fastest car ever made, hurtling in space. keeping the government chugging as oneas deal described nobody loves. ♪ >> it seems like life has changed and rather than talk about no volatility or low volatility in markets, the only thing both are talking about now is to get used to volatility. andtility is here to stay, i want to show you a chart that reminded me of the great ernie's peng lei -- ernest hemingway quote. this chart shows you that ed --acency that is br the short-term fix, the several to blame of the rapid selling in the session. you can see complacency all the way up until the very and, and then these devastating losses. many warn us about these induced leverage etn's, however, nobody thought would go to zero, as a got to zero yet but they are headed straight there. >> it lays the question or puts into question where it goes from here. of aard from the likes credit analyst who warned about the shortfall trades prior to the selloff. is now ang me it opportunity to start buying, but but the majority of people are saying there are opportunities around this now and you can put cash back into play. the flipside is that there are warnings of volatility, and in the asian markets you saw a selloff in china yesterday and some big selldowns in the developer stocks in hong kong. we have trade data to focus on. there is a lot to get through and the big focus on asian markets when they start to open up. both the national champions in china be put to play as well? >> a quick reminder of putting cash to work, that is what it seems like investors are doing in u.s. markets, and we saw gains earlier in the session where people are trying to buy on the debt, in the market failed to hold on to those gains in the last hour. the snp lower by half a percent, and the nasdaq being dragged down by some of the selling going on. as you mentioned, it is setting up for a softer opening in asia. >> i am going to check in now with new zealand, keeping rates on hold in terms of inflation, and i don't see that picking up and rates appear to be on hold until 2019. no concerns about inflation in stocks pickingd up marginally in terms of the 0.72, and in about australia, you are a little bit 0.15 percent drop there, and then you have the aussie .78.r at korea,ook at japan and checking japanese futures around thechicago, seven hundred 50 mark for japanese futures, the nikkei closed yesterday just under 2/10 of a percent -- and then of course you have the yen at 109. the value clearly in exporters there. now let's get a look at first world news. >> china's foreign exchange rose for paul straight month as the yuan strengthened and economic improved. climbed to 3.1 trillion, fractionally low estimates of a bloomberg survey, and it moved to its strongest valuation, shrugging off central-bank signals that appreciation should flow. new research shows the u.k. will leave the european union as the area's slowest growing economy even if it keeps the same trading agreement even after brexit. , androwth will slow conversely the commission says that the euro economy will accelerate faster than anticipated than at any time since the financial crisis. a senior british official says china is wary of providing any trade commitment until it sees how brexit lays out. trade commissioner hopes the u.k. cap negotiate a new agreement with beijing during the two-year implementation. after march of 2019. the two nations launched a review of their relationship during theresa may's visit last week. recognize that will want be able to reach an agreement they we left it eu, but are endorsed by both sides. rbn kept rates at a record low and will stay there until the middle of next year. growth and inflation is low as acting governor how the official cash rate at one and three-quarter percent and said policy will remain accommodated for a considerable. period. and the reserve bank of india maintained a neutral policy stance hoping its key rate at 6% , but also had a warning about spending. last week's budget for rural of nexties ahead years's elections, however the r.b.i. says the worsening can lead to high inflation. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. let's get to the biggest bumpy ride on wall street -- a increases and the gains in the final hour, one strategist brings the pick up on treasury yields for that slide. i want to bring in su keenan for more. interest rates are at four-year highs, and we instigated this here, that pushed us into a selloff on friday. let's go to the charts, and what you don't see here is the dow had a 500 point rise, that shows the volatility, white knuckle ride for investors. commodities are also under pressure as you see oil in extended trading is down. will get two more on that in the bit. if you get to market movers, there are sizable moves. gains watchers announcing -- snap coming out with its first publicly traded company beat on the street, and five upgrades resulted. and chipotle continuing to have the mexican future and has had a lot of different scandals in terms of food crisis , and is going to change their ceo and still having problems. investors not buying that. let's talk about volatility -- the chart showed in the beginning of the stocks spiking, and the other asset classes, notice oil. nobody else's spiking up here like the stocks, so what it shows is the volatility spike is concentrated in equities and the notion that makes product propelled plunge according to one analyst had a lot to do with stocks. instance of china for appears to bemp limited to stocks in terms of having the market jitters. that decoupling as you show up, as let's talk about softbank and this make a report of a possible deal. what is this? >> it has been confirmed by the insurance company that help both -- itnk and swiss higher appears this could be a $10 billion deal, and softbank can buy a third of swiss re. the ceo of softbank has been involved with a lot of interesting investments over the last year as he reshapes japan's largest mobile phone carrier and is taken aggressive moves and this may be the latest. a lot of speculation. >> what are we hearing about oil? how is that going out? report, thelatest u.s. is eclipsing saudi arabia in terms of production. what debit for the price of oil is that we were down to 61, and what that tells us is that we are putting out more oil, 10 million a day, that is a record for the u.s. it could even the cubs russia, and that is a concern going forward. bitcoin has also been in the spotlight, and what is a stake here is that we talk about the slump, the coin has come up and has peers, but it is down 50% since the start of the year. a lot of these clients have come up a lot these days as regulators have said they're going to watch these things closer, but they won't be as close to the scrutiny as originally feared. sticking to the u.s., senate leaders have announced a two-year budget agreement, nearly $300 billion in additional funding, a step to avert a government shutdown and the months long impasse on spending priorities. its go to washington for all the details. besides additional funding, what is in this deal? >> it is a grab bag of things, markets are going to suspend the federal debt ceiling, the amount of money the u.s. can borrow until march 2019. it will move it from effects of the midterm elections coming up in november and will be left up to the new congress after those elections to decide what to do next with that. additionalre is hurricane aid and fire aid for california, texas, puerto rico, florida, the virgin islands, to deal with disasters. cotton andght to dairy farmers, and things for energy companies and some sorts of tax extenders that authorizes sales from strategic petroleum reserves. it is quite a number of things that includes changes to medicare and adjustments to help pay a little bit of this. >> mitch mcconnell and chuck schumer saying they agree on the budget deal. paul ryan is supporting it, but nancy pelosi says she cannot support it and she just finished her marathon speech. the question is, is it going to pass? isone thing that happened that president trump gave his full endorsement to so that will still be some republicans will resist it, and some democrats as well, identified by pelosi will vote against it because they did not get any assurance that they can get a vote on an immigration bill. enoughre should be between the remaining republicans and democrats to push it over the hump in the house. it is not currently a shirt but it looks in pretty good shape is paul ryan and mitch mcconnell and chuck schumer whatnot extend a limb without thinking they are solid on getting votes. as you mentioned, pelosi finished her marathon speech , and this funds the government until march 23, so what happens between now and then? >> between now and then the plan is to work the details of this agreement so that they can have a budget for the rest of the year. they are well down that road already and now it has to be converted the legislative language. got to get numbers together and get a score from the congressional budget office, so that is what they will take the time to do. the senate will also take the immigration debate as well, so all signs point to them to be able to come to a final agreement on what is called the omnibus budget for the rest of the year and they can therefore and these continual temporary spending measures we have been running under since the start of the fiscal year. thank you so much on the latest budget negotiations. still ahead, steve when stepping will be live from l.a. for more on that story. up next, steve goldman with his views of where the money is going in all told times. this is bloomberg. ♪ >> this is daybreak: asia. >> wall street stocks finishing lower capping the route that began on friday, rising treasury yields renewing concerns of rescue or assets -- riskier assets. in these risklue assets, are you end the by the debt campaign, steve? >> i definitely am. there are risks ahead, and there has been a low and years of central banks keeping rates low for years, and this causes risk assets to rally, and now we have to be worried about central rate hikes, and it is not as easy a game as it was in the past. if you look at the long-term fundamentals, there are still significant hurdles of inflation coming back in the global economy, and what that means is risk assets will continue to perform well, albeit with a lot more volatility than in the past. >> that is certainly the argument that we have been hearing more and more, are you going to start to see more outflows? we have seen it in btp's -- are you going to see it in this switch from passive investing, which has nothing to this bubble point, the more active investing? >> i think there is a lot of changes we're seeing right now. i think now the ease that investors can get in and out the asset classes and markets with exchange traded funds. the lowering of costs, you will see more movement in and out of asset classes. is that it have seen is not that investors are making significant reallocations to bonds or equities or commodities. and are taking money holding it on the sidelines in cash and try to find a better entry point. in my view that as a tough thing to do and eventually that money is going to equity and risk. our kids -- markets. lot easier to do today than in the past. inflation is low, and in the end, that money will be back in equity and risk markets again at some point in the future. >> in an environment of high , that surely is going to make credit more expensive for the corporate's, but he say corporate bonds are a positive. you are still bullish on corporate bonds, why is that? >> that is a key point that aren't costs are rising and is a part of inflation -- and risk is increasing. and and it is a question of where in the corporate bond market should be investing. in my view, any high-yield market, it is more risky because you have a lot of is this models in high-yield companies that have only been sustainable because of low yields and low borrowing costs. now we move to a more normal market environment for yields and borrowing costs. some of those high-yield companies are going to fail, and historically low to follow rates that we have seen in high of the markets are going to increase in the long run. what that means for investors is that yet to be more careful, and that is a good argument for active versus passive management where yet to find good managers that are finding the right yield bonds. in the past it didn't matter and you can buy anything and it performed. where we are, i think you are going to see ridiculously low default rates because corporate profitability is good and will continue to stay good. we have tax cuts on the corporate sector begin in the u.s. and borrowing costs are going up marginally for investment-grade companies. i think there is a lot more protection and tailwind built in the investment-grade markets than the highly yield markets. >> possibly more defaults on the credit side, but in terms of the bigger picture, you are liking some of the asian currencies, gives your topics. we like singapore -- taiwan, those markets we continue to like. the aussie dollar here in already rallying strongly, i am relatively neutral, it is a weakening dollar story as we end up with continuing trade deficits, fiscal deficits in the u.s. i think it is a u.s. dollar story for the longer run. >> we have lines out about the dangers of the fiscal deficit in the u.s. steve, thank you for that. , is he still musk shooting for the stars of his profit projections? this is bloomberg. ♪ >> tesla jumping around in after-hours trades after fourth-quarter earnings beat expectations. let's break it down -- what a week for elon musk. let's tackle tesla and these results which showed they are not earning as much cash as before. is this good news? >> i think so. that it willmed have 5000 cars by the end of june, and there was concern this will be delayed yet again, but they are sticking to their -- people will be happy, elon musk was in a good mood on the call that is still going on, but he said in the offset that if we can send a tesla to the asteroids, we can send a production model. he clearly sees both companies as being one in his mind. >> if we can land a man on the moon we can get together on this budget deal to in washington, right? a lot of comparisons here. we're talking about 5000 model threes by june, how confident are analysts or investors that this goal is going to be reached? >> people think this is doable. delayed several times, so another delay will be concerning, but here it is, early february. by the end of june they should have this figured it out. with their sick briskly as they are sticking to it, there is no new problem that appears to have arisen, and must sounds gung ho about continuing to improve production and become the best manufacturer on earth. he sounds confident, a lot of that is showmanship, but you see the stocks react, and a not so dramatic way -- the other thing positive about tesla is customer deposits are up. despite delays there has been a rush of people canceling their orders. >> there is a lot abuzz about tesla and was concerned about whether or not they hit the production target and the body of the bottlenecks and factories, and if they can push through that, it will be positive. that is bloomberg technology reporter in san francisco breaking down those tesla earnings. ♪ >> it is 7:30 a.m. thursday in hong kong and where 30 minutes away from asia's first major market open. it is 6:30 p.m. in new york where markets closed lower and couldn't hold on to the second day of gains. >> you are watching "daybreak: asia". .ow i look at first wrote news >> nancy pelosi says democrats want back the senate budget agreement without a commitment from spiegel paul ryan than open debate on immigration. for a record amount of hours, wanted to provide additional funding, and the agreement should avert a government shutdown. >> this bill is the product of extensive negotiations among congressional leaders and the white house. no one would suggest it is perfect, but we worked hard to find common ground and stay focused on serving the american people. it has been a painstaking months long process, it is required concession, sometimes painful by both sides, bad end havee day, i believe we reached a budget deal that neither side loves, but both sides can be proud of. productions triggers new worries that it will swamp demand again, crude jumped to 10 moving theer barrels u.s. into a leak producers among saudi arabia and russia. allies i'd be forced to reassess. angela merkel made an arrangement as a new reawakening for europe. martin schulz will become foreign minister and has already promised germany will again take an active leading role in europe. party members on both sides approved the deal. group says embattled it is a victim of a conspiracy against it and the government in beijing. bloomberg has seen a transcript of a speech given by hna cochairman in which he said reactionary forces within china and overseas are trying to disrupt the market and subvert the communist party. stocks soar after selling assets. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. we counting down to the , andt open in tokyo sophie, a bumpy ride in the u.s., more volatility for asia? this is a v-shaped rebound ballots further out of reach, and even though we have futures hinting at a positive open, investors are going to be on resultses as they await -- they are back after a soft treasury auction. this bull market, and what many agree is that this turbulence had a necessary wake-up call. chart to point to this pointing out this drawdown in global stocks and is coming at a time where central banks pulled the brakes on stimulus. stay?volatility here to >> money managers think it will extend well into this year, and this is the biggest turbulence since the u.s. elections, and you can see that this presents a double-edged sword for investors. there are opportunities to on the other hand, it could punish strategies that have benefited, but when you talk about beneficiary, that could be the dollar getting a boost from the tour mall -- turmoil. the u.s. government has unsustainable fiscal pass, which could give something to consider. >> some of the market moves where seeing, the market remains jittery, and the want to bring in our global editor, kathleen hays. let's start with the banks first. that is certainly what they're saying publicly, and two shruggingpresidents off the impact of stock market selloff on policy, echoing what was called a predictive selloff of all time. it doesn't he was even more emphatic when he spoke on wednesday. >> if the start market were to go down and stayed out, and that would feed into the economic outlook and affect my view in terms of what the implications are for monetary policy. but so far this is a big story in the pass and the big story for financial market participants, but i think it is a big story at all for central bankers. >> it also said it is not affecting his economic outlook even in the short term. was saidin frankfurt that market corrections can be healthy after big rallies. clearly not suggesting he is concerned in his view. no surprise that the reserve bank in new zealand on interest rates also weighing in on the impact of volatility. it is very interesting because that was expected, but what is interesting to me is that at the beginning of the press conference reporters were asking about the impact of the market it is very interesting volatility on the rbn policy, and here's what acting governor grant spencer had to say. it is a warning sign it is a we that volatility shows how the market is about the prospects for interest rates at normalization of interest rates and inflation. be market is expecting to more gradual, but it was sharper you can have more volatility down the tracks. the rbn said they change their forecast and are getting back to the middle of their target until 2020 and will keep the policy accommodated until 2019. the reserve bank of india, no policy change there, but there was a warning as well, right? >> absolutely. they warned that higher government spending could fuel inflation. let's see why they are worried and warning about that. here you can see their target is 4%, and you can see the cpi is up at 5%, and the government spending has to fund that budget deficit and have to spend money ahead of the election and get farmers pleased and firmly in power -- it could make it even worse. one thing interesting is that indian bond markets seem to like it. the r.b.i. kept their neutral stance and it has been a big selloff rushing yields up about seven and a half percent. so good news for trader there. >> kathleen, thank you very much. be watching shares in southeast asia when singapore opens in 19 minutes. our chief international correspondent has more. dbs., a strong quarter for a 33%trong quarter, dbs showing strong growth from higher lending, heightened interest income, and increased margins as well. as we have been reporting, the rise in global trade is helping businesses, not just in singapore but also in hong kong and china. is the upside, credit costs are beginning to ease given exposure to oil related assets possibly take in the third quarter. but also helped is the easing of allowances and the loss of debt millionunted to 2020 $5 -- $225 million. central banks to get the report under new accounting standards, still, estimates could see some upside, profit growth at wealth and retail may be the ones to watch and may drive growth going forward. dbs.ank you so much on now back to the u.s. and when resorts -- wynn resorts. the 76-year-old ceo resigned despite denying allegations of sexual misconduct and said the rush to judgment, he cannot stay on. was suspended on thursday because of this news, and i want to bring in l.a. bureau chief chris palmeri, chris, was the driving force behind this resignation? what is the business reason for this? steve wynn said it was becoming a distraction for his company, and i do think that was the case. it has been a steady drip of universitiesith pulling his name off of buildings and having to step down there republican national committee. he thought it was not going to end, so he needed to take some action. >> was there a sense that the distraction is going to jeopardize the license renewal for wynn? >> there is no question given regulators in massachusetts and nevada all said they were investigating this and also that they would take a look at all possible outcomes and do in fact have a broad range of powers. it was endangering his properties and is still endangering. the big news today is that massachusetts and nevada regulator spoke that the investigations will continue, so wynn resorts is not in the clear yet. the hearing in massachusetts also said they are looking at holdings,sonal stock and potentially he could be forced to sell shares. wynn resorts more of a takeover target. >> if it were to become a takeover target, who would be some of the acquirers? propertiesvowed all and there have been people who have coveted them. a u.s. company that was not able to get to the massachusetts or to goodo that would be properties for caesar's. you can look at private equity firms like blackstone who on the cosmopolitan, and in particular, asian companies looking to get a market. that big macau >> what are the challenges that wynn faces? up forlicense is coming renewal in a couple of years, so this is an overhand for operators. regulators will look at the pattern of abuse, and the question regulators in massachusetts that today -- we're looking at what did the board know and what did management beyond steve wynn no and what actions they take when these allegations first popped up. does that speak to a company that is being run ethically and deserves to continue to be licensed? >> chris, thank you. next, we will discuss the appeal of bitcoin. this is bloomberg. ♪ >> this is daybreak asia and i am tom mackenzie in hong kong. another rocky ride for stocks, but that isn't going to last forever. now, rickards joining us and using artificial intelligence to predict analytics in capital markets, so, what are your algorithms showing here? >> i think what happened monday, i think we all know what happened the stock market, and this is a warning that it could have been a lot worse. >> could have been a lot worse? >> stocks go down, volatility goes up, you expect that, but this inverse volatility, that starts crashing, and so people holding that start losing money &p, start shorting the s and it could've kept on. and then their counterparts are pulling out, is what happened in 1998 -- ofare you seeing echoes 2008? >> i am, so many of the conditional correlations, things that are not normally correlated and then become correlated under stress, and in how far does it spread? we still have more volatility, it is pandora's box of volatility, and that is here to stay. if we get weak data, and the market will go down, and for buts it was up up up, there'll be more consensus of the data going forward. you talked about gold as related to bitcoin, and the normal, what you traditionally as as people jump to gold safe haven, i want to play for you a comment from one of our guests earlier. this is what he said about gold. >> i do not anybody under the age of 30 buying gold. that is true and a day at the older generation. know people over the age of 30 buying gold either. china has tripled their gold reserves over the last 10 years, and countries like turkey, iran, i call this the axis of gold. buy gold, states, i and i talked to my dealer and ask how is business? and he goes, never been worse. i have three millennial children, so this makes me an expert on this. with gold, we need more data, and it is predominantly people over the age of 35, and predominantly male. there is a little bit -- there here, yet the sp buyers -- they have a long way down, but gold will make its way higher. >> they have a stake in bitcoin -- they said this increased buyersregulatory crackdown on e cryptocurrency space is ultimately going to prove a positive for bitcoin. a lot of smart people are in the space and on bitcoin, but they are not primarily by can take the card, what their investing in is the blockchain technology. interestingly, it looks at ibm and intel are running away with the field, so i am a big fan of blockchain. that are quick those that don't rely on -- but quinn has utility on more efficient systems, so if you are to spend $60 to make $50, not an attractive transaction, so the coin is a dead end. some of these other coins may have a future -- i am not anti-coin, i am anti-bitcoin. is a waste of money and a dead end. >> so bitcoin cash is of the you would look at? not little bit better, but that she have to compete with lisa, mastercard, and paypal. -- visa. but not ripple, not bitcoin, not the quick cash or any you mentioned, delighting network, if you understand what lightning is, if the understand that let's take our transaction off blockchain and do all these transactions and will bring it to the blockchain. the bitcoin go off blockchain, you have to trust the group you are in. member, this is a trust the system -- but there is no such thing as a trust less system. billion and got 51% of the computing power and create a block and invalidated the block. is cheaper than building aircraft carriers, my point is there is no such thing as a trust less system. >> isis this debate is going to continue ahead, but thank you very much for your thoughts. we have some breaking economic numbers coming out on japan for the month of december. this is a current account balance -- that is much lower than what economists estimated. also the current account adjusted coming in at 1.47 -- trillion and.48 the trade balance coming in at 538 billion yen, that is slightly above what economists said an estimated in the month of december. will keep an eye on japan and reactions as the earning reports just a few moments. this is bloomberg. ♪ >> this is daybreak asia and i am tom mackenzie and hong kong. we may be on the outlook for some m&a, with more on this, real has a lot of cash with acquisitions, right, paul? spreading the cash, it is the best result in three years, paint record dividends to shareholders, and a billion tintos by back, and rio looking at things to buy. the ceo hinting that the company is looking for deal opportunities and is going to venture, screening for new commodities outside of copper, --n, or alan new medium aluminum, to see if there could be something new. it's a with the ceo had to say. >> for us it is about two it is verybelieve important, it is about rewarding shareholders with cash returns, that is what we did today, and it is about investing in the long-term. we have three drivers for investments in the long-term, and we say growth, it is growth about cash flows, is not about volume or market share, we're not interested about being the largest, it is about being the most profitable. chief financial officer said that he can't rule out better returns next year, let's look at shares, early 20% in early trade here in sydney at 2.5%.ment -- paul, a strong set of numbers, but there are bumps in the road. >> ortiz in the track might be more appropriate way of putting or kinks in the track. in plan was to get it done two years for $540 million, but here we are in your six with 940 million spent, step has been a blowout, so in terms of potential, it has a lot of potential to expand export thoses and cap costs, and driverless trains have been about 6% faster than human drivers. >> paul allen in sydney, take you very much. don't forget our tv function and watch as life and catch up with interviews and ivan to any securities or bloomberg functions. this is for bloomberg subscribers only. we are counting down to the china trade data, china economist joins us with his 11:40 a.m. in sydney, and this week selloff, jpmorgan asset management chief asian market strategist joining us in 50 minutes. -- 15 minutes. this is bloomberg. ♪ ♪ is 8:00 a.m. here in hong kong, live from asia's bloomberg headquarters. i am tom mackenzie. the top stories this thursday. asia-pacific markets on a rocky rise as volatility returns with a vengeance. u.s. stocks swung wildly throughout the day. at one point, the s&p 500 erased its session gains. while the dow had a 500 point dive. in newi am betty liu york where it is after 7:00 p.m. wednesday. softbank may want to take out insurance. we will have the very latest from tokyo. an unprecedented glimpse inside the world of cyber crime. bloomberg businessweek spoke to a hacker from north korea. ♪ tom: yes, betty, a choppy end in certain day in the u.s. how that feeds into the asian markets will be a big focus for us. we will get data points out of china on trade. clearly there is a lot of reliance on china's economy ticking over strongly to keep the globalized economy going. will there be softness around exports, imports? and what about the u.s.-china trade relationship, given china is looking at reviewing the story imports -- reviewing the soy imports. we have some great guests lined up for the rest of the show. betty: we do, indeed. investors are keeping one eye on those you mentioned, looking to see what treasury bonds are doing. equitye leading what markets are doing here in the u.s. as we heard from one of our guests, there is more downside, this is having echoes. to him at least, of 2008. let's hope not. in the meantime, i want to bring in sophie kamaruddin with a look at the major markets coming online. sophie: following wall street, caution may prevail. we are seeing stocks in japan climb 0.6%. japanese stocks set for the worst week in two years. we do have the yen a climbing a second day amid the haven demand we are seeing. investors will be eyeing a jgb option today. we have earnings aplenty to consider following softbank's results. it down 0.7%. they have a mobile phone listing to consider as well. isuzuusan motors -- and motors among companies that has reported. cannot put your hat on this one just yet. drop. among the biggest top producers in focus after this sank to a december low. let's check in on the risk radar. what mayeing a hint of come with the u.s. futures extending losses. benchmark treasury's holding around the 280 handle. the dollar holding onto gains. a second week higher. oil remaining under pressure after posting the biggest loss in two months. tom: seems the markets are still trying to find a floor. our guest joins us from singapore to show us what is driving markets today. what should we be focused on in today's session? >> i think this will be a bad day for equities, a very poor session. the equities we have traded have been the perfect map of how we trade in risk-averse markets. we see that correction and a powerful bounds. always in risk-averse markets, andget left liquidity traders have lower conviction. exactly where technicals would suggest is appropriate. we will trade boldly again, especially since rates have not corrected. this won't and until rate markets move lower. it is contingent overall on equity markets. there is a structural lowering, which will allow for many months. as soon as rates come down, they will find a floor, but not before then. betty: is there a sense we are finally in the u.s. in the last leg of this bull market? mark: i don't think so. there have been three major pillars behind this, it is growth, which remains positive. earnings remains positive. overall a positive story. the third pillar was liquidity. that is the one at that has been impaired the past few weeks, the last month in particular. we saw an incredible tightening in the u.s. it is 90 basis points lower in less than five months. we have not seen that pace since 2008, and we know how that year ended. we have gotten an acceleration in the past couple weeks at a time when the market sees record flows, less cash in the sidelines. get value risk metrics will go higher, so banks can take less leverage this year. it is a permanent blow to liquidity that will last a few months. several things have hit liquidity at the same time. until we get liquidity in the market, it will be a struggle. soon,uld continue higher but it means rates need to lower first. betty: i am curious about the foreign exchange markets and whether that holds the key to whether things flow into asia. what i mean by that, the lower dollar, the dollar continues to climb. will we see those flows continue? fx market has been very calm this year, impression -- impressive in terms of the reaction. more pain a to get spreading into emerging markets of this week as the dollar strengthens. that squeezes the consensus short view on the dollar. longer view, the reason for a secular bear market and the dollar remain. they were overextended in january. you might see a bounce and a couple weeks. ascould be a painful squeeze people reduce risk and get their perdition -- get their positions cleaned out. it is not suddenly looking like a wonderful, long-term dollar for the rest of the year. betty: mark cudmore, macro strategist on the markets. you can follow more on this story and all the stories on the markets live blog. that is on the market on mliv . you can find out what is affecting your investment now. let's talk about the softbank story that has been dominating the market. they confirmed discussions about a stake sale with softbank. they are also planning to list a stake in their mobile phone unit. let's get to asia tech reporter in tokyo. what do we know about softbank's ipo plan? >> good morning, or good evening, as it might be. earningse softbank's come out, the news is already out. alibaba has reported earnings by then. but they always give you something to talk about. this time is the mobile ipo. they seek to live -- lift all of their mobile telecom assets, such as broadband, within the year. i do not know the amount they intend to raise or the debt they will take on. one interesting take away for shareholders is that the ipo will be focused only on dividend payout. thisnalyst pointed out, might be a way for softbank to kill two birds with one stone. on one hand, they could secure the access to cash flow to continue making investments, but at the same time unlock value and help narrow down the discount softbank has been under for years. tom: how far does this go in narrowing the softbank discount you touched on? they have struggled with it for years. that is right. i think at this moment, the value of softbank is less than the total value of the stake it owns and alibaba. -- in alibaba. on one hand, investors argue you could split this and have more conservative telco investors. and more adventurous ones could invest in the remaining tech group. the counter argument goes, of all the softbank holdings, these are the easiest to see. it is the vision fund and recent news in insurance in switzerland, that is financially difficult to see. that is really the part softbank is not doing enough to address, the questions surrounding vision fund. tom: still a lot of opacity there. did investors get any more transparency on the vision fund in the presentation? pavel: yes i know. -- yes and no. there are 25 companies. that does not include didi. we do not know the fee structure. we do not know the valuations, the exact amounts. much of that is not softbank's fault. our sources are telling us perhaps we will see more disclosure once the fund closes sometime in march. one thing of interest for people following this issue, the comment about the plan to see one or two, or several ipo's from the vision fund every year. that is something investors are looking out for. the impression, if softbank wants to be an investing company, they need to see some exits. pavel, let's talk about the swiss deal and softbank of they buying 1/3 company. why does it make sense for masayoshi son? pavel: as a discrete investment, there are many good reasons to put money in the company. apparently, swiss is one of the -- swiss re is one of the more innovative companies. from the point of view of an investment portfolio, someone wants you to believe there is an overarching strategy. they spent 50 minutes talking about their group strategy, the satellite operations. it is one of those puzzling things that always throws softbank's shareholders. definitely something we want better, howexplain this fits into the vision fund a structure. betty: thank you so much. let's get the first word news with courtney collins. >> house minority leader nancy pelosi says democrats in the chamber won't back the senate budget agreement without an agreement from paul ryan for an open debate on immigration. pelosi spoke for a record of eight hours, after talking about a deal for providing $300 billion in additional funding. the agreement should avert a friday government shutdown. >> this bill is the product of extensive negotiations among congressional leaders and the white house. no one would suggest it is perfect. but we worked hard to find common ground and stay focused. andt has been a painstaking months long process. it is required concession, sometimes painful, by both sides. but at the end of the day, i believe we have reached a budget deal that neither side loves, but both sides can be proud of. >> china's foreign exchange reserve rose for a 12th strength -- straight month. the stockpiles grew to $3.1 trillion, fractionally below estimates. moves to its strongest since 2016, shrugging off signals that appreciation should slow. oil extending its the klein after reporting the biggest loss in two months. thatiggers new worries supply will swamp demand again. day.mped 10.25 barrels a set to increase, opec and its allies may be forced to reconsider their self-imposed limit on production. group saidattled hna it is victim of a conspiracy against it and the government in beijing. hna chairman said reactionary forces both within china and overseas are trying to disrupt to the markets and support the communist party. hna has seen borrowing costs soar after spending tens of billions on foreign assets. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ tom: thank you. i had, looking to china's latest trade numbers. any positivity these nervous markets can hang their hats on? betty: and we discussed bond yields and their effect on the markets with tai hui. this is bloomberg. ♪ betty: this is "daybreak asia." i am betty liu in new york. tom: i am tom mackenzie in hong kong. talks aboutst little risk of recession and earnings expectations remain strong. this could be a buying opportunity. joining us now is tai hui. thank you for your time. we have heard cautious commentary from some of our guests come out some saying the volatility and concerns, the correction we saw on friday, that points to some risks we have not seen since 2008. how do you position from here? mr. tai hui: the difference between my view and your other guests, we are thinking long-term, the next six months or longer. we still see the global macro picture to be pretty constructive. even the fourth quarter earnings in the u.s., we still see improvement. i do agree volatility could stay with us longer in the coming days and weeks. at the same time, if my financial investment objective is the next six to 12 months or beyond, the macro bond is constructive. tom: volatility provides opportunity for stock pickers. mr. tai hui: absolutely. if you look at the volatility we have not had in 2017, it is very straightforward. now that volatility has picked up, there is more opportunity. with high volatility, you would expect it to pick up and contribute more, which will subtract earnings in the two quarters. tom: how much more can the fed stomach? how much more riling of the markets can they put up with? mr. tai hui: that is a good question. the market volatility we saw today was similar to 2015 august. it spread globally. some economies postponed. the question now becomes, if this continues the next two or three weeks, how will jay powell, the fed chair, react? or actually, the macro economy is fine [indiscernible] therefore we should continue with the rate hike. that will be a key factor to monitor over the next few weeks. it is not just in the u.s. central bank, but others, as well, including the bank of japan. is that position of shrugging off the market volatility? steel itselfle to against the that? how about the boj and how much they can ignore the volatility? mr. tai hui: probably in the best position to ignore volatility. inflation is slowly creeping up in europe, japan. it is still largely benign. those a central banks considered back and say, we have this qe program and will run at the next few quarters. we have a ways to go before raising interest rates. the u.s. rather than japan or the central bank. asian central banks, the nervousness will come from the dollar. the dollar will rebound and decrease pressure on asian currencies or em currencies. and they may have to pay more attention, as we saw yesterday. that does not seem to be the issue now. in your view, is this market on its last legs, this bull run in u.s. equities? mr. tai hui: not necessarily. in our view the u.s. economy has plenty of room to run. if you look back to history, markets do not decline or correct or go to bull market simply because of volatility. it needs to deteriorate, and so far we have seen no signs of that. tom: how do you think the pboc is reading this? will seeui: you management being taken up most seriously. we saw the chinese onshore market reacted with a two day time lag. they will be cautious. it is not the equity market per se. it is more to do with it the currency and a spike in bond use in the u.s. and how it could potentially impact on shore rates. there is a good short -- there is a good correlation. that will be one of the parities. tom: there have been questions about whether they will pour down capital controls. you imply there will be no rush to do that. mr. tai hui: in the short-term, there is no urgency for the pboc to unwind those controls. term, there is the desire to do so. but they will need a calm her water. -- calmer water. great to get your insights, as ever, tai hui, from jpmorgan asset. cautious, but says there are still opportunities in the equity markets, particularly the s&p 500, to the end of the year. get a roundup of stories you need to know in today's edition of the daybreak. bloomberg subscribers go to dayb on their terminals. it is all available -- also available in the mobile anywhere app. this is bloomberg. ♪ ♪ tom: welcome back. a quick check of the latest business flash headlines. deutsche bank plunged to the lowest after a crisis, and analyst downgrades. shares lost 11% since friday when the bank reported revenue at a seven-year low and declines in business at several units. they have struggled since agreeing a $7 billion deal with the u.s. department of justice 18 months ago. to pay $369 million to resolve claims of money laundered by mexican drug cartels. they were accused of conspiring to defraud the u.s. and obstruct law enforcement. millions of dollars of untraceable cash flow through rabobanks. beat estimates, with revenue of just over a billion dollars. that is driven by higher subscriber fees for its cable business, led by fox news. broadcast television is a problem, ratings for the fox network down 20% in prime time. broadcast will be the core of the business after disney buys of their film assets. you can find in-depth analysis and the days big newsmakers over bloomberg radio. tune in to daybreak asia at 7:00 hong kong. app,an download the bloomberg radio plus, or access it on bloombergradio.com. boyfriend image. we have more on that and china's numbers. this is bloomberg. ♪ ♪ tom: it is 8:30 in singapore, half an hour from the open of trading there. 33% jump inorted a fourth-quarter profit from a year earlier to read on the back of a strong performance in wealth management division. i am tom mackenzie in hong kong. betty: i am betty liu in new york. you are watching "daybreak asia ." >> a senior british official says china is wary of providing trade agreement until they see how brexit plays out. the u.k. hopes to negotiate a new deal with beijing during the two-year implementation period after march of 2019. they launched a review of their $77 billion trading relationship during theresa may's visit last week. ,> we asked members of the e.u. and we won't be able to implement any visit. the launch of the second chapter clearly endorsed by both sides. germany has agreed and outlined coalition giving chancellor merkel a fourth term. describesge report the arrangement as a new awakening for europe. already promised germany will take a leading role in europe. new research claims the u.k. will leave the european union as the slowest growing economy, even if they can says -- even if it keeps the same trading relationship after brexit. it grew to 1.4%. euro area economy will grow faster than anticipated, with growth more balanced than at any time since the financial crisis. the rbnz cap to rates at a record low and will stay there as growth and inflation slowed. capped the cash 1.75% and said it will remain accommodative. he said the bank should start raising the rates in the second quarter of next year. india has abank of neutral stance, holding its key rate at 6%. it also had a warning for the government about spending. last year's budget increased funding for world communities. communities. however, they warned it could stoke already high inflation. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ tom: courtney, thank you. let's check in on how the asian markets are shaping up. here is sophie kamaruddin. sophie: stocks are mixed, but we see losses ease in sydney. we are seeing gains of around 1% cannotl and it tokyo, we count our chickens before they hatch, following the turbulence on wall street. touch.lds picking up a we do have investors latching onto earnings today. on the back of company updates, firstly in tokyo, engineering rising, despite posting an annual loss. they're the best performer so far on the nikkei 225. i also want to highlight that among the worst performers in tokyo, which is not adding to much of a drag to the nikkei 225, this one falling a fifth day. to see what is falling in seoul, i want to show you engineering and construction. that stock is sliding amid a local reports. japanese stocks are a mixed bag. tokyo, -- may be giving up the bid for the company. the kospi on february 9. uber in sydney, we are seeing cap marks slating as -- sliding. net income of for the company fell. we are seeing copper miners under pressure in sydney as well. this following the drop in the red. overnight we had copper futures sliding to a december low. consider the broad it commodities complex, which has been under pressure, given the resurgence in the dollar. i want to highlight the kiwi, down 0.4%. continuing to slide following the rbnz's comments of this morning. thank you so much, sophie kamaruddin. let's focus in on yum china falling sharply after the company reported earnings. kfc,perators, pizza hut, taco bell, beat estimates by a penny. ramy inocencio digested these numbers at the wall. the bloomberg chart we need to know? >> i am digesting these numbers but a lot of people, a lot of investors are having stomach upset probably. take a look at the shares in after hour sherries. this is the after hours function on your bloomberg terminal. going into earnings after the 2% and thene up by the numbers of dropped and so did the share price. they settled down 3% in the past hour or so. as theyat the numbers dropped, they beat on revenue, eps, same-store sales, margins. they raised the number of retail outlets. pulledas one thing that everything down, and that is the u.s. tax charge from the tax overhaul of $160 million. the shortage was $.42 a share. a loss of $90 million is what they reported versus a $90 million surplus on the same quarter one year ago. we can see that reaction on the share price. we have to wait and see what happens tomorrow in normal trading. let's look at positivity. there was a lot of good news that came out of this fourth-quarter report. in the yellow, restaurant margins, orange, same-store sales. both of these beat estimates this fourth-quarter, they also beat what happened in the fourth quarter prior back in 2016. for restaurant margins, they were up by 11.3%. the quarter prior was 11%. 5%.-store sales was up by in 20, almost no growth whatsoever. -- in 20, almost no growth whatsoever. the number of locations around china have been growing, up by 12%. ever since yum china spun off from yum! brands in the first quarter of 2015. 8000is pushing almost the location mark. down by about 300 in the quarter prior. definitely rising ahead. when yum china did spin off from yum! brands, they said we could see 20,000 retail locations. to go. ways finally, to g #btv 5396. when they spun off, where were you, where was your money? if your money was in yum china, the white lines, you gained 83%. brands,t was in yum! you still got some back, about 20%. the after hours down 3%. less than 24 hours from now, we are expecting earnings for the most recent quarter from yum! brands. those are your four terminal charts as we digest and dissect yum china. tom: the buildup of stores in the impressive. coming up, year of increases for china's foreign reserves with a strengthening yuan and improving economic outlook, ahead of trade numbers out shortly. our guest joins us next with his outlook. this is bloomberg. ♪ ♪ tom: this is "daybreak asia." i am tom mackenzie in hong kong. betty: i am betty liu in new york. the yuan strengthened and economic outlook improved. pboc said the economic stockpile climbed to $3.1 trillion. enda curran has more. what else do you read into this 12 month rise? morning, betty. there is a good degree of good fortune. a lot of it is down to the weak dollar. in means of increases the value of all the other currencies in china's reserve holdings. it reflects aide, strong currency. no doubt china's economy is in a stronger place than it was a few years ago. enforced of those rules of moving money across the border. it is a mixture of tightness on the policy side, and good fortune in terms of the weak dollar. tom: where is the yuan likely to go in 2018+ does a get to a point when it becomes too strong for the pboc and they have to be concerned about exporters+ the manufacturing mix has changed somewhat. is a possibility they have to weigh? enda: there is a feeling they are ok with it. but if, as you say, we start to reach the point when experts are not cool and there is a sense -- there is a feeling there might be a temptation to weakness. truly it is out of their hands. it is down to u.s. policy and where the fed goes this year. it is down to inflation, the trump's administration's policies and the like. china has its own view where .hey want the yuan the truth, it is out of their control, and a lot goes to the u.s. dollar. tom: we bring you the chief chinese economist at standard chartered. he was formerly an economist at the pboc and joins us from shanghai. thank you for joining us on a day when we will get the trade data out of china. let's kick off with of the yuan. byre are you seeing the yuan the end of the year? how much pressure does this put on exports for china? since 2017 the pboc focused on a basket of currencies and the exchange rate of the renminbi against the u.s. dollar is more a function of the u.s. dollar weakness or strength. we see more room for u.s. dollar weakness as a result. as a result, the renminbi could appreciate more by the end of the year. our current forecast is, by the end of the year, the renminbi could reach 6.18. you are optimistic for the export picture for china. is that largely a demand story? enda: yes -- mr. ding shuang: yes. performance is likely to match the result of last year about 8% growth. mainly because of broad-based global recovery. but imports on the other hand, can decelerate quite significantly, because of lower import price inflation, as well as the slower growth of deleveraging. betty: where do you stand on inflation? do think there will be a surprise to the upside on inflation in china? mr. ding shuang: we look at the january number. dropnflation could significantly from the december level. mainly because of the pace. last year, the chinese new year fell in january. but that base effect could be reversed in february. there could be a strong pickup. but is more important to look beyond the short-term volatility. we expect annual inflation to rise this year. and it may surprise the market. forecast 2.7% cpi inflation averaged this year, up from 1.6%. the main drivers are normalization of food price, the pass through from the producer price, and service inflation. you mentioned earlier about the chinese currency and where you see it ending in 2018. i will relate that the capital outflows. you say the risk of that has receded and trade frictions have come to the forefront for risks to the chinese economy? mr. ding shuang: yes, indeed. the major risk to generating external demand is the possibility or escalation of friction with the u.s. is the the main reason bilateral imbalance with the u.s. actually widened in 2017. china's surplus with the u.s. increased by 9% to 278 billion u.s. dollars. it is hard for president trump to swallow because he promised to get tough on trade issues. could i ask you, given the strength of the reserves, do you think the authorities might start to ease off on capital controls at any point this year? mr. ding shuang: i think that could be the first response from the government. the government does not want a very strong currency against the market. a stronger appreciation could undermine china's export competitiveness. although i think the renminbi already appreciated a little i see very limited room for the renminbi to appreciate further against the market. the way to relieve appreciation pressure is to relax some capital control measures, including some measures introduced in the past one or two years. it is likely for the government and itx controls, increase the quota in the program. enda: when would that happen? it is a second half year of the story or near term, do you think? mr. ding shuang: it could happen anytime. we already see some measures introduced by the government, mostly related to the corporate sector, making it easier for corporate to invest abroad, for the multinational companies to move their renminbi funds across. as long as the renminbi expectation is to weigh and the foreign reserve remains strong, i would expect more measures coming out. tom: i want to pull it back to the trade question. we were speaking to richard burns, the trade representative for the u.k., when it comes to the relationship with china. he said the chinese are pretty optimistic, pretty keen to do some type of deal with the u.k. once we have exited the european union. listen to what he had to say. >> they recognize we are still members of the e.u. and we won't be able to implement any trade agreement until we have left the e.u.. the prime minister's visit with the second chapter of the golden very clearly endorsed by both sides, has put us in a place to do that. tom: any deal between the u.k. and china will be totally lopsided, isn't it? would say iang: i think there is a desire to reach an appeal from both sides. but from the china cited also wants to see what will come out from the budget negotiation. as i mentioned earlier, trade friction is a big risk as china would try to diversify its trade pattern. especially the destination for its exports. u.k., the european union, and other emerging market economies, are the markets china wants to explore. apart from a trade agreement, continues to push ahead with the belt and road initiative. we already see some progress in with somerade countries, away from developed economies. much, dingk you so shuang. enda curran,'s joining us on the trade numbers in china. we will delve into the murky web of global hacking, revealing the increasingly dominant role played by north korea. this is bloomberg. ♪ ♪ cyber investigators are increasingly blaming north korea for a wave of hack attacks across the globe to read pyongyang's prowess in this area almost as them oppressive as there nuclear threat. inside of the world of kim jong-un's cyber warriors, having spoken to a defector, the reporter of that story reporting from seoul. what does hacking mean for kim? what does he care about technology? >> a lot of people tend to think north korea is such a backwater that you would not expect any type of technology, but that is not true. it is true that internet access is very limited in north korea. regime excepts's a lot of things that would improve the productivity of the factories they run. so technology is very important. kim jong-un is personally a mac user. he is a big fan of apple products. i have spoken to defectors that officials carry around ipads in the offices. technology is important for north korea. they would not allow internet access enough so that you could filter through that. betty: that is an interesting revelation about them using apple products. what were some other revelations you found about these hackers in your reporting? sam: what i found is that kim hackers,as hundreds of at least, abroad, especially in china. what they would be doing is -- it meansmercial they would be opening up of this beta version of software, copy them, make replicas, that could be sold onto black market. -- black markets. are disrupting communications between the commercial software and service. the service would not be aware these replicas are hacked programs. android-apple applications, which is surprising. a lot of the apps we make may be used by north koreans, described as it chinese nationals or foreign nationals. there are a lot of misconceptions of the hacking capabilities of the north koreans. what are some of the key things we need to remember? what are the key points that stand out for you? most of the misperception about north korean hackers has to do with the fact we think these are really elite programmers enjoying the best of which is under the regime. but what i found is the opposite. they are living in pretty dire conditions. one of the hackers living in a chinese city actually died from a fever well working there. another person, while they woke up, there was a cockroach lodged in his ear. he had to get urgent medical attention. some people struggle to feed themselves. it is pretty tough for them and they have their families practically held as hostage from home. tom: that is interesting they are deployed to china. they obviously see these contradictions between what is happening in north korea and the realities of the world around them. how did a square that? they are not showered with riches. is this a fear factor? sam: it is true. families are held hostage back at home. they know what is going on outside in the outside world. there is a lot of freedom out there. they don't want to risk the safety of their families. they try to keep themselves from defecting. once in a while you will see one of them defecting because they seek freedom. kim, thank you very a thatn seoul, with story about north korea's hackers. that is it from "daybreak asia." market coverage continues with david and haidi. this is bloomberg. ♪ retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> markets show optimism after a technical indicator said the selloff had gone too far. making a comeback today. when you look at japanese stocks they are pushing the rebound into the second straight day. over inthat advance tokyo. when you look at the commodities space that will be interesting to watch. losses asg on to the record [indiscernible] concerned that supply will [inaudible] haidi: bitcoin regulation. would it be good or bad? we hr

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