Im Tom Mackenzie in london. These are stories that set the agenda. The bank of japan hikes Interest Rates for the First Time Since 2007 and scraps yield curve control. The yen falls through 150 versus the dollar. Traders cut fed bets as fomc members gather. U. S. Two year fiveyear yields climb to the highest levels this year. Plus, nvidia unveils the successor to its old ai processor. But markets deliver a muted response to the highly anticipated speech. This is hopper. Hopper changed the world. This is blackwell. Tom a new era for the japanese economy. The first hike since 2007, ending of yield curve control, and an ending of etf thats in buying. We have Stephen Engle on the ground in tokyo for all the details and we will cross over momentarily. Lets check in on the markets as we set you up throughout the trading day. The fed starts its own policy meeting with that decision on wednesday and a focus on the dot plots, the focus from the fed officials. European futures up. When it comes to s p futures, 5200, off by a 10th of a percent. Nasard futures down. Lets flip the board and focus on the japanese yen. A little softer in the session on the back of that decision by the boj. Seen by some in the markets at least as a dovish hike that came through for the boj. We check in on the japanese yen. 150 down 8 10 of a percent versus the u. S. Dollar. The move we have seen, on the twos and fives, yeartodate, you seem close to 50 basis points of moves in terms of the twoyear yield higher. You are currently at 472. Brun in focus as well. Continue to access assess the damage to the russian refineries. Estimates between 600 and 900,000. 900,000 barrels taken out by Ukrainian Drones. Currently 86 a barrel. Iron ore back above 100 per ounce. 100 currently 105. Currently up a little under 2 . 1. 8 percent on iron ore. The bank of japan has hiked Interest Rates for the First Time Since 2007, ending its negative cycle. Removing its yield curve control. Lets go to Stephen Engle whos been on the ground covering that story for us. Get us up today on what has happened. What we know at this point as we lead up to the press conference from governor you eta governor ueda. This was telegraphed by the nikkei and other japanese media, then they had a followup scoop earlier this morning essentially saying that the boj was going to scrap the yield curve control. That was one wild card, whether they would scrap that, tweak it, or whatever. They had decided as was reported yesterday, to hike Interest Rates for the first time in 17 years, exiting this negative Interest Rate policy. They did not hike by much. The same amount we expected by 10 basis points to a range on the shortterm benchmark rate of zero to 0. 1 . By scrapping the yield curve control, which had been in place since 2016. It basically is a momentous occasion in many ways. Because again, they are pledging to keep their jgb bond purchasing. They also stated they will scrap future etf purchases, not as needed as before because of the equity rally we had in the beginning part of this year. But the key line from this statement that we are awaiting at the press conference a half hour from governor ueda to explain the decisions, they will remain in accommodative policy mode. In the way the markets read that is essentially at least the bank of japan is not telegraphing that there is going to be an Interest Rate tightening cycle. There is no indication that there will be further once this year or beyond. It could be one and done, it might not be. We simply dont know. You alluded to the fact that the yen against the dollar has weakened past the 150 mark. That is the main reason why. Tom you have been speaking to x boj officials. What are they going to be looking out for from the press conference. 3 30 your time, 6 30 our time from governor ueda. Stephen what is the post yield curve control policy and Balance Sheet policy going to be . Already they have indicated they will keep jgb purchases relatively stable, but how will that be tweaked as benchmark as well. There is a few things that need to be ironed out. As far as the etf purchases, they will not purchase anymore, but will they start selling down the holdings of Exchange Traded funds . Again, the number one question, and he wont answer it because hes talking about the data that led to this decision as of right now. He is not going to answer the Million Dollar question and that is, is this the beginning of further tightening. Just normalization mean further tightening down the road, or is it one in 10 . One and done. Tom this historic decision from the bank of japan. The last to end negative Interest Rates. Stephen on the ground for us. Lets see how the markets are reacting and bring in avril hong in singapore. What are you seeing in terms of the bojs reaction across asia . Avril this was a move that was more or less anticipated it was well telegraphed given the flurry of media reports. But i think, to stevens point, its about how its going to stay accommodated. We will find out as the presser progresses. The idea that the boj will keep up with the amount of jgb buying more or less is proving to provide summer lee for they jgb futures. We see that spike. Lets flip the board and take a closer look at what we see across equities in japan. As we got that dovish hike. Its the sense you get whatever Interest Rate increases we see from the bank of japan is not enough to cause an issue for Japanese Equities. After all, fundamentals are intact. Corporate governance has been improving, so the benchmarks finding their footing before the close of trade. I want to mention especially here, we see those japanese financial related stocks that have been doing well in anticipation of this rate hike from the boj. It looks like the best might be behind them. They have tend to underperform in previous tightening cycles, taking the lead in Japanese Equities real estate sector. That surged 4. 5 . The idea that we are in an inflationary environment in japan, what do investors latch onto, tangible assets. Thats my property is running up the way that it is. Tom meanwhile, the rba, reserve bank of Australia Holding ranks and removing language about potential hikes in the future. Talk to us about that decision, the phrasing that came through and how markets are reacting to that. Avril the whole came in as expected. What we were watching out for was whether it would remove a bit of its hawkish bias. And it did in his statement where remove the phrase, the need for further rate hikes. Thats what investors latch onto. This is showing up in the currency space, the aussie losing ground in the face of whats expected to be a hawkish Federal Reserve later in the week, losing ground against the kiwi. The yen has been weakening past the 115 level against the greenback, similar picture on the aussie cross. Lets flip the board and take a look at what we see in the bond space. Bond traders are really liking the sound of what we are hearing from the rba. They are running higher, particularly on the short end of things. Thats the thats despite the rba governor saying they are not sure whether they can rule out future rate hikes. The markets have really run along with that. Tom avril hong in singapore with the Market Reaction. The boj in the rba removing it from a hawkish language. The other major story for us this week, above and beyond the Central Banks is the corporate story and ai story that is nvidia. Unveiling new chips aimed at the dominance of ai computing. The ceo showed off a new process of design called blackwell at the companys dtc conference in california. Hoffer changed the world. This is blackwell. Tom lets get more from Bloomberg Intelligence for the analysis on what we have been hearing from the ceo. This announcement around the blackwell chip. An upgrade to its processors around ai. Your take away from what we heard. This was a widely anticipated an for the continued ship. About 2. 5 more times more powerful than the hopper platform it replaces in the be 100, it will be the new technology to replace the h 100. As well as the performance, it is very keen to emphasize the reduced power consumption of this new platform. Which every corporate is incredibly sensitive to their environmental footprint. So it will be a much more confrontational process doing things without using power. I think it was an important element. I dont think anybody heard anything they were not expecting to hear. But there was lots of fanfare about how the world is getting more and more complex and competition driven and how these chips developing well continue to be in strong demand. I think they continue to maintain a big edge with their rivals in terms of delivering these things. Big customers are the Big Data Center and cloud companies. A lot more goes on than just the processing of the connectivity between these different computing devices. Kind of expanding the market. Tom its interesting you say they are looking to address those Energy Concerns around ai and energy consumption. We will see if the analyst latch on. In terms of what exists between nvidia and its competitors, have they widen that with the p100 with blackwell, or are they catching up . Its hard to say. My initial reaction would be maybe they have widened it a bit, but we have to see in terms of other announcements, but they are definitely maintaining it. One of the other things was towards the end, on the robotics platform, which disney is looking to use the small robots that are disney themes, they kinda remind me of the things that you saw on the star wars movies. So theres some exciting things that will open up a new debate about this robotics platform and how its used in the enterprise in the entertainment era. It was a lighthearted movement, which may be would spark some interest from bloomberg and others, i imagine. Thank you very much from what we heard at that key event around nvidia and the launch of their latest ai processor. Heres what else we are looking ahead to today. Front and center for us. 6 30 u. K. Time, 3 30 is the Governors Press conference for the bank of japan after that historic decision to raise Interest Rates from the boj for the First Time Since 2007. First time in 17 years. This will be important in terms of whether or not he gives an assessment guidance on the next steps for the boj after they raise rates, ended yield curve control and have decided to step back from etf and real estate purchases as well. So that press conference, six 30, we will bring it to you live with analysis from the experts throughout that press conference. Meanwhile, germany, the survey drops 10 00 a. M. U. K. Time, is europes largest economy starting to turn around, are they green shoots, that detail will be important. We know the economy of germany is challenge. Some suggested signs of green shoots. What that would mean for the thinking of the ecb. Fomc meeting beginning today. The fed has started that meeting. They will start later today with the decision from the Federal Reserve coming through tomorrow, expected to stay on hold. But we are looking for any potential revisions for the dot plots in terms of rates and rate cuts. With three currently penciled in. They move that to two. Crude prices on the move after the Ukrainian Drone strikes knockout in estimated 600,000 barrels of russias daily oil refining capacity. The details on that story just ahead. Coming up, i will be speaking to the chief economist at fujitsu, getting his view on the bank of japan news and governor uedas comments. Thats at 6 40 a. M. U. K. Time. Stay with us. This is bloomberg. Tom welcome back to bloomberg daybreak europe. Happy tuesday. Lets go into whats happening in the oil space. Gains this morning after brent closed at its highest since late october. That since Ukrainian Drone strikes at the geopolitical tensions with the Oil Trading Platform estimating around 600,000 barrels of russias daily Oil Refinery Capacity has been knocked out by attacks. For more on this lets bring you bloomberg seeing Energy Reporter stephen. Talk to us about the impact on russias refining space from these Ukrainian Drone attacks and how long it will take to get these refiners back on line back online. Lee talk to the analyst, j. P. Morgan thinks there will be 900,000 minerals a day barrels a day of an impact. No matter which way you look at this, this is in and day situation. When we have talked to people in been to analyst notes, it does look like it will be a weeks or months outage. That means that gasoline and other oil products being refined at these facilities, their output is going to be reduced. That will have a twofold impact. That will reduce their exports out of russia and puts upward pressure on russian gasoline prices, which is something the government does not want to happen. They like things to be cheap for folks inside the country. Another complicated issue is how does crude oil react. We have this risk premium on crude oil rising because the knock on effect of higher gasoline prices means potentially crude will have to rises well. There is this other view that if crude isnt being refined, russia can just export that crude, which means Russian Oil Exports could also rise. That could be a bearish element in the market. But overall, i think the market is looking at this as a risk premium on crude. Thats why we saw the big jump yesterday. Analyst say theres a two dollar to three dollar premium on crude, thats why brent is up 87 about, which is the highest since november, basically. Tom thats an interesting detail the fact that it could lead to more russian oil on the market and suppressed prices. For now, the expectation is that it will continue to push these prices higher. Up 12 on brent year to date, does it change the thinking of opec plus at all, the developments that are unfolding in russia . Are we starting to talk about on prices . What is your take on those lines . The interesting thing you have to look at is this is a price level they probably wanted from the beginning. I think when they continue their cuts for the next quarter, i dont think they were really worried so much about prices being too high. So i think at this range, you are not dealing with demand destruction, you are not dealing with pressure from the Biden Administration begging for relief. So in general, the view is that these cuts will continue into the next quarter. You could see a continuation after that as well. At the same time you see some producers like iraq say, we werent to the level that we said we were going to, so we will retroactively reduce our exports as well, and thats what happened recently and that has helped add to this bullish narrative in the market. I think opecplus was comfortable. Once we hit above 90 and there is pressure on consumers in the u. S. And other places and asian consumers as well, thats perhaps when you will see them considering, but i think we are still a little too early for those discussions. Tom important context. Bloomberg seeing Energy Reporter as we look at brent edging closer to that 19 level. Not there yet but currently at 8673. Coming, barclays chief executive tells bloomberg the lender is planning to expand relationships with sovereign wealth funds. More from that exclusive conversation, next. This is bloomberg. Who wouldve expected ubs shares that have soared since the bank took over its swiss rival Credit Suisse one year ago. Yet, thats exactly what happened with the stock hitting a 16 senior high in early march behind this confidence with the chief executives turnaround and integration of two banks. I think its important for investors to understand how we are connecting the dots between what we see in summer last year, in respect of our longterm plans. Quex a goal is simple. To make ubs the undisputed Global Wealth champion and take on wall street why bulls rivals where they have the home advantage in the u. S. The chief hopes to leverage them in the u. S. And manage their wealth. Including those still building their fortunes. But, catching up with these American Financial giants will take time and come at a cost. More than 50 comes at a cost. We try to do it over time. European banks, including Deutsche Bank and hsbc and ubs have previously tried to crack the u. S. Market and had to pull back. But this time, ubs seems to be the one left standing at the end of this round. Tom bloombergs daniel reporting on the outlook for ubs one year after they took over credit suites. Talking of ubs, lines crossing from the Swiss National bank on an annual report on Capital Requirements saying a review of ubs systemic Capital Requirements is needed, saying that stability of the swiss Bank Financing needs are strengthening and it says banks need to prepare more collateral for emergencies. We will keep across the story for you throughout the next few hours. Lines crossing on the snb with this annual report with the focus on collateral and Capital Requirements they see needed because ubs plays a major part in that. Barclays seeking to expand with the private equity giant as a broad its own footprint with executive underwriting. Barclays ceo spoke exclusively to bloomberg surveillance. Previously, in the Investment Banking side, we were working with corporations, and since then, we still work with corporations in a very big way. In addition to that you have the financial sponsors on the sovereign wealth funds. It makes an important to have the full relationship with those players in the market. Tom later, brian moynihan, bank of america ceo will join surveillance for an interview live from the lenders trading floor. Now to some of the other stories making news. Bloomberg understands that fidelity plans to cut about 20 positions in china as part of wider costcutting measures. The move could slow the Asset Managers expansion in the local 27 trillion u. N. Neutral fund market. Its planning to cut a thousand jobs globally. About 9 of its staff across all business lines and regions. Meanwhile, chinas top security regulator has accused evergrande of inflating revenue by more than 78 billion dollars in the two years leading up to its failure. Evergrande is the defaulted developer at the heart of chinas real estate crisis. Chinese regulators have put much of the blame on the companys founder and former chairman. No criminal charges have been made public in his whereabouts are not known. Coming up. We get more details from the youre probably not easily persuaded to switch mobile providers for your business. But what if we told you its possible that comcast business mobile can save you up to 75 a year on your wireless bill versus the big three carriers . Did we peak your interest . You can get two unlimited lines for just 30 each a month. There are no Term Contracts or line activation fees. And you can bring your own device. Oh, and all on the most reliable 5g mobile network nationwide. Wireless that works for you. Its not just possible, its happening. Tom good morning, this is bloomberg it and i am Tom Mackenzie. Thank of japan hikes Interest Rates for the First Time Since 2007 and scraps control. The yen false versus the dollar. The Governors Press conference is imminent. Fomc members gather for a two day policy meeting. U. S. Yields climb. Markets deliver a muted response to jensen longs speech. Hopper change the world. This is blackwell. [applause] tom lets check on markets. The rate increase between zero and 0. 1 . S p futures down and nasdaq futures down. The fed meeting decision comes through tomorrow. Traders pricing in fewer than three cuts. Goldman sachs things june, but yields are up 50 basis points on the twoyear. Lets flip the board. The japanese yen has softened in a dovish hike. Bond buying will continue as they scrap yield curve control. The governor is holding a press conference. We expect pictures of that and we will keep a cross the lines from the boj. Lets bring in those pictures as the nsaids at 150, down 8 10 of 1 . You can see the momentous decision to lift Interest Rates for the First Time Since 2007. Lets bring in Stephen Engle, chief north Asian Correspondent who has been covering this story in detail. Walk us through what you are expecting to hear and looking out for from the bank of japan . Stephen here he is explaining a dub this hike. When it comes to future rate hikes and the impact on the yen, looking through our top live blog as we follow this, fairly typical gray suit with a black tie, Morgan Stanley wanting to know what a possible rate level will be. I think for the first time in seven years. Remaining accommodative, what is the path to normalization . Does it include rate hikes or is it one and done . Tom the governor confirming the virtuous link between prices. The key Umbrella Union last friday with the update, that was consequential. Ueda saying the policy stance will stay and we are unlikely to get more detail on timing for a while. Yield curve control has been ended. The view from the market as you look at softness from the yen, when we think about Market Reaction was there a surprise . Youve asked officials about reaction in the move. The excitation seems to have been sidelined for now. Go back to the comments that they will remain accommodative. How long is a piece of string . Again youve seen reaction in the stock market. Banks were down because of the prospect of a higher Interest Rate environment. No indication that there will be further tightening and that is the question. If he is to dovish does that undermine his lift off . Every Central Bank Governor has to deal with this. Tom Stephen Engle in tokyo. Steven chu, rate strategist for Bloomberg Intelligence, lets get into the Market Reaction from the boj and live pictures. Your take on the market. They are not happy with what they are getting. He tell fish hike. That anchored expectation. We saw Japanese Equities and the yen drop. That is understandable. Its not like they hyped by 100 pips in one go. The yen will be under pressure. The fed will matter more than the boj. Tom the fed will matter more on the back of this from the central bank of japan. The fed decision will come through tomorrow with the updates in focus. Ueda saying they will use shortterm policy is the tool and in terms of the policy will remain for a while. This is an exit from policy, not an abrupt shift. Japanese 10 years, a bid in the session, yields are down. The yen is weaker past 150. How do you expect that to evolve . Straightforward, it does not care about the outcome. One of the reasons the bank of japan is scrapping control is the stability of the 10 year yield. High u. S. Treasury yields and now the fed is going to cut and treasury yields are suppressed. That is why there is no pressure. They can scrap it and it did nothing to the yield. We expect the yield to grind higher gradually. Whereas dollaryen is the u. S. And japan, so it depends on rate cuts. That materialize you can see dollaryen near 145 or 146. Tom probably at the lowest levels for now. 1456, and youve talked about the fed role. Weve seen Goldman Sachs adjusting their forecast and they expect to see for next year. Where does Bloomberg Intelligence lie . Base case, 23 is reasonable. Until something cracks like an equity market meltdown they will cut. If something happens they will go. But at best, three cuts for now. The fed will try to back expectations. Tom thank you very much. We continue to keep across the bank of japan story saying the price target is insight but data showed the Virtuous Cycle is strengthening. Plenty more as the bank of japan governor continues the process. His analysis is next. This is bloomberg. Tom welcome back to daybreak europe. The governor continues the press conference after the decision to raise Interest Rates, ending yield curve control. Prices not expecting a spike. The price target is in sight and ueda sees the virtuous Economic Cycle strengthening. Japanese jgb benchmark is down close to three basis points. Lets bring in chief economist in tokyo for the latest analysis. Your topline response, theyve done it since 2007, the last bank two and negative Interest Rates. The significance of this . Finally we are through with it. The economy has recovered and we have all of see normalization. That was important on the ground. Tom what do you make of Market Reaction . They seem to be assessing a doll that she hike that is being emphasized. The Market Reaction with the yen down and debt bid, is that rational . It is rational, but more so the bank of japan side. The most important thing was to avoid a Market Reaction. Yen jumps becoming higher and some people are disappointed. This is what the bank of japan was hoping for. Tom how do you see the boj steering policy . Where do you see the rates . Normalization is one and done. This is a clear signal and shows some things will have to change. Bank of japan does not want to be restrictive. Other banks are more dovish. Boj wants to support the economy. Not many restrictive steps, but costs will go up, Interest Rates positive again. Government policy will have to change and the yen will probably stabilize. Tom do you see repatriation of japanese funds . If not on this move, then through this year . This would be what would drive the yen. I do not expect it. Companies have been investing. What they are doing is not about investing actively, but they have been building operations in the u. S. With major investment and income generated overseas. I do not think anyone is interested in holding both bonds when the yen become stronger. I expect more investment, no big movement in the yen for the foreseeable future. Tom theory interesting. More investment. The governors saying they will decide on the appropriate level. The governor says it is important to be accommodative, excitations to beat 2 . How resilient is the economy . Major companies have been optimistic, but the economy has been driven by Government Spending and week yen. Companies will have to invest in digitalization. They are sharing profits with employees. 5 plus is unheard of in a generation, extremely helpful. Not all companies will do that. Smaller companies will struggle. Tom what do you make of the Balance Sheets . Youre talking about how this will big breakdown and japan. When it comes to the Balance Sheet, they are not buying etfs. They are Still Holding vast numbers, they are the biggest owner of stocks. How do you see the Balance Sheet adjusting . The Balance Sheet is huge. Talking just Bank Reserves sitting in the account of the bank of japan, rolling it over. Major buying, so they are in the market. So far they are earning money on loans. On the bank account in the central bank, with positive Interest Rates, they will earn less. Much less but government conditions are getting tighter. Financing will be more expensive and the bank of japan wants the economy to grow. Tom interesting updates coming through. I will bring this to you right now, the governors saying it is important to keep conditions accommodative and the pace depends on the economy. Markets will decide longterm yields. Also saying they want to involve cutting in the future. The governors saying they can avoid rapid increases based on the outlook. Your take . I would like to fold in your view on the japanese consumer, because data suggest the consumer is looking soft. Martin consumption look softer. This is supported, but there are many older people in japan on fixed incomes still struggling with inflation, boers incomes. Men this is improving, it will be helpful from the consumer side. What you were mentioning his Credit Demand is Credit Demand. The economy is recovering so this will not create a major headache soon. Tom martin schulz, fantastic to get your analysis. Chief economist joining us out of tokyo. Plenty more including a deep dive on nvidia, ubs and the boj. This is bloomberg. A new industrial revolution. A trillion dollars of install data centers will be modernized. Because of the computational ability, generative ai will create new infrastructure to do one thing not for multiusers, but ai generators. Everything will be robotic. And these robotic systems all need one thing. A digital platform, processors. And they system designed is a miracle. This is blackwell and what a gpu looks like in my mind. Nvidia ceo speaking on the first day of the annual ai conference. Reflecting on sales, theyve gone from 5 billion in 2016 to over 110 billion, more than four times the level of 2022 on the h 100 ship processors . Are we topping out or is there more to come . Major customers. Lets have a look at the boj. When it comes to macro policy and the decision to raise rates, how markets have reacted with softer yen and the expectation and view that this is a dovish hike from the boj. Theyve said it will be accommodative and they continue to buy bonds. Over the next couple of meetings pricing around rates has not changed. We will see if that evolves. 02 0. 1 is the market rate. Lets flip to ubs. In terms of the market cap, on this year since the deal, market cap crossing 100 billion. As they joined Morgan Stanley. That story will be getting coverage throughout the day. Plenty more coming up including interviews with the eu economy commissioner and ceo of honeywell. Of next is markets today. This is bloomberg. When i was your age, we never had anything like this. What . Wifi . Wifi that works all over the house, even the basement. The basement. So i can finally throw that party. And invite shannon barnes. Dream do come true. Xfinity gives you reliable wifi with walltowall coverage on all your devices, even when everyone is online. Maybe well even get married one day. I wonder what i will be doing . Probably still living here with mom and dad. Fast reliable speeds right where you need them. Thats walltowall wifi on the xfinity 10g network. Anna this is Bloomberg Markets today. The castrated less than an hour away, heres what you need to know. Z yen weekends despite the boj hiking Interest Rates were the First Time Since 2007 and scrapping yield cut control. Governor ueda says the accommodative stanl
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