Month. World coverage on daybreak asia. We will be live in tokyo with Rex Tillersons tour of asia and beijing. Movedl analyze the pbocs to raise rates. Plus, we will be breaking down president trumps first budget. Republicans and not happy about it, either. This is bloomberg daybreak asia, i am betty liu in new york. It is just after 7 00 p. M. It is just after 7 00 a. M. Here in hong kong. I am in a man. What a week. At the central bank meetings, budget proposals, and a wild ride in oil. It is looking to be calm, so to speak. Betty calm or even a little bit of a dud right now in the u. S. It has people wondering, what is next . Where do we go next in the markets . A little indication, stocks are slightly slower in asia. How are we shaping up . Yvonne post said it is a risk on, risk off feel two things. Lets see how things are starting off. Yields in the 10 year, the u. S. Leading declines. Index, more positivity, up 1 5 of 1 . We did get those pmi numbers out that were showing a rebound. We are seeing the kiwi dollar unchanged right now. Australia, the aussie watching a downward trend since a wild jobs report. If things have stabilized. Stocks slow at the open. To japan, this is how we are looking. Looks like we could be seeing a bit of softness here today. 113. 36. That weakness will not help in tokyo today. It could be a lower open. That is the level in the region. We have seen a stall in the market after the fed. Betty we did, but it is hard to read too much into it. Investors are digesting what this means next and where weight where rates will go next. We have a peek of the investor psychology. Investors taking a breather after the date rally wednesday when the fed raised rates, more dovish than investors had been expecting. Markets finished unchanged. The dow and s p 500 down, the nasdaq up slightly. Lets see the rally after the election. Lets dive into the bloomberg. Dow, s p 500, and nasdaq after the election. The dow is on top and it is up more than 14 . The second point to be made, in november when the fed did not raise rates, stocks were sold out. Perhaps we are seeing another stall here. But in that uptrend. This looks healthy for stocks. A biggerdid see reversal on the day was the bond market. We had a 10 year yield back up a little. It dropped 11 basis points. Haven bonds rallied. That dovish messaging from the fed. Today, investors reconsidered and we see the 10 year yield up in red. Those bonds are selling off. Indecisiveness and choppiness, digesting these different moves. A dramaticreally was drop down on those yields. Banks were down yesterday. What happened today . Banks today, not surprisingly as rates act up five basis points, banks rally. The s p 500 Financial Sector at fargo, wells jpmorgan, morgan stanley, goldman sachs. Only time will tell. As for some stocks that were on the move today within the health care sector, this is one of the worst sectors. Nasdaq down more than 1 . It dragged down by the biotech are concerneds about one of the key drugs. Plus, illumina, a key drag around president Donald Trumps budget for the Life Sciences company. There were some winners in the australia our hour. 20, downng below more than 30 from its high in the short trading life, that hot ipo of the year. Can they meet those revenue productions of 1 billion for this year . Plus, there are more than five analysts to recommend selling shares of the snap. Snap not getting a huge break after that huge pop on its ipo. Yvonne abigail doolittle, thank you for joining us from new york to read we have first word news with courtney collins. Arabia says opec and its allies are prepared to extend production cuts beyond june if global inventories remain high. The Energy Minister told bloomberg it is excessive and the markets are not confident they will fall, the curve could be sustained. They will decide whether to continue the restrictions aimed at ending the global oil glut. They have been cooperating. Ith us quite nicely we are satisfied that we are on track. There are fluctuations in price. Trumps first budget aces little chance of being protected. He wants to boost defense spending. Senator john mccain saying it cannot be passed. No president in recent memory has proposed such austerity to nondefense programs with cuts before inflation averaging 10 . Chinas secondlargest insurer says the mounting cost of shortterm debt may rein in a spree a borrowing spree by banks. They are now more expensive in shortterm commercial paper, making it unsustainable for the lenders. Help were introduced to Smaller Banks compete but have morphed into a risky refinancing tool. Indonesia is a central bank kept benchmark Interest Rates unchanged at 4. 75 . There is a threat of outflows following the hike. Sayinging cycle is over, the key rate is low enough and supportive of Economic Growth. Raised sixte was times last year, most recently in october. The brexit bill has become law, allowing theresa mays government to trigger the process to take the u. K. Out of the european union. The lord of commons says it passed after receiving the royal assent. Invoke article 50 of the lisbon treaty. She is aiming to do that this month. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am courtney collins, this is bloomberg. Secretary of state Rex Tillerson says it is time for a new approach to north korea and its nuclear ambitions. We are following tillerson on his short tour of asia. He joins us now from tokyo. It was interesting to hear from the secretary of state, saying they have no need to fear the u. S. A cryptic message. Any clues to what this new approach might be for north korea . Good question. It let me give you the good and the bad for Rex Tillerson here in tokyo. The good thing is, we heard from Rex Tillerson. In the six weeks since his confirmation an appointment as u. S. Secretary of state he has not spoken to the press. He only brought one reporter day reporter with him to tokyo from washington. We have not heard much from him other than what donald trump has ran out on his agenda. We heard from him yesterday he had a joint press conference. The bad side of it is, there were no specifics. He said 20 years of diplomacy with north korea has failed. He says there needs to be a new and different approach to north korea. But, he declined to answer a question about what those new or different approaches might be. So we are left to guess. Is he going to go Madeleine Albright and visit north korea . I doubt that. Will he get more hawkish militarily with north korea . He says china needs to come on board and be a stronger player in reining in north korea. We are left guessing even more. Areor the fear factor, you right, lets hear from Rex Tillerson when he appealed directly to the north korea people. North korea and its people need not fear the United States or their neighbors in the region who seek only to live in peace with north korea. With a this in mind, the United States called on north korea to abandon its Nuclear Ballistic missile programs and refrain from any further provocations. Outsiderday when i was the guesthouse reporting on this ,rip, we talked about a protest american protesters protesting the trump administration. Yesterday we had a nationalist, japanese protesters welcoming Rex Tillerson with loudspeakers and megaphones, saying the u. S. Secretary of state and his approach to this part of the world and north asia is quite welcome. I think we have some video you can roll that. Certainly a delicate balance for him. But there is the hard part. He heads to seoul today and beijing tomorrow. He stops inight, japan first, shores of that relationship with the biggest and best ally in north in asia. I believe he will go to the Demilitarized Zone and then on to beijing. Role. Ked about beijings beijing wants the status quo. Here is what Rex Tillerson had to say about chinas role. We look to china to fulfill its obligations and fulfill the sanctions in the u. N. Resolutions. We will be having discussions with china as to further actions we believe they might consider taking that would be helpful to bring north korea to a different attitude about its future need for nuclear weapons. Again, no details of what that further action he would like to see from beijing. Perhaps we will find out more. Steve, thank you so much on Rex Tillerson strips are asia. The big test facing u. N. White chinas capital controls may be unsustainable. Plus, why oil prices driving equities may come to an end. We are counting down to asias first market trading but trading in sydney is already underway. Here, upening higher 1 10 of 1 . We are waiting for japan and korea to open in the next hour. This is daybreak asia, i am betty liu in new york. And i am yvonne man in hong kong. Fired quoting ethics. There were breaches at the Las Vegas Business that sells discounted it grew bonds. Failed leading to invest 3 million in the company in 2016. A deal worth 2 billion. The acquisition will see it at a number of products for safety divisions. Makes products from gas masks to post it notes and seeks to expand its business. They bought another safety unit for 2. 5 billion. Mcdonalds is blaming hackers for a tweet that attacked president trump. The message was posted as a personalto trumps response, saying he was a disgusting excuse for a president. It was shared hundreds of times before taken down. They are investigating. Got to be careful of those tweets. Our next guest says staying involved in u. S. Stocks, focus on liquid large caps. Lets bring in this chief market strategist. What did you read into . I know we do not like to read into daytoday movements. But it seemed the market did not have a lot of conviction on this dovish fed outlook. What did you read into it . That is definitely the case. A nice pop yesterday, not much followthrough today. The stock market day of and day after a fed meeting, all the action for the market happens the day before and day of with only a little followthrough the day after. So it is holding to form. Betty so this is typical. Yes. Price stock and oil correlation. This is something that is a big focus for you. I want to pull up this chart that you looked at a little while ago. The contention is that correlation between stocks and oil is going to come to an end. Although it has been quite strong. Where do you see this . That is represented by the bottom chart. It has been picking up the past several months. Nicholas if you look back over the last 30 years there is not much of a relationship between oil and stocks. They tended to move independently. Over the past couple years with al imploding, there has been residual tale of that relationship. You see oil affect stocks to some degree. Oil has really come down and stocks have held pretty well. Both because of the speech with donald trump a week ago and yesterday with the fed. We will be clawing our way out. Betty how do know that is not temporary . Nicholas the longer term record indicates these assets are very different. They respond differently to supply and demand. Supply, usage and stocks for corporate earnings and Interest Rates. They should break apart to some degree. Oil was at 40. That correlation will skyrocket. Betty just within our range . If oil stays in range that correlation could break down . Nicholas yes, volatility matters. More volatility in oils, you will see it in stocks, no doubt about it. Yvonne you mentioned about correlations. Is because ofe it these correlations breaking down between sectors. We do see this correlations between sectors has dropped below a correlation between stocks. It is why we are seeing this money poured into these Broader Market etfs. Is it a stock pickers market . Mathematically. Of that is good news for stock pickers and active managers. It does have the effect of dampening volatility because with correlations so low one zags. Zigs and one thing please to have correlations of 60 , 70 , 80 . It is a false reading to say volatility is low. It is caused by less correlation among the sectors. Good for managers, but lulls us into complacency about volatility overall. Betty there is market complacency and centralbank decisions, budget proposals, oil going into different directions. But we still seek volatility at these lows. What will trigger that . Nicholas that is the tricky part of any trade, figuring out the catalyst for the markets come to your point of view. We are set up for more volatility. You all may have a couple days in the past 30 years when the vix has been below 10. Our valuations are at high levels, earning estimates coming down for the year. It is a question of what does the market wake up to . 500 hemes for the s p cuts the fed is raising rates higher, the catalyst is really tricky. Andould just be a change those things definitely do occur. Yvonne great to have you, have a great weekend. Coming up, after a flurry of centralbank activity we look at what else might be in store from Global Policymakers. Is daybreak asia, i am betty liu in new york. And i am yvonne man in hong kong. Leading the rate hike, investors wonder how much longer Central Banks can lag behind. Lets bring in our Global Economics and policy editor, kathleen hays. She has more now. What a busy week for you. Lets look at england, mired in exit uncertainty. A more hawkish tilt has emerged with that one defender yesterday. A little hawkish chirp, not that strong but it caught attention around the world. There were two bank of the bank of england policymakers dissenting. With stronger data or different conditions, maybe it could lean in that direction, as well. Overall, there was no change in the policy tools. A neutral stance on the economy. Dissent fromf this a Christian Forbes, one of the members of their Monetary Policy committee, and hints in the minutes, this could be possible white people got this sense. Boed other members of the follow Christian Forbes in this direction . I want to look at one thing to focus this discussion. She is looking at the expectation that inflation in the u. K. Could move above target. 4. Have a chart for you, 609 it shows you that cpi is close to the 2 target. We are showing that u. K. Wage growth is rising. This is interesting. You have the white line, the cpi moving up. Flat, theges moving average paycheck. The problem is, she figures it is moving so much in that way it will continue. Want to talk about now is the fact that Bloomberg Intelligence is saying the boe is mired in exit, that is the bottom line. They are not going to make any change in policy. Another point, it has happened in the past that when a bank of england policymaker is leaving, they get a little more out there, more extreme. Wasre the head left, he wishing for quantitative easing. People are taking this with a grain of salt. Nonetheless, an Interesting Development at the boe. Yvonne it looks like the fed is little leading the path for Interest Rates among foreign banks. Do the latest data, i know you have focused on. Does that support that . Kathleen we are watching day by day. Janet yellen is pointing to labor data in particular, suggesting the later market labor market has gotten tighter. The survey is not a front burner, maybe a middle burner number. Inshows job openings january. The quit rate is important. If i am confident in the labor market, willing to quit my job, that is a sign of strength. Rate hasow the quit moved up to a postrecession high. That is another powerful signal. Homes, homey building up the most since 2007. That is 10 years. Trump, confidence in the economy, confidence in jobs. You put it together, you can say that supports Janet Yellens argument and what the fed is doing. They can lead the rest of the world forward. We will later talk about things that are not following. Betty chinas balancing acts. How policymakers double rising debts and the declining yuan. Happy friday, looking cloudy out there. 7 30 a. M. In hong kong. 30 minutes away from asias first market open. We are finally clearing ourselves of the snow. Beautiful evening in new york, still frigid, though. Markets did close lower. I am betty liu in new york. In hongi am yvonne man kong. You are watching daybreak asia. First word news with courtney collins. Secretary of state Rex Tillerson called for a new approach to north korea. Speaking in tokyo he said years pyongyangto persuade to abandon its Nuclear Program have failed. But said they should not fear the u. S. Or its allies. He is in south korea on friday before flying on to north koreas allied china this weekend. Ubs says the relief rally that swept across europe after the dutch election will not last because there is Political Uncertainty. The chairman says mark ruttes victory shows the center can hold but important elections will take place in france and germany. Is the brexit and the election of donald trump. Europe will be plagued by Political Uncertainty the entire year. Might come back is a problem over the summer. There was a Political Risk that might materialize in europe and the market will react with volatility and caution as these data points materialize. The investigation into corruption following airbus, joining a reddish inquiry. Fraud, bribery, corruption in the Aviation Business related to thirdparty consultants. Airbus says it is cooperating fully and expects extended guarantees to be restored. Barclay coming back. Areatlas Merchant Capital preparing to announce a deal for year year air brokerage. He wants a banking empire acros