Dent traders Risk Appetite ahead of the earnings season. That is the state of play for japanese equities, tracking the yen, 152 is the line for intervention but when we reach that point depends on the u. S. Inflation print. Stickier or hotter than expected. As we said, korea is shut, but australia is just starting to trade. Haidi staggered start to trading, 1 10 of 1 upside. Watching big miners as we see commodities getting that lift. Iron ore as well, that supportive rally headed for the biggest twoday rally in more than two years. Brighter consumption outlook boosting commodities sector. Aussie dollar is trading steady ahead of the u. S. Cpi print in focus. We have more moves when it comes to trading around the kiwi ahead of the rbn said decision. Not expecting much, but indicators suggest there could be hope in the markets that we see a pivoted. The aussie kiwi pair, number of numura is not confident that they will meet the dovish pricing that we see a. Watching crude, the other part of the commodities story under 90 a barrel, up one tent of 1 . Those today losses are being held by crude with a rise in u. S. Inventories. Of course, we are watching treasuries closely ahead of the key cpi report and we saw a rebound, treasuries rising as bonds are starting to spike when it comes to the expectations for the inflation print. Any resurgence that is seen as hotter than expected across assets, we could see sidelined treasury investors coming back into short positions and a spike in yields. Annabelle lets bring in daniel lam, head of equity strategy at Standard CharteredWealth Solutions. You are one of the people expecting inflation to come in hotter than expected. Daniel hotter, yes, we believe inflation might be affected by the healthy side of things and energy cost is costly, crude oil being where it is. Annabelle how does that affect your outlook for rate cuts in turn . Daniel still expecting three rate cuts, but now the line is shifting from two to three. Now it is two to three and that has indications on how you allocate within u. S. Equities, right . In quarter one we saw growth sectors powering ahead, but for the end of q1 you are seeing rotation to other sectors, especially energy. We upweighted u. S. Energy to overweight, a shortterm technical by, given that technical buy given that supply of oil is helping crude to go higher. Upside earnings risk is probable for u. S. Energy companies in this earnings season. Haidi how does the shifting allocation change your allocations within asia . Daniel well, in asia basically we like japan equities, but at this stage like what you said, the nikkei 225 is stalling at these kinds of levels, so in terms of sector preferences, you need to go for the domestics because there are concerns what if the yen strengthens . What if the fed does not want to cut as much as what people expect them to or if the boj looking at inflation data may look out doing more faster hikes, things like that. Yen strengthens is good for domestics. Annabelle what are your expectations going into earnings . Risk of disappointment given the optimism for japan . Daniel we see japan as a longterm story because wage growth is certainly strong and the fact that the boj exited the negative interestrate policy as a vote of confidence for the economy. Longterm is looking good, but shortterm, expectations is certainly high and so is for the u. S. Markets. So you can see there is shortterm pullback in the sectors that have been running and likely rotation within equities there. Haidi expectations have not been high in china, but we are starting to see maybe the start of more interest returning to the market. Would you be one of the people that think there are more opportunities now and some optimism . Daniel months ago when i was here i said china is not looking bad and i maintain that view, especially for state owned enterprises because the dividend yield is high and the government has made a kpi that they need to boost market capitalization. These are strong incentives to outperform and opportunities where we see in the china market and we continue to see that. Haidi daniel, were getting comments from bank of japan governor ueda talking about the need to watch out for fx. He expects financial conditions to stay accommodative, that the system is resilient, the trend will rise gradually and there is a moderate economic recovery with some weakness in parts of japan. So weve talked a little about japan in terms of market optimism that we have seen. What are the sectors that are not lower hanging fruit if the Economic Outlook remains mixed and the boj is not in any hurry to pick up momentum . Daniel well, basically, it is very much of the yen. So if the u. S. Fed is starting to pare back on rate cut expectations, the other side of the coin is the yen would be strengthening by definition. So if the boj is not in any hurry to hike, it would lessen pressure for the yen to go higher. So in this case i would concentrate on the domestics because the economy is looking pretty good versus the rest of the globe. So domestics stocks like banks, insurers, consumption stories, those are the sectors one would be looking for. If exporters are ok, you do not know when they yen will be strengthening. If they do strengthen it would hurt exporters so for the short term, the market is looking fine. Longerterm, they have more room. Annabelle one asset class that has not been moving in a Way Investors anticipated was gold and it is likely to track closely. At these levels do you want to buy gold . Daniel not here, but if it goes back to 2200 or 2100 level, it would be looking interesting. Right now there has been demand for chinese investors for gold because they are looking for alternative investments, but if you see Chinese Markets coming back in some sort of form they could be lessening upward pressure on gold a little bit. Haidi daniel lam, head of equity strategy at Standard CharteredWealth Solutions and we are 10 minutes into the session for tokyo trading. Korea is shut for public holiday. Stocks we are watching for chipmakers, intraday price for these names. Microsoft is investing almost 3 billion over two years to boost ai capacity. Those names are in the spotlight. Haidi coming up, we will hear why the bank of thailand should hold rates with inflation staying low. Of more on the outlook later this hour, but the japanese Prime Minister is urging businesses to boost tech investment in japan. More on his agenda. This is bloomberg. Haidi japanese Prime Minister kishida is making a pitch ahead of oneonone talks with joe biden. This bilateral summit is scheduled for overnight asia time, so what outcomes are we expecting and what are we expecting when it comes to deals and investment and trade . Isabel weve had a massive microsoft investment, 2. 9 billion dollars, a huge success on could she does kishidas balance sheet. Concerns on how united the two countries are on this issue, to have the two militaries work more closely together, for example. To set up a defense counsel, which will work on defense procurement and how it can be made more efficient. That could apply to things like patriot missiles, which are produced in japan, very expensively. Japan will pass on patriots to the u. S. , that is an expensive proposition. Something about Japanese Shipyard workers to repair u. S. Naval ships in japan. Knitting together the two sides in terms of the military and alliance aspect. Going back to business, there is a huge microsoft deal go ahead. Annabelle continue on the business side of things. Isabel we had kishida addressing Business Executives today in washington. One thing they talked about was lng. Japan is concerned about how sustainable it supply of lng will be from the u. S. , but the big element is the nippon steel deal and the message kishida wants to send is investment between our countries is healthy, beneficial. No need to fear it Japanese Company taking over a u. S. Company at this stage. Haidi the other elephant in the room and pretext is the risks posed by china and the philippines. There was a question we posed to ambassador rahm emmanuel, how do you expect them to position themselves in the South China Sea . Isabel that is very much still to be seen. Japan has been in a subtle way trying to build up defense ties with the philippines. It has passed on radar equipment, but at the same time, japan is the biggest trading partners still and it does not want to alienate its largest neighbor, so there will always be a fine balance for countries in this region. They cannot afford to cut off ties with china, but they have to show china that they mean business when it comes to territorial issues. Annabelle that was tokyo bureau chief Isabel Reynolds and one issue left off the official agenda is nippon steeles 14 billion dollar takeover bid for u. S. Steel. The biggest u. S. Steel union is doing everything to block the deal and has the backing of President Biden. That is the focus of todays big take and lets bring in our commodities reporter for more. It is rare to see union scolding so much sway in takeover deals, but why has this become so complicated . Martin it has become complicated, our story referred to it as a 14 billion firestorm. Politics in every direction, fairly straightforward transaction. Between two highly advanced steelmakers, one in japan and one in the u. S. , sharing technology. Nippon steel had promised not to make any cuts, not to make any layoffs, to invest 1 billion in new facilities. But the big problem is politics. It is a big year with elections coming up. The unions are very powerful in the u. S. Steel industry and in u. S. Steel. They want to make absolutely sure that nippon steel is going to protect their members and not just jobs, but retirement plans, benefits. They want to make sure nippon steel is keeping the facilities that have been under pressure over recent years in certain key states and one of them is pennsylvania, a key swing state. Now joe biden has come out and said he does not want u. S. Steel owned by a foreign company, that is the position now. A lot between the unions and nippon steel, a potential rival bid from another u. S. Company for u. S. Steel, so this has become a complex situation in the middle of an Election Year. Haidi it is the middle of an Election Year. Can the deal go ahead despite President Bidens intervention and domestic political noise . Martin when i first saw what joe biden had said, i thought the deal was dead, but it seems like reporting coming out from the u. S. Is just kicking the can down the road beyond the election. People seem to be suggesting that the deal can go ahead in some form. The nippon steel deal, there are three outcomes. Nippon steel can get this to go ahead, maybe after a lot of legal work. Secondly, the rival takeover bid can go ahead, but there are complications as well that would create a powerful domestic u. S. Steel company owning 100 of iron or production in the u. S. And the deal might just fall apart. It does look like this is an issue for 20 25, postelection and once we see whether it is joe biden or donald trump in the white house they will return to it. Haidi this is one of the items that has been left off the official agenda with President Biden and kishida meeting. What sort of signal does this send and could it be problematic for relations between washington and tokyo . Martin i think our colleague on before me referred to this as the elephant in the room for this meeting between kishida and biden. I do think they will try to set this aside, possibly on the japanese side they understand why this is complicated. In an Election Year for joe biden, they understand why he has come out and said this. But hey look strange when japan and the u. S. Are supposed to be close allies and yet you have a deal involving japans best known companies referred to the National Security board for investigation, that is a problem and kishida might erase that, but it is part of a bigger picture, so it is not going to derail the relationship. Haidi commodities reporter martin ritchie. Read the full story on todays big take on the terminal for bloomberg. Com. More to come on daybreak asia. This is bloomberg. Annabelle taking a look at how commodities are faring, brent crude and wti are range bound. A little weakness in the prior session, given we had an Oil Inventory report showing rising u. S. Stockpiles. Opec and iea will release their report this week which will give us a sense of supply and demand pressures this year. Iron is one to track, it is on a tear this week. That has given optimism around chinas outlook demand. Closer to the 110 level given that we were below the hundred dollar level a few days ago. Gold to track given we saw a fresh record high overnight. Speaking with daniel lam from Standard Chartered weld solutions saying you do not want to buy in at these levels, but weve seen a lot of buying from china in particular. Lets stick with china for the latest developments we are tracking. Beijing and russia have agreed to start a dialogue on Eurasian Security with the aim of counteracting the european Atlantic Alliance led by the u. S. Russias performance minister told a News Conference in beijing that the two nations would begin a dialogue and seek other likeminded countries to join. Beijing and moscow have intensified their Partnership Since the invasion of ukraine. China is sending its highest level delegation to north korea in nearly five years. The third Ranking Member of the politburo will lead to the three day trip starting thursday. China has been north koreas largest benefactor but kim jonguns regime is receiving massive aid from russia in exchange for transfers of weapons for the war on ukraine. Haidi another story we are following, a source says three people have been killed after an explosion at a power plant in northern italy. Enel says a fire hit a transformer, but they did not provide details on casualties. They shut the plant down, local power supply was not affected. Taking a look at how european futures are opening, caution as we get closer to the release of the key u. S. Inflation print. We have seen weakness in the previous session for european stocks, but more optimism in the session. Euro stoxx 50 futures up by 4 10 of 1 in a positive open for german dax futures. Tuesday was marked by stocks falling as there were doubts on how many rate cuts we could see and that inflation print curbing risk sentiment across global markets. Watching any moves in the dollar following the inflation print. Coming up, turning more bullish on chinas recovery. This is bloomberg. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Haidi Bloomberg Opinion columnist mohammed expects the fed will use Monetary Policy less in the coming months. Theyve doubled down on the wait and see approach and need further evidence inflation is slowing. Chair powell has made it clear he is willing to look through these bumps. To use his phrase, the inflation story has not changed, so they will need overwhelming evidence that it is more than a bump in order to change their views. You think they are too sensitive to recent data and not strategic enough. What do you mean . Mohammed you talked in the last hour about business confidence. There are reasons to believe the economy remains slow. If you are setting policy according to the lags with which the policy operates, you would be more dovish than otherwise. If however, you focus exclusively on the data, you would be to hawkish. You talk about Small Business optimism. It came at the lowest level since december of 2012. It is hard to read gauges because we get people saying they are broken. How important is this in contrast with the bullishness that we keep hearing . Mohammed this is important. The big mistake when people embraced the transitory narrative as they did not listen to the companies. Companies were clearly saying we have in flesh inflationary pressures, we have pricing power. We are going to price in the imported inflation. This time, listen to the earnings call, they are worried about the outlook. You need to listen to them because aggregate data does not capture what businesses are feeling on the ground. Annabelle that was Bloomberg Opinion columnist mohammed el erian. Speaking with our colleagues. Keeping our eyes on what treasuries are doing in particular, we saw a retreat come through for yields, but there is a big focus on the u. S. Inflation print and if it will come in a hotter than expected, what that will mean for the outlook of ed cuts this year . Two or three priced in at this point in time. Stocks in trade, half an hour into the trading session for japan and australia and korea are shut for a public holiday. A little caution prevailing. It is shut for public holiday. But no real relevant Economic Data on the schedule except positioning ahead of the u. S. Inflation print. If you bring up the terminal chart, emerging market stocks, we have been tracking the rise in their trading at the highest level since june of 2022. The rally was helped along by a jump in tsmc hitting a fresh record high given Government Investment in the u. S. Risk appetite broadleaved for emerging markets is helped by the recent data from th