Not just the japanese yen. Its the korean won which has been sensitive to the actions of jay powell. Were getting commentary from the likes of ocbc, jeffrey saying upside in dollar trade, count down to around 1335 per dollar by december. Better demand, that is improving and also they start of the easing cycle adding to appeal. For equity markets it will be trade or read through from big tech earnings. We had microsoft, alphabet really impressing because the takeaway was they are spending on ai and cloud, thats paying off. Best week for u. S. Stocks in 2024. Still farmer. Haidi of course potential expectation of a hawkish pivot and how that plays into Asian Central banks and economies. In the last leg of the cycle, the open, a couple of minutes into cash trading coming online in a staggered open. Upside when it comes to sydney stocks. Watching treasuries as well, expecting dollar and yields to get a lift higher. Ozzie bonds following that trajectory. Dollar is holding. Against the backdrop of dollar strength, most other asian currencies, brent crude is holding the decline, u. S. Stepping up efforts for a truce, brokering a deal to reduce geopolitical tensions. We saw after a two and a half sent gained last week, a bit more of a drop with wti as well as geopolitical tensions continuing to weigh. Big week for commodities i should mention. We talked about earnings and gold earnings, producers wrapping up latest numbers and i mentioned treasuries and we been seeing a lift with the pce number and all eyes on fomc decision. Annabelle the meeting wrapping on wednesday, thursday in asia. Our next guest actually says the key risk for markets is the fed needs to keep rates higher for longer. There is a recession. Mark matthews is joining us. Mark, how much risk are you ascribing to that happening that we enter recessionary contraction environment . Mark annabelle, very low. I dont think it will materialize and we are penciling in three rate cuts this year but because the economy is strong, they will not happen until the end of the year and specifically the months we are looking for our september and november and december. Haidi what you think will happen in the u. S. Economy to necessitate cuts . Are you seeing signals that we need to see rate cuts . Mark the key thing will be the inflation reading in the last mile is challenging. Stopped at 3. 5 headline cpi. We will be down around three by the end of the year, even south of that if you look at the realtime rental indices and factor in the lag between when those appear in the data. That would in for inflation rate of less than 3 . Although the fed says they want to, that is not realistic. But that is what we are looking for, inflation to come down. Not possible to cut with headline cpi of 3. 5 just now. Haidi i am very intrigued even if the three comes toward the end of the year, there has been so much stubborn resilience in data sets. Not just inflation. What is going to change between now and then . Do you think there is a risk . Mark yes, there is a risk. There is a risk that inflation stays sticky and there are several components contributing beyond the shelter component. A bunch of smaller things, you add them up and they are material like food, auto insurance, so i dont know. It is something we will only be able to see at the time. Our assumption is it will come down, but not 2 . Haidi obviously we could see inflation impact. The risks that you see in november is interesting. It is not risk of trump presidency, more chaotic policies, it is if biden gets reelected. Mark i think i meant that as a joke. I might have said Something Like if biden is reelected. His mental faculties decline in the second time, that would necessitate handing over the reins to the Vice President and some people are not favorable. All kinds of things can happen. Weve managed almost 10 years of significant volatility in the u. S. And outside. In the market has done well. So not something to prevent investing. Annabelle where you have conviction is around market in china. What sectors, what opportunities . Mark i am agnostic in china. The way i say it is if you want to be aggressive, biotechnology companies, dave gone down the most. There are etfs in the u. S. That replicate and if you want to be defensive, there is high dividend yields etf of the hang seng listed Companies Traded in hong kong, that gives you a comfortable buffer if memory serves me right, north of 8 yield. A combination of those or maybe you just by the tracker. I like china. I think it has already gone up from where it was at the end of january by about 15 percent and i would say there is at least another 15 coming between now and the end of the year. Haidi how much vulnerability for emerging markets . The indonesian story was a big surprise last week. China is improving on a marginal level. Are there risks . Mark there are risks because of the fed taking time to cut. I dont think other Central Banks will follow, but they will wait for the fed. If the fed does not cut until september, no emergingmarket is going to. And that will impact markets, i agree. Some have such good stories that they can go up regardless of whether Central Banks are delayed. One is india. The others i would not say have superstrong stories. So yes, domain rate cuts act as headwind on stock markets. Haidi what do you see for japan, given we see the boj and weve got a graphic, it was soft against the u. S. Dollar, these are multiyear lows. How long do you see that persisting and you expect a positive boost . Mark first thing, i never thought it would be at this level, so i do not quite understand. Most undervalued currency in the world by a long shot and to give you an illustration of that, the minimum wage in japan is about five dollars. Which is one third of the minimum wage in california. It is a competitive economy because of this. Yes, there is imported inflation, but i think the japanese can handle it. It is a developed middleclass economies so in aggregate, i believe weak yen is of benefit to them and their companies, 40 of revenues are overseas. I presume that will rise because of weaker yen so now will we stop here . It should but i dont think bank of japan they dont like volatility or falling so fast. Direction would not surprise me if it did not remain the same this year because of the big differential and the fact that actually it is making them competitive. Mark matthews head of asia research. Still ahead, xi jinping warrants americas top diplomat against vicious competition. The implications with jim of interpercent thick. Elon musk meets with chinese premier during an unannounced visit. The main agenda next. This is bloomberg. It is good to see. Elon musk speaking during his unannounced speech in china. Watching lg and samsung seeing upside. Samsung ahead of the final numbers is up by 4 10 of 1 as we continue to get analysis on the significance of the trip, lets bring our chief north Asian CorrespondentStephen Engle in beijing. Does this give us an indication where market priorities lie for elon musk . Stephen he was supposed to go to india, he canceled that because of the troubles and pressing needs at home. And also in china. We did not know he was going to make this visit. Yesterday into beijing airport, this is physical stream. We do not know if he is on this one, you can connect the dots because he is in beijing. We have the video, he is the premier. He was the former party boss when elon musk and tesla set up their big factory in 2019. The big issue is as tesla is off its first decline in yearly revenue since 2020, cutting headcount, accelerating new models, china is a key market. Tesla is pitching a selfdriving system. It needs driver assistance. It gives a fairly decent revenue stream if you buy it outright. What weve heard is he is in china trying to get regulatory approval. Given Data Security, all other kinds of geopolitics behind Data Security. We heard elon musk say it is good to see chinese electric vehicle makers doing so well and all cars will be electric vehicles in the future. One thing on thursday and friday is how much progress chinese makers have made in dominating the ev space. I spoke with bill russo, the founder of auto mobility, longtime analyst. This is what he had to say. They are coming down the leaderboard in china. Bill tesla launched a price war because they saw weakness on the horizon. They do not have new products that are relevant to the chinese consumer. It is these companies that disrupt us. They are the ones to watch right now. Stephen that was a big theme and im starting to see more cars on the streets. The chairman says they have orders, 5000 have been delivered. That is a trend, tech meets automobile. Elon musk sees this. Theyve lost ground to byd. And others. Haidi steve, do you think tesla driver assistance bringing that to market will be enough to impress buyers in china who have so many incredible options available . Stephen well, there is some cachet to a tesla. They are more expensive and if you look at the leaderboard of the models in the first quarter, nine out of 10 are chinese and they are more affordable models. That is the trend, more people move toward evs. That is why tesla is rolling out midrange and affordable models, it is a premium product. Again, some issues are down the road. Data security, tesla is american. Theyve been keeping data onshore in shanghai since 2021 or two, so they are complying. Coincidentally or not, yesterday afternoon, the chinese administrative automobile manufacturing said the tesla model 3 in the model y past Data Security reviews done by chinese authorities. So maybe that is one hurdle for tesla. But they see china and india down the road as Growth Markets for tesla. That is why he is here, meeting his old acquaintance. Annabelle Stephen Engle there. You can get a roundup of stories to get your day going in daybreak. Subscribers can find that on your terminals and it is available on mobile for bloomberg anywhere. Customize the industries and assets that matter to you. This is bloomberg. Annabelle taking a look at major currency pairs, a Little Movement coming through. Watching the yen closely. As we have been discussing, going to 160. Which makes the risk of intervention in play. Were continuing to track that. Japanese equity markets are shut. We are just seeing it weaker across the dollar. What could also change the direction is the fed rate decision, no change is expected. Focus will be on the tone that jay powell strikes in his press conference, whether he needs to sound hawkish given we have seen resurgent inflation data. Lets discuss in terms of the sounds or signals from jay powell and bring in jill, our news desk editor for todays big take. It is focused on fed speak index, which shows the hawkish pit it started in december. Talk us through what the index is and what it is telling you . Jill essentially Bloomberg Economics trained a language algorithm on 60,000 different fed headlines, along with news reports, in order to gauge how to tell the tone of things powell is saying and construct that out as to whether it is hawkish, dovish, it synthesizes and spits out essentially how the tone is rated. According to the index, when you go back to what powell was saying, that was really what he saw as a dovish pipit toward expecting Interest Rate cuts as soon as march. While it is true that the fed policy did not change, what this does is show us that yes, the wording changed, that is where you saw change in yields, markets respond and then more expectations for a cut. The fact is it seems like Bloomberg Economics estimates that his change in tone drove up inflation by half a percentage point, and hotter than expected activity. Haidi what do you see as a major impact . We heard bank of indonesia, a big surprise. A lot of asia will be impacted by this. Jill at this point, the big question is we constantly have to recalibrate for when the pivot will happen. What this model shows is it may be the case that powells language is contributing to a higher for longer language despite saying at the time, hinting toward a window opening earlier for cuts. They acknowledged that powell is making a pivot at the Spring Meeting in d. C. , there is a need for things to stay higher for longer. If pushback expectations. That was jill joining us. Up next, we will speak to the german marshall of the United States about the impact of Antony Blinkens visit to china. He is heading to the middle east. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Haidi you are secretary of state Antony Blinken is due in saudi arabia for talks with regional counterparts on the israelno laws or following a meeting in beijing with xi jinping wrapping up two days of sometimes confrontational talks. The chinese president warned u. S. Not to target china. Antony blinken told reporters after the meeting that the u. S. Will impose further sanctions if china continues supporting russias war in ukraine. If we dont see a change, indicates of the United States, we have already imposed sanctions on more than 100 chinese entities, export controls etc. , and we are fully prepared to act and take additional measures, and i made that very clear in my meeting today. Haidi our next guest says the recent engagement since beijing is invested in maintaining stability, but trade and diplomatic tensions will likely intensify if no action is taken on issues like overcapacity. Bonnie, always great to have you on with us. We have seen a flurry of diplomatic visits. Janet yellen, Antony Blinken. The level of engagement being more frequent is welcome to. It did you see the fundamental relationship improving . I do not. It is good to have communication and interactions between senior officials and residents, but i think the journey is out as to whether there could be real cooperation where there are some differences between the United States and china at can actually be addressed. Secretary of state blinken talked about the fentanyl prices in the United States, and president xi jinping told blinken that china would take actions. I think we have seen some small elections, but they have not really done enough, and there was a major report that came out of the select committee on the Chinese Communist party just a few weeks ago listing all of the things that china is doing in the area of fentanyl, so that is one example. There is a lot of friction between the United States and china over a growing number of issues, and yet both countries want to try to maintain a fragile stability and see if they can through dialogue manage the risks and perhaps find some areas to cooperate. Haidi how do you perceive the respective domestic appetite were either going hard with perhaps more sanctions or domestic posturing or looking for areas to collaborate . It is an Election Year for the u. S. Going into november, and china has its own domestic problems to contend with. I think that is exactly right , we have an Election Year in china is nervous about being front and center in the elections and the campaigns. It at this point does not want to be the target of even more sanctions from the United States, but that could happen, and as you are segment showed secretary blinken it made quite clear that if china does not act to stop the assistance it is giving to russias economy and Defense Industry not only to prosecute the war in ukraine, but also to increase potentially the threat your, and the United States does have had appetite. And there are better report said that the United States is considering imposing sanctions on chinese banks. We have also seen some european discussions about targeting more chinese entities and imposing sanctions on them, and i think it is quite possible that is the direction of travel at this point. Annabelle sanctions do not seem to have been particularly defective effective as a deterrent in the war in ukraine so far. Russia has a managed to expand its arsenal and make territorial gains as well. Do you see any sort of sanctions on chinas vendors have been a big impact and something that could force a change in beijings behavior . I think there has been some deterrent effect on china. We have not seen the chinese provide legal aid to, entire Weapons Systems to russia. We have seen equipment, machines that has strengthened the Defense Industry of russia, enabled it is essentially to reconstitute its Defense Industry that had been severely set back by u. S. And european sanctions, so at this point Biden Administration is saying legal aid is not enough. It is too high a bar. We are going to lower it. The chinese have balked, but at the end of the day they do not want their major banks to be sanctioned. Those banks would be cut off from the International Financial system, and in terms of their own interactions with russia, about 90 of it is not in the u. S. Dollar. It is in the russian and chinese and other currencies. There are regional banks in china that could assist russia. Nonetheless i think china major banks would not want to be targeted with such sanctions. Annabelle we are in this Election Year and getting more hawkish messaging coming through from both sides, but in the scenario planning that is being mapped out by beijing right now, which president or white house do you think they would prefer to see come november . I think there is no consensus in beijing, and for a long time many chinese preferred trump because he is transactional and many chinese believe they might be able to cut a deal with them, but since the discussion of the imposition of potentially 60 tariffs on china and 100 tariffs on electric vehicles, and also in the aftermath of bidens relatively successful meeting with xi jinping in San Francisco i think the chinese have decided they want greater stability in this relationship and do not want the unpredictability that donald trump would bring. That is a majority view, not a consensus. Haidi how much vulnerability do you think there remains in the South China Sea . That was supposed to be one of the issues push at this meeting as well. Do you think beijing is continuing to make headway in terms of a number of these countries not being able to push back in that region . Chinas capabilities, even just its coast guard, not to mention the navy far exceeds what any other claimant in the South China Sea has. We are talking about vietnam, philippines, malaysia. These are countries that have much smaller capabilities. The situation at a particular feature really is today the most dangerous flashpoint between the United States and china. The philippines has this rusted out ship from world war ii that it beached in 1999, and the philippines supplies food, water, and various humanitarian aid to the dozen rings that are there, and the chinese want to prevent the philippines from supplying those things. The chinese claimed the philippines is supplying Construction Material to the marines and make that more sustainable and more habitable so the philippines can keep their out was there for the indefinite future. So this is a flashpoint, because the United States as a defense treaty with the philippines, and if there is a use of force by china against the philippines, the philippines can invoke that treaty, and the United States will come to the philippines aid, in which case we have a potential military confrontation between the United States and china. Annabelle that was bonnie glaser, thanks so much for your time. Lets take a look at markets 40 minutes into the session so far for sydney and seoul. At Japan Initiative for public holiday. It is the story of gains following the u. S. Close on friday, strong numbers over the course of last week reading relating to alphabet, but their bets and investment in Ai Technology is starting to pay off, and investors are starting to like the sound of that. Quite a big week coming up, not just earnings in this part of the world, also the focus on the fed and the signaling we get from jay powell, whether he sounds hawkish even though we had inflation coming in line with estimates, still stubborn. That last mile very much a big hurdle. Some of the stocks we are tracking particular, japanese yen, 158. We will be watching catl, the chinese battery maker at the opening mainland equities. See atl catl and another company signing a strategic partnership. We have seen elon musk heading to china for a surprise visit, tesla sales liking of the country. Traders are bracing for a busy earnings taken china. Byd is on tap. We will preview those numbers for you next. This is bloomberg. Annabelle chinas property crisis and the challenge approaches for lenders will be on full display this week. We have an embattled developer and chinese megabanks reporting their earnings. Lets bring in our senior fintech analyst at bloomberg intelligence. It seems like it again we will see the woes and the property sector affecting numbers. Based on the full year numbers we see at the end of march, probably ok. We do see higher none performing loan figures, but overall it has been stable for these banks. We do not have more details because it is more like the first quarter. Haidi obviously property is front and center both because of the downturn, but also i wonder about the participation of some of these lenders into projects. Do you see much exposure from that already . So far it has not been what we have been focusing on. We do focus on the fundamental prospects of these banks especially with many of their shares doing well, since the beginning of the year. This is one of the outperforming sectors. I still do not see their earning prospects to be very inspiring during the end of this year, because of margin moves or risk, but overall it is something we are worried about but not as bad as we thought. Haidi thank you, francis, ahead of the slew of Major Bank Earnings and also automakers byd reporting. Expected to report muted results due to these price cuts. Lets bring in asias price reporter, and the aggressive discounting is been at the forefront of the strategy. How does that play out for the numbers . We have seen byd heavily discount many of its models, so analysts expecting that is going to weigh on its margins, which seemed healthy last year compared to teslas margins, but now that they have slashed these prices it will enter their bottom line. It will keep stoking up this price where we are seeing in the chinese ev market. Annabelle what are we expecting if it is getting more of a market share. Do you think that will have a big impact on overall sales and revenue . Yes, so one of the reasons we are thinking byd is launching these price cuts is to gain even more market share. They are already the Industry Leader in china for evs and plug in hybrids, but now they are really trying to take on the gasoline cars as well, essentially trying to get into this price range that competes against the vehicles from toyota and volkswagen, so tesla is willing to sacrifice their margins to drive out these competitors and help me to really become the dominant player in this market. Haidi we have seen byd expanding the luxury line up. Do we see that premium end particularly when it comes to export ambitions . Byd has launched a new one million yuan vehicle. It has gotten some good reception. A lot of auto show attendees which looking at this vehicle, but at this stage it is unclear how much volume these cars will do. In the short term i think analyst saying it will probably not do that much for margins, but over the long term they will expect premium cars to lift up byds brand and hopefully attract more customers and improve margins. Annabelle that was our asia transport reporter in beijing there. Tune into Bloomberg Radio to get indepth analysis from the Daybreak Team broadcasting live from our studio in hong kong. Listen via the app, bloomberg plus, or bloombergradio. Com. Plenty more ahead. Haidi the top corporate stories we are following, Elliott Management is built the lawyers taken one of Warren Buffetts favorite japanese trading houses. Our sources tell bloomberg the investment is several tens of billions of yen. Buffett said when year ago he would be raising his holdings. Renew discussions with openai about using tech allergy to powers some of its features on iphones. The two firms are discussing terms of a possible agreement. The latest Development Comes about 1. 5 months before the Worldwide Development conference where it is posed to what avail new ai software. Samsung ends is group have agreed to boost cooperation and manufacturing following a meeting between the company executives. Their cooperation in cutting edge machines used in foundries and a memory chip production. Annabelle a bloomberg scoop, bloomberg has learned geiger is close to taking an offer of the Skincare Company private. We know that loccitane key revenue markets have shifted away from america to asia. What is the justification of delisting from hong kong . We have been following this deal for several months and probably will have news regarding it this morning. How important it is said and why is it happening right now . The main point is simply look over the time, the company has been listed in hong kong 14 years now. There was a clear interest to boost exposure to asia, boost revenues from asia, and it is clear the region represents 1 3 of revenues they have globally, while in the americas Revenue Growth is much faster and indicates there was a lot more interest in such places. You have a lot of other Luxury Companies struggling to increase their share within asia, mostly within china. When you see the Company Trading at a much lower value than they were expecting, at a much cheaper price than they wanted to there is the space to go out there and put this buyout offer in place. Haidi how close are we to this being a done deal . That is a very good point. The reporting from our colleagues within the deals team is making it clear we could have details out this morning. Geiger, the chairman of the company, is working with the blackstone and Goldman Sachs to come up with an offer that would give a value of 7 billion u. S. And is working closely with Goldman Sachs and blackstone. Together those two big names would add 1. 6 billion to the offer. They were to be coming with details of such a deal and are probably offering between 33 and 34 hong kong within the sure that would give investors a premium of 15 to where it is straight in hong kong right now. This talk is not been trading since april 9, so if we do have details of this morning we could have a reaction within the market probably today or tomorrow. Wednesday is a holiday in hong kong, so we should have fast reaction. Annabelle what is the path ahead as a private company . Does it look to relist somewhere else and is this setting up receipt and a precedent for other companies . We have a list of companies that also went private when there was a push for luxury names to read exposure to asia. If they will live somewhere else is an open question. Then look at the u. S. Market Getting Better and better when it comes to listings and ideas. It could be a potential European Market as well, but for the Hong Kong Market is a clear indication that those global luxury names that were in the past looking at the city as a way to mostly be exposed to chinese clients, they are rethinking their strategy. Haidi our Equity Capital markets reporter with the latest. It take a look at out futures are shaping up as we get broader optimism across asian markets trading at the moment. U. S. Futures looking positive, point two of 1 higher. A hawkish pit of it pivot in the tone from the fed. A holiday session with japan equity markets closed for a public holiday. Th f bl david it is half an hour the opening bell in hong kong, shanghai, and shenzhen. Yvonne no one ever calls it that. Elon musk makes an