Bloomberg Break of day: Asia 04/17/2024

This is DAYBREAK, Asia.We're counting down to Asia's major market opens.And Heidi, we have spoken so much this year and about this so-called last milefor disinflation. And now it seems like that's somethingthat's being acknowledged by the Fed chair, Jay Powell.Yeah, the stickiness of really very positive, robust labor market numbersand really broader equity numbers that we've seen from the US.Right. And in a sense that what Jay Powell saidovernight wasn't much of a surprise, but really got, I guess, adding more clarityto the willingness of the Fed to hold.

Rates, as he says, as long as they needto be at these levels to combat inflation.So we are seeing, of course, a big reaction across global bonds in the USdollar, and that's passing through to Asian effects in particular today.Yeah, absolutely. We've been tracking that Japanese yenvery closely here, very close as well to that 155 mark.A lot of different analysts in the market.Bank of America, for instance, among those saying that 160, that's the newline in the sand that you want to be watching out for.We do often look for any sort of.

Jawboning at this time of the day.But no lines as yet on that. But certainly we know that Japanesegovernment officials are watching these levels very closely.And indeed, we actually heard from the finance ministers of both South Koreaand Japan saying that they are seeing some serious or sharing their seriousconcerns about the weakening of their local currencies.But weaker yen, it's a dynamic that we know has been assisting or aidingJapanese exporters in particular. And today you're actually seeingJapanese equities a little bit higher to the open, a bit of a stand out becauseperhaps most other markets could trade.

In the red so far today, given as wellwhat we had in the US session overnight. But today we are seeing Japan justmoving a little bit higher. Echo data to note as well because weactually just had March exports data and again the numbers from Japan a littlebit better than expected here. So right here, 7.3% on the year, betterthan what economists had been expecting. So that's the state of play there.Let's switch on and take a look at what's happening in Korea so far as wecome online. Again, actually, Korea is a little bithigher here. It's interesting because growth stocksor tech stocks in particular were the.

Key focus in the US session overnighttoday. You're seeing that caused tech indexactually outpacing some of the broader gains that we're seeing for the Cosby sofar. But it is still that story again, thatfocus on the local currency. Again, just a little bit of weakness ofthe of the of the dollar. But, Heidi, put it in context.I mean, we've just seen the best five day run for the greenback going back to2022. Yep.And sort of the broader direction. Right.Potentially getting a little bit.

Concerning in particular, some of theseemerging market Asian currencies plus a yen to seeing further sustained weaknessthere. Potentially 160 is a level to watch ifwe see that Korean and Japanese finance sharing their concerns on theirweakening respective currencies. Take a look at just the start of thetrading session here in Sydney. We're pretty flat at the moment.What do in particular some of the mining names and we're watching with the sortof lending given to some critical mineral firms that could see a reactionacross those names. We're also hearing from the copper bossfor Rio Tinto, talking about building.

Mines being better than buy.So watching that across the mining and minerals space when it comes toAustralian bonds, of course, also seeing potentially really that follow throughas we see US yield sitting still at 2024 highs.And we're also seeing across a short end in particular that two year climbingpast 5% for the highest since November, the Aussie dollar actually holdingpretty well perhaps on sort of some of the resilience that we see across thecommodities complex. 6413 is we we're trading in oilunchanged, pretty steady at the moment. These Middle East tensions and the Fedoutlook continuing to be in focus.

And take a look at Treasuries.And of course, this was really the big play and we'll continue to see thatreverberation across Asian and global bond markets.Take a listen to what we heard overnight.We'll need greater confidence that inflation is moving sustainably toward2%. The recent data have clearly not givenus greater confidence and instead indicate that it's likely to take longerthan expected to achieve that confidence.Right now, given the strength of the labor market and progress on inflationso far, it's appropriate to allow.

Restrictive policy further time to workand let the data and the evolving outlook guide us.The performance of the US economy over the past year has really been quitestrong. Come what may, we remain stronglycommitted to returning inflation over time sustainably to 2%.Histrionics. Guess Heavenly is a senior macrostrategist at Lombardo ADR and Home, and you've pulled back when it comes toeasing expectations from full rate cuts expected this year to three.Did the commentary last night sort of meaningfully change the outlook for you?We maintain our base case, despite Chair.

Powell's comments last night.Certainly the first three months of the year, we have seen a fairly significantpositive surprises on growth and inflation, and that's going to make theFed slightly uncomfortable with a potential the start of the easing cyclein, say, June. So so that's certainly going to be amore borderline call here at this juncture in our view.But if you think about the broader macroeconomic context, wage growth isnot accelerating, possibly due to changes in the labourmarket and the economies outside the US. They're certainly seeing a continueddisinflation, especially in China, where.

We continue to have a very low inflationand certainly the country is still trying to maintain or even gain marketshare with low prices. So in that kind of context, we stillthink it's quite likely that we'll see additional 30 to 60 basis point declinein the core PC measure in next 12 months.And I think that's a good enough context for the Fed to start cutting.This is something that the median dot in the FOMC projections shows despite therise in GDP forecast and inflation, still the the median that looks forthose three cuts. So our base case remains to be cut.We wouldn't be terribly surprised if.

They reduce it to two.But that's not our base case at this juncture.How much further to go for the US dollar rally?I know that you're overweight when it comes to the greenback.Well, we have to acknowledge that in the near-term the dollar will continue to bethe outperformer, especially against the other reserve currencies, especially theEuropean currencies, that the economy is doing pretty well.The GDP growth performance and the inflation outlookdefinitely have diverged quite substantially in the past few months.So in our view, it's quite likely that.

The European Central Bank and the theBank of England will actually do a little more in terms of rate cuts thisyear compared to the Fed, and they'll also likely move slightly ahead of theFed in starting the easing cycle. So against that backdrop, we think it'squite likely that at least in the in the next few months, the dollar continues toreceive a bit of support against the other currencies and certainly a trickygeopolitical backdrop which tends to boost energy prices, which, by the way,is rather helpful for the US compared to the other developed markets.There will also be another factor driving the currency higher.So in the near term we are we're.

Positive on the dollar.And the flip side of that, of course, as you said, is weakness we see in othercurrencies. But the Japanese yen is really standingout very close to 155 at this point. Is that still the level that you'retracking for intervention? So the you know, we in the market, youknow, basically moving the goalposts around.And I have to acknowledge that, you know, we don't even have a pretty firmconsensus on what what the trigger is for the Japanese finance Ministry tointervene in the foreign currency market.You know, despite the slightly mixed.

Language from finance ministry, we wethink the recent, you know, rhetoric from finance ministry and also themeeting that it held with the BOJ and FSA suggests that that we're prettyclose to an intervention. We wouldn't rule out, you know, 155 forItalian to be the trigger for the markets, especially because porusunhappy with the currency weakness. And you know, potentially the recentmove is a bit excessive compared to the underlying fundamentals for the economy.So we we think it's possible that the Finance Ministry tries to intervene whenthe currency, the pair that daily yen punctures through 155.You know, if it goes further from there,.

It's certainly start effecting theinflation outlook for Japan. And this is something this is an anglethat BOJ Governor Ueda has been highlighting in his recent speeches.So our view is we're pretty close to the intervention level.We don't rule out 155 as the trigger, but maybe the weakness in the currencymight be slightly on the excessive side. Let's speak about inflation.HEDGES Because you mentioned commodities earlier, and gold is really standing outthis year with that run up that we've seen.Would you still find it attractive at these levels?And if so, how are you looking to play.

It as well, getting exposure to it?So in our portfolios, we do have strategic asset allocation to gold andwe have benefited from that position this year.We think, you know, the gold prices have actually detached quite a bit from realrate in the US potentially due to the hedge fund positioning on the preciousmetal on top of, you know, aggressive buying from some emerging marketincluding China. So you know, that divergence is a bittricky from our perspective. So we're not chasing this at thisjuncture, but we do have that position in the portfolio.And if the price corrects a little bit a.

Little further from here without any ofthe geopolitical risk being resolved, then we're certainly be bias to consideradding the metal to the portfolio. But currently we are more neutralagainst our benchmark. But we do have that 2 to 3% exposure inour balanced portfolios. All right.Herman Lay, the senior macro strategist at Lombard.Thanks so much for your time this morning.And still ahead this hour, we discuss the upcoming Bitcoin, halving withemergent digital asset Insights. Hey, why they think the event is alreadywell priced in?.

As we say, Bitcoin trading back towardthis year's highs. But first, the latest on the Germanchancellor's China visit as Beijing pushes back against pressure to rein inhis country's powerhouse industries. Details next.This is Bloomberg. The International Monetary Fund hasinched up its expectations for global economic growth this year.It now sees output expanding 3.2% worldwide.The fund's latest World Economic Outlook report cites strength in the US and someemerging markets, while warning the outlook remains cautious amid persistentinflation and geopolitical risks.

Plus, it's urging China to find ways tooffset headwinds from its property crisis, with an economy that is that haspotentially still relatively weak domestic demand.But is is is growing. Then there will be an increased relianceon on the export sector. And that is something that in thecontext of very tight trade tensions could be complicated.And so certainly that would be, you know, in the interest of the Chineseeconomy to develop ways of sustaining domestic domestic demand.And Chinese leader Xi Jinping has told German Chancellor Olaf Scholz that asurge in China's China's clean tech.

Exports has helped cool inflation.His comments suggest Beijing may not be swayed by European and US pressure torein in China's manufacturing capacity. Greater China editor Jenny Marsh is withus. And Jenny, I mean, we just heard it fromthe IMF there, that pressure that we're seeing in in China's domestic economy,its reliance on exports, there have been a sense perhaps that Beijing would sortof be a bit more amenable or a willing to absorb this message from the from theUS, from Germany. But it doesn't appear to be the case,perhaps. Absolutely.I mean, President Xi Jinping came out.

Yesterday very strongly defendingChina's industrial policy, framing it as a good for the world in two ways.One, cheap Chinese exports are easing inflationary pressures, which have beena problem for the US and Europe. And also, you know, China's advancementin these sectors is a good thing for sort of a country's efforts todecarbonize. So he certainly showed no sign of sortof relenting. But also, he doesn't really have a lotof space. Do you know, as you just mentioned, thedomestic demand in the Chinese economy is still very weak.We saw that in quarterly data that was.

Released yesterday.You know, consumers still really just spending more of the daily essentialsand not sort of spending on eating out and, you know, other things that wouldbuoy the economy more. And also, you know, the trade policiesof the US have sort of pushed China back to this need to manufacture.You know, President Biden has been sort of kneecapping China's access to hightech chips, imposing tariffs on other parts of the US economy.So it's really sort of double down on President Xi Jinping, need to make surethat the domestic manufacturing industry is able to provide China with the hightech equipment that it needs.

So there's very little space for she topivot, even if he wanted to. Teddy was much space in talking aboutthe geopolitical situation when it comes to China's relationship with Russia andwhat potentially Beijing can do in terms of pushing for what it calls it wantsthe restoration of peace. I think China's position on this is verysteadfast and been clear all along. You know, they're a big backer ofRussia, but they say they will engage with peace talks only if both sides areat the table essentially saying I. Schultz is trying to really push push tosort of use his influence with Putin, who is reported to be coming to Beijingin May to try and bring some sort of.

Peaceful resolution to this.But, you know, there's only so much she can or is willing to do.Having said that, we did see in China's March export data a pullback fromRussia. So exports slump for the first timesince March 2022. So that kind of shows that maybe there'ssome sort of moderation in the economic engagement.You know, I think one thing for China's always been they don't want to cross redlines that would lead to sanctions or their own economy.So they're taking a very sort of careful game.And, you know, when Yellen came to China.

Early this month, she warned again, youknow, that if Chinese banks were seen to be helping Russia's war machine, theycould face sanctions. And that's certainly something thatBeijing will be careful to avoid. Credit, China editor Jenni Marsh withus. Meanwhile, China's position in the SouthPacific could hinge on elections today in the Solomon Islands.Polls opened a couple of hours ago. Results are being closely monitored inWashington, Beijing and Canberra. A government reporter, Ben Scott, joinsus now for more. And then, what are we expecting and whythere's so many international eyes on.

This election?Yeah, you're exactly right. So the polls opened this morning atabout 7 a.m. in the Solomon Islands and they expectedto close about 4 p.m., but we're not expecting a result today.First of all, the votes to be counted from across all the different islands,more than 90 islands in the Solomon Islands.And then after that they need to all the lawmakers need to meet in the capital,Honiara, where they will hammer out who exactly is going to be the PrimeMinister. Now the current Prime Minister isnecessary.

Guevarra And he has moved his country alot closer to the Chinese government. It was under him that Solomon Islands,which is recognition from Taiwan to China, is diplomatic recognition.And then in 2022 he famously announced that China, that phone islands, hadsigned a security pact with China, which set off alarm bells from Washington toCanberra and led to a massive diplomatic outreach.Now, if he wins another term in office, you would be expecting the SolomonIslands to move closer to China once again in forms of business, in forms ofsecurity. However, if he is denied a second termsorry, it would actually be his fifth.

Term as Prime Minister, but his secondconsecutive term then he would be given. Then the successor would almostcertainly want to re-evaluate those ties.One potential candidate has even suggested that relations with Taiwanmight resume under his government. So a lot at stake here.Yes, certainly a lot at stake just to get through some of the otherinternational outcomes we can expect. And also whether this was a sort ofrelationship that it was. There was a perception, at least inAustralia, perhaps, that it had been ignored, you know, from from Australiaand others in this region.

Is there a window for for other Westerndemocratic powers to re-establish some sort of ties?Do you think? Look, it all depends on who is the PrimeMinister. Later this month, after the announcementof the after the outcome of the election is known.So under Sogavare, he has been a very clever leader of the Solomon Islandsusing that sort of strategic position as new geopolitical importance to getoutcomes for it. You know, he has been invited to theWhite House twice, something that previous leaders at the Solomon Islandscan't really say has happened for them.

And top of that, he's been courted byChina. He's been courted by Australia, and thathas led to millions of dollars and support for his government and for hiscountry. Now, if he was to leave power, certainlythere'd be a big push by Australia and the US to embrace the Solomon Islandsand pull it back towards those historic links that it has that go back to WorldWar Two. However, his successor would be courtedvery energetically by the Chinese government.The Solomon Islands is effectively China's closest ally in the Pacific andthey wouldn't want to lose that.

Whether the Prime Minister is Sogavare,any kind of lawyer or Matthew Whaling. Right.And as you said, Ben, we'll be watching for the outcome of that vote.Voting. Count that vote count, rather.But that was our government reporter Ben Westcott in Canberra.And let's turn now to the conflict in the Middle East and the US is going tobe imposing new sanctions on Iran targeting its missile and drone programfollowing the weekend attack on Israel. White House national security adviserJake Sullivan says the sanctions could be unveiled in the coming days and theUS is coordinating with G7 nations and.

Allies on what it calls a comprehensiveresponse. New Zealand's Prime Minister ChristopherLuxon, has added his voice to the international calls for restraintfollowing that attack from Iran on Israel.He told us his government continues to call for negotiations and an immediatehumanitarian ceasefire in Gaza. I think we join with the rest of theinternational community. We are concerned and what we don't wantto see is we want to see don't want to see the escalation of conflict in theregion. It's the last thing the region needs.We want to see people showing restraint.

And most importantly, we need theparties and the sides to get round the negotiating table and to commence theMiddle East peace process. Ultimately, with a vision of deliveringa two state solution. So that's a longstanding position ofours. And we've been calling consistently foran immediate humanitarian ceasefire and a cessation of hostilities.Do you condemn Iran for the attack? Do you condemn Israel?Well, we condemn and we condemn Iran for the attack.I mean, it was unprecedented in terms of what we've seen in the region.But what's important now is that.

Actually all parties show restraint sothat actually the region can get back into a process that's important.What are you most concerned about if there is an escalation?Is it to do with perhaps impact on supply chains as well as the globaleconomy? Well, I mean, to be honest, our primarythought is actually with the suffering and the pain and suffering of the peoplein the region. You know, it's been a region that's gonethrough a tremendous amount. And we've seen the conflict in Israel,Gaza. We think about the suffering of peopleon on, you know, in Palestine, but also.

In Israel as well.And it's something that we've, you know, we really want to see, you know,stability in the region because it's actually about people and it's abouttheir livelihoods and their lives. And it's been horrendously disrupted anda catastrophe. So we really want to make sure that weactually see peace breaking out in that region.Given rising geopolitical concerns, do you see a need for New Zealand torealign itself with traditional partners like the Western Wall, like the U.S.?How are you looking at it? Well, like I just say, you know, NewZealand is a country that, like many.

Other countries, has an independentforeign policy that acts in its own interests.What is very much in our interest is within the Indo-Pacific region to seestability and security, but also to see prosperity and peace break out.And so we know there's heightened tensions.There's certainly a lot more geopolitical competition in our part ofthe world now. But it's what's important for us is tomake sure that we build and deepen relationships with like minded countriesthat stand up for the values that we believe very strongly in, but equallythat we're able to work with all.

Countries across the region.That was New Zealand Prime Minister Christopher Luxon speaking with ourcolleague Haslinda Amin. And you can watch us live and catch upon past interviews and our interactive TV function.That's at we go. You can also dive into any of thesecurities or the Bloomberg functions that we talk about, plus become part ofthe conversation. You can send us instant messages duringour shows. This is the Bloomberg subscribers onlyto check it out at TV. Go.This is Bloomberg.

We should bearing major shocks ofsurprises. Decide on a first rate cut at our nextmeeting on June the sixth. I would then argue furthermore in favourof a policy of pragmatic and agile gradualism.There will have to be further cuts this year and next.This may be Governing Council member Francois Villeroy galore on the centralbank's rate outlook. Take a look at how European futures areopening and we are seeing, of course, some reaction across the Asian sessionwhen it comes to repricing over Fed Chair Jerome Powell, hiscomments over rates being held as long.

As necessary at these levels.We did see European stocks really sinking in the worst day since July.These right fears, the war fears, quite frankly, as well.At play here. We are seeing potentially a little bitof a recovery in sentiment. Euro stoxx 50 futures up by about half apercent. And german dax futures looking mildlypositive there as well. But really that biggest one day declinefor the Europe 600 index since July with mining and banks potentially recoveringtoday. All right.Just taking a look at some lines that.

Are crossing the terminal here.Singapore is pushing out its non oil on non-oil exports, rather, for the monthof March. You can see they've actually fallenquite substantially passport economists had been expecting.So a drop there of 20.7% on a year that was far greater than the analysts oreconomists rather had been expecting for a contraction of 7.4% instead as well.On the month, we've seen a drop of 8.4%, that's roughly double again whateconomists had been predicting. Electronics, we've seen weakness thereas well. The down 9.4% year on year.So not great export numbers coming.

Through from Singapore there, Heidi.Singapore dollar trading fairly steady at this point in time.Yeah, we are seeing kind of that broad downside across major markets that aretrading at the moment about Australia kind of just keeping its head abovewater. We're seeing a little bit of leadershipthere from utilities, some of the oil and energy related names there as wellas we continue to see the demand side being supported by these Middle Easttensions. But the Nikkei 2 to 5 of about 3/10 of1%, that the divergence. Interestingly, even as we seepotentially Dalian approaching 155 160.

That level we're watching now butdivergence in terms of the beneficiary effect on Japanese stocks seems to beweakening. We could see that widened further shouldthe yen keep weakening amid these ongoing Middle East tensions.And of course, perhaps more importantly, the ongoing strength that we see in theUS dollar. The cost is up about 3/10 of 1% there.We've seen the decline in the one in particular playing into some of theseauto bets, but the cost of causing a little bit of a bounce back, it did seethe biggest decline in about five months in the previous session.So maybe just a little bit of.

Equilibrium.The Kiwi stocks looking pretty muted. We did get some weakness, in fact, quitea bit of volatility in the Kiwi dollar with the inflation number.Inflation slowing, the domestic price pressures aside continues to persistthere. So we could see sort of further ongoingdownside when it comes to the Kiwi dollar.And of course it is earnings season, particularly when it comes to the focuson banks in the US. Bank of America shares falling the mostin a year, reported elevated expenses and charge offs for bad loans.But it also did join the four other big.

US lenders in beating expectations fortrading revenue. It is a risk we feel it's bringing aBloomberg Intelligence senior industry analyst Matt Ingram for more so acrossthe board seemed pretty healthy. What really jumped out to you there?Could I Heidi look I think there's three things.As you just mentioned, trading was extremely strong.That was a mixed bag. Bank of America was pretty strong inequities. Goldman, as we saw yesterday, was verystrong in fixed income. But yeah, either both fixed income andequities or just fixed income.

I think that's on the back of reallystrong client volumes. We've now really well and truly movedpast the pandemic. Business activity is back to normal.I think questions about what the Fed's going to do this year are maybe startingto raise questions in the clients minds and therefore that's really keeping agood a good amount of activity in fixed income trading, particularly thathedging type trading. We also had commentary from both Bank ofAmerica and Jp morgan saying that client activity and investment activity inequities is really strong. As you also mentioned, investmentbanking, for me, that's the biggest.

Stand out, the biggest surprise on thisside of the pond. It's been extremely weak.Australian and Asian banks are really struggling in investment banking.But again, we're seeing really good deal flows are surprisingly most of allprobably in mergers and acquisitions. That's really healthy.The third one, and I think this is a good sign that the banks have broadentheir business models post the pandemic. That's the wealth management inflows.We've seen big wealth management inflows across the board.That's really high margin money. It's also really good for bank returns.So I think those are the three.

Standouts.Bank of America, obviously the impairment is what hit the stock today.That was a standout versus its other peers.Jp morgan rode back some money and their provisions last week.So I think those are the standouts. And that was saying the bank'sbenefiting from the Fed's hiking cycle. Do you see that outlook or that trendstaying intact or are we going to see it weakening instead?Goodbye, Annabel. Yeah.Look, our analyst in the US, Allison Williams, has made a good call on this.The.

The net interest income is still atreally close to record levels, but certainly the margins and the outlookare tapering. Now, again, what I said yesterday, thatcomes back to what the Fed does as to how much impact that has.But certainly we're expecting the peak in net interest income to be in therearview mirror. And the outlook from the banks iscertainly it's probably not going to be as good as it has been.But are we going to see the margin collapses that we've seen here inAustralia and for banks like HSBC potentially?Probably not.

The margin outlook in the US seems to bemuch stronger than it is over here. Has the diversification helped?Yeah, Heidi, absolutely. And look, I think something that cameout of the financial crisis was that you cannot run a business through the cyclewith trading and investment banking. They're very lumpy in terms of revenues.They're very capital intensive. And shareholders don't want that.They want a dividend. So the banks moved more towards lendingand more towards wealth management, which which I mentioned before.Those are by far more consistent through the cycle.But also wealth management really juices.

Returns and we saw that with Goldmanyesterday with that 15% return on equity.That's healthy for a business to generate through the cycle.So I think that diversification is coming to the fore now with goodrevenues across the board. They're going to be held up by wealthand lending. If those trading revenues drop off.All right, Matt, thanks so much for your time.That was at Bloomberg Intelligence. Senior industry analyst Matt Ingramthere. And we're going to have an exclusiveinterview with JPMorgan Chase CEO Jamie.

Dimon in the second season premiere ofThe Circuit with Emily Chang. You can see it here on BloombergTelevision at 6 p.m. Wednesday.That's New York time, 6 a.m. Thursday.If you're watching from Hong Kong. And some breaking news as well, justcrossing the terminal relating to the trading that we're seeing today over thesession, because we've actually had the Asian benchmark, the MSCI Asia PacificIndex erasing its year to date gain. So we're pretty muted so far in thesession, but certainly enough of a pullback over the last few days to bringus back down to to where we were really.

To start the year.It is really that repricing that we're seeing in terms of the outlook for theFed. It's been a really, really bigreadjustment around expectations given we earlier this year had seven cutspriced in. Now around that 2 to 3 point withindications bats will say none at all. And really the moves as well, there'shigher Treasury yields. But the PJM CEO, David Hunt, he actuallysees Bonds making a comeback in the next few years.He told us more about the factors behind a migration from money market funds toother assets.

You know, certainly at a higher level ofinterest rates relative to money market funds.And as we begin to see rates peak and then decline, duration begins to look alittle bit more, more attractive. But there are two other things that aregoing on which are at least as important.One is that the big pension funds with higher rates are actually better funded.And so they actually are using this as a chance to de-risk.And that means for them, they are moving money into fixed income.And the second is that, you know, we have the continued demographic trendsgoing on not just in this country, but.

Around the world.And retirees need income. So we are in the process now of thishuge shift from accumulation products to de cumulation and income products.And those need fixed income. So if you take the kind of short termshift, you add to them to structural shifts, we think over the next threeyears, we really are going to see bonds are back.This sounds like a new regime and I'm going to give your team a bit of a shoutout because you're a modest man. Mike Collins, Greg Peters, Robert SIPP,just absolutely phenomenal, pre-pandemic, really defining that bondmarket regime of yesteryear.

Can you talk to me about how differentthis regime is going to be compared to that?We think it will be different. And you're right, they were they wereright on the lower for longer for quite a long time in that.And then more recently, our call has actually been that we're going to behigher. So if you go back six months, we werevery early to the hey, we're looking at kind of two cuts for 424 when the marketwas pricing in seven. And we held with that view and themarkets kind of come back to us at this point.So we pride ourselves on taking, I.

Think, considered non consensus viewsthat are long term in nature rather than simply trading views.PJM CEO David Hunt speaking with Bloomberg's Jonathan Ferro.Take a look at how we're seeing Bonds reacting.Of course, we saw the big moves across global bonds led by Treasuries asthose sort of new messaging when it comes to what we heard from Fed ChairPowell. But certainly the reaffirmation of thefact that interest rates in the US could stay as long as they need to be, kindof, in his words. And we are seeing that catch up, if youwill, for Australia and New Zealand.

Bonds there.We're seeing the three year bond yield in Australia climbing to the highestsince December. Also seeing some reaction to thatslowing of a Kiwi inflation to 4%. That was a weaker since mid 2021.However, there is still seen to be some pretty stubborn domestic price pressuresthat sort of weighing on what we're seeing across markets as well.But the yield, certainly the yield curve here in Australia in particular shiftinghigher in the morning session. We've seen some of these yields in theUS really sitting at the highest for the year to that two year, putting that 5%level in play in particular.

Well, coming up next here, why emergingex Digital Asset Insights expects a long term rally in crypto markets ahead ofthe bitcoin halving event. This is Bloomberg. All right.Taking a look at crypto prices this morning, You got Bitcoin actually very,very close to its year to date. High and record high, actually.It's all this this market move that we've been really tracking over thecourse of this year, led by the the optimism and the inflows around spotBitcoin ETFs but also ahead of the halving event.Lots of different views on what halving.

Will mean for prices over the nearer andalso more medium to longer term. But here is a look at what halvingactually means and how it could affect prices in turn.The Olympics sporting World Cups leap years and Bitcoin halving.They each happen every four years and in the crypto world halvings typicallymeant a boon for prices. In a nutshell, Bitcoin halving meansfewer new tokens are issued. That's because Bitcoin miners whovalidate blockchain transactions receive 50% less of a reward for doing so.At Bitcoin's launch in 2009, miners received 50 new coins per block post thehalving in 2024 that will be cut just.

3.1 to 5 Bitcoin instead.In the past we've seen prices spike following the event.For example, in 2012, when the token jumped by 8,000% in the following 12months. This time around, the prospect forfurther gains is unclear. Some analysts say the halving couldtrigger upside of at least 80%. Others argue the event is already bakedin, particularly as bitcoin's already risen to fresh records this year.Which brings to mind a familiar phrase. Past performance does not guaranteefuture results. All right.Let's bring in is my power now.

She's CEO at advisory platform emergeneggs digital asset insights and as me I'm curious for your views on thisbitcoin halving how much do you think it's already been baked in at this pointor can we expect to see a significant rally from here.Right Again, Annabel thanks for having me.So I will say that overall I have a bullish secular view in terms of thefuture performance of Bitcoin. Outside that overall there will be twokey changes. First, it will be around marketstructures and I do want to draw in the Bitcoin ETF that has been approved aswell as E for ETFs in Hong Kong.

And the second would be around how weshould position as investors. So first of all, we always see that withlimited supply. So that's going to bring in the bluechips to perform at a rally for us. And then we're going to see that streamchannel into the meme coins as well. In terms of the different subsectors,it's very similar to equities. So you think this this next rally isgoing to be really led more by by institutional investors like us cominginto the market? Yes, absolutely.I think that's been a few cases of crying wolf, whether it's whether todeepen or whether it's a tokenization.

But I think for this round in 2024, I'mvery bullish for two reasons. The first will be around the regulatoryclarity before they see many sell side brokerage broker dealers coming in andoffering infrastructure. And the second thing will be around theinfrastructure, including online, all from.And the second thing is, I do want to emphasize, if I were to bring in spotETFs, so we do have income redemptions, which is going to channel more of this,um, into regulated exchanges and also trading venues.Yeah. So, so in kind is, is, is a quirk or notquirk, but it's a typical ETF structure.

It's not being followed in the US forits spot Bitcoin ETFs but it is going to be full it here in Hong Kong.What sort of inflows are you expecting. Right Absolutely.I think we can start with the base case that what we see in Hong Kong internetspot ETFs is only going to be a fraction of what we see in the US.Right? But I do want to caveat that with whatthe market participants we should be focusing on on that front.We should be looking at the southbound Chinese volumes coming into Hong Kong.And what I like to highlight is in terms of the market participants, we do seethat the participants would be China,.

AMC, Horses.These are all major high platforms in China, and I think that's going todefine what the participants would be when it comes to inflowsthis ETF. So crypto ETFs in Hong Kong, what wouldbe the ways that you would expect to see Chinese money coming into them becausethey wouldn't be eligible for inclusion in the in the stock Connect scheme atthis point in time. But again, I think overall it would be amatter of time, but I think near-term it will be more of the offshore funds thatin Hong Kong that are ready to allocate alpha overall.Right.

If they were to it's more of a popstrategy. So of course I think it will be quitechanneled. So first of all, we're going to see moreeasy on offer out around the whole ecosystem.For example, Stablecoins and afterwards it's going to funnel into RWAtokenization. So we've seen, for example, Singaporedialogue that that examples and many of them are basically setting up shop inHong Kong. So I think overall what this is will bea full of confidence for the overall Hong Kong ecosystem.You've talked about how as an asset.

Class is evolving into a full ecosystemas opposed to just as an alternative investment or a store of value or ahedge. What are the implications as thiscontinues to happen? Well, I would say that the overallecosystem is that privacy and privacy cycles, given that there's very highretail participation in cryptocurrencies.So we see a rather cyclical nature in terms of price performance.But again, tying back to the point of market structure changes.So we're going to see with more institutional adoption slowly withregulations, it's inevitable that that.

Short ratio is going to come down.At the same time, we're going to see more price support as we see in terms ofBitcoin inflows into the Bitcoin ETF and US.So we're going to see a very similar mirror image when it comes to Hong Kongspot ETFs. And the second thing is that I would saythat Hong Kong is basically setting the stage for and also a precedent for manyother jurisdictions to follow. Are we going to see a bit of a washoutwhen it comes to Bitcoin miners? Because even though we've seen kind ofthe confidence being struck ahead of the halving, it does appear that investorsare concerned about a pretty sharp loss.

Of revenue.But again, I would say that referencing to previous cycles, it is in factequitable that the miners were washed out at that same time, I think overall.So there's going to be more innovation around that.So I understand that some of the miners, they have been pivoting closer to otherrevenue models. So, for example, a staking an asset.Our thing is that they caught by itself is basically evolving to a technology inits own right or other ecosystem and also be 20 as opposed to being just astore of value. So I think we can see that more of theseminers are basically saying to.

Themselves to be conglomerates withmultiple revenue streams. You speak about the evolution of HongKong's crypto digital asset ecosystem. I'm curious because when you speak withsome of the major ETF issuers, its names aren't on the list of of approvedapplicants or people that have the approval in principle or companies.One of the key reasons we hear that's keeping people on the sidelines at thispoint in time is just the lack of overdeveloped infrastructure in HongKong. What needs to happen next is that thebanking piece, for instance, that's really missing at this point in time,right?.

You're absolutely right to point outabout the banking piece, because at the same time, having been in financialinstitutions and their journey of adoption and digital assets, I would saythat overall there needs to be a lot of infrastructure changes.Again, I do want to mention that it always starts with the top, right?The top, of course you need to have a major and buy in at the same time.You do need to have the government set a very strong framework and thereforeyou're going to see the banks start coming in.And I would say that if you look at just globally, digital assets are thephenomenon.

So you do see that in the EU.There's Mika, which is basically giving a green light to a lot of Europeanparticipants. Also see us.We're going to see more clarity post election and also for Asia, Hong Kongand also Japan. So we're actually seeing more of theseregulators put their full of confidence in.All right. Thanks so much for your time thismorning. That was as my panel there, CEO atEmergent Digital Asset Insights. And.And be sure to tune in to Bloomberg.

Radio to hear more from the day's bignewsmakers and get in-depth analysis from the DAYBREAK team broadcasting livefrom our studio in Hong Kong. You can listen via the app radio Plus oron Bloomberg Radio. Dot com will have plenty more ahead.Stay with us. Some of the latest corporate storiesthat we're tracking this morning. An HSBC is said to have started a newround of job cuts at its Asia Investment bank.Sources say the lender laid off around a dozen bankers on Tuesday.It comes as dealmaking across Asia has slowed, especially in Hong Kong andChina.

Other banks, including UBS and GoldmanSachs, have made rounds of job cuts in Asia over the past 18 months.Country Garden is said to be pushing back some offshore bond payments despitealready getting a round of extensions last year.Sources say its onshore unit plans to extend coupon and principal installmentpayments for Samuel Bonds maturing in 2026.Last month, country gone and missed a $13 million coupon payment, triggering a30 day trading day grace period. LVMH has reported slower sales growth aswealthy consumers reined in spending. Organic revenue at the luxury group'sFashion and leather goods unit rose 2%.

In the first quarter, which is theslowest pace of growth for the period since the pandemic began in 2020.Sales in Asia outside Japan fell 6%, although Chinese demand was higher.Rio Tinto has reported a sharp drop in first quarter iron ore shipments asChinese demand remains soft. The world's second biggest miner says itexported 78 million tonnes of the steelmaking material, marking a 5%decline from the previous year. Output of Rio's other materials,including copper and aluminium, were more robust.And taking a look at some of the Aussie miners that we're tracking in thesession so far.

It is that story of just broad weaknesscoming through for these names. Rio Tinto, as you said, that drop iniron ore shipments in the first quarter of 5%.We are seeing that stock down half a percent at this point in the session.Broadly, though, when you take a look at how Asian equities or Aussie equitiesare faring so far, actually it's just a slight bit of upside.But taking on that function, you do see that materials and also energy stocksare the big laggards in this session so far.Is that question around rate cuts as well?That's playing into it.

We did hear Jay Powell, of course,reiterating that need for patience overnight, caution on the outlook forrate cuts as well. Given that that last mile ofdisinflation, Heidi, it is really proving to be very sticky to bring down.Yeah. As long as Neda's is the sort of weddingthat we had from Jay Powell. And take a look at how US futures arekind of coming into the session, We're seeing a little bit of muted upside,about a 10th of 1%. This is kind of seen as well mentionedpotentially as a bit of a shift in his message following a third straight monthin which we saw the key measure of.

Inflation beating analyst forecasts.And it also really paints a picture of a Fed that sees very little urgency to cutrates. Any reductions this year could comerelatively late in the year, if at all. There are still some analysts are stillsaying 2 to 3 rate cuts, though. Coming up in the next hour, he won't beoffering securities believes China's equity markets can continue to trendhigher, even with a sluggish economy. That is it for DAYBREAK.Asia markets coverage continues. The China show is next.

Sharing is caring!