investors unnerved by claims against the chairman. this is a bloomberg markets: asia. taking a look at the markets and investors really checking themselves, taking money off the table and there is plenty to take off the table after equities had one of their best starts to any year. in 2018,he most so far and that negativity is trickling through, a lot of it coming from the selloff. 2.7,d the 10 year pushing and that level is creating nerves when it comes to contagion. take a look at the early asian sessions, the nikkei 225 just off. topics also turning lower. singapore lower ahead of the open. thenoble group, one of biggest movers, really taking after investors restructuring the debt. the company saying the commodity trader will be safe from bankruptcy, but control will be handed over to creditors and essentially wiping out current shareholders in no ball. a lot of what has been happening with appreciation is down to dollar weakness. that is all seemingly changed in the last 34 hours with the dollar coming back. some say the move belies general weakness in the medium to short-term. have a look at the offshore yuan. the biggest drop in almost three weeks with the u.s. dollar firming up. yields are in play. look at this moving average. we are way below that at the moment, which would suggest we are headed even further down. we may run into significant hurdles near this level and read. it is a psychological level. red.trongest -- in it is a psychological level, the strongest since 2013. technical level is actually 6.3110. watch for that. let's get to first word news. remy: thank you and good morning. washington is calling for a breakthrough on the touchy is to nafta proposals by the end of february, underscoring the fragility of any optimism from fresh ideas by canada and mexico. talks were framed as pivotal for the u.s. ramping up pressure on its partners. in the comingmore weeks. wynn fell heavily again as sexual harassment claims continued to unnerve investors. the company earns most of its money from operations in macau and authorities there have been in contact with major shareholders and key staff. to review the process for casino license bidding later this year. the deputy director of the fbi before his formal retirement in march. he has been the target of heticism by trump who says was biased toward hillary clinton during the election. he worked in the counterterrorism division and the washington field office. he was acting director when james comey was fired in may. blockchain's investment fund has bought china's first bitcoin halting aharel -- regulatory crackdown in beijing. the company says it will now focus exclusively on the international market and its three major products. the terms of the deal have not been disclosed. news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am ramy inocencio and this is bloomberg. global bonds selloff continues driven by global recovery and central-bank moves to keep gradually removing stimulus. be the next major driver for this market? let's start with japan's labor market. what sort of message are we getting here? away isnk that take that it's still tight and in some ways getting even tighter. and that is what the bank of japan is eventually you looking for to boost wages. , you can see the jobless rate moving steadily higher, a small pickup in december, but still, look at the downtrend. and on the other blue line, moving up, that's the job applicant ratio. up to 1.59, a surprising jump from 1.56. now, as for bank of japan, davosor kuroda spoke in on friday, getting a lot of because he sees a slight pickup in inflation, getting closer to the target. the doj says no change. gradualst saying improvement. nevertheless, that is something that certainly caused the bond market to move. the closer the doj gets to talking about removing stimulus, the more fuel that gives the bond market selloff. point -- 9% onne the month. 3.6 percent year-over-year. overall household spending is down 0.1%. what is the difference? overall, department stores and services. services, we see sticky prices and wages. consumers are spending more, but broader measure, flat for now. click solid consumer spending in the u.s., those numbers coming up monday. next, the end of the era, the federal reserve with its meeting and the state of the union address, these could have -- these could be fuel on the bond market fire. >> bill gross affirming this is a bear market in bonds. he sees the 10 year yield getting up to 2.9% by the end of the year. you can see a red line that shows where the 10 year yield is now, around 2.7 percent. trading as high as 2.3% today. toback across the red line 2014. we haven't seen yields this high since then. it has been quite a bear market in bonds. insumer spending went up december. inflation gauge is stalling out at one .5%. it seems to be stuck there which, as you know, the fed's key inflation gauge is supposed to get up to 2%. ,ond market drivers broadly steady but slow improvement in spending, no improvement in inflation, fed rate hikes, ecb stimulus,o be moving inflation expectations rising, particularly if you look at 10-year breakevens. state of thearket, union, janet yellen's last fed jobs report on friday. this is janet yellen's last press conference. i'm sure there will be a lot of person.a sentimental i would be making a sentimental statement while i asked her my question. hawkish statement. may be inflation rising and the in thatpushing direction. again, if you are a bond trader, this is the week when you are going to be watching every headline on the bloomberg. thanks very much. kathleen. let's get to our guest from ubs wealth management. what are you making of all of this? what about the bond market, historic events coming up? the state of the union address and janet yellen's last fed meeting? >> we have been negative on the bond markets for quite some time. our view has always been that if you don't have to be in a high-grade government bond space, don't be. there are a lot of factors coming into play that are not likely to be positive for the bond market for quite some time. we think it's going to hit close to 2.9% by the end of the year. still more to come. rishaad: absolutely. that begs the next question. this meeting of the fed, there is a lot of talk it might have a hawkish tone. what is your view? will be threeere interest rate hikes this year. we willmes out hawkish, not be surprised by that. if you look at the data on consumer spending, it seems to point to the fact that yes, perhaps the federal reserve might need to guide toward more than two of the rate hikes the market has been pricing in. inflation expectations are still within they might need a more hawkish statement if the rate hikes are more than what the market is looking at right now. haidi: i want to get your thoughts on this chart and potentially getting a more hawkish fed and more hawkish central bank trajectory globally. we have seen utilities, bond proxies, underperformed the s&p during what had been's such a phenomenal ramp-up in every other sector. to really stay away from utilities, telecoms and other proxies here in asia as well? >> i think there is room for what we call value stocks. strong cash flows, growth, not particularly growing at 25%-30%. there is room for these stocks. as we increasingly move to the late stage of the business cycle itself, these stocks tend to do better as an investment rather than the of very aggressive growth stocks. i think there is room. nonetheless, you have to be careful. correlations are very low. that means if stock a goes up, stock be may not necessarily follow suit. ifan environment like that, the stock selection is actually good, it can generate what's needed. you mentioned the u.s. 10 year pushing to 2.9%. at those levels, what is the equity market doing? towe think if it's good up 2.9%, there will probably be some taking from the market as well. if that's the case, your risk premiums might have to trade higher. and that's probably going to the from some weakness in market. as you pointed out earlier on, equities had one of the best starts of the year in decades. in our view, we think it's a little overextended at this point in time. it's going to be hard to expect this run to continue for the rest of the year. at some point, there will be profit taking from the market. concerns are still negative. you should not expect any negative impact on equity markets in the next week. rishaad: stick around with us, if you would. wealth management in singapore. of course, you can catch up with ourof our interviews with interactive tv function. you can watch us live or delve into security functions. become part of the conversation by sending us instant messages during our program. check it out. still ahead, tencent sees the wonder in wonder -- wanda. why the tech giant is considering brick-and-mortar deals. ♪ haidi: this is bloomberg markets asia. latest: these are the business flash headlines. shares jumping in sydney on optimism a change in policy and china will help with key products. there is speculation that trend will change. fell 4% last quarter. use betterrged to quality materials to cut down on pollution. haidi: the effort to build a food -- the food and beverage empire is moving into soft drinks. keurig has taken over dr pepper end will be a challenger to one of its largest competitors, coca-cola. years ofafter corporate creativity, michael dell is now ready to bring all the pieces of his tech empire under one publicly traded umbrella. one option is an ipo for dell. another is combining the two. vmware shares slumped more than 16% on the speculation. haidi: let's get back to the markets. where does this go? there is a narrative still intact where there are too many risk events on the horizon this week. let's get back to the chief investment officer at ubs wealth management in singapore. given that we are looking at youa and the tpp, and that are moving on without trump, and how intertwined the capital flows are linked and trade flows, globally, are you concerned that this is the year that protectionism really materializes and pushes the markets lower? >> we don't think trade protectionism will rise. we think it will be fairly constrained. barack obama and george bush tariffs on chinese steel. this is not unusual. this was expected by the markets. it is a big back down from what he was ordered to do during the campaign. chineseff on all experts. this is a become down from his campaign pledge in that sense. i don't think he is going to go all out to her chinese exports. -- hurtrget that chinese exports. don't forget that this year the chinese retail market will be bigger than the u.s. retail market. so it will hurt them as well. >> so, if trade isn't a massive concern, i am curious what to the biggest concern, worry, lack clients have.ng >> people are spooked by the fact that on a year-to-date basis we have had such a good run on markets. the chinese market is up 13% in less than a month. where do we go from here? at the same time, you can understand why markets are running the way they are. you look at the u.s. equities market, earnings growth is going 8% to almost 13%. you put all of that together recovering oil, no trading at $70 per barrel, a weaker likely to beo positive for earnings as well. you put everything together, and it's hard to understand why markets are not running the way why markets are running the way they are. what is going to move markets up? that is the question we all have at this point in time. well, what will? that brings me to my question, why are you so optimistic? when you look at the horizon, you don't see any to actuallyactors bring things down. clearly, there are a couple of factors. in theill be a selloff equities market. if the u.s. treasury yields rise over 3.5%, yes, there will be panic on the equity markets as well. at this time, u.s. treasury yields will rise. we think a gradual rise of 2.9%. if you put that in perspective here, yes, equity markets will run, but not at the rate we have had in the first month. then again, on a year today the percent increase in u.s. equities is near the 8% we with tax reforms equities should be running at. rise to 8%.s should great talking to you. calvin taylor from ubs wealth management. coming up, win shares go on a losing streak. regulators tighten the screws. details on the way. this is bloomberg. ♪ this is bloomberg markets: asia. i am haidi lun in sydney. rishaad: counting down to the start of the session in hong kong. the premarket session looks like this. down by two thirds of a percent, giving up some of the gains we have had of late. also seeing the futures contract down. a special committee has been formed to investigate sexual harassment claims against steve shares of wynn resorts plunging. we have the latest. you have been working on this since the story broke on friday. you know every twist and turn of it. >> it is a story about power dynamics so far. last night was quite special because macau finally voiced themselves. i want to explain a little bit why that is so important. more than 40% of wynn resorts profits came from its macau property. that is why any type of of macaution properties will cause a significant impact on the entire company's performance. keyre already entering a period because the current will start to expire from 2020. later this year, the macau regulator will start to disclose process,ils about the so any messages and signals sent by the regulator on their about the casino operators will be super important among investors. 10 seconds. how does this affect business? will trigger more share drops and cause steve went to step down. rishaad: thank you very much. next, why tencent is advancing with brick and mortar deals. this time reaching out to wanda properties. ♪ >> there we go. 9:29 in hong kong. it looks as though there is a bit of bull market fatigue. the bears are out at the moment. 10 year yields up at 2.7 percent, breaching that level, the highest in 2014. this really at the moment feeding through. we have a dollar on the way up as well, some saying this is just a brief period of dollar strength. looking at the fed meeting, janet yellen's last, the end of an era. in 24 hours or less, the state of the union address by donald trump. haidi. haidi: will it be a president that sticks to the script or a president that goes for a more bipartisan, softer tone? a more optimistic tone, perhaps, when it comes to the economy, in particular, and what does he have to say on trade? that is being keenly watched. it is a very hectic week for market participants. let's get it over to david, who is taking a look at the shanghai and hong kong markets. what about mliv taking money off the table? there is a lot of money to get off the table. david: i will show you something on the h-shares and that's. to give you -- index to give you an idea. thursday. into last it was right on about christmas, and before that, mid-december. have a look at the four-day chart. at thei composite down open. 3500, to give you a sense of the early movers. imap function breaks it down across sectors. virtually every single sector is down at the moment. have a look at what we are seeing across the hang seng index. quite a sharp a down. we are down. we are getting a bit of fight back. let's have a look at the early movers. mov is your function for that. up --f china on the way on the way down, rather. the split very much in favor here of the decliners. 29 down. up 16. unchanged at six. i am curious how this chart looks and whether we are trading a fairly -- at fairly more rational levels. we are overbought. even look at the hang seng index, which is why this bit right here, a big spike in the past 19. vix that is a 52-week high. said, it does in the gay alluded to a moment back that some of these technical indicators did sort of indicate were indicating that the upward momentum was a little bit more overdone. have a look at this, h-shares. before last thursday, when we dropped 1.7%, the last down day -- we need to scroll lower to give you a sense of how long that winning streak was. there we go. december 27. before that was right before christmas on the summer 20th. this chart was even more terrifying, almost vertical. 13,500. index, above when you talk about this market, do we have movers on that one? there we go. china merchants bank this to the upside, but that means 18 down out of the 16 up as well. a quick look across the asia-pacific. it is a down day, down one point on the overall benchmark. we are looking at the bond market. 2.7% on the u.s. tenure. rishaad: -- u.s. 10 year. rishaad: doing a lot at the moment with regards to sector rotation as well. thanks a lot for that, david ingles. let's find out about this memo causing all sorts of controversy on th capitol hill and the white house. linnaeus until. -- ramy inocencio. a house of representatives committees says they will release this classified republican memo alleging bias and abuses in government surveillance of people surrounding president trump. conservative congressional republicans say the fbi and justice department pursued the investigation of possible kremlin price to the trump administration under false pretenses. >> i think we have crossed the deeply regrettable line in this committee when in the first time in the 10 years i have been on the committee, there was a vote to politicize the declassification of intelligence and compromise sources and methods. ramy: to asia now, and indonesia is latest to criticize president trump's reductionist drive. told bloomberg his policies are potential setback to decades of progress. globalization has helped reduce policy. she added indonesia relies on the global market and trade is not a zero-sum game. >> the current protectionism language is definitely going to create a constant. globally, there will be a setback of all progress being made. danielpmorgan has named pinto and gordon smith as copresidents, positioning them as the front runner's to succeed ceo jamie dimon. they will immediately take the president role from diamond. he plans to stay. he told bloomberg that he and the board believe some of the direct reports could run the company. blockchain investment fund has bought china's first bitcoin exchange following a regulatory crackdown by beijing. bpcc will focus exclusively on the international market and its three major products. moby and usd exchange. terms of the deal have not been disclosed. what one is, 20 four hours a day, powered by more than 2700 journalists and analysts in 120 countries. i am ramy inocencio. this is the number. haidi: tencent making a new push into brick-and-mortar retail, leading an acquisition as part of wanda's unit. tom mackenzie joins us now from beijing for more, and tom, why is tencent doing this deal, and why is it doing it now? tom: clearly, they have been presented with an opportunity, offering up this stake in their commercial property unit, but it is part of this date focus now -- big focus now to combine some of their online presence, services, and businesses, with what is happening offline as well. big push into brick-and-mortar retail space here, worth $14 trillion so far. of these china -- some big tech giant think they can revolutionize. they are harvesting the data from consumers. mobile payments for tencent and alibaba, both financing for market share pretty aggressively. tencent leading this acquisition, buying about a 14% a'ske in commercial -- wand commercial property unit. it is backed by alibaba. this is part of a trend that we are likely to see in its infancy at the moment. it could reshape the retail sector here in china, possibly further afield. this deal worth about 5.4 billion u.s. dollars. it has: it does seem fallen to some extent. where does this leave him and the ambitions he has for wanda? had histainly, he has feathers clipped. they are in retreat. of bravado, one of china's most ambitious, swaggering ceo's, the head of this massive, very inquisitive conglomerate. he said 12 months ago he was proud of their acquisitions overseas and they would continue to make those deals overseas. fast forward to just a few weeks ago, and he was really focusing on the domestic environment, and saying they were going to be paying down their debts and saying they were not going to be defaulting. it is not just wanda being put under pressure, but hna and other conglomerates which have been quite aggressive in their overseas acquisitions. the government here has been focused on ensuring they reign those back in because of concerns over the risky debt. we have seen wanda selling property portfolios, selling their resorts, for the likes of cnet and arnett -- properties -- sunac and rnf properties. and theseecting wanda other conglomerates to continue to divest on their assets, particularly overseas in the next 12 months or so. clearly, this provides an opportunity for some of these tech companies to get in and do what they think is synchronizing their online -- with some of these offline businesses. maybe not great news for him. one of china's -- once one of china's richest men, but an opportunity for some of the other sectors in china. rishaad: tom mackenzie joining us from beijing. coming up, assessing the concept of "business as usual" in china with foreign companies not feeling the love. in china chairman joins us next. this is bloomberg. ♪ rishaad: you are back with. "bloomberg markets." i'm rishaad salamat in hong kong. haidi: i'm haidi lun. exxon mobil ready to invest $50 billion in the next five years, bringing its spending back to levels before the oil route, with prices now around $65 in new york. darren woods disclosed the program that includes the basin west texas and new mexico, a focus of u.s. shale drilling, where exxon has been aggressively expanding for years. he says the republican tax plan has also fueled their plans. rishaad: revlon on the up in late trading. downhief executive stepped from a company struggling with losses. garcia had been in the jobless than two years. he is leaving to pursue other opportunities and plans to push sales to $5 billion from the current less than $3 billion. at fourth quarter net losses $80 million from $36 million a year ago. sold: fitch ratings has 49% of one of china's major rating agencies to singapore's gic for an undisclosed sum. comes ast rating beijing is allowing foreign reading companies to operate and pave the way for a future venture on china's debt market. a strategicourse market and will continue to invest in the region, according to fitch. china has assumed the role of champion of globalization and open markets abroad, but foreign companies feel less than welcome on the mainland. let us guess that with william. thanks for joining us. how so? thank you. what was the question? american companies do not really feel the love in china. how does this manifest itself? how does it all play out? william: ok. well, we just had our 20th annual business climate survey, and that is wh where we get the statistics for answering question. three out of four of the respondents feel less welcome in china. we have to look at the whole picture. , 64% of are of a bit our companies. they said revenues are up a bit over last year, and that is not a surprise. the china market has been so strong. however, in terms of the top five challenges our companies face, it is still pretty much the same as it has been for a number of years. the regulatory environment is not transparent. it is inconsistent. enforcement is inconsistent. we have a new challenge this year. which our compliance, companies are facing. it is regulatory inconsistency, lack of assistant enforcement, and protectionism, which is again one of the top five challenges. trump's does donald trade between the two countries also affects this how far isp, and that really as far as perceived? 'slliam: donald trump policies, or this administration's policies actually, i think, whether we had donald trump or the other candidate had one method presidency, the u.s. would have gone in this direction, because there is a realization back in washington that after so many unbalanced trade toationship, something needs be done, so that is what this administration is attempting to do, is balance the trade --ationship for a more fair and a relationship based on reciprocal treatment. haidi: case in point in terms of the tensions and the level of distrust between the two countries. we had this news out today that verizon is said to be dropping underans to sell phones pressure from the government. the government obviously have these concerns over, you know, chinese buying being done to these companies. what does that kind of tell you about the level available for trade and cross-border deals? william: yeah, i think that is one of the keys, is trust. what we have been saying for years -- the way to build the trust is through open consistency and clarity, and that really goes to the regulatory environment. it is just not clear. it's not consistent. and so, it's difficult to have trust in the china environment. haidi: william, one of the quotes from the chamber, from the report, saying there are major imbalances in the commercial relationship between the u.s. and china. it's hard to see how you redress these issues without generating further friction. so, is that essentially saying that it has to get a lot worse in terms of a restructuring or a reset before can get better? -- before it can get better? how'd you actually address this? william: we are hoping it is not want to get worse before it gets better, but you may be right about that. we are really again looking for airness, so that is more of balanced trade relationship, and i'm not talking specifically about the deficit, but more fairness and reciprocal treatment in terms of open markets and market access. now, what we are hoping for is that china would provide reciprocal treatment, which would not result in more friction and more pain before we do get to this balance relationship. -- balanced relationship. rishaad: how has this relationship a vols? has it -- relationship evolved? has it improved? perhaps the procession of using technology which they would not using other countries as well. there's no question that over the 20 years that we have been carrying out this survey, that things have improved. and in fact, it seems like china was on a trajectory to be more and, be more market-based, to be more in line with international trade rules and regulations. but that seems to have stopped. and so, we see this in our surveys, the last three to four years, that the so-called reforms has stopped -- have stopped him and what we see now as reforms in the chinese parlance is not what we see in the west as opening up the markets, liberalization, and so forth, but rather, making the state owned enterprises more efficient. so yes, there has been progress over the years, but the last four to five years, reforms have stalled. you mentioned intellectual property. indeed, the environment has improved over the last 20 years, and it still has a long, long way to go. we have covered the issues over trust, over fairness. whenan extraordinary thing three quarters of the members you survey think that they are being treated unfairly, but on top of that, is it also that the china is aerating in lot less profitable and aggressive than it was even five years or 10 years ago? a lot of people are talking about regulatory challenges in rising labor costs, and that is why they are moving outside of china now. william: well, it is fair to say that in our top five challenges, rising labor cost and shortage of skilled employees are two bank of the other top -- are two of the top five challenges. the american companies are compensating. they are cutting costs. they are being more focused. and so, almost by definition, the companies that are still ife are making money if -- they were not, they would not be here. one thing worth noting on the there are countless american companies who are not even members of the american chamber because they are not doing business in china. a great is due to extent because of the market barriers and the protectionism in their respective industry sectors. william, appreciate your time for us. fascinating report. williams there it, the china chairman joining us. why a new deal will leave shareholders pretty much empty handed. the market reaction, too. this is bloomberg. ♪ rishaad: we are back. this is "bloomberg markets." i'm rishaad salamat in hong kong. haidi: i'm haidi lun in sydney. we are going to check on this commodity trader. just narrowly avoided bankruptcy. investors not liking it one bit. we have the plunge at the open of over 20%. we have come back of it all, still off by close to 60%. this in principle agreement will wipe out existing shareholders. asia metals and mining reporter james paul has been following this drama basically for years. we are finally towards the end of the saga. james: i think we are approaching the end of the saga. it's hard to say we are at the end of the soggy yet because this has to be approved by all the stakeholders over the next few weeks and months, but still, as you say, what happened is they have reached an agreement in principle. the debt was $3.5 billion. it is new equity. the creditors, including various hedge funds, are taking about while the company, management keeps up to 20%. so that is where we are. go onis a lot longer to this before we have a final resolution, haidi. rishaad: what are the issues which are outstanding here? james: i think there is a couple of things. one is that the shareholders, founder, are going to have a significant dilution of their equities. but also importantly, the bonds, have perpetual and they are going to get just $15 million in new securities. they plunged 43% to just 7.8 cents on the dollar. this deal does require the approval of the perpetual bondholders. haidi: james, what about the founder, rick adelman? james: yes, i mean, richard -- it's been quite a turnaround, obviously, for him. he started the business. first of all, he started his career as a teenage scrap metal worker in england. he bought assets here and there and then supplied china with various metals. it grenoble into a $10 billion company. now, as of yesterday, before this restructuring deal was officially announced, the value of the company was $263 million. the latest deal puts his equity company 1.8% in the compared to 18% before the restructuring, so you can see how far that situation has deteriorated for richard e lman. rishaad: very quickly here, it was named after the novel "noble house." he succeeded in navigating his business the turbulence. will richard elman right the next -- write the next chapter, or will bondholders? james: i think it will be bondholders, the creditors. the creditors, the hedge funds, hold all the cards right now, i think. 70% of the equity of the company. and i think they are the people who are going to decide as well i think what everyone wants to do is to avoid the bankruptcy of the company, which i think the chairman has done. rishaad: good stuff. india.talking about is it erring on the side of caution in its upcoming budget? we use our phones and computers the same way these days. so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get 5 lines of talk and text included at no extra cost. so all you pay for is data. choose by the gig or unlimited. and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. ♪ rishaad: the bears are out, the asia-pacific market declining as the equity surge grind to a halt. even though it's the third best january on record. among the biggest losers. shareholders will be all but wiped out. -- wynn macau plunged macau plunged again. also coming up, the coin check heist puts cryptocurrencies back in the spotlight. a look at risk and reward in a special report on taiwan. this is "bloomberg markets: asia ." ♪ rishaad: this is what is going on at the moment, the bears are out, and bulls should be putting their hats on. mccabe dump -- nikkei down three quarters 1%. hang seng recovering to be flat at the moment. selloff in government bonds and the united states that is a deepening, not taking yields above that 2.7% handle at the moment. that's the highest since 2014. looking at what else is going on, some dollar strength not coming to the rescue here, particularly for the nikkei 225 -- to ensure three quarters down. haidi: the question is, is this really down to rising rates and concerns we are heading into a bear market proper when it comes to the bond market? look at the terminal, there is another indicator that maybe this market is heading for a logical pause, if you want to be optimistic. mrs. on the bloomberg. -- this is on the bloomberg, it , it wasthe msci index down since mid-august the last year, we had u.s. stocks falling overnight. it is starting to diverge there in turquoise. data, we are still seeing global stocks march higher. this kind of divergence is what a lot of the cautious voices we heard in davos from some of the biggest voices on wall street saying this should not be going up in a straight line. if we had healthy corrections along the way, it would make the event will come down more tolerable. rishaad: we are looking at all of this is a place into the last meeting chaired by janet yellen and the state of the union from donald trump. the pressure inquiry continues, it rumbles along. rattling cages in congress and the white house. let's get to the first word news. >> house of representatives committee will see clearance in the white house to release a classified republican memo alleging bias and abuses in the government surveillance of people surrounding president trump. conservative congressional republicans say the fbi and justice department pursued the investigation of possible kremlin ties to the trump administration under false pretenses. have crossed a deeply regrettable line in this committee were for the first time in the 10 years or so i have been on the committee, there was a vote to politicize the declassification process, for intelligence, and potentially copper my sources and methods. >> verizon has that to drop plans to sell off its phones in the u.s. it follows at&t's decision not to introduce a device. allowedales would have it to reach more customers. domestic smartphone sales are increasingly pressured. union's morning and will fight back against potential u.s. trade measures against the bloc. president trump said he was angry at eu policy and that transatlantic policy could morph into something big. both sides sought to create a free trade zone with $100 billion per year for each side. >> trade policy is not a zero-sum game. it is not about winners and losers. we here in the european union trade can and should be win-win. we also believe that while trade has to be open and fair, it also has to be rules-based. >> washington is calling for a breakthrough on the touchy's proposals through the end of february, underscoring the fragility of optimism on ideas from canada and mexico. the u.s. is ramping up the pressure on its partners. robert lighthizer says progress has been modest but the u.s. wants more in the coming weeks. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am yvonne man. this is bloomberg. haidi: thank you for that. asia-pacific markets are headed for declines, and extending the declines gasol overnight on wall street despite being on the verge of their third best january on record. watching allt is of the action from singapore. is this really the bond market story, we're seeing some contagion, or are you watching this going this is what should happen? would you feel more comfortable we got some logical pauses along the way? >> that's not fair, we've had a complete lack of relatively recently, and it makes sense there are corrections beard in the the rally seem healthier when there are some pullbacks. year,of risk events this whether it was the fed meeting, labor data, the state of the union, the supply schedule, there is so much going on. after an incredible start the year, massive gains in equity markets all over the world, it does make sense for investors to retrench a little bit, especially in the next two days, portfolio rebalancing will probably amount to a lot of equity selling and bond buying developed portfolios. negate the shouldn't fact that the fundamental structural toward behind the equity bull market remains very solid and improving all the time. we might see weakness extended for another few days but this is not the start of a bigger bear market. rishaad: and people shouldn't really panic at this point, should they? check,bit of a gut nothing goes in a straight line. mark: we were just joking at the desk before i came to the studio, we have forgotten that at s&p started the year 2600, which shows how fast it has risen. we could see another pullback another couple of percent and it would still be an incredible start to the year for u.s. stocks, and asian start -- asian stocks have done even better. global growth remains solid, earnings continue to be upgraded, a very good season, no signs of inflation, which means the goldilocks scenario should overall remain despite the ticket recently. they're not exactly running away. and we still have good liquidity. growth, earnings and liquidity, the three pillars remain very solid. that is the most important thing to focus on beyond the next few days, where we can still see more pain in the short-term. haidi: state of the union, janet you thinkwan song, do these events being much of a mover for the dollar? mark: i think the yellen meeting, they want to make it clear that will hike in march, and the market has been slightly hawkish in the short-term. it might cause a little bit of reaction in yields. the state of the union is more interesting. there are two elements here. those trump successfully managed to convince investors the infrastructure plan, there are good details on that could become a real policy focus the short-term and might actually be delivered on a foreseeable horizon, or is there much more f a focus on the trade element and a possible escalation of the trade war with china? that is a serious risk. the one thing that could really derail everything is if there was a proper trade war between china and the u.s. unlikely, butery is something we need to watch for, especially if trump takes a very strong stance in the state of the union on trade. thank you for that, mark, joining us from singapore. let's get to our guest. again, it could be a slight pullback, and given what we can yesterday, two days of minor declines in the whole scheme of things does not make a bear market. >> that's right. if you have a market that moves days, a matter of 25 there is bound to be some profit booking. that's what we have seen. we must remember that this bull market has been solidly underpinned by earnings. the most interesting part is that in 2016 we saw a earnings driven entirely almost by one market, korea. china joined late in the game and a less corner of the year, now it is getting more broad-based, you're seeing thai health care, indian discretion s, -- discretionary, etc. h rishaad: discretionary tends not to be a staple later in the game. manishi: there are important sectors that is not joined yet. banks. rishaad: banks have been on a tear in china. banks dides, but participate in the earnings projections luster. joining and now, you have them in china and india. it is not really something to be very scared of at this point. you are almost certain to see this at certain points, to see these corrections. i don't think fish should scare away -- i don't think this should scare away investors. haidi: how far behind asia and emerging-- asia and markets? manishi: that's a tricky question, in the u.s. we have seen the earnings cycle stretch across different sectors for the last two or three years, about eight or 10 quarters. it was a very narrow earnings cycle last year, and we're possibly seeing this in a couple of other sectors now. i would think that emerging markets, particularly emerging 1.52 two yearsps behind america. it's something we have to watch. u.s. consumer demand, for example, the latest news about apple and iphone x, those of the kind of data points that we have to watch very closely. haidi: what about the impact of the bond markets? we have a 10 year yield pushing 2.7%, we clearly saw that play out when it comes to the bond proxy stocks overnight. we are getting calls for closer to 3% within the course of this year. would you see that contagion play out negatively for equity investors? manishi: usually the contagion plays out through the currency market. if you have a rally in bond almost certainly pushes up the currency, particularly the u.s. dollar, which in turn has a negative impact on emerging-market flows, which pushes down the equity valuations in emerging markets. curiously, with not seen that this year. the bond yields of moved up, but the dollar has been week except for the last two or three days literally. obviouslyink that we have to watch the currencies closely, and eventually, at least in the short-term, i would think the u.s. dollar would move up. our point of view is that that would be more in relation to emerging markets currencies. this time around, we are not so concerned about emerging-market flows flowing down like what we have seen in the previous dollar rally cycles. rishaad: thank you, do stick around with us, we have a lot to discuss, including the upcoming indian budget. is staying with us. i want to bring your attention to tv , you can watch us interviews,t past --diveso did into .nto any of the charts have a look at it, tv . still ahead, banking on a recovery. of clampdown is boosting stocks. this is bloomberg. ♪ ♪ rishaad: this is "bloomberg ," i am in hong kong. haidi: and i am haidi lun in sydney. 5.5 billioneading a dollars investment in commercial properties that will see properties retreat from the sector. funding is also part of the acquisition of shares owned by private investors who backed listing plans and 2016. it will be rebranded and focused on property management. noble finally reaching a restructuring deal on $3.5 billion of debt. at the cost of wiping our current shareholders and handed control to creditors. after three years of losses, we also have write-downs and criticism of its accounting practices as well. noble reaching an agreement to divert half its debts into new equity. ready toxon mobil is invest $50 billion in the next five years, bringing spending back to levers before the oil route, prices are hovering at about $65 in new york. the ceo disclose a program that in texas andsis new mexico, where shale oil has been expanding for years. ♪ ahead towe are looking the india budget handed down thursday. it's one of the many bits of data for investors this week. manishi is still with us, head of equity research for a pac. manishi: is about 16 months. rishaad: the question is an obvious one. manishi: first thing to appreciate is the scope of the budget has declined. earlier, the finance minister could play a through with expenditure, taxes. taxes have gone out of the scope of the budget. the taxes are tinkered around by the gsc council. he has taxes and expenditures. rishaad: but the indirect are on the gse. manishi: on his own he doesn't have control over it. he can't tinker with the tax rate in the budget and that is an important point to make. he basically can tinker around with direct taxes, with the hike them before a general election? in my opinion, no. a the same time, there is significant amount of distress in india, he has to enhance expenditure in infrastructure, irrigation, etc. in my opinion, the finance minister is walking a tightrope in the budget. he has to balance the expenditure side, control the fiscal deficit, somewhere around 2.3% is what he started with in fiscal 2018. how does he do that? we have to watch presumptions very carefully. we have watch perceptions regarding nontax revenue. subsidies? do with $40rices are no longer at -$50, they are now up to $60-$70. it's likely to be a complicated exercise this time. quite a few variables to watch. haidi: the political and fiscal challenges are elements -- are immense for modi. let's look at this chart, it shows indian growth. this is the unrealized growth story it seems to me. it's been a disappointment relative to the growth potential given the demographics and the base we are coming off. we've seen a steady decline when it comes to real gdp since the first quarter of 2016. a little bit of pickup in the third quarter of 2017. if he is constrained from doing these corporate tax cuts, would it be a blow to competitiveness? you have the u.s. with tax incentives, china is doing tax incentives, japan is hungry, france, everywhere, it is a bit of a race to the bottom. what is the risk india will be left out? manishi: first of all, i think growth is gradually climbing back to the long-term trend, and that trend currently for india is somewhere around 7%-seven .5%. 2019,k india in fiscal you are limited to that with quarterly numbers improving. you are seeing that was on the ground variables as well. cars are being sold. india hademember that some self-inflicted wounds. monetization and implementation , they actually depressed growth for four to five quarters. i think what we are seeing is somewhat of the main reversion. rishaad: thank you very much indeed. way, a look at indonesia, the latest to criticize president trump's protectionist drive. why they said the policies are a potential setback to decades of global progress. ♪ ♪ of its asianany peers, indonesia has benefited from the liberalization of trade and capital flows. there finance minister spoke with bloomberg about trump's recent protectionist moves. >> i think locally we have to recognize that openness and global trade is helping a lot of countries to really get shared prosperity. the regions one of that has successfully reduced poverty and increased the well-being of many millions of people. that is because of the trade openness and investment across the countries and the world. the protectionism language is afinitely going to create construct work globally there will be a setback. indonesia,cially in we are a country which also relies on the global market in order for us to be able to move from low income to become middle or high income. managing this openness is very important. that's why trade can become a very powerful form of improving prosperity for all. this is not a zero-sum game. for indonesia, we are exporting quite a lot in the region, not just in the u.s., and even in india, we have to be able to come up with a new market destination. >> indonesia was also under investigation by the u.s. for running a large trade surplus with the u.s. have you had discussion with this with u.s. authorities? discussed with secretary mnuchin about what it tried at that time they to define what it means to have fair trade between countries, and the united states seems to think having a more balanced approach then multilateral like wto. i think it will be useful for many countries in the world, the u.s. is the largest economy in the world. first does not mean america alone, and what does it mean in defining the relationship between countries, so it creates prosperity for the u.s. and the rest of the world? haidi: the indonesian finance minister there speaking to us. next, insages, up india, how government advisers are's ignoring -- are signaling different directions on economic policy. this is bloomberg. ♪ ♪ i am yvonne man with first word headlines. harassment claim -- continues to unnerve investors in wynn macau. regulators are to review the process for casino license fitting later this year. jpmorgan has named daniel pinto and gordon smith as copresident, positioning them is front runners to succeed jamie dimon. they will succeed the road from -- the role from dimon. last week at davos, he told bloomberg that he and the board believe some of his direct reports could already run the company. in theight brewing brexit negotiations, the u.k. pushing back against an october deadline for a deal. the brexit secretary says nothing will be signed until u.k. has clarity on future trade relations with the bloc. the battle is also shaping up over the two-year transition. the eu says the u.k. must continue to abide by eu rules, including the court of justice. >> during transition, the u.k. will continue to take part in the single market, to take part all unionon, and to policies, it will continue to have all benefits. therefore it must also apply all the eu rules. a single market cannot be a lockhart -- a la carte. hong kong investors have bought china's first bitcoin exchange. they will have three major projects -- products. terms of the deal have not been disclosed. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am yvonne man. this is bloomberg. thank you so much for that. what goes up must come down, and peoplet better, a lot of are saying if we see these reasonable many selloff or pullbacks, this is not a market that will end in an ugly and spectacular way. when you're in a week when it's the last fed chair meeting for janet yellen, it's probably on talkingburner, were about the state of the union and the potential for trumps rhetoric on trade and commerce to set the tone for the next period for the market. rishaad: indeed, and bond markets to some extent in dictating what is going on. is it actually people just looking at different places to put their money? some of the late stage companies doing very well, and we have the specs in china that certainly did not -- these banks in china that did not do well in 2017. some of the mustering to trade above book value for the first time -- some of them are starting to trade above book value for the first time in three years. these financial stocks are rising. up 25% this month, .2% for bank of china, bank of communications, 18%. it is quite something. the stocks are everywhere. stocks have been a favorite play everywhere in the world this year. it's on the rising interest rates and the bet that these banks will get their profits boosted by higher rates. in china, as you mentioned, lester we had the deleveraging concerned, some concerns this would curtail business for banks. i think businesses that started to change their attitudes toward this, deleveraging is a good thing, it removes risks from the financial system and details risk to -- and kurt tales at risk to nonfinancial institutions. on not onlyf a play china's better also moment -- china's better economic growth, but the financial system. looking at price-to-book, what is the significance when it comes to chinese banks? often we were talking about stocks in china, these fundamentals or technicals tend not to apply as much. sofia: exactly. two things at play here, symbolic thing, investors believe an asset quality of these banks. if it is trading below a ratio of one, all of these assets, the value of these assets that banks are reporting an earnings statements, investors believe they are worth less than the banks say, and specifically for china, that one hurdle, it is an important measuring rate. the point where banks can raise capital now, no one is really saying they are going to start raising capital anytime soon, but it is a measure of confidence in the banks balance sheet. rishaad: very quickly, we look at some of these banks, they have got much better ratios, return on equity's has been good. bet -- has the bad debt problem just moved to the back of everybody's mind? sofia: it's been a difficult part of the market to invest in. parts been an uninvestable of the market and china -- market in china with all of these bad loans, it's kind of been a shadow banking system in china for at least the last five years. if these concerns start to wayne, it could be -- start to wane, it could be the bullish part of the market in china. rishaad: i believe it. thank you so much for that. when india unveils its annual budget, there are likely to be few surprises according to the vice president of a think tank. the government might stick to fiscal consolidation rather than reining in ambitions. not a bad idea. it is not a precursor to the budget, the budget might surprise you by sticking to fiscal consolidation. i think the government has tried normalize external sources. including from the bank. the prime minister in finance minister, and their commitment, i think there will be a nice surprise. >> [indiscernible] you say it is not a bad idea, why? >> personally, i want to focus much more on the fiscal deficit. i think it's a bad idea to borrow and consume, but not a bad idea to borrow and improve productivity. toody objects [indiscernible] the same thing works for the country as a whole. the focus will be much more debt services than the actual debt. debthould be managing your much better. were talking about the crude, broad concept about the ratio. think [indiscernible] for a country that sees a lot of foreign capital, a lot of investors look at the fiscal deficit and a lot of agencies look at it, it is a moot and setting for -- it is setting the mood for foreign investors? sofia>> think so. of the no more than 3% total investment are foreign investors. [indiscernible] if you look at what we used to do with china 15 years ago. [indiscernible] they look at the growth and potential rather than be a fiscal fundamentals. i think there is something not right with people continuing to focus only on this one number and not the others. i encourage you and everybody else to look at what the growth prospects are. haidi: let's get it over to delhi, where our bureau chief joins us. there, it really contradicts what another advisor has been saying. >> good morning. advisers, these recommendations they put forth. [indiscernible] the finance minister will display when he unveils the budget, they are essentially balancing the need to control the deficit, but not to the point where he convinces investors [indiscernible] while at the same time realizing it is an election year and he needs to loosen the purse strings to ensure there is forgh money on the table the distressed areas coming -- areas, including the farmers and the people that cast the ballots. it will be a tightrope walk for the government, and that is what both advisors, if you read through the lines, you realize that what they are saying is that the government might stick to fiscal consolidation but he wants spending to be in a manner where even if you borrow more, you need to borrow more to spend on creating assets and not boostingly in government employees or salaries. essentially creating assets were you create more hospitals, schools and other capital investment. in a sense it is a contradiction, but if you read through the lines, it will be a tighter block where it is a balance. rishaad: what major structural reforms are affected in this budget? >> essentially, there might be a couple of steps to increase foreign investment in sectors reforms are affected in this where there is a cap. those are the signals we are getting from the finance ministry. the structural reforms essentially are something perceived -- that are essentially something perceived to be anti-poor are off the table. i don't think anything radicals coming in the budget. rishaad: thank you very much. our bureau chief joining us from the indian capital. coming up, taiwan seeing a window of opportunity opening amid the crypto crackdown. why it could be the next bitcoin hub. details coming up. this is bloomberg. ♪ ♪ haidi: this is "bloomberg markets: asia." taiwan may be positioning itself to become the next cryptocurrency hub in asia following official crackdowns and china and south korea. the theft of half $1 billion from the coin check exchange in tokyo has raised fresh concerns about fraud. stephen engle is with me for a look at the highest and how it heists -- a look at the and how it affects things. stephen: japan was seen as a model for mixing innovation and regulation on cryptocurrencies and blockchain, as opposed to china, which was more of a cautionary tale because of the fraud and subsequent heart crackdown by authorities on initial point operating -- initial coin offerings and the like. taiwan has been sitting back and looking at how the different players are regulating but also allowing innovation. taiwan, at least some of the newer, younger people in legislation and regulatory eyes are trying to push good -- to push. the 23 brew company is at the intersection of old and new. it is an establishment challenging the establishment, or at least the established way of buying around. their pintspay for bitcoin. >> we are forward thinking, we want to support that coin and kickstart that in taiwan. give power back to the people. stephen: in light of the coin inst in japan and crackdowns other countries, taiwan is trying to figure out where it stands on cryptocurrencies. should the government and regulators suppress the market or set it free? believes this works to taiwan's advantage. >> it is not unlike the awkward position that the coin finds itself in the established banking world. i want taiwan to be known as the r.o.c.. >> we should really take advantage of this wave and fill the void left in the region. stephen: he says with the government here, risk aversion and red tape year -- tape run deep, and yet a regulatory sandbox bill was passed last year to allow fintech experimentation. there are still fraud and money laundering fears, however. >> if the government is passive or choosing to avoid talking run away but you can't from it, it would just go underground and it would have a lot of implications. for me, i think taiwan can become a ico trading hub in asia. >> on the mainland, it was too much too soon and it violated the fundamental tenet of do no harm. here in taiwan, it is slower but safer. stephen: taiwan is taking more palatable for steps into the crypto world. >> want to start see that bitcoin sticker in more places, people will start to get into it. i can actually use the coin in my everyday life. this is where they can start, having a beer. fraser was talking about giving power back to the people. it's not really about power back to the people, only about one patron per month uses cryptocurrencies, and how do you tip when it is $10,000 per coin? rishaad: and the next day it could be worth 8000? stephen: it's about baby steps and getting people accustomed to seeing bitcoin. rishaad: how does taiwan takes your -- taiwan exploit these advantages? the tsmc and 2018 will see 1/10 of its revenues coming from people buying -- well, all of these service to power, the mining of this. stephen: the servers, and who meets -- the servers need chips and who makes the chips? taiwan. but mining takes a lot of power. it has a power shortage on the island. we were trying to do live hits with you guys last week when we were there and there was a massive power shortage in the neighborhood. that is endemic in taiwan right now, especially in the summer when big factories making motherboards and the like turn on the air conditioners. right now that is a back burner issue for the government, mining. 's probably higher on the list and getting wider adoption and regulatory framework for cryptocurrency is more pressing. haidi: it is a regulatory tight rope, right? one of the people you interviewed saying the problem with china is they stepped over the do no harm type of tenant. is the regulatory acceptance side fragile? absolutely. you don't have a real regulatory framework right now. it is fairly friendly, they have parliamentfrom the on december 29 that is kind of a sandbox, a regulatory sandbox to try innovation and experiment in fintech. that you also have a financial regulator, according to a lawmaker in that report, saying over the last six months, there has been more progress and opening up the regulatory framework but right now it has been a slow process and getting people on board because of the risks. rishaad: good stuff. stephen engle there. taking a look at a selloff saga getting stranger. [indiscernible] we will tell you why. ♪ ♪ withad: you are back "bloomberg markets: asia." dell may finally bring all the pieces of technology empire under one publicly traded roof. the billionaire wants to create a structure that would help his two companies better manage a massive debt load. our reporter has been following the story out of san francisco. >> last week we reported michael dale was considering options to getting his company public, and today we have more view on what options might look like. the tech mobile is leaning toward a tie up with other publicly traded company, vmware. vmware would use its common stock to acquire dell, which is privately held, making the two combined companies into one public company. this would give them cash to potentially paydown debt and give michael dell the ability to tap into vmware cash flows to services -- to service the debt put on dell. the dellg emc into family a few years back. also, you remember back when dell bought emc, it also created a public tracking stock that trades on the value of the stake in vmware that emc hold. this stock would be subsumed into the dell-vmware, nation if you went this route. we will keep track on how this shakes out. the board is set to make a decision in a meeting at the end of january or decide not to do anything going forward. either way, we will be there with the news. moving to the business flash headlines with jb holdings drinks.nto taking over other companies. biggestmake sure it the -- keuring the third biggest soft drink seller in the u.s. -- signsience the new of the new one dollar menu and mcdonald's is paying off. 10% increase.most positive results show mcdonald's dollar menus are resonating with more frugal diners. rishaad: that is it for this edition or this part of "bloomberg markets." david ingles is here. david: the indian budget, of course. we have been talking about the state of the union, about president trump, this is , i do want to say in the backseat but it is important. rishaad: thursday is the budget, ahead of that is janet yellen, also the state of the union. david: yes, that is in washington, and gdp coming out of europe. it is a complicated issue, and we have economists from india coming on to talk about this. it is almost a mind-boggling exercise of difficulty you look at the indian budget. he is essentially saying, 3.2%, the target for the fiscal deficit. it is a tall order, it's based on assumptions the economy is going up 11%. and they have elections about 16 months or thereabouts. they can't really do things in terms of increasing taxes. david: no. two we get the populace sort of move back we get the budget talks? it's also in the mix. have the fund manager for asia-pacific joining us to talk about india. little vulnerable at the moment. ♪ ♪ david: it is almost 11:00 a.m. in hong kong. we are in the middle of the second trading session. bad news, we will get to the details in a moment. i am david ingles, welcome to "bloomberg markets: asia." ♪ david: the bears have woken as the equity surge grinds to a halt. even the benchmark is seeing his third that january on record. among the day's big losers, avoiding bankruptcy but at a cost, existing shareholders will be all but wiped out. and the coin check heist puts cryptocurrency back in the spotlight. we discussed the risk and rewards in a special report from taiwan. it is not a good day to be an equity investor. have a look at what we are seeing across the region, you're pretty much looking at one consistent color across asset classes right now. bond deals on the way up, equity yields very much, southeast asia's sing the biggest one-day drop since august of last year. and of course the other side of the equation, southeast asia currencies. some substantial money coming out, as well. is this a start or a healthy correction given that we are still on track for the best january for equity markets going .ack 30 years the last summary we had a january this good was 2012. before that, 1994. not a good day to be an equity investor, but it has been good, so don't be greedy. that's a look at markets early. but get an update on the first word news. house of representatives committee will seek clearance from the white house to release a classified republican memo bias against president trump. republicans say the fbi and justice department pursued an investigation of possible kremlin ties to the trump administration under false pretenses. >> i think we have crossed a deeply regrettable line in this committee, where for the first time in the teen years or so i've been on the committee, it was a vote to politicize the declassification process of intelligence and potentially compromise its sources and methods. yvonne: verizon has said to have dropped plans to sell phones after pressure from washington. this follows at&t's decision not to introduce a model. it is a significant blow to the company's international expansion plans as domestic smartphone sales are increasingly pressured. wynn counseling troubling for a second day, down 5% with investors unnerved by harassment claims against their chairman. the overall company earned most of its money from operations in macau. authorities have been in contact to check that major shareholders, executives and key staff meet certain standards. resorts plunged heavily overnight on the allegations. the european union's morning will fight back against potential u.s. trade measures against the bloc. president trump said over the weekend he was angry about eu policy, but that it could morph into something really big. this is a contrast to the previous administration, where both sides sought to great a free trade zone worth a billion dollars per year for each side. >> trade policy is not a zero-sum game. it is not about winners and losers. we here in the european union believe that trade can and should be win-win. we also believe that while trade has to be open and fair, it also has to be rules-based. yvonne: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am yvonne man, this is bloomberg. david: thank you so much for that. let's recap data out of tokyo this morning. data on jobs, also some things on retail spending. essentially, labor markets continue to tighten in december, while household spending is lower. our economy reporter joins us out of tokyo to break down the numbers. key takeaways? of datae had a flurry today, and as you mentioned, household spending fell, a disappointing thing to see. we had the tightest labor market in decades. we saw the unemployment rate, 2.8%, the lowest in a couple of decades, we saw the job to actually -- job to applicant ratio at the highest level since the 1970's. the we are not seeing consumers spend too much. i think that comes back to wages. the wage gains in japan in recent years have not really been enough to persuade consumers to dip into their pockets and spend. that's one of the missing pieces for abenomics we will be looking for in the next month in the month after that. it may be key for japan this year in terms of getting consumers to spend more as they see wages rise. tomorrow, we will look ahead in seymour and the different sector of the economy, we will have industrial production, and looking for factory output in japan to rise a little bit. it's one of the stronger part of the economy. we look back to medically, we have we consumer spending and that is still a disappointing area for japan. david: thank you for wrapping all of that for us. brett miller out of tokyo. chart, 454.at this looking at a tighter labor market, but wages are very sticky. that is the morgan stanley japan wage growth indicator. that's the bottom panel. promising signs. this is abenomics on the way up. 82.7, 2.8%ently at rate -- currently at a 2.7%, ..8% rate for a deeper dive, what is driving markets across the region, we have our editor here on set. chris, i look at these declines and i'm almost tempted to say this is the start of the big correction everyone is waiting for. but it has been a very good january anyway. chris: we are in the red. not quite as tempted as you are to call the end of people run. .- of the bull run i think we are seeing the rise of bond yields basically testing equities. asset see the risk-free rate of return going up, it is going to make you a little less willing to take on risk and going to equities. we are seeing some pullback. but if you look at the msci asia index today, we are not as down as the s&p 500 was overnight, and the apple news from the nikkei warning about some of the apple sales forecast. it has had an impact, but we are not seeing dramatic declines. i think what we are really waiting to see is what are we going to hear from president trump tomorrow on the state of the union front, how serious is the threat of a ramp-up in trade tensions with china that would reverberate across this region, and to what extent will the dollar continue to fail to respond to the higher u.s. yields? it has really been striking that we had seen -- the we have seen u.s. treasury yields pick up that it has not helped the dollar. the old nightmare scenario for emerging markets is that you get federal reserve lifting interest rates, u.s. treasury yields go up, the dollar strengthens. the capital flight out of emerging markets. that pattern is not what we're seeing. david: it's the opposite of what we are seeing, or sing massive inflows. it brings to mind the risk. we have the state of the union and the fed having a meeting. we should not treat it as a nonevent, they might come up with something disruptive the markets. yields are on the way up, 2.7% i believe on the 10 year right now. that is the risk-free free rate, but reflective of rates going up and us needing to be think whether valuations need to stay at these levels. how is asia's position for final -- four higher yield? do you take different positions different companies -- different countries? chris: pakistan is a subject of speculation on a potential bailout program from the imf. all in all, if you look at asian growth rates, you look at how asian over the -- how asia over the past couple of decades has built domestic financial markets. they have sold bonds and stocks in the currency rather than u.s. dollars. they are pretty well-positioned at this point. perhaps the biggest wildcard is trade policy. an outright trade war between the u.s. and china would probably affect not only trade flows but currencies, capital flows, all kinds of things that would be hard to predict exactly how it would pan out. you look at the asian flexible exchange rate systems that have been put in place for a couple of decades, you look at underlying growth rates. evenme countries, demographics. look at the philippines, it has a large and expanding labor force. look at the anon, which has been trending 6%-plus growth. it's hard to see these guys in the next couple of years coming cap and him -- cap in hand to the imf. david: good demographics can mask many things. thank you very much. joining us live on set here in hong kong. we will continue the conversation on markets just ahead. we will be joined in a few set.es by a guest on we have the outlook on where the long-term risk and opportunities are. later, we will be live at of india where one of the top ha -- economistd top-ranked economists has a preview. this is bloomberg. ♪ ♪ david: welcome back, you are watching "bloomberg markets: asia." let's have a look at what is happening across markets, the opportunities. we are joined on set with -- set asian investment officer. i've not seen you in a bit. i just want to read this top line, it does say a lot about the milton equities. you are saying -- the melt up in equities. your sing the bull market is a years of money printing. how long until the effexor to go away -- the effects start to go away? >> that's what you're seeing the bull market actually accelerating but you also see the money growth numbers coming down. that puts you in an environment where it is a bit late in the game. for asian things are a bit different because we also started later in the game so you might still have more to go because of valuations, much more of a global environment. bullish onfairly markets in general in asia because i don't see a lot of froth except for a few markets. generally there is good upside and what is crucial is after a number of years with little earnings growth, you're seeing fantastic earnings growth in 2017 and again we expect 2018 the a decent here for earnings growth. less quarter, and you also sold of the year expectations were revised upwards. we have to see if that will happen in 2018 as well. generally the environment for better earnings growth is healthier because the china economy is healthier. david: i'm surprised because you look at the current earnings upgrades the we are in at the moment, it is quite surprising that not a lot of people focus healthier because the china economy is healthier. david:coming to much is the amof upgrades coming to the system before the reporting system. is this a function of i guess of growth that started to show up about two quarters ago? arnout: your sing a more and more cyclical growth starting to pick up. commodityrally in prices, it was like, where did that come from? it's mostly from the chinese economy getting better and also the japanese economy getting a little better. they are doing better and there is more demand for cyclicals. also lester, and that is a major point for me, -- also, last year, and that is a major point for me. this is an environment where people think of growth in asia is not as good as before. not really bad, but we focus of the companies -- we focus on the companies were growth is still happening. now you see a broadening of the market, not just growth stocks performing, not just tech stocks like last year driving the market, but the energy sector, the industrial sector doing well. the only sector still under , whiche is the telecom is traditionally more interest rate sensitive. this goes back to the first point, the main headline today, u.s. yields are breaking new highs, what does that tell you about the future? david: what point do with that information? lasthe most part in the six month, and equity investor would have been able to simply ignore rising yields on the u.s.. recently, you look at the five-year in germany, it is back at zero. is that something i can also ignore or should i start adjusting my portfolio? arnout: isn't it funny wizard are talking about it is great, and the five-year is at zero? we are to the point of thinking negative interest rates david: are normal. -- rates are normal. david: does it matter? arnout: yes, because they are not normal. that wantedn thinks it easing, we should stop it. that's how most people feel. but we have been tricked into thinking the interest rates should stay low forever. in that environment, i think it is unlikely to stay. no matter what happens with growth, you will see a little inflation and won't say interest rates stay low forever. that means naturally there is a shift from the long duration farks which have cash flows into the future being discounted back to today is very low discount rates, moving back into more short duration stocks, more of the value stocks. it interest rate doesn't have much of an impact. david: is value the broader thing you are playing now? arnout: there should be kept up rally in value stocks because they are underperforming, as a medic as it has ever been, more like 1999. i think the value rally will have some legs. david: the money coming out of the bond markets, does it go into equities? we do have a bear market there. should i be worried as an equity investor? arnout: generally you will see some moving out of owns -- of bond into equity, but if rates rise and equities also have a hard time rising further, that is the big caveat. my expectation to interest rates will go up further, but inflation is relative. it will rise but not too badly, and then markets can continue to do well. that is still my best case. but i am saying to people, because, look at what inflation is doing. so far it looks quite muted. also look at interest rates. i'm old enough to have lived through the 1994 interest rate hobble. there is this mindset that interest rates will stay low forever right now. shift in see a massive the market and things will spiral of very quickly and that could be a problem for the equity market as well. david: we have had worried about it for over 10 years. the feeling is not a lot of people are positioned from -- position for higher inflation. we have to leave it there. our guest joining us with solid thoughts on inflation. if you are a bloomberg subscriber, you can catch all of the interviews you missed, just tune into tv . you can also send us instant messages during our shows to our team for our guests. we have a conversation coming up on the indian budget, if you have questions about that, and the men. coming up, we are also talking about wanda. how tencent sees potential in old-school retail. that is in a few minutes. this is bloomberg. ♪ ♪ david: this is "bloomberg let's get you an update of the latest business flash headlines. starting things off with noble, finally reaching a restructuring $3.5 million. is that the cost of wiping out -- it is ateholders the cost of wiping out current shareholders. the company agreed to convert half of its debt into new equity. .et's look at metals there is optimism in sydney that a change in china will help key products. beijing favorseen iron or come a speculation that will change. fortescue was up last quarter as china clamps down on still capacity. they're using better quality materials to cut down on air pollution. exxon mobil is ready to invest $60 billion in the next five years bringing spending back to toles before -- back previous prices. put --e looking to looking to expand in texas and new mexico. let's have a look at tencent, the company is making a new push into brick-and-mortar retail, leading the acquisition with -- with part of wanda. tencent?now for it fits into the strategies they have been drawing out, which is to combine their online business acumen and prowess with off-line retail. lester, they bought a 5% stake in the supermarket chain -- last year, they bought a 5% stake supermarket chain. competitors are doing the same. tencent wants to get involved as well. wanda is looking to divest some assets. tencent is taking the lead on this, it is a 14% stake of wanda's commercial property unit, which was was about $5.4 billion. it's not just tencent, but others. this is a key thing going for for the next 12 months at least, these big tech companies in china getting involved in brick-and-mortar retail. david: the other side of the equation, the deal, where does this leave them with the dream for conglomerates? the big dream has been severely curtailed. one of the leading business leaders in china for many years. he was once china's richest man. his ambitions have been curtailed to say the least. not least because the policymakers in beijing have put thebig conglomerates under lights. they're worried that a lot of acquisitions made overseas for using -- overseas were using risky debt. there encouraging them to sell assets and pay back debt essentially. lester they sold almost $9 billion worth of their -- last year they sold almost $9 billion worth of their properties that were theme parks. they also sold properties in hours,and in the last 24 to property projects in australia worth about one quarter of a billion u.s. people we spoke to hear 70 continue -- hearsay they continue to see wanda and big conglomerates divesting assets. you see these companies getting involved in big data and mobile payments and off-line retail, but you also have big conglomerates trying to divest some assets. david: tom mackenzie live out of beijing. wrapping up a great story for us. let's have a quick glance at markets as we head into the lunch break. it is not that good. the clients for the major benchmarks, and look at the very bottom, the pullback we are seeing across the small caps. compared to southeast asia, it's almost like the bulls are running amok in shanghai. more a moment. ♪ away from the open of cash markets in india. futures index line. not doing anything with the currency. further presents for the indian currency on the back of the move back into the u.s. dollar. hong kong, where we need a feel, bit of the indian indexes pulling back from big spike. properties also in focus today. earnings coming out of some point in the next few hours. hung saying down .08. smog. of .08.ng seng down beautiful day in the chinese capital. asian markets taking the brunt of the selling. indonesia seeing a lot of pressure as well as the philippines. first word headlines. correspondent: the deputy director of the fbi steps down early ahead of his formal retirement in march. andrew mccabe has been a target of criticism from president trump who claims he was biased toward hillary clinton in the 2016 election. he worked in the counterterrorism and washington field office. he was acting director for james comey when he was fired in may. -- the nextrscored in montreal were seen as his middle -- were seen as pivotal. danieln has a named pinto and gordon smith as of the new co-ceos. they will take the president role from dimon who will stay in the top job for 5 more years. a new fight brewing in brexit negotiations with the u.k. pushing back against an october deadline for a deal. brexit secretary david davis says nothing will be signed in the u.k. until the u.k. have clarity on future trade relations with the block. sts the u.k.i must continue to abide by eu rules including the european court of justice. >> u.k. will continue to take part in the custom unions and to ion policies it will have all the benefits. therefore, it must also apply all the rules to singular market. carte.ot be a la global news 24 hours a day powered by over 2400 journalists and analysts in over 120 countries. this is bloomberg. correspondent: the other big story is the budget in india. advisor to prime minister narendra modi said the government may stick to its deficit. some comments contradict during the government will not seek overly ambitious deficit targets. ofhave our chief economist mumbai. siddhartha, thank you for joining us to talk about an overwhelming mental exercise. just to simplify this for our viewers, let me start with this question. a shows the budget deficit as percentage of gdp. do you think they will fix to the target of 3.2% and is it realistic for them? >> difficult question. you really need to be a clairvoyant to answer that. since the economic survey came angry that the thernment would stick to 3.2% fiscal deficit that was budgeted. put the pause clause, the pause fiscal consolidation -- it cannot be ruled out. bond prices dropped when bonds were sold. there is a chance the fiscal deficit will be breached. hopefully they will not br each it to a significant degree. they should not do anything above 3.5. the effects oft government spending are not clear and the effect on the market are very sharp. david: assuming they d do stick 3.5%, what maybe does that do for the outlook of government borrowing? once that is done, what spending shelved.been get >> they have plans for additional borrowing they goes on into february for about half a trillion indian rupees. --that is an algebraic correspondence with the fiscal deficit. eventually we had talks that they would take a part of this keepthe fy 19 budget and fy 19 market borrowings down. remember the plan. it is not the idea of getting more money. even more money in the federal budget for fy18, that has not been spent so far. quite low.g rate is we do need government expenditure and public investment but the spending efficiency needs to increase. why do you think the government needs to soend more? to offset the drop in private investment? >> yes. given the extreme leverage of ts, itate balance shee is coming down with bankruptcy proceedings taking effect. it is still very high. capacity utilization is low. there needs to be an increase in spending and it is the government who needs to spend. india needs a lot of infrastructure. particularly urban infrastructure and a lot of food processing infrastructure needs. the private sector will not be either willing or able to come into these sectors so public investment is required. bond story, see the the budget.aw into we are looking at the 10 year in india at 7.8%. how much stability does the government have in terms of allocating more money and ead ofing debt inst putting them to use in the much-needed areas of the economy you lined out. >> a simple algebraic calculation. we have about 80 trillion rupees a duration ofwith eight to nine years for that portfolio. basisields have risen 100 points. this money could be allocated to other expense in this environment. we come back to the basic point. there are many ways of spending money. there are ways of that money can be borrowed from the financial sector and state and financial institutions. roads and avenues need to be explored before a straight out public spending is put into the next budget. david: this is the first budget event, is there anything on the tax collections i we need to be aware of -- we need to be aware of? >> even the most recent gft collection numbers have shown an uptick. the electronic matching of invoices and tax revenues the sales. i think compliance will increase. one of the things we have seen in the economic survey is there has been an increase in former sector registrations. that compliance is definitely likely to increase. that would help plug the fiscal deficit but there needs to be higher spending at this point in time. i think various funding activities need to be explored. particularly with this investment now. and invested -- an aggressive investment program, the economic survey -- other government assets need to be looked at. the opportunities and avenues are there. just an imaginative way to try and raise the sources. bond markets are important. together with that the need for public spending/ . david: are you worried about rising bond yields? saugata: yes. a significant amount of capital. some of that comes from the profits and reserves of the banks. and it still has to provide provisions for bad assets. sources from the investment portfolio str --are important. is risingeal in the yield curve is rising. then all the other interest rates will be impacted. this is the indian budget we are talking about. a fairly overwhelming mental exercise. saugata bhattacharya, thank you for coming to think about the finer things. let's talk about what is coming up. kim president trump -- can president trump have restraint in the upcoming state of the union? this is bloomberg. ♪ david: this is "bloomberg markets: asia". investors counting down to president trump's first state of the union address which takes place in 22 hours. which version of the president will get the address? address?he last year was not a state of the union. correspondent: investors hoping they get the more businesslike version rather than the bombastic donald trump. like the one who spoke in davos about business things and a bipartisan approach. we can expect that probably. last year he was more talking to the base. it was right after the inauguration. here he would like to make some points in a bipartisan way and also adhere to campaign themes. david: infrastructure. that is one of the themes that has come up in recent days that he will talk about. what other things do you think he will touch on? correspondent: infrastructure is one. there was a lot of hope among wall street and his investors that he would deliver on that. he is not done that yet. forad a $1.7 trillion plan fixing the nation's crumbling inds and bridges 2019. also defense spending. that is another thing he has talked about that we have not releasing a big increase in defense spending. also one thing that has pleased investors is cutting back -- rolling back regulation particularly on banks. one would expect those kinds of things and he will talk about a billry lap of the tax and take credit for the booming stock market as well. david: that is roughly what we are expecting and a lot of people have been talking about this. talk about potential surprises. correspondent: it is president trump and he is unpredictable and he likes to surprise. there will probably be something in thertheir -- tossed e and something for the base. like those make america great or america first themes. and if he does not say that in the speech, "lite to twitter after. -- he can take to twitter after. david: we will have special coverage of the state of the union address. that is not :00 p.m. if you're p.m. in new9:00 york. thompson-reuters is in talks with the blackstone group about a potential partnership that will account for half of its revenue. we must know that bloomberg competes with thomson. let's get you caught up with the business last headlines. stepping down from a company that has been struggling with loss and debt. he is leaving to pursue other opportunities. he planned to push sales above $5 million to the current $3 billion mark but quarter losses $80 million.to let's look at what is happening in japan. they are in talks with chipmaker maxim. worth $20ould be billion and that sent shares up the most in 20 years. it says that claims of acquisition talks are not -- the beverage empire is moving into soft drinks. is buying dr pepper and it will make it a challenger to coca-cola. that is the corporate news. markets?s the budget. before the >> it does look like corporate tax cuts could help the way as modi is experiencing a budget squeeze. this index down by .04 oepercen. tata steel rising solidly on the onk of the moves commodity. utilities up .01 percent. indian companies in focus. tomorrow we're hearing from two of the biggest banks. investors and analysts looking for lending margins and loan growth guidance. lowould be marred by trading profits on government debt. tata lifting the market. coming at .7 percent. indian oil looking good. there is a report he could consider offering free share issue to shareholders. we are seeing a bit of a pullback coming through on that market. david: overall it is quite bad? correspondent: look at all this red on green. let coming through from the states and the story was that you saw the yield on the 10 year push past 2.7% for the first time since 2014. in southern bosnia and asia you see it heavily sold off. south korea yield of 3.5 basis points. it is definitely a day of red across the market david: coming up on the program, tales from the crypt. how taiwan is positioning itself as a hub in the bitcoin revolution. this is bloomberg. ♪ david: let's have a look at the world of cryptocurrency. taiwan positioning itself as the next hub in the asian pacific. our chief asian correspondent that taiwan means to become tech relevant again. >> what taiwan is facing is transformational problem. we have not yet leap from yesterday's experiences and we try to figure out what our next economic pillar is. when we look at what we used to hardware, which is which is going nowhere because of the low-cost and cheap labor. enoughaiwan innovative to fully back a new initiative? often times in the past either the regulators or lawmakers have either been slow to adopt or they shut down something they do not know. past, red tape is a big problem and rated hassel --administrative hassle. i wanted to remove those barriers for innovation and technology and startups. we passed of the technology experimentation innovation bill. it is a bill that will pave the pa for the tech industry to ve the way in taiwan. it is the government entelechy --mentality that is the issue. women look at the -- when you look at the trends in cryptocurrency, taiwan can find a unique position with the rise of this technology. we should fill the void that is left in this region. weeks, i haveour been meeting with blockchain companies and cryptocurrency companies interested in coming to taiwan to set up their r and d sensors or to set up branch offices. ae issue is how does regulatory body see this issue? do we see it as a threat to clamp down on or is there opportunity? ipo's initialn to offerings on the taiwan exchange? >> the government is passive and is not talking about it. underground and have alot of implications. taiwan can become ico trading hub in asia. >> to look at the opportunities of using the uniqueness of taiwan to take advantage of this. >> it could be in mining center in addition to ico's. probelm. a power --problem. they want to attract cryptocurrency companies into come to asia. david: how long before we get there? >> the launch will be may. david: lots to talk about then. a good step. it is the power infrastructure and also a regulatory issue for cryptocurrencies. david: lots more to talk about. that's it for us. ♪ ♪ ♪ saugata: asian equities retreat after u.s. stocks fell aft government bonds selloffer radel investors. --after government bonds selloff rattle investors. thanople killed and more 140 injured as violence flare in yemen. tosaudi arabia strives

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