at the open. Annabelle from the japan perspec