Bloomberg Break of day: Australia 02/05/2024

Welcome to DAYBREAK, Australia.I'm Heidi Strode. Votes in Sydney where markets have justcome online. I meant about drool, as in Hong Kong.We're counting down to Asia's major trading opens.And our top stories this hour. Asian stocks may get a boost from WallStreet's record close, but strong U.S. hiring is testing bond traders faiththat Fed rate cuts are on the way. China is pledging to stabilize itsmarkets after shares sink to a five year low.But officials offer no specifics on ending the selloff.Plus, Middle East tensions hit new highs.

After a wave of US led strikes in Iraq,Syria and Yemen. And kicking off with that story thismorning, Heidi, because we've got Brent crude WTI.Both of these coming online. You're seeing some very muted gains hereat the start of trade. Now, that is in the context of theFriday close. We saw both contracts falling into thered. What is driving that is just thisgeneral recalibration around supply versus demand concerns.But from the supply side, it's it's down to Middle Eastern tensions.And as you said, these there's really.

Ratcheted up over the weekend.But what we had was the latest US and UK forces striking dozens of signs in Yemenagainst Iran that U.S. militants were getting that vowed torespond. And then separately as well, we had theearlier strikes against Iran linked militias in Iraq and Syria as well.So that's really playing into the dynamic here.What else are tracking, though, Because let's take a look at how US futures arecoming online this morning. And we did have that Friday close, very,very, very strong day for Wall Street here.We're not seeing too much movement yet,.

But just look at the levels that you seefor the S&P 500 contract there, because we are approaching that 5000 mark.It's already trading as well at a record high.We did have the strong U.S. jobs print, but still, that just tellsus, Heidi, the US economy is just so strong and powering along.And of course, it's really the geopolitical overlay that we're watchingthat potentially complicates that broader picture when it comes to thefocus on central banks. That is a focus on central banks thisweek as well. When it comes to the start of tradinghere in Australia.

Of course, we're looking to that firstmeeting from the Reserve Bank of Australia, unanimously expected to keepits cash rate at 34.48, 5% and probably maintain that hawkish stance.But certainly a lot of focus and certainty this week will be on thatrevamped communications regime and what we hear from the RBA and from GovernorMichel when it comes to their expectations.Right. Michelle Bullock is expected to retainthat hawkish position. With inflation still higher in the UScompared to what will eat in Australia compared to what we see in the US.Taking a look at how stocks are coming.

Online, that subgroup boom, we're seeingdownside of about 4/10 of 1%. This though, as we see Australian stocksreally trading close to those highs of June 1992.But we have been pretty rangebound when it comes to this market, extending thoserecord highs. The Aussie dollar is sitting at 6502 atthe moment. The US dollar pretty mixed tight rangesthat we're seeing within that G10 space. Of course, after posting its best day inabout a fortnight, the fifth weekly advance for the Bloomberg dollar index.So a little bit of pressure coming from that side when it comes to the Aussiedollar, but the Aussie really closing.

Down almost 1% for a fifth weeklydecline. So we'll see if there's any kind ofcomeback in this week. But watching Kiwi stocks of buy justabout a quarter of 1% as well, but we could see a little bit more upside as wesee the rest of major markets come online.Chicago Nikkei futures up about a 10th of a percent dollar and holding prettysteady at that 148 level. And of course, continuing to look towhat next for this rally of sentiment in China.Right footsie a50. China futures looking decidedly lower,7/10 of a percent even as the chinese.

Regulator continues to jawbone on theseabnormal market fluctuations as it's characterized.But of course, watching politics this morning in the Middle East.Iran backed Houthi militants have promised to respond after US and UK ledforces struck dozens of sites in Yemen. A Houthi spokesman says the airstrikeswill not deter the group from expressing support for Palestinians in Gaza.The Pentagon says 36 sites were targeted, including deeply buriedweapons storage facilities and missile systems.Separately, the US also conducted airstrikes against Iran linked militiain Iraq and Syria over the weekend in.

Response to a deadly drone attack onAmerican troops in Jordan. US officials say they struck 85 targetsat seven locations linked to Iran's Islamic Revolutionary Guards.Iraq has warned of potentially disastrous consequences following thoseattacks. Well, William Weschler is the seniordirector of the Rafik Hariri Center for Middle East Programs at the AtlanticCouncil, and he joins us now. William, great to have you with us.So this latest move from the Biden administration, does it deter or does ithide intentions? Does it perhaps do neither?Where do you see this going from here?.

And I know that you think that thiswould be a pretty extended conflict. Yes, this conflict will go on for sometime. The goal of it is to reestablish thedeterrence that unfortunately had been lost in recent months.Whether it is successful strategically at re-establishing that deterrence willdepend, of course, on the actions by Iran, Iran's partners and Iran'sproxies. They will and they have already made alot of rhetorical noise, as one would expect.But we'll see in the weeks and months ahead whether the level of violencedeclines.

What do you expect when it comes todiplomatic overtures? Right.Because we we would still expect these channels to be open to Tehran.We know that Iran has also signaled that it perhaps wants to de-escalate.Yes. Iran doesn't want a regional war becauseit would lose in that regional war. The United States doesn't want aregional war because it would be devastating for the region and put a lotof U.S. interests at risk.So there is a mutual commonality of avoiding that mostnegative outcome.

Now, that said, once the bombs startdropping, there's always the potential for misunderstanding this escalation.What we've seen in the past is Iran and its proxies steadily marching up theescalation ladder, waiting to be pushed back, and then they'll go down.That's why one would most likely expect the outcome here.How do you think relations between the US and Iran are likely to shift thenover the course of this year as we count down to the US election?I think Iran sees 2024 as a potentially great opportunity for them to achievetheir longstanding strategic objective of pushing the United States out of theregion.

They saw internal discussionswithin the U.S. government of removing troops fromSyria. They know that there's publicdiscussions with the government of Iraq about withdrawing troops.And of course, the overall context of this is the war in Gaza, which has madepublic sentiment towards the United States go down and public sentimenttowards Iran going up. So they thought that they could increasethe level of violence to achieve their end.I suspect that they're actually made a mistake here and that what's going tohappen is there is going to be even more.

Firm commitment to keeping U.S.troops in the region from the rest of the year.This is an excellent idea. So then how do you think the White Houseand both Democrats, Republicans, are sort of likely to to shape theirrhetoric in response to this Radical rhetoric will be tough on bothsides. And both sides in an election year willbe competing to see who can be who can be tougher.But the most important thing that's going on right now is the diplomaticdiscussions of Secretary Blinken in the region.I believe for the fifth time since the.

October 7th terrorist attack by Hamas.And what they're trying to do is to do a massive restructuring of thegeopolitical sentiments within the region by ending or at least pausing thewar in Gaza, creating a new relationship between the United States and SaudiArabia, and creating a new relationship between Saudi Arabia and Israel.That is a worst case scenario for Iran. And it and the prospect of that is oneof the reasons why Hamas probably did the attack in the first place.But this is still a Biden administration key strategic objective.You know, President Biden came into office vowing to end America's foreverwar.

Does this look increasingly like anissue of bandwidth? Because we've already have Ukraine as anissue where we have, of course, the ongoing war in Gaza?And is this just heightening potential expectations or risks that this is goingto be a broader regionalization of a third front?This is definitely raising the threat of a third front of a wider regional war.And again, that's something that both the United States and Iran don't want.I do believe that the United States and its allies have the ability to both walkand chew gum at the same time. They can support the Ukrainians withwith a significant amount of weaponry.

For them to fight with.They can support Israel with what it needs to deal with Hamas, and they canprotect long standing U.S. national security interests likeprotection and freedom of navigation and the protection of their own people inthe region from Iran and its proxies. They can do all of these at the sametime. Biden officials again headed to theregion for, I think, a fifth visit to try and broker a ceasefire.Are you optimistic at this point, given the humanitarian toll that's been taken,that any kind of a temporary or even more significant ceasefire can benegotiated?.

Well, there is, by all reports, a verysignificant deal on the table right now. And the the the party to the to theconflict that has not yet accepted the deal.It is Hamas. There's reports of divisions betweenthose leaders and Hamas that are taking the brunt of the violence in Gaza andthose who are political leaders living in Doha between whether or not theyshould take this deal. But the ball is very clearly in Hamas'scourt. They could have a very extensivehumanitarian pause of the fighting tomorrow if they wanted to.All right.

That was willing which the seniordirector of the Rafik Hariri Center for Middle East Programs at the AtlanticCouncil there. Coming up, a survey shows most Japanesefirms don't see China's economy improving this year.The Japanese Chamber of Commerce and Industry in China tells us more abouttheir findings later this hour. But first, China stabilizes or pledges,rather, to stabilize markets after local shares sank to a five year low onFriday. We'll have more details on that ahead.This is Bloomberg. Chinese authorities are again promisingsupport for the nation's battered stocks.

After Friday's market rout led to anoutpouring of frustration on social media.For more, let's bring in our chief North Asia correspondent, Stephen Engle inHong Kong. And Steve, I mean, we've heard thisbefore, but but another pledge and another time that we don't really getmany details on it. Sure.I think authorities had to say something.So a statement coming from the securities regulator, the CCRC,yesterday, Sunday, essentially trying to at least put a Band-Aid or, you know,some cream on the wound, if you will, of.

Friday's stock market rout.Essentially, all that jawboning that we heard earlier in the week petered out byFriday and the market sank. The CSI 300 sank 3.4%.There was an outpouring of frustration on social media, which is which is, youknow, a very narrow area to be able to voice your discontent in China becauseit's so heavily, you know, scrutinized, obviously.And and basically, what's the word I'm looking for policed.There's a good one. Yes.Thank you. It's a monday morning, so I'm finding itstruggling with my words.

So anyway, I think a lot of thesefrustrated investors went to the US embassy website to voice theirfrustration. I don't know why exactly the US embassywhether the US had anything to do with this, but again, it's just showing thepotential for political or social instability.With a stock marking stock market now losing about what, $6 trillion in theroute. This is the sixth consecutive week oflosses. And so, again, this is what the CSR cameout and vowed yesterday. Prevent abnormal fluctuations.Well, how is the big question?.

How are you going to prevent that?They say they will give the medium and long term funds into the market so theywill provide some funds into the into the market.But again, we don't know how much. There's been a lot of talk about amarket stabilization fund. Still no details on that.And then also crack down on what they called illegal activities, includingmalicious short selling and insider trading.But again, no details on who potentially is doing that and how it is affectingthe market right now. Heidi.I don't think anyone can blame me for.

Being a bit sort of speechless.Right. Because at this point, what else can wesay? What can we say?What can authorities say or do to actually meaningfully change sentiment?Yeah, well, again, there's this Chinese Academy of Social Sciences.I'm sure you've heard about them and worked with them essentially on stories.They are a government think tank. They are an advisory body to theCommunist Party. But how much sway they have is yet to bereally determined. They are coming out.At least the academic Leo view was.

Saying authorities should set up astabilization fund as soon as possible, given the market sentiment right now,this academic saying up to ¥10 trillion should be the sum that they shouldtarget for the stabilization fund. That's 1.4 trillion USD, includingbetween 300 to 500 billion USD in immediate funding.And again, that academic is saying right now the market stabilization is beingessentially led by quote unquote the national team, and that means stateowned enterprises and essentially directives from the central governmentto prop up the market. And again, we had earlier last weekdirectives coming down to further limit.

Malicious short selling.So they're trying to do what they can to boost sentiment.But the bottom line, Heidi and Annabel, as you all know, is the overall macrocondition in China, weak growth, if any, really in many parts of China, you havesimmering US-China problems. And the big elephant in the room is theproperty sector. Many investors want more concretemeasures coming down the pike to support the property market and potentially evena rate cut with the medium term lending facility, something to really tangiblyimpact a market sentiment. Tangible.That's it.

That's another good word that we'll keepan eye on. Back pocket.The chief Rose Asia correspondent David Angle, though, with the latest when itcomes to these efforts to try and change the trajectory for Chinese markets.Right. But take a look at oil, of course, veryclosely in focus, given the geopolitical tensions and overlay that we continue towatch this morning with 30 rebels vowing new attacks after the latest US and UKled airstrikes. So we're watching that very closely.But at the moment we're seeing quite a bit of upside when it comes to Brentcrude just holding pretty steady at just.

Under 78 bucks.New York crude, they're also trading just shy of $73, another big earningsperiod as well from a big oil in focus this week.Let's take a look at energy markets a little bit more closely, the latestgeopolitical uncertainties with the Su Keenan, who joins us in New York.And a lot for crude traders to be contending with at the start of thisweek. Right.This is the first time that we've seen both oil investors and traders react tothe significant events late last week. And again, that's a significant bidwe're seeing given that oil fell by the.

Mostfor the week since October. On a number of different factors I'llget into when we look at just last Friday, the market had been waiting forthis promised response. It had taken a moment.The US military had said it would choose its own moment and timing on this U.S.and allies targeted. Who decides 13 locations in Yemen.It is the biggest barrage since initial attacks on January 11th.But as you can see in this Bloomberg chart, oil had started to decline evenas this response was being awaited. These attacks by the Houthis began inthe Red Sea in November, prompting the.

Biden administration to vow retaliationalong with its allies. But again, the reaction results so farhave been mixed and these attacks in the Red Sea have continued.And we know the Houthis have now vowed to to payback the US and the UK for itslatest airstrikes. There were a number of bearish factorsthat pushed West Texas Intermediate and Brent to some extent down more than 7%last week. There were reports of a potential ceasefire, you may remember late last week that had a bearish effect.There were fresh indications that world markets were adequately supplied.That's the bigger overarching.

Fundamentals story on crude WTI promptspread that the difference between the two nearest contracts flip by as much as$0.05 into a bearish structure known as contango.And there was a breach of two key technicals that triggered algorithmicselling. So again, this is a, you know,significant are turning into the green as a result of what's happened.Yeah, some big fluctuations. But what is clear, I guess to counterthis is that the way that oil is being moved around is changing out of this.Yeah. At first many had anticipated this wouldbe a temporary disruption and it.

Wouldn't really impact oil.But at this point we're starting to see major shifts in the way the global oilbuyers are making their purchases. Bottom line, local cargoes have becomemuch more attractive. One ship tracking firm has come out withsome pretty compelling statistics. Again, we know there's been higherprices. We know there's been a slump in trafficthrough the Suez and a lot of our ships are having to go around the tip ofAfrica. Across Europe, refiners have skippedpurchases of Iraqi crude in favor of other types.We know that the crude loadings for the.

US to Asia alone plunged by more than athird last month from December. Again, that's according to one shiptracking firm's data. That same firm tells us that oil tankertraffic from the Suez is down some 23% last month when compared to November.So these attacks and the really mixed response we've seen to theUS and UK countermeasures have continued to really impact the oil shippingmarket. Back to you.Yeah, absolutely. That was at Bloomberg Su Keenan.They will have more ahead on DAYBREAK. Australia.This is Bloomberg.

Chevron has posted fourth quarterearnings that beat the average analyst estimate with annual production hittinga record. Chair and CEO Mike Wirth told us moreabout the results as well as its acquisition strategy.It was a year of records for us. We had record global oil and gasproduction of 3.1 million barrels a day, record U.S.production. And in the fourth quarter we had arecord Permian production of over 870,000 barrels per day.So really strong performance in our business across the board allowed us toreturn a record $26 billion to.

Shareholders, almost 10% of our marketcap. And as you mentioned, we raised ourdividend 8% earlier this year. So a strong performance, you know,around the world. Permian certainly is showing very stronggrowth and momentum as we move towards a million barrels a day in 2025.So, Mike, you mentioned on the call that you weren't going to be increasingCapEx. So I'm just wondering what yourconfidence level is in maintaining and improving those productivity andefficiency gains. Well, capital discipline always mattersin our business, and for years now we.

Have been very committed to tightcapital budget and focusing on execution.What we've done now in the Permian is we've grown to a point where we'll holdour CapEx has guided about $5 billion this year and and see continued growththis year and next year. And as we get to next year, 2 millionbarrels a day, we'll start to talk about holding a plateau, which allows us toactually invest even less capital in order to do that.So we're very committed to, you know, capital discipline through the cycle.It matters in this industry. It's an industry that at times hasn'tnecessarily exhibited that.

And I think it's important that that ourcompany and other companies remember the lessons of commodity markets.What does that mean, Mike, going forward here?Once the acquisition of Hess closes later, later this year here, what typeof changes still need to be made? When we we closed the deal with Hess,which is expected midyear. We've got a fairly involved FTCinformation request that we're in the midst of right now.We'll have a company that has even stronger production growth further intothe future. It will allow us to underpin not onlythe dividend, but also a very strong.

Balance sheet and continued sharerepurchases, not only through the balance of this decade, but well intothe next. So it takes what's a strong portfoliofor us today and it makes it even stronger for longer.And then of course, looking at the strength in the stock, looking at thestrength of the balance sheet. Mike, I'm sure you've heard thequestions here. Do you plan any other major acquisitionsthis year? We just completed one acquisition lastyear. We're in the midst of another one andwe're always alert to opportunities.

But integrating a company in ourindustry matters. We operate in challenging environments.The work we do needs to be done with precision to keep people safe, toprotect the environment and integrating two companies together and all thethings that go with that are something we take very, very seriously.And so we've got our we've got our hands full right now.Will. We'll work hard to close the deal and doa good job integrating a great company with ours.And as we go forward, if opportunities present themselves, we'll certainlyevaluate them.

But we're not we're not feeling a needto do anything. Chevron CEO Mike Wirth, speaking toBloomberg's Alix Steel and Romaine Bostick.Much more to come here on DAYBREAK. Australia as we see Australian stocks inthat first half hour of trading not significantly lower this point.We're seeing just about every sector there in the red with a materials andenergy. Some of the biggest losers.This is Bloomberg. Wow.Wow. Look, the economy is really strong.What an amazing jobs report.

This is a very strong report and astrong labor market. This is an exceptional labor market.You really have to squint to see the cracks in the system.I do think it's a bit of a headache for the Fed.The Fed doesn't have to normalize policy as quick March is off the table.We never thought the Fed was going to make a move in March.You are more likely to get this week cuts that the Fed has signaled 3 to 4rather than the higher number that the markets has been romancing.The aggressive market pricing in of of a lot of cuts this year are starting tocome out June is what I think should.

Happen and what I think is likely tohappen and that this report just feeds into that.Some of our guests there on Bloomberg TV reacting to the surprise surge in USjobs data. And let's discuss that now with ourguest, Spencer Ackerman, founder and CIO, Tolu Capital Management.Spencer, I'm interested in your views on this number because the jobs reportreally does call into question this narrative around a soft landing.U.S. equities, though, they seem to like thisidea that the US economy is powering ahead.Bond markets are thinking otherwise.

Around the direction for Fed rate cuts.But how did you read the numbers? I totally agree.It was it was a massive number and even more massive was probably the revisionsthat came on for the past month. And I think that this report justsolidifies that March is highly, highly unlikely for a rate cut.I think that eventually the futures market, futures market and the Fed,Scott, were going to be somewhere in the middle and we're going to get 3 to 4rate cuts in 2024. I actually think that is a betterenvironment for equities than the type of environment where you'd be gettingsix or seven rate cuts.

That's a lot moresynonymous with a recession That would not be good for corporate profits in anyway whatsoever. So we think that it makes sense for themarkets to like it, and especially if no ECI was a little bit weak.If we get an inflation print that's manageable or even weak, that's exactlywhat we would want. The you know, the Fed chair has alwayssaid they don't want a recession. It's not a problem that corporateprofits are high or the labor market is strong.So, I mean, this could be a good environment for news going forward,but it does raise the risk that we we.

See a no landing sort of situation.Inflation could stay elevated. Is that still an environment thatequities are going to like above inflation, say, sticks around the 3%mark? So, you know,I think one of the biggest risks that we see on this front is the fact that wagesare growing between four and 5%. And that's inherently going to bedifficult to get inflation down to 2%. Expect pretty good start to reinflate.That'll be very hard for, you know, to get the overall picture.So that's why we would suggest, you know, even within equities to be investin equities that are less rate sensitive.

To other sectors that could stillbenefit from, you know, consumer funds, you know, a strong consumer, butwouldn't get very negatively impacted if the Fed had to hold for longer or evenpossibly hike, although that is not our base case, that is still definitely apossibility. Spencer, how much consideration are youassigning to both geopolitical and domestic political risk this year?Oh, I mean, absolutely. I mean, look, you can see what'shappening in the Red Sea. It's something that we have to monitorclosely, especially as it relates to commodity prices.And also, you know, this is the biggest.

Election year in global history, or atleast in the Western history. 40% of global GDP is going into anelection this year. So that is something wherewho's at the table is going to change and that is going to have an impact oneway or another, whether it be through tariffs, whether it be through, youknow, changes in geopolitical stance. There's a variety of ways that that canaffect things. So we're going to be watching thatclosely, of course. The outlier, of course, when it comes tothe central bank stock was the BOJ. What are your expectations?And I know your expectation ends with.

The yen potentially at 135.How does that impact the equity rally? So I had to take it back a second.I think that the DOJ has seen enough or is close to are seeing enough to justifyexiting that, you know, the last negative rate in the whole world.And if they do that, especially if the Federal Reserve, the ECB, the Bank ofEngland, the PBOC, are all cutting, are all easing.We think that is very bullish for the yen.We think that's a tailwind and we can see the yen rallying up to 135 here,actually, as it were, to relate to Japanese equities.We actually would see that as somewhat.

Of a headwind, I should say, similar towhat you saw in the United States in late 2021.As you know, the central bank begins to hike.That is obviously a net negative to companies that are borrowing.But it's also if it raises the prices and yeah, it's going to make Japaneseexports more expensive. And Japan is is a pretty big exporter tothe world. So.But on the flip side, it would make their imports of commodities cheaper.So it could work both ways, but we'd be a little bit cautious on Japaneseequities if the DOJ is going to cite.

I'm curious to know if you're cautiouson Chinese equities, because over the weekend, the big headline coming out wasthat China regulators are pledging to stabilize markets.Do you see any sort of investment opportunities here, even from avaluation perspective? Let's talk about it from a valuationperspective. The CSI 300, the Shanghai 200 right nowis at 27 prices. Now, what's happened in China since2007? GDP has quadrupled.Corporate profits have quadrupled. And the ten year yield in China is atits lowest point.

At any point in these past 17 years.So surely from a valuation perspective, it is probably the cheapest that Chineserisk assets have ever been. But obviously markets are highly, highlyefficient and things that are cheap generally happen to be cheap for areason as it relates to China. There is the hidden debt problem,especially when you consider state owned enterprises and local government debt.That could be closer to 50% of GDP by some estimates.There is the population problem. China's population decline to 2022 forthe first time in 60 years. There's obviously the elephant in theroom, which is any type of conflict.

Regarding Taiwan that would immediatelycause a wave of sanctions from the West. That would obviously be a negativeimpact, some Chinese risk assets. So while it is cheap, we believe thereis business to be cheap and for us personally to get more interested, wewould like to see more forceful and direct both monetary and fiscal stimulusfrom the PBS and from Beijing. So that's what we'll be waiting foruntil the Chinese start. Your highest conviction call is 4 to 10steepness. So just talk us through that one.Absolutely. So, you know, highest conviction collegeasset is the two statistical are in the.

US right now the yield curve is aboutfive -35 basis points inverted history strongly shows that every time the Fedcuts whether it be three cuts for about six cuts, it doesn't really matter aslong as it is cutting the yield curve tends to normalize.And given the fact that we're starting at -35, we see it as having pretty goodrelative value. I don't want to step beyond that.We spoke about wages a little bit earlier.The front ends of the curve has a lot less interest rate risk premium turn jobinflation premium. So we think that the sharp ratio or therisk reward in the front end of the.

Curve is much better than in the backend of the curve. So we just see that we see the curvenormalize and probably to the tune of 50 or 100 basis points in 24, and thatwould yield itself to a pretty nice return on a stupid trade.Spencer Hickman, founder and CEO, Tolu Capital Management.Great to have you with us. We do have much more ahead here onDAYBREAK Australia. This is Bloomberg. It's time for Japan.Ahead on DAYBREAK, Australia and Japanese markets set to open in about 20minutes from now.

So far, the outlook for futures today,it's looking like we're going to see some gains here at the open.Now, of course, put it in the context of the Wall Street session on Friday,because we saw U.S. stocks powering to all time highs.We had a strong jobs report, but that tells us that the US economy isextremely strong. And so we did see that move higher forthe S&P 500 nearing the 5000 mark. But Nikkei futures looking to followthat lead from the session on Friday. And you continue to see that Japaneseyen there holding fairly steady. But, Heidi, of course, it is gettinginto quite a significant holiday week.

For this region as well.Yeah, of course, Lunar New Year, of course, is almost upon us.China facing as we enter the Year of the Dragon, a series of macroeconomicchallenges following the housing slump, the weak rebound over Covid and ofcourse a loss of market sentiment has been thing reporting on throughout thecourse of the last few months, and foreign companies are becoming lessoptimistic when it comes to their prospects for the Chinese economy.A survey by the Japanese Chamber of Commerce and Industry in China foundthat over 400 companies cut their investment in the country last year.Masami Miyashita is the vice chairman of.

The chamber and joins us now.Masumi, great to have you with us. And of course, I'm sure all foreignbusinesses operating in China are hoping for a better year in the year of theDragon, but it's looking pretty pessimistic.Oh, yes. Our chamber is joining the Chamber ofCommerce Industry Journal conducted a survey of our member and received thoseonce 1700 response, which is conditional and just to pass picture of our membercontinue to be challenging but to Joe Hart we are a modest improvementcompared to the previous survey. So main reasons are the easing of theinternational situation surrounding the.

China.So last November, the Japan China summit meeting and the US-China summit meeting,I'll just say, is also good reason for our Japanese companies.Biggest issue in China. The political side hasn't helped either.There's been various government crackdowns as been changes tosignificant things like accounting and auditing rules for foreign firms.How much does that weighed into the overall picture, given that we've seenthe steep fall in foreign direct investment?Yes. I also wrote to the Japanese company inSeoul, China.

So now we are struggling in investmentin China. And the mainly thing is uncertainbecause of our Chinese economy. In addition, the details of just spiralsand data and what are the restrictions are still unclear.We need to improve and it will be difficult to maintain the current.The biggest and no weakness over new investment will be a generating.I'm curious with the finding that about 80% of respondents to your surveyanswered that they feel that they're treated equally with Chinese companies.We spoke to the American Chamber of Commerce in China last week, and it wasquite a different response because we.

Heard from that body that US companieswere feeling increasingly less welcome in the country.So what's the difference, do you think, for Japanese firms instead?Yes, for a lot of companies in China. So into the 1990s and over the 2000,though, I wrote the majority of companies to have good relations withlocal government or with China. So our local government, the China, theoffshore US treaty, it is also very, very clear to the Japanese companies.So we have a big effect from the local government offshore. What are the biggest issues, though, doyou think, in terms of labor costs?.

How significant is that?Yes. However, these are very good.Big program. But alsoRiver school in China is better than the other countries.So in. So you stay as the East Asia or soSoutheast Asia damages competition in China.I'll still continue to stay and China and conducted our own vignette. A mayor.Great to have you with us. Vice chairman of the Japanese Chamber ofCommerce and Industry in China.

We do have some breaking news when itcomes to this U.S. border Ukraine aid deal.An agreement has been reached, but there are some hurdles that remain.Senators have released that bipartisan deal to impose new U.S.immigration restrictions to potentially unlock billions of dollars in Ukraineaid that had been held up. This is a crucial step, even as thatmeasure continues to face, of course, long odds when it gets to the House.Senate Democratic leader Chuck Schumer and his Republican counterpart, MitchMcConnell, both backing the $118.2 billion compromise.The Senate planning the first procedural.

Vote on the measure to take place onWednesday. But the GOP presidential front runner,Donald Trump, vehemently opposes it, as do many House conservatives.Schumer saying the positive bipartisan Senate deal is a monumental step andthat senators must shut out that noise from those who want this deal to failfor their own political agenda. This, of course, has taken months ofhaggling by Democrats, Republicans and independents as well, who have reachedthis deal. But of course, we could see,Bill, this deal fail and House Republicans could still try to alterthat deal more to their liking.

We know that a lot of Ukraine supporterscould seek to attach that to upcoming funding bills that are essential tokeeping the government open as well if the border issue continues to head intoanother stalemate. Yes, certainly trying to track veryclosely that that response and the possible implications.But let's shift back to Japan now, because the earnings spotlight is movingto auto giants this week with Toyota, Honda and Nissan all reporting Toyota'sresults will be closely watched for any impact from the recent.I had some scandal and comments on its lowered electric vehicle goals.Our breaking news editor Gareth Allen.

Joins us now from Tokyo.And Gareth, I'm curious, let's just kick off with what you're expecting from theJapan carmakers in particular. Yeah, that's right.Huge week, four innings in Japan. And the comeback is going to be a bigfocus. We have Toyota tomorrow and then Hondaand Nissan later in the week. Consensus is looking pretty strong.Top line growth somewhere around 20% or a little under an operating incomelevel, a 30 to 40% growth year on year, according to analysts consensus.So generally the numbers are going to look pretty good.But of course, the underlying issue.

With, as you said, with with Toyota isit's a seemingly never ending string of scandals at its subsidiaries fromRenault to Daihatsu to Toyota industries.And of course, Daihatsu is is just starting to come back online line with acouple of models have been recertified but they pretty much still lots are notoperating at all. So you know we'll be watching althoughToyota has already said quite a lot on the matter and probably won't comment ontoo much more detail tomorrow. But anything we can get on on what theirlonger term impact of this is going to be is it's going to be reallyinteresting,.

Gareth, potentially really interestingweek when it comes to some of the other big earnings.Right. A big focus on tech for Japan this week.Yeah, in terms of tech, we've got Nintendo, which is always, always hugeand things are looking a little bit more difficult for for Nintendo than it waswith the with the auto makers consensus showing they're going to have a declinein profit after the third quarter in focus for Nintendo of course is thethe the upcoming new console which is slated to be this year.So any hints we can get on when that might be and what it might look back.What it might look like is also going to.

Be pretty fascinating.Breaking news editor Gareth Allen there in Tokyo.You can catch Japan ahead every week. That's every Monday at 8:40 a.m.if you're watching in Tokyo, 7:40 p.m. on Sunday, if you're catching it out ofNew York, Bloomberg subscribers can watch us live on the terminal as well.That's at the TV go function. This is Bloomberg. Also, Central District Court is set toissue a decision today on charges against Samsung.Executive Chair Jae Widely is accused of fraud in connection with a controversialmerger of two Samsung group units in.

2015.Let's get a preview as to what we're expecting from Asia Technology.Senior reporter Yu Lim. Lee joins us now.So watching this very closely. We don't really know, I guess, but whatare some of the broad expectations? That's right.This this case goes back to 2015. Two Samsung affiliates merged and a lotof people, prosecutors accuse of him and Samsung executives to really kind ofengineered a, you know, illegal move to help his succession facilitatingsuccession. He's a third generation leader ofSamsung.

So this has been going on three and morethan three years. The trial, there have been more than 100trials on this case, of which I think he attended 97 trials himself.So this has been a huge shackle on Samsung because, you know, they have toreally clear this this uncertainty. And now in November, prosecutors intheir final ruling said, you know, they were actually seeking four or five yearjail time and a fine. So today is really a crucial day forSamsung because the lower court, the Seoul Central District Court, is goingto make a ruling on this case that has been going on for three years.Expectations are varied.

If it's clear that that's going to bereally great news for Samsung. But there is a chance that the courtmay, you know, draw five year jail time, for example, then he will have to goback to jail. Either scenario is that he will be hemay be able to avoid the jail time if the judges analysis suspended him, suchas maybe less than three years, then he will be able to avoid going to the jail.Yeah. I'm interested in that scenario of asuspended sentence. Does that mean that he could continue toto lead the company or be in a position of leadership?What are the.

If he is sent back to jail?What does. What's the significance of that, then?Sure. Suspended sentence means that he will beable to avoid a jury some and he will be able to run the company.But there this is not the end. There is a chance that prosecutors mayappeal. And if if the outcome is bad forSamsung, Samsung will obviously appeal again.So there is a chance that this could go to the next court.So we don't know. But if he gets a suspended sentence,that would mean that he will be able to.

Lead Samsung at this pivotal time.He has said in November, when the prosecutors a five year term, he hasconsistently denied wrongdoing. And as for really pleaded the court togive him a chance to lead Samsung, because, you know, this three years ofuncertainty has really took a toll on the entire group.For example, SK Hynix, which is a smaller rival, has really used its timeto accelerate development of their next next stage, advanced chips.So, you know, a lot of analysts and we spoke to think that that has reallyaffected something in a negative way. And if he is able to avoid this jurytimes, he will be able to to lead.

And that would be a great news forSamsung. That was our Asia technology seniorreporter Yu Lim. They ultimately the very thing we'regoing to track very closely. But coming up in the next hour, moremarket analysis with Citi Global Wealth Investments, head of Ipac investmentstrategy. Plus, Credit Agricole tells us why theyexpect a bumpy path ahead for China's growth.

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