Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20170516

They may listen to demands of its activist investors. Inhine orders are released tokyo later this hour. We are keeping our eyes across on the latest from the white house as it denies reports alleging meddling by the president in the russia investigation. This is daybreak asia coming to you live. It is just after 7 00 p. M. Betty, where do i start . The perfect storm in d. C. New reports surfacing. On the heels of what we could have seen, the disclosure of sensitive information. How can you deny that . We are seeing that reaction with the dollar plunging. Youre absolutely right. A lot of questions here. The market seems to be shrugging off the chaos in the white house. It had a bigger effect on the markets in the lower dollar. Housing numbers this morning, in below estimates. That has people worried. Maybe this economic recovery and this momentum might the losing steam. Lots of people focused on the economic numbers to come in the u. S. Is pretty confusing. We did get production out gaining the most in three years. Then we had housing stocks. It is sort of all over the place. That with dissecting our guests throughout the day. New zealand gaining 2 10 of 1 . Ago ptiave 15 minutes numbers growing quarter on crow were quarter on quarter. We have more data coming out of ulster i get today. A couple of data points. We have wages for the First Quarter. Those are numbers we need to keep an eye on. Futures pointing slightly upwards. It gained in the last session. Butdollar is Holding Steady this is something you have to keep an eye on because hedge funds are giving up on the aussie. Japan, futureso pointing downwards. The nikkei did gain in the last session. Flirting with the 20,000 mark. Yen is gaining against the dollar. That could weigh on stocks. That is an early look of what we can expect in the region. At least equity markets in the u. S. And be taking everything well. Particularly the tech shares. Lets take a look at how u. S. Markets close. And the dowthe s p are finishing slightly lower. Pretty much unchanged. The nasdaq continuing to power higher. Howard also by the chipmakers. Were going to dig deeper into have the u. S. Market has traded. The white house is on the defensive at this hour over allegations President Trump they have tried to derail the investigation into his former National Security advisor. The bloomberg is reporting that in a memo written by james comey seen memo claims to have reported by someone seen this copy of this memo. Saying the president essentially go. Let this investigation lets get straight to washington now with more. Nobody has seen the memo yet. It sounds like it is a matter of time. Absolutely. We have a description from. Omebody who has seen the memo seen a copy of it. Outlets in media washington have confirmed this story. This is something riffling through washington now. There are comments across the political spectrum. Many saying this only validates the need for an independent prosecutor, an independent commission to look into the allegations President Trump may have tried to squash an investigation into its former National Security adviser. We have a comment just in some on shape fits a fits jason shape that saying that they will get the memo. I have my subpoena pen ready. Whats even if we get the memo, im sure more questions will be raised. Its not as if you get the memo and everything is clear. Saying letsls now bring comey out. Is in a matter of time before he gets calls to congress . There is already that call. Lawmakers would love to hear from james comey sooner rather than later. The calls are only going to increase. It is important to note that this is directly contradicting what President Trump has told people on record. He said i never tried to do this. I never tried to cut off any such investigation. I would point out that just this i would point out that just this morning, i dont think hes going to get his wish any soon. Lets talk about what happens if this memo is confirmed. People are saying this was obstruction of justice. Is this an Impeachable Offense . That is one of the questions that will be asked. Chargedvery politically saying. So far we dont have republican saying anything like that. Republicans control the house and the senate. You would need republicans to say this to have any serious threat about that. What this does do is in boldens the call for additional scrutiny. It emboldens the people who have been trying to use this against not just this white house but their entire agenda. Giant distraction that the white house has been trying to use to reset the conversation. We are expecting him to go to saudi arabia and israel. Thank you for your time. It must be very busy in d. C. Despite the political turmoil stock markets are at alltime highs. Volatility has been subdued. Many are betting that is about to change. Stock volatility will rebound. Take a look at the bloomberg. Its function is pretty interesting. You can go to most active options and see the call options are past 9 million contracts. This would be the line here. This is an all time high. Triple of that of the option. People are expecting for volatility to triple in the coming days. Most popular wagers are in the 30 and 35 strike options. Here. S right about almost three times as high as the level of 10. Lets continue the conversation with the global risks. We are seeing volatility slow. It will tripper. Thank you for joining us. Our the option traders right in expecting volatility will surge any time now . Our expectation is volatility will rise but the problem with that is it is a difficult position to continue to hold. What you are seeing at the moment is a perfect storm of positive influences for higher asset markets. You have a rotation by Pension Funds to stocks and a multidecade rally. With the expectation they are switching to stocks. You have the ecb buying huge down andwhich pushes make stocks more attractive. Cycle is relatively positive. There is a huge amount of political risk. Just before, in the u. S. And outside but for now those factors are continuing to boost the stock market. Certainly the risk of some degree of correction in the u. S. Or outside in asia is rising. Hedging would seem to make sense. Earlier,g with betty we are not seeing that much reaction in the market especially when it comes to equity. We are seeing the dollar. November lows. Can you still buy into the Interest Rate differential, to push for the dollar . Will this be upset by the fact that stimulus could be delayed so much more, so much longer than expected . One of our key themes for this year, by the head of our u. S. Research practice was tax reform is not point to happen this year. Its probably going to be a 2018 story. All the issues the white house entangle ittinue to and keep it from trying to push through tax reform. Tax reform is a huge swing factor in terms of Interest Rates. The u. S. Is facing gross competition. On the bloomberg, in the u. S. Or in europe, in europe they are continuing to point up in the u. S. Is pointing down. Thats another factor weighing on the u. S. Dollar. We expect the u. S. Dollar to continue to weaken from here. Throughout the end of the year. Which markets are you looking at . Is it the bond markets, the equity markets, to get a gauge of true Market Sentiment . Particularly as relates to what is going on in washington. Difficult to get the same signal from different markets. The stock market rallied in the u. S. Massively in the wake of the trump election on the expectation of this goal easing, tax reform. And now it continues to rally despite those tax reform prospects diminishing or the u. S. Dollar, for those same reasons is falling. What we are seeing is different signals from different markets. That is what i mean though. We have seen this before when it comes to views on the. In their rate hikes. Is whom trying to dig at has it right in which market . If you are going to look at markets as a predictive mechanism or tool, who has it right . Our expectation is in the u. S. , most likely it will not happen this year. It will be a q1 story. If that is right, u. S. Stocks look somewhat expensive at these levels. Perhaps not a relative basis compared to bond yields. The u. S. Dollar will continue to weaken. That makes markets outside the u. S. More attractive as well. It is a mixed picture. One of the key things is there are a number of technical or structural factors supporting the markets which i talked about before, which allow them to ignore the rising political risks not just in the u. S. But korea, regarding north trade tensions towards the end of the year. For now those risks are being offset by the structural market factors. Inexpect those to reemerge the second half of the year which could produce a choppy second half. Thank you so much. Lets get now to the first word news with more on trump and other news. Beijing has given its blessing to a bond length between hong kong and the mainland. The third such an next between their markets. The bond connect will run northbound. This gives access without a day look daily quota. Demand should be strong if the yuan remains straight will remains stable. The pboc strengthened its daily fixing and the dollar weakens. Wants a Stable Currency and is willing to push the fixing stronger when the dollar is weak to ensure no pickup and outflows. It was 100 stronger. A new high after firstquarter results and secondquarter guidance the estimates. It gives the Chinese Company 17. 3 billion in market cap. It also has more active users through march. Its american rival has 328 million. Twitter expects revenue to increase this year. The department of Homeland Security is looking at several identify declined to any. And expansion is likely. The u. S. Band devices larger than mobile phones in cabins on flights from 10 airports in the middle east and north africa. Global news 24 hours a day powered by 2600 journalists and analysts. This is bloomberg. Still ahead, traditional retailers. They are undersea under siege. How battle lines are being drawn a little bit later. From paulew attack singer. Details ahead. Betty this is daybreak asia. Shery representatives from Elliott Management may be may meet later today to discuss the plan to unlock shareholder value. Paul allen is joining me now. They are not letting this go. Bhp could be listening. We could see more u. S. Sales. That is right. Been quite strident accusing them of destroying value in this shale venture in criticizing bhp for the donothing approach to the suggestion about how to unlock shareholder value. We have reports that the two sides may indeed meet where there is a bank of america conference going on now. Bhp addressed that conference late tuesday and admitted mistakes were made with the 20 billion assets purchased before the oil price slumped. Lets have a listen. The exactowledge position that took us into this business, we pay too high a price. Early on a rapid pace of development was too quick. We have learned that lesson. Bhp says they are actively considering more u. S. Shell the vestments. Elliott may partially get what it wants. Elliott management has also pulled back on the original plan as well, has in it . That is right. Originally it wanted to see bhp end the dual listing arrangement where it is listed here in australia and in london. The treasury stepped in and suggested prosecution because that might violate the merger agreement when bhp joined forces. Elliott is back down on that may have had something to do with that. Investigators investors are not enthusiastic. The Australian Company pays dividends. That is a reasonably popular part of the setup at the moment. Citigroup said that all of this ultimatelyould result in the breakup of bhp though in the shortterm they do see advantages to spending off just the oil part of the business. We will continue to follow this story throughout daybreak asia. Update its may macbook as it faces falling ipad sales. Apple is planning an update to the macbook range. Come amid declining ipad sales, rising competition from microsoft. With the latest on this, mark gurman. Hey are retooling this it has been a while since we heard about the mac. They upgraded a full redesign, last october in the fall. The macbook air and 12 inch macbook might also get some love. It comes at an important time for apple. People have been talking about this. Now here is apples turn. What is going to be exciting about it . Faster processors across the board. New chips are coming out at this time as well. They are going to come to the new macbook pro and speeded up. They will look the same as the current models. Im hearing they will update the macbook air which im looking forward to. I love those laptops. Given the laptop business accounts for 10, 11 of their sales, why is this important . We shouldnt look at the financials of the product itself. Its what it means for the larger business. People by max. They expand to the iphone. More people by ipads, apple watches. They all can the. If one link in the chain of the ecosystem breaks there is potential for the rest of the chain to break. The surface. S from it is important they keep this chain of products linked at all times to continue to grow the user base which affects its bottomline. Thank you for joining us. Looking forward to these upgrades on the mac look. The twitter of china. It may be time to reconsider that analogy. We will have the details next. This is bloomberg. Its wednesday here and hong kong. Take a look at that beautiful skyline. We are 30 minutes away from asias first major market open. Betty gorgeous here in new york as well. Mixed. Closed smp finishing up unchanged. You are watching daybreak asia. The first word news. Whats bloomberg has been told President Trump asked james comey to drop an investigation into michael flynn. Our source has a copy of the memo that comey wrote following the conversation withdrawal. Comey didnt respond to trumps response which was made a day after trump was fired. The director to comment and testify. We ought to ask if there are notes taken around the time of the conversation. They would be powerful evidence of what took place and then i think we follow up from there. Clearly of the president was being truthful in the threat to director comey that he had tapes we are going to want to get a hold of those. The white house is fighting to contain the fallout from claims the president shared classified information with russia. H. R. Mcmaster says the premise into the Oval Office Meeting was called and describe what the president said to surgery lavrov as wholly appropriate. Protona wants to sell after the dream of an asian industrial powerhouse drove into a ditch. In 1983. Ny was found is in financial trouble and wants to sell the foreign buyer to keep it open and develop new models. Indias aviation regulator is afterg away watchdogs they have forced airlines to cancel flights at the last minute. The changes would make pilots provide a years notice before changing jobs and upset the Market Leader to hire a crew for a small aircraft fleet which the aim to start later this year. By 2600ews powered journalists and analysts in my hundred 20 countries. This is bloomberg. We are counting down major market opens in asia today. For more here is adam haigh. The dollar is down for a fifth day. How is that playing out . The outcome is no surprise. All about the u. S. Administration at the moment. Latest revelations we have been hearing, it is weighing on risk assets across the board. The yen is stronger. Gold is ticking higher. I think we are going to see a weak start to japanese equities. Tot should follow through the rest of the asian session. These revelations underpin a cautious sentiment around the next steps from the trump administration, the unpredictability of what is happening. Elsewhere in the region we have that opec meeting, the head of the big meeting later today. That will be closely watched. Later on we get into europe, we have those week inflation numbers. The pound got a hit. Today we have a labor report. That will be closely watched by sterling traders. Shery we are also seeing the Biggest Exchange fund. Just attracting the biggest inflow in almost a year. Is this warranted is this a risk . This is a few things going on here. If we bring up the chart that shows you the extent, some of the biggest inflows weve seen going back 12 months. This is an 11 billion emergingmarket. Performance has been good but it is living leaving some folks at pine ridge saying bonds are looking for expensive here. This rally is starting to look squeeze. It does put pressure back on the board when they take some money off the table elsewhere. They still seem attractive to a lot of investors. We have the bank of America Survey overnight. That quite clearly showed people saying emergingmarket stocks are still undervalued. 50 still saying they are undervalued. We have seen a big runup. Plenty of people are saying that has further to run. As people bring down those positions, it will be interesting to watch those developments. Lets see what happens, to see how that is going to be changing given that valuations are ramping up now. Betty gaining now for seven second of sessions. Thank you for joining us this morning. Often described as twitter of thea, they have outgrown moniker in more ways than one. It has a larger mountain market cap and it has more users as well. This was looking pretty good. Absolutely. They have managed to do what twitter hasnt, grow its user base at a rapid rate while managing to turn a profit. They have a Walled Garden because of censorship. Theres plenty of competition domestically. They have managed to beat them off. How did that happen . They have had a strong reputation. Its the place you turn to if you want to get news or Government Agency information, like how do i avoid traffic jams. They cornered the market on that. The biggest competitor is we chat. That is a messaging surface service. Clearly they have grown considerably. Have a capitalize on this . What does this mean in terms of competition with others like twitter . Fortunately for twitter they dont have major plans to go overseas. It is china focused. You have to ask if that is a future area for them. Targeting growing chinese population outside of china. Thank you. Xceeding growth among the leading Central Banks the doj could be voted to least likely to ship policy. Could factory data change that . Catherina Kathleen Hays is here with a preview. What should we expect . Orders for machinery by japans biggest companies. If you see orders rising, more optimism or willingness to invest. That is a good sign. Bloomberg intelligence is looking for 2. 8 . The court takes out orders in big shipping companies. They marched to their own tune. Not so much demand driven. 1. 5 but on a gain of jump into the bloomberg with me. The turquoise line is the court order. As you can see the down represents a drop of 3. 2 in january. Higher in february. Another gain will be a positive. If you look at the blue line you can see how it has leveled out. You can see that court orders have been in a range. Companies are cautious. They go up, they pulled back. It is not a steady rise that would signal a jumping confidence. Bloomberg is saying that for the First Quarter you will see a drop in court orders but that week,elease by japan last the fastest increase, the best since november 2014. That points to the japanese cpi rate byt a 1 annual the end of the year. Bank of japan may be saying we are going to exit. It is an eventual change. Said he thinks stimulus is not going to end. It is not really something he wants to show as an active conversation right now. Lets talk a little bit about about the u. S. We did get a mixed bag of data. Industrial production rising but Housing Starts disappointing. Is it anything that could alter the rate hike . Pretty clear that when they step back they say unemployment is so low. We think it is time to move. Specifically home construction. Permits down 2. 5 . Maybe housing is starting to lose momentum. Apartment construction slow this down. Especially if morgan rates might start rising. Inustrial production up 1 april. Now you have a hard data marine data matching the sentiment data we saw after donald trump was elected. Given donald trump, who knows what it will look like ahead. A cool piece, you can find it on bloomberg. Com. He is saying to the fed. Reduce the Balance Sheet. The fed has two choices. Start reducing the Balance Sheet and keep Interest Rates lower or keep the Balance Sheet higher and have a higher level of Interest Rates. Is a recession its going to be better to have higher rates and cut Interest Rates than have that lower Balance Sheet and have to start buying bonds again. Its interesting argument. Always a bit of a maverick in his views. The fed says we are going to cut the Balance Sheet the beginning of next year. They are having in both directions. Coming up next, online we will see how that is heading traditional retailers, next. To the counting down first major market opens. Japan futures down a quarter of a percent. Not surprising given the yen is strengthening. This is daybreak asia. We are awaiting the japan machinery orders. Get that, brick and mortar retailers are finding unstable foundations. It has been a long story here pushing famous names to the edge. Others are laying off staff. Theill discuss that with here withthers ceo, us also that spring up that chart that went along with the story which i thought was fascinating. Hasnow this whole story been decades long about Online Retailing hurting brickandmortar. The chart on amazon please. Amazond in your story, affected inflation. That we are buying so many goods aline that that is having effect on prices overall. Like you say, retail competition is that new but it is a dizzying pace of innovation in terms of not just how we shop at how we price our goods. That is starting to flow through to the real economy. The global narrative is picking up because of chinese factory prices. Inflation yesterday to pick up around the world. But economists are saying lets have a look at what is happening in shopping baskets. Prices continue to fall. Its not going away any time soon. Let me bring you into the conversation. We have to address the Department Stores meltdown that happened for our viewers. See is a chart, they can when it comes to Department Stores, they are in a world of hurt because of online sales and not keeping up. ,ut their performance this year which would be in blue shows little relationship to other consumer businesses. That would be in white. Does this mean the meltdown we are saying, it doesnt weaknessly reflect a in the consumer side of things . You have to recognize how much of the business is being done in Department Stores nationally. Its a small percentage. Just to contextualize it. Anywherefic is down 510 on a monthly basis. ,irstquarter results mall traffic poor, was down 20 . Many retailers had like kinds of business during that time. The First Quarter was difficult. Looking at the balance of the are moreilers optimistic that the worst is behind them. Certainly all of the factors you mentioned are creating this problem for them. Is it going to be really hard from here on out . Amazon has been a competitor for so long. It does feel like the Amazon Effect has been even more pressure. This idea of being able to raise prices. Is that out the window . If you look at the products amazon is selling, basically everything, they dont want to be the highest price person. They also dont want to be undersold. If there is a consistency of pricing they will maintain that but if someone is selling it for lower their algorithm would suggest they can match that immediately. Thinking about brickandmortar retailers, home depot reported. They had a phenomenal quarter. Revenue was up 6 . Is astounding. Here is a brickandmortar player. They have a good ecommerce business. They are doing the right things. The beauty sector is doing very well. I think the real problem today is candidly and apparel. Accessoriesrel and and footwear. The mallbased stores are having a bad time. Let me bring you into the conversation again. We have to talk about this inflationary risk in asia. Factoryeeing china prices turn positive and start to grow. Will this filter through not only the chinese economy but the Global Economy . As long as China Remains positive, that is a powerful impulse. Even if they continue to cool down from the levels they were. There are plenty of factors that might push inflation not. Oil prices are starting to come up again. The stars are aligning for prices. Here comes things that havent been fully considered yet. That is extraordinary innovation. It is impacting consumers. Which will impact cpi. I want to break in with some breaking news. We have been watching these machinery orders. Quite big messes here. 1. 4 is the growth month on month. Economists estimated two and a half percent. We have seen declines year on year. Zero point 0 on the year. Expectation was for growth of 1. 2 . Even that was a slow down from the prior month. Some big messes on the japanese economy. It does not support great numbers going into gdp for japan. Well be watching for reaction but also in the equity markets as tokyo opens in 10 minutes. I want to get back to you in the u. S. Markets. Ets bring up that chart walmart and target. It is key to get the online strategy right. Target seem to be on fire. They had great brands and designers. Everybody thought it was cool to go to target. Now samestore sales are declining while walmart which has finally figured out there online strategy is going up. Suddenly there is this value price situation. If you look at what retailers are doing well, they are offering terrific value. Down,axx reported a slow a cell a softening. They still had positive growth, improvement in earnings. They are still very strong. In isthe difficulty pops in terms of the full line guys that are really struggling. Let me continue talking about target. If you take a look at the bloomberg for our viewers, they can go into the function for the supply chain and there are some stores that do supply to target like sony in asia. Asiann see so many other suppliers. If we are seeing this slowdown in the u. S. , what will that mean in the broader impact for Asian Companies . We have talk about japan missing the Industrial Production numbers. Also the fact that Department Store sales are slowing. What is the broader impact . Ultimately it will trigger down the trickle down into markets. Target has been focusing their strategy on raising margins. We talked about the value pricing and lowering pricing. They are trying to raise margins. They either going to buy better or charge more. Maybe have more fashion. That doesnt seem to be working now. Their strategy was to grow apparel. The Apparel Market is challenge. What are the trends today . Athleteeen all about leisure. It is a relatively low ticket item. You can buy a pair of leggings anywhere from a hundred dollars to 9. 90. That is the world they are facing. Food is not doing what others are doing. Walmart went to low was cost provider. Those are some things that edna ,entioned in his article keeping prices low. Thank you for joining us this morning. Chairman, we will have more here. This is a this is daybreak asia. Betty plenty more still to come, agers first market open still to come. Reaction to dismal machinery orders. Shery lets bring in sophie to tell us what we should be watching in the open. Going to bere watching their reaction to machine order numbers, but stocks, we are checking out electric power and Nuclear Reactors today. , the ceo is said to be considering a sale of u. S. Gas assets given the activists criticism of that business. The ceo saying the crisis is overstated when it comes to forecasts of shortages on the australian east coast. Keep an eye there. On the futures board, and next open for asian markets, the dollaryen looking to drag on stocks in tokyo. Thise going to be watching one trading gets underway and australia, a mixed day for the markets as investors assess the political upheaval and golfing the trump white house. The administration feels criticism from all sides. Mitch mcconnell said he would like to see a little less drama. Chinas embattled investors look like they are winning some respite as the pboc loosens the purse strings. The worlds biggest miner considers a sale. They may listen to the demands of its activist investor. This is the second hour of daybreak asia from bloomberg u. S. And asian headquarters. I am shery ahn in hong kong, just past 8 00 a. M. Betty just after 8 00 p. M. In new york. What a day in washington. We knew that the fallout from comey was going to be big, but it certainly has engulfed many different areas, and in fact is now twisting into a whole different story line. We are going to get the latest on what is coming out from this comey fallout. As we have been noting all morning long, not a lot of reaction in the markets yet to this. Until there is something very definitive, the markets are still shrugging this off. Shery i am really sorry, but i cant help but laugh when Mitch Mcconnell says he would like to see less drama from the white house, because i dont see that happening anytime soon. When it comes to the markets, less drama in the markets. We are seeing reaction in the dollar, but from everything else, stock markets in the u. S. , they did pretty well. We have some data that investors do need to get across this morning in asian trading, so lets go to sophie to give us details of how they are starting to trade. Sophie taking a look at the session here, not much of a dramatic start. Take a look at what is going on in japan, the nikkei down about 25 , getting dragged by the stronger yen, that below 1. 13 for the first time in a week after the dismal machine orders data this morning, perhaps also weighing on shares in tokyo for the moment. That data coming ahead of gdp figures due out tomorrow, expected to show that growth rose for a fifth straight quarter thanks to solid exports helped by the weaker yen. Kospithe cost be and asx 200. The aussie dollar, a change on wage growth data. Goldman sachs forecast a modest uptick in wages in the First Quarter, given a boost in corporate profits. If inflation recovers, goldman says that markets can be underestimating the likelihood of a rate hike by november. The risk that we are getting is seeing the bonds and gold take up higher, gold about. 5 higher. Take a look at oil prices. We have crude falling over 1 back below the 49 a barrel mark. As betty noted, not much in the way of Market Reaction when it came to u. S. Stocks with concerns around the oval office. We are seeing the dollar take a hit, falling to november lows amid the turmoil about whether trump may be a lameduck president and more sides of moderating u. S. Economic growth also likely a drag. As the dollar weakens, we are seeing an ascension for the euro , trading at its strongest level since november. It could see a slight correction potentially in the asian session, but it could keep up the momentum if dollar negative news keeps coming out of washington. Helping the, dropping below 113 and a breach of the 112 to 94 level is now 11260. That could see it move toward the average of 11191. Betty thank you so much. Sophie with a look at the markets and the reaction. Now lets go to the first word news with tom mackenzie. Tom beijing has given its formal blessing between hong kong and the mainland, the third such connection between the two markets. The pboc and Hong Kong Monetary Authorities Say the bond connect is its first run northbound as foreigners access mainland security without a daily quota. No start date was given. China Merchants Bank says demand should be strong if the yuan remains stable. The offshore yuan was higher for a fifth day, the longest run of gains since february last year after the pboc strengthened its daily fix and the dollar weakened. Beijing wants a Stable Currency and is willing to push the fixing stronger when the dollar is weak to ensure no takeup and outflows. Tuesdays reference rate was more than 100 point stronger. Another company surged to a new high after firstquarter results and secondquarter guidance beat estimates. The jump gives the Chinese Company a market cap of almost 17. 3 billion, 3 billion more than its american beer. It also then its american peer. It also has more active users. Twitter expects revenue to lag behind growth this year. The u. S. May widen its ban on large Electronic Devices and aircraft cabins to flights from europe and elsewhere. The department of Homeland Security is looking at several areas, but declined to identify any. No decision has been made, but we are told and expansion is likely. In march, the u. S. Ban devices larger than mobile phones on flights from 10 airports the middle east and north africa. Global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. I am tom mackenzie. This is bloomberg. Thank you. Shares in bhp are gaining about. 2 after reports that the minor may meet Elliott Management later today to discuss aspects of elliotts aggressive plan to unlock shareholder value. Paul allen joining us from sydney. Having ay saw bhp shale Holding Since 2012, that we could see further sales. What is this about . Paul this is something that Elliott Management was calling for an answer or, to unlock was calling for in its report to unlock shareholder value. Bhp was strident in its criticism, saying they destroyed 41 billion in shareholder value in its u. S. Sale. Another 9 billion in overpriced share buybacks and criticizing bhp for it called a donothing approach for management, who rejected elliotts suggestions. Anyway, it looks like bhp might be warming up to some of the ideas about the u. S. Shale assets. Andrew mackenzie was speaking in barcelona late tuesday to a conference there. He admits mistakes were made over the 20 billion u. S. Shale assets purchased before the oil price fell. Here is what he had to say. That the exactge position that took us into this business were poorly timed, that we paid to higher price. But early on, the rapid pace of development was too quick, and we have learned that lesson. Bhp Andrew Mackenzie says would actively consider further divestments, particularly if it can find a buyer that saw more value than bhp does. Elliott management have also pulled back on some parts of its original plan, right . Paul yeah, they have. There was the original idea that bhp should get rid of its australian listing and just keep the london one. The treasurer intervened and said that might be illegal. There could be a prosecution because keeping an asx listing was part of the original merger agreement back in 2001, so that might have had something to do with it. Investors seem to be lukewarm on the idea as well, because the Australian Company pays dividends to the u. K. Based company so that investors of both stocks get the same payouts. It is a reasonably popular set up. Saysbroadly, citigroup this week that all this agitating over the mergers could eventually lead to the breakup of bhp. In the shortterm, it does the advantages and spinning off these struggling u. S. Shale assets. Thank you so much, paul allen in sydney with the latest on the fight over bhp. Speaking of fighting, the white house fighting for a second day amid claims that a memo from sacked fbi director james comey says President Trump tried to derail his investigation into michael flynn. Ramy inocencio has the latest. What is the latest . Ramy a lot in the last hour and a last few days. A few major storms following donald trump and his white house. On one hand, obstruction of justice allegations, which is an Impeachable Offense. The other is the over sharing of classified documents to russian officials from last week. First, to this memo regarding james comey. The memo, as we have been saying, has basically said that donald trump asked james comey to stop his investigation into mike flynn, saying, let this go. That is according to a person with a copy of the memo who described it to bloomberg. You are looking on your screen at a white house statement, the white house pushing back vehemently, saying that donald trump has never asked mr. Comey or anyone else to end the investigation, also saying it is not truthful or accurate portrayal of the conversation between the president and mr. Comey. Are also seeing some reaction a lot of reaction bipartisan reaction coming from republicans as well as democrats. For example, senator Lindsey Graham of south carolina, a senior republican, as well as Chuck Schumer of new york, democrat. Take a listen to both. What the president shared was wholly appropriate. The story combined what was leaked with other information, and then insinuated about sources and methods. I wanted to make clear to everybody that the president in no way compromised any sources or methods in the course of this conversation. Ramy actually, that was h. R. Mcmaster, National Security adviser, talking about his reaction. Lets also go to what Lindsey Graham was talking about. He is basically saying that if mr. Comey is alleging the president did something, he doesnt want to read the memo, he wants to hear it from him. Is alleging the president did something inappropriate, he has an open invitation to come to the judiciary committee. I dont want to read a memo, i want to hear from him. Report inhaken by the the New York Times that alleged the president tried to shut down the active fbi investigation into a close political associate. Was talking about obstruction of justice and that being an Impeachable Offense. We are seeing calls by democrats pointing this out, including Patrick Leahy of vermont and richard durbin, both saying this is evidence of obstruction of justice and richard blumenthal, a strong critic from connecticut , also saying that this merits immediate investigation by an independent special prosecutor. Mentioned those disclosures, highly classified information. Of course, that has been going on for a while, the white house trying to contain the fallout. I wonder, how can you contain the fallout when the president comes out tweeting and says he had an absolute right to share the intelligence . Ramy exactly right, that is what the white house and white house officials are trying to deal with. For example, h. R. Mcmaster yesterday saying one thing and donald trump contradicting him. We saw it happen last week as well. You mentioned what donald trump was saying. Lets take a look at that, because he did put this out on twitter, saying that as president he wanted to share with russia the information that he had and that he has the absolute right to do so, which actually is true, according to legal sources. That said, he also said he wants to put russia, in accord with what they are doing in the u. S. , to step up their fight against isis and terrorism. As i mentioned, legally, this is within the president s authority, but contextually, it has been described as something that has been spontaneous that should not have happened without more thought. But mr. Mcmaster is saying it was appropriate. One other thing to he also said he wanted to make clear that President Trump wasnt going to reveal any sources, because he in fact did not know what those sources were. We know, according to a New York Times reports that the country of origin was from israel, and israel is being cited by current and former u. S. Officials. Israel itself not confirming or denying anything, but the ambassador the israeli and asked her to the u. S. Did come out with a statement saying that israel has full confidence in the intelligence sharing relationship and looks forward to deepening its relationship with the trump administration. But there could potentially be some blowback. Abc news is now reporting that President Trumps disclosure could have endangered a spy that was placed inside an isis so in the middle east and isis cell in the middle east, placed there by israel. We are going to watch what happens later next week when donald trump goes to the middle east and israel, on may 22, next monday, potentially meeting with benjamin netanyahu. As he is away, you can expect a lot of tensions and criticism is going to rise in the vacuum of donald trump not being here, but overseas. The nineday trip coming up. They are also going to be talking to the g7 leaders, so that is something to keep a close eye on as the story continues to unfold. Ramy inocencio in new york, thank you for wrapping the very complicated story. Still ahead, a look at how alibaba and tencent are defying chinas slowdown. Japan hold, can strong as the u. S. Turns more price protectionist under trump . Stocks right now in japan are lower. This is bloomberg. This is daybreak asia. I am shery ahn in hong kong. Betty and i am betty liu in new york. We just had a disappointing read on the key indicator of the health of japans Manufacturing Sector. Machine orders came out for the month of march, some big misses and a decline even. What does this mean for japan, for policy, for the bank of japan . Kathleen hays here with a look at this. What happened here . Kathleen they just came up short, at least against the forecast. The bloomberg consensus survey number was for a gain of 2. 1 in march, a month on month gain, and it came in at 1. 1 1. 4 . Lets see how it looks. The white lined is the core machine orders, from shipping companies and utilities. It did rise, but it should have risen more to help offset the drop of more than 3 in january. The blue line is pretty flat with a bit of a downward tilt yearoveryear. Core machine orders are getting weaker. I had a conversation with the currency strategist at bb h investor services. Here is how he described the report. He said, orders not good but not so bad. The pluses here global growth, fiscal steps from the Abe Administration helping boost orders, but overall, remaining subdued but overall capex remaining subdued. I have to share a story over the wires from tokyo. She is pointing out that japan is set for its longest string of Economic Growth in a decade. Lets jump back into the bloomberg and look at hashtag btb 8641. Japan has had 46 three quarters of growth, the next japan has had cointreau straight quarters of growth, the next is supposed to be up as well. That would be the best growth since 2006, the last period of political stability under the leader of the Prime Minister then. A big potential plus for abes administration and the boj. They are not getting their target yet on inflation, but they can see the extreme stimulus is working because the economy is growing like it has not since 2006. Thank you so much. Do stick around because we want to bring in the chief asiapacific economist for a breakdown of not only the japan numbers but also some data coming out of australia. Lets start with japan, because we got disappointing machine orders, but as kathleen was telling us, it may not be too bad. We do get Industrial Production in a few hours, and we did see a sharp decline there last month. What is the health of the japanese economy right now when you look at these numbers . I would agree that the numbers are not as bad, to say that japans economy wont recover this year. Growthexpecting higher than last year, 1. 2 this year. Industrial production was a lot of noise in last month data, the effect of the chinese new year. Im not too worried. However, saying this is a wonderful recovery, looking at the numbers, 1. 2 at most growth. We should not be over positive. We should be cyclically positive. The yen is in recovery. Lets not forget a huge fiscal stimulus that has just started in march, nearly 6 gdp with a lot of capex this week. Japan will grow, but it is cyclical. We have to look at longterm growth to be less positive about japan, i am afraid. Betty i want to bring up one chart, one bloomberg terminal chart, that shows the five quarters of growth we have seen. It makes people believe in this recovery in japan, however slow it may be. It is really led by the exports we have seen. Continuet this may not , where does that leave rates, exactly . Everyone wonders we are talking about japanese banks and their earnings a few days ago everyone wonders, when do we see negative rates bottom out . Does this change the picture at all . I dont think we will see that anytime soon. However, the impact of higher u. S. Rates is affecting japan, if you look at the 10 year yield. The bank of japan will have a hard time keeping that at the level it has promised. Movingseeing markets , andrterm yields higher the bank of japan really scrambling to keep that target. The yen, we think it will weaken further, so you have weaker currency, which is good for exports, not good for consumption. That is one of the negatives. I think the boj, if anything, will keep rates constant. Any idea of tapering i think is under discussion. If anything, it will have to , notthat target on yields to weaken the yen even further. Avoiding to negative too negative or too positive yields. That is where we are with japan. I dont think we will see any real tapering in japan anytime soon. Productivity is very low in japan, very low. , you have. 5 ta only developed nations around the world are struggling to get their productivity higher. Prime minister abe has shown he is behind the boj. He put the governor in place to have this extraordinary policy in place. What more would have to be done to get the economy growing faster . You say this is cyclical. I think people who support kuroda and abe say they are moving in the right direction. Are you saying that Prime Minister abe is the one who has to do more Structural Reforms to get this off the ground . Absolutely. It is very simple. The key reform for japan is labor reform. They have to increase productivity in japan was massive because it was mainly led by the Manufacturing Sector that has lost ground. Now you need Service Sector productivity in japan. You need to create jobs in the right sectors. That is where the jobs are being created in japan. For that, you need massive labor reform. This is the dual labor market. You need to basically allow for the young population, for the women to get into the now protective labor markets, to increase Labor Productivity in japan. That is essential for japan to grow in the mediumterm. Talking about the labor market, lets move on to australia. We do get wage data for the First Quarter, expected to gain about. 5 . We also get Less Consumer confidence. That fell into the negatives in the month of april. What is the picture of the australian economy right now when it comes to unemployment rates coming out later this week . It is interesting because the labor market was really the strength of australia, to manage that rebalancing from the Mining Sector quite smoothly. So of course, the rba helped. The lowest in history, record low Monetary Policy rates, which had been there for a while. The laborfrank market was really the engine for australia to keep growth at relatively high levels, 2. 5 , a decent growth rate for a country that is undergoing such a transformation. Betty from mining especially. The reality is we have relied on wages and the labor market too long, and we are starting to feel the pinch. The rba is not going to help any further. We have a slightly weaker policy, just lightly, that is not going to help any further. I think households are going to feel slightly the pinch in this recovery. It is, again, a cyclical thing. We have to realize that probably it wont be depressed forever. Therefore, households will pay a little bit, but it wont be a disaster. Very interesting, your thoughts on australia, especially as we see not only the employment situation. But when it comes to the u. S. , we keep getting a mixed picture. What is it telling you, just quickly . It is telling me that it is mixed, and we see it in the dollar, but i dont think that is going to stop the fed. This is long overdue. It is mixed, but it has been next for a while, and we have a huge Balance Sheet for the move ahead. So the fed rate hike in june. Thank you so much for joining us. Plenty more coming up. This is bloomberg. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Betty 8 30 a. M. In singapore, half an hour from the open of trading. Betty you are watching daybreak asia. Shery we have got breaking news out of singapore. We have got nonoil exports in april, now falling. 7 year on year. This was, after what economists thought, that we would get a 13 growth for april. In fact, we got numbers in the red, falling. 7 , also coming down significantly from the previous month, when it grew 16. 5 . Electronic exports year on year, those going 4. 8 in the positive, but still a growth of half the amount experts were expecting of 9. 3 , also a slowdown from the previous month. Nonoil domestic exports on year, falling. 7 instead of expectations of growth of more than 13 . Quite surprising numbers out of singapore this morning. Betty indeed a surprise. This whole show has been full of surprises, from washington to economic numbers. Lets get to the first word news with tom mackenzie. Toldbloomberg has been that President Trump asked fbi director james comey to drop an investigation into former National Security advisor mike flynn. Our source claims to have a copy of a memo that comey wrote following his oval office conversation. We are told the director did not directly respond to trumps request, which came a day after flynn was fired for lying about contacts with the russian investor. Russian ambassador. We asked the director to testify. That ought to be the first step. We ought to ask if there were notes taken around the time of the conversation. That would be very powerful evidence of what took place from those conversations. Then i think we followup from there. Clearly, if the president was being truthful in the threat to director comey that he might have tapes, we want to get out of those. Tom the white house is also fighting to contain the fallout from the claim that the president shared classified information with russia. National security adviser h. R. Mcmaster said the premise of the Washington Post report was false and described what the president said to Sergey Lavrov as wholly appropriate. Malaysia wants to sell their National Automaker after the dream of an asian industrial powerhouse drove into a ditch. Ae company was founded by former Prime Minister in 1983. He wanted to turn the economy into a rival for korea and taiwan. Severe financial trouble and wants to sell up to 51 to a foreign buyer in order to keep factories open and develop new models. Indias aviation regulator is turning labor watchdog, aiming alt ecru exodus that at times required airlines to cancel flights. It would require pilots to provide a your notice before quitting. It would also of said the it would also upset indigos ability. Global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. I am tom mackenzie. This is bloomberg. Time to see how the asian markets are shaping up this morning. Half an hour to trade in tokyo. Here is Sophie Kamaruddin with more. Sophie asian stocks under pressure today as investors see the latest coming out of washington, d. C. , focusing what is going on with japanese markets, falling over. 6 , the nikkei 225 dropping for a third day in four. Utilities leading gains when it comes to leaders in the index, up. 8 . ,his is gas utility stocks rising as they look set to win more customers from incumbent power players. The big medicine machine orders spurring investors to divest ahead of gdp figures tomorrow, and a stronger yen also feeding the drop in tokyo, sending shares of exporters lower. We do have financials and Energy Leading the drop in tokyo. The direction of the yen is also likely to be determined by the euro, which is making gains against the dollar. The common currency has hit a ,neyear high against the yen looking steady for the moment, but given how the euro is gaining against the dollar, that may feed into the yens climb against the greenback as well. The dollar very much in focus today, getting dented from u. S. Political uncertainty. For evidence of the dollar rally losing steam, check out this chart. , funds cut their bullish positions by the most 11 months, falling to the lowest since august. As you can see from this chart, dollar volatility, that has dropped significantly, both the 30 day and 10 day moving averages. That has fallen below the average since the november election. Volatility in the currency market is expected to remain subdued. 8622 tracks jpmorgans indexes of three month implied volatility for e. M. And g7 currencies. As you can see, both have dropped to near threeyear lows. Again, low volatility way it when it comes to Market Sentiment. Betty Sophie Kamaruddin, thank you. Shery chinas economy may be slowing, but there is a sector that is bucking the trend. The internet will see more evidence of that. Tencent will post results later today, and alibaba follows tomorrow. Here is our tech reporter. Analysts are turning more bullish on these two companies. Why . Reporter if you look at projected growth, tencents revenues is expected to rise more than 48 , alibaba also more than 40 . The reason outlook might be bullish is because both Companies Fall into the sweet spot of entertainment. For alibaba, online goods, for tencent, virtual goods in gaming. These companies are soaring past 300 billion in market cap. Expectation for chinese consumption power in that space. It is interesting, given what you are telling me, that for tencent at least, bearish bets have been piling up before this weeks earnings. Why . Lulu probably a move to hedge the gains traders have made so far. As you said, more than 30 million put warrants have piled up, also a record high in 18 months. That trend is probably going to continue all the way until their earnings are reported. Seen, their share prices are also at a record high right now. Ipohat is the status of an at its financial affiliate . What is going on there . Lulu our sources have told us that the ipo that was expected probably wont be happening this year. The company has done a lot of expansion overseas. They are also trying to fend off competition from tension from tencent answer domestically in china. The company has a lot to actually consolidate and grow out their business, so in terms of the ipo, there isnt a timeline, according to our sources as of now. Thank you so much. We will be watching for more news on that. Much more ahead. Lets turn back to what is going on in washington. The Senate Majority leader has advised the trump administration. We will hear from Mitch Mcconnell, next. This is bloomberg. Shery this is daybreak asia. Im shery ahn in hong kong. Betty i am betty liu in new york. A quick check of the business headlines. Saudi aramco said to be planning deals with at least 10 u. S. Companies. ,hey include ge and halliburton and we are told they will be signed on saturday. Saudi arabia planning to sell up to 5 of aramco sometime next year. The kingdom also aims to announce as much as 40 billion worth of investment in the u. S. Betty steal posted a surprise fourthquarter loss after taking a . 5 billion charge related to disclosure of its british pension plan. A shortfall of 113 million compares with estimates of 154 million profit. Even so, an improvement on the previous years loss of 420 million. The deal brings it closer to a possible european joint venture. Another company is said to be under pressure from two of the worlds biggest Asset Managers to buy back the stake in a singapore food company it sold them a year ago. Sources say blackstone and Lgt Capital Partners spent about 50 million buying 60 of the company from stan chart private equity. Now they want their money back after the bank dismissed two top executives who were managing the investment. Goldman sachs is applying new analytics to its measure of stress in chinas financial markets. Its version of the Financial Stress index is rising. That is no surprise, given sliding stocks, Corporate Bond sales, and rising Government Debt yields. Goldman says the fsi has come off a recent high and may not necessarily mean weakness in the chinese economy. Betty the white house remains in damage control mode today, feeling allegations that President Trump may have tried to derail the investigation into his former National Security adviser michael flynn, and also amid claims he shared classified information with russia. Senate majority leader Mitch Mcconnell told bloomberg the Administration Must get his policy programs that contract. Sen. Mcconnell i read the Washington Post story and read general mcmasters response, which refutes the story rebuts the story. I think we can do with a little less drama from the white house on a lot of things, so that we can focus on our agenda, which , andregulation, tax reform repealing and replacing obamacare. First and foremost, a lot of attention right now on who the president will select to replace now former fbi director james comey. Have you spoken with the president about this, and who would you recommend . Sen. Mcconnell . I have i recommended merrick garland. May surprise people, but he has a deep background in criminal law, he was the prosecutor in Oklahoma City bombing case. I think that would make it clear that President Trump will continue the tradition of having an apolitical professional. You thinking he need democratic support on whoever he picks to legitimize the nominee . Sen. Mcconnell it would be good to have democratic support. I think if he picks someone with a deep background in lawenforcement, who has no history of political involvement , a genuine expert. The reason i mention garland he is an example of that. It will serve him well, serve the country well, and lead to a more bipartisan approach. Before we get to policy, i want to mention this tweet last week. President trump tweeting about the james comey better hope there are no case of our conversation before he starts leaking. You have expressed confidence in the Republican Committee investigating this, but should that committee have access, if they do exist . Sen. Mcconnell senator burr and senator warren are handling the investigation. They will decide what they need. For the rest of us were not directly involved, we need to concentrate on what comes next. We need to have a great choice for fbi director. I anticipate the president will do that and move on. How has all the drama influenced your ability to get across health care reform, for example . What is the timeline on that . So many republicans across the country elected a Republican Controlled Congress to fix health care. Sen. Mcconnell we are in intense meetings in the senate. It was not easy to pass in the house and wont be easier in the senate. Three days a week, we are in intense discussions with virtually all 52 members of the senate. My goal is to get to at least 50 votes to repeal and replace obamacare, and those discussions are underway. You have a timeline . Sen. Mcconnell we cant take forever. The private Health Insurance market is collapsing. Insurers are pulling out of markets. I dont think we have forever to address this, but im not going to put on a strict timeline. So many people that there is nothing more personal than Health Insurance. Can you guarantee that whatever packages past, that no one will lose coverage . Sen. Mcconnell what we know is what we have now is a disaster, exchanges are collapsing. We need to do better than the status quo. Another big issue is tax reform. You have said this has to be revenue neutral. The president is proposing a massive tax cut. Seemingly, there could be tension on visions. Is there, and what is the timeline . Are you confident we could have comprehensive reform by the end of the year . Sen. Mcconnell it will have to be revenue neutral. We have a 21 trillion debt. We had a tremendous matter of debt during the obama years. I dont want a strict timeline on it. The last time tax reform was on, it took several years, but we certainly want to try to completed this congress and make america more competitive. That is what it is about. We did not have one year of 3 growth during all of obama. That was kevin cirillis exclusive interview with Senate Majority leader Mitch Mcconnell. It is interesting to see that we are seeing features in the red. Are we finally going to see the following from everything that is happening in d. C. In the equity markets . Perfectly, right when we were saying it seems like the markets are resilient. Take a look, guys, at the is futures. The many futures falling by about. 6 at the lows of the session very early, of course. There is not a lot of liquidity, but it does give you an example that perhaps investors are more spooked that this is yet another and justconfusion another level in the chaos in washington that might be a breaking point where investors to pay attention. Watch the sentiment as we go around the world and new york. Shery already in asia, were seeing the regional benchmarks losing ground from two days of gains in the previous session, so this is something we have to keep an eye on as we see more markets come online in asia. For now, the markets that are open are in the red, for the exception of new zealand. Betty you can get a roundup of the stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can use your terminal. It is also available on mobile. You can customize your settings so you only get news on the industries and assets that you care about. Plenty more coming up. This is bloomberg. This is daybreak asia. I am betty lou in new york. Shery and im shery ahn in hong kong. Lets get a check of the latest business headlines. Urban outfitters fell after adjusted firstquarter earnings of . 13 per share missed estimates. They came in below analyst expectations at just over 761 million. The company is operating in a tough mall environment that continues to suffer from week traffic. Continuing the story we have been following all morning about the retail industry, consumers are increasingly shopping online and seem to be spending more money on experiences and events than clothing. Betty apple spending a lot of money, i know that. New macbookch a range in the face of falling ipad sales and rising competition. We are told us three new laptops will have faster processors and intel, and the news may be announced next month. The upgrades come at an important time for apple. Boots up inlaptop seconds, have a touch, and runs a more stable version of windows. Shery twitter cofounder is rejoining the company six years after he left, becoming the second senior figure to help revive the struggling service. He says he will focus on Company Culture after being invited back by his cofounder jack dorsey. Shares jumped on the news before finishing almost 1. 5 up. He laughed twitter in 2011, long before its initial public inering he left twitter 2011. Betty knowing says it has resolved issues and has almost 37 orders from around the world. Billing says that makes it the fastest selling aircraft in company history. The first plane has gone to malaysia and indonesia. The 737 production was briefly halted by problems with lowpressure turbine disks. Chinas embattled investors may finally win some respite. The pboc has boosted cash injections this week after leading a Deleveraging Campaign that wiped some 500 billion from a man stopped. Our china correspondent, tom mackenzie, has more on this from beijing. More effort from authorities to bring back some stability in china. Tom thats right, a pretty painful few weeks with bond and equity investors. Now something of a respite. We have seen this week, the pboc resorting to more sevenday reverse repos. What that impact has had for the bond yield, that has actually come off about seven basis points and you have seen a strengthening in the equities as well. The shanghai composite went up about 2 in the last four days. This decision, this move to focus on the sevenday reverse repos, comes after a report from the Central Bank Published on friday that seems to suggest they have a weakening appetite for more tightening. And that is off eating into what we are seeing now in terms of the bond yields ticking down. In terms of context, in the Third Quarter of 2016, the summer, that is when the central bank started to focus on longerterm interbank funding. 14 day, 28 day, the more expensive funding. That was their attempt to edge toward tightening. On tuesday, they refrained from offering 28 day funding for the first time in six months, other than over chinese new year. If they are switching their focus from the longerterm, more expensive funding to shorter term, the sevenday reverse repos, to ease some of this pain in the bond markets. Is the end of the shortlived is this the end of the shortlived Deleveraging Campaign . Tom that is what the economists and analysts have been trying to work out. One thing to point out is that president xi jinping himself is backing this move to try to reduce risks in the financial system, systemic risks. It is unlikely to stop altogether, but of course the broader context is that many see the First Quarter gdp number we got, the 6. 9 , was the peak for the year. We have had other data points coming through that suggest we will see a gradual slowing of whether that is the pmi numbers or weaker factory numbers. That is the broader context of slower, weaker growth. The pboc is factoring that in and is saying in their report that what they are trying to do is get this goldilocks balance, the balance between deleveraging and ensuring there is enough liquidity in the system. They are going to focus more on the sevenday reverse repos as cheaper funding. We heard from economists that this is about the pboc trying to read find itself. It has different tools at his disposal, but that sometimes causes market volatility. They are now going to refine that and focus more on the sevenday reverse repos to try to reduce volatility. It all comes down to the balancing act for the pboc. Tom, thank you so much. The pboc pulling a lot of levers. Tom mackenzie in beijing. One feature on the bloomberg is our interactive tv function. You can find it at tv. You will not only be able to watch us live, but also see previous interviews like the one with Mitch Mcconnell, and also dive into securities or a bloomberg functions that we cap about. And you can become part of the conversation by sending us instant messages during our shows. This is for subscribers only, so check it out at tv. Shery that is almost it for daybreak asia. Time for a quick look at what is coming up on bloomberg markets. Rishaad joining me now. You just saw Mitch Mcconnell, the exclusive interview said he wanted less drama from the white house. If anything, the noise is becoming deafening, with the latest revelations and claims being made today from james ey and also these that also the spat with donald trump. We are going to look at the market implications. Like the dollar, taking a hit. Rishaad it has been, and we are looking at gold. What happens with gold in the future . It is seen as a haven. Do people run for cover into Precious Metals . Whaterhaps portending happens in the future with s p, they drop taking place. Betty there are growing concerns the least you could say over the turmoil surrounding President Trumps administration. Where do we see the biggest risks in the market . Rishaad we are going to be talking to someone from credit suisse, head of fixed income with the asiapacific. Loads to discuss with him on this. It is 9 00 in hong kong. Am haidi lun. Bloombergs is markets. The white house is in damage control mode facing allegations of who said what to who. Asia pacific stks