Bloomberg Break of day: Australia 02/21/2024

Welcome to DAYBREAK Australia.I'm Heidi Stroud. Well, in Sydney, where markets have justcome online. And I'm Paul Allen.We are counting down to Asia's major trading opens.The top stories this hour. Big tech drags Wall Street away from alltime highs as investors await and videos earnings.Traders are also starting to speculate whether the Fed's next move is a hike,not a cut. Australia's earnings season continueswith its centre and Woolworths among more than 70 companies reporting thisweek.

Plus, the US set to warn allies thatRussia could deploy a nuclear weapon into space as early as this year.All right, let's take a look at what's happening on the markets.We have, of course, just open for trade here in Australia, early going.Of course, we have a staggered opening here, so we're just off by about aquarter of 1% how to get a read on things, of course.But we are going to be watching a lot of stocks today.Woolworths was one of those out with earnings.CEO Brad Bender, she's going to retire. He did not have a great experience onlocal media this week.

We might talk about that a bit later.Rio Tinto one to watch as well. Impacted by falling iron ore prices,Santos comes out with full year profits also and National Australia Bank had atrading update. But by virtue of the fact that all ofthose stocks are some way down the alphabet, they haven't started tradingyet. We got not a great deal of movement onthe Aussie ten year yields have just been grinding lower a little bit.Not a lot of movement in the Aussie dollar as well, about 65 and a halfcents U.S.. Okay, let's see what we got in terms ofNikkei futures.

We are, of course, keeping an eye onthings because the Nikkei closing in on that all time high that it set inDecember 29, 1989. The number to watch for the close,38,009 15 was some way off that debt and futures suggesting it's going to be afairly quiet day so we might not get there today either.A little bit of weakness in the yen, relatively speaking, just dipping below150. Oil's an interesting story.Some competing pressures there. There was, of course, tension in theMiddle East with the Opec+ curbs, but balanced against that very weak demandout of China Heidi.

Yeah, And you mentioned at the top justhow much pressure there is when it comes to these numbers due out of Nvidia.It's hard to underestimate just how much money and perhaps sentiment is reallyriding on these numbers. Right.Options signaling almost $200 billion really in market value riding on thatearnings report and prices for short term calls implying that a 10% move inthose shares could potentially see quite a bit of volatility.But this is a picture as we take a look at US futures.As we mentioned, it was really big tech drop dropping and dragging the broadermarket a bit lower from that all time.

High on the back of really some of thenerves ahead of the Nvidia numbers on Wednesday, really looking forconfirmation that there is really substance behind these boomexpectations. Nasdaq futures settling a little bitlower at this point. Dow Jones futures also looking prettyflat at the minute. And there are, of course, still ongoingconcerns about what some of the latest data on the Fed speak really means forthe direction of the Fed going forward. I should mention a couple of names thatwe're also watching when it comes to some reallocations within US markets.Amazon named to the Dow Industrials.

Industrial average, I should say.So we're seeing a bit of a pop there for Amazon in post-market trading after itwas allocated to the Dow Jones Industrial Average.We also see some other names being switched around as well.Uber replacing JetBlue in the Dow Jones transportation average.We're also seeing Walgreens Boots Alliance will be exit exiting, I shouldsay that average as well. So we've seen a bit of a sell off inWalgreens boots in the overnight session.Let's get some more views from our chief rights correspondent for Asia and lovecontributor Guy food is with us now.

And you know, so much of this at thispoint in the week is riding on whether we get I guessreconfirmation in those in video numbers that investors were on the right trackby backing this boom. Soyeah that's right, Heidi. It's somewhat concerning, you wouldthink, even if invidious numbers do end up well, that we're so reliant on on onecompany for the direction of, you know, the world's biggest stock market.We're used to think more about five or six companies.But you know, it is seen as the poster child for age and with rates high, withconcerns about the impact of that on.

Various sectors of the economy and alsowith concerns about some parts of the global economy showing weakness, youreally need something like AI to change the game and therefore to drivesustainable gains for a market that you know is close to unprecedented levels ona nominal basis, even on a valuations basis, is is at among the higher levelswe have seen across history. Yeah.And another wild card to throw into the mix here.I spoke to one guest yesterday, described US markets as unsinkable.And now we've got some commentary suggesting that maybe the Fed's notgoing to ease.

We could see a hike.What's the logic behind this? Well, I mean, the logic behind that isthat, you know, the Fed Powell did actually say back when they werestarting to push back against these early rate cut bets that, you know, weour base case is that we will be able to gradually ease rates later on this year,provided the data, give our confidence that inflation is going to return totarget in a timely fashion. And he pretty slack that, you know, ifthe data doesn't give us that confidence, well, you know, we wouldn'trule out a hike as well. And the data have kind of been moving inthat direction.

We've had a reacceleration in inflation.We've got, you know, pretty strong demand.And we haven't really had the fall in consumer inflation expectations that theFed would fully like to see. And in particular that speculation aboutrate cuts even after it's cooled off has given us some pretty loose financialconditions. So I think you would need to see anothervery strong jobs report and some more concerning inflation numbers before itwould happen. But I joke, I'm sure that there's veryfew members of the FOMC that would be ruling it out.And you only need to look at, as Powell.

And Coho often done, look at whathappened the last time inflation was this high there.The Fed cut at the first sign of economic trouble and then ended uphaving to hike again. They've made it clear that this timeround they would prefer to hike that hike to high and then have to cutwhen you know rapidly when they're fully sure rather than have the risk of goingdown and then up. So if they've got a concern that, youknow, the economy's too hot, that gives them every reason to go higher.All right. Bloomberg and live contributor GarfieldReynolds there.

Well, the US will unveil sanctionsagainst Russia this week following the death of opposition leader AlexeiNavalny. President Biden blames his Russiancounterpart, Vladimir Putin, for the death of Navalny, who had beenimprisoned in the Arctic. I told you we'd be announcing sanctionson Russia. We'll have a major package announced onFriday. Bloomberg's editor Michael Heath joinsus now. Michael, there's already a whole lot ofsanctions in place against Russia. I can't imagine Vladimir Putin's quakingin his boots at the prospect of more.

No, I mean, when when Russia invadedUkraine and the anniversary, the two year anniversary for that is on Monday,there was a swathe of of sanctions and measures against Russia, against seniorofficials there. And the expectation was it would reallydamage the economy there, that this was going to be quite you know, this wassome what are some of the biggest round of sanctions that we'd seen.And and there was a period of adjustment in Russia.But it really does look like they've managed to to retool and re mobilizetheir economy where they can function under these sort of sort of issues.I mean, the only way that you can really.

Target Russia that hits home is thesenior officials. A lot of them have children abroad.A lot of them have money abroad or this sort of thing.It's sort of you really need to target that.But it's quite difficult to explain, to argue, you know, why are you targetingchildren, All these sort of things they all like to have, you know, while theylike to be patriotic at home, they would like to have their children going toOxford and these sorts of things. So.But as to those sanctions themselves, I mean, Russia's still selling oil.At the end of the day, if Russia can.

Sell oil, Russia can keep financingitself and financing its space program. It seems, because this Bloomberg scoopis telling us that we could see sooner rather than later a nuclear weapon fromRussia in space. Yeah, it's really concerning because inthe past, when people have sort of gamed out, how would we end up in anotherserious war, potentially World War three or something, the sort of end up comingto this conclusion that it would be something generated from from war,starting in space and Russia doing this. I mean, unfortunately, the more we seefrom Russia, it's just becoming more and more reckless internationally.And it's sort of it's always like this.

Saber rattling to to seek attention orsomething like that. And there's part of me that thinks it'salmost I mean, it's it's not North Korea and it's not quite going down that path,but it looks for these pinch points where it can leverage and where it cancause trouble sort of thing. And yeah, it's just it's just reallyconcerning. I mean, the the reason I bring up NorthKorea is I was just reading earlier early this week that large parts ofRussia, the heating isn't working. You know, they're relying on Sovietlevel heating for a very cold country, and yet they're talking about a newnuclear weapon in space.

You know, the sort of the priorities aredistorted there, which looks like, you know, these very autocratic regimes.So. It's worrying and it's something that Ithink will concern not just the West, but the world in general.Well, let's switch focus to what's going on in the Middle East and particularlythe war in Gaza, of course. A UN resolution calling for a ceasefiregot struck down. What happened?Yeah, well, Algeria put forward this this resolution for a ceasefire.And it's actually not not that different from what the US apparently is sort ofdrawing up as well.

But it calls for sort of an immediateend to the war and also calls for the release of hostages and no attack onRafah. Obviously this this last area of of Gazawhere a lot of civilians obviously have sought shelter and which is a real causefor concern. So the US vetoed it, Britain abstained,everyone else supported it. Now the US says that that it did so notbecause it's necessarily opposed to it, but because they're trying to work.You know, the Egyptians and the Qataris and the US are trying to come up withthis pause in fighting, not not ending the war, because Israel would rejectthat.

But a pause to try to release thehostages. And it said that the UN resolution, asit stood, didn't help that case. It sort of hindered it.And the US is of working on its own, which would again be a pause and thehostages released. And they are also requiring that Israelget the civilians out of harm's way before any events happening in Rafah.Diplomatic positioning on this conflict is one that you would expect that G20foreign ministers would have at the top of their agenda.They meeting in Brazil on Wednesday. But we're hearing that it could be sosplit and so sensitive that it gets.

Removed entirely from the agenda, whichmakes people question the relevance of the G20.Yeah, it's exactly right. And it's the same with Ukraine, too.It's it's quite unusual there. I mean, you can sort of see with withIsrael and Gaza the divide, you know, the natural one, the civiliancasualties, all the suffering and that sort of thing.And with with Ukraine, you find a lot of the global south is actually sympathetictowards Russia. And the idea that Russia's leading somesort of anti-imperialist block where it's inviting in neighboring countries,quite extraordinary.

But you're right.I mean, the G20 is there to solve problems, to have dialogue, to discussthese things. And when they get to a stage where theykind even put things on the agenda, I mean, really it just leaves them witheconomics and that's fine. But these geopolitical issues do impactthe economy as well. So you can't just pretend they're notthere. It does it really does raise questionsabout the its role going forward. Editor Michael Heath with that politicalwrap of some of the headlines coming up, though, we take a closer look at theearnings season here in Australia.

Jp morgan's head of Australia EquityResearch will be along with us insights into those recent beats and misses andguidance next. This is Bloomberg. About 15 minutes into the start of cashtrading here in Sydney. Take a look at some of the movers aswe're really in the thick of earnings season here in Australia.Big week with almost 100 companies reporting throughout the course of thisweek. One of them is Rio Tinto, of course,that we're waiting for a little bit later on today.We're off by about 2.3%.

But in the meantime, a bit of news flow.Rio Tinto signing Australia's biggest renewable power deal.So that could be sort of an extra narrative that we're watching as we getthose numbers. Santos disappointing the full year netincome missing estimates in its numbers this morning.Income coming in at $1.4 billion. That's down about 33% year on year witha final dividend per share of 17.5 cents or also a little bit more thanexpectations. We're also watching Woolworths bigleadership change, of course, as Paul alluded to at the top, has been a verydifficult week for the Woolworths CEO,.

Bob Banducci.He has tendered his resignation and he will be replaced by Amanda Abboud.Well the retailer has really been in the spotlight for much of the wrong reasonsamid the rising cost of living and inflationary pressures with its marginreally kind of catching the spotlight when it comes to local media coveragehere. Amanda Bardwell currently heads up theloyalty and e-commerce divisions. Woolworths watching that as well as wecontinue to really watch some of these banking numbers with the first quarterunaudited cash profit come in at 1.8 billion Aussie dollars, one of the fewoutperformers so far in what is a pretty.

Cautious start to trading across Asia.And as I mentioned, a big week when it comes to reporting season here.Over 70 firms on the Australian Stock Exchange, the ASX 200 total, a marketcap of $691 billion will be reporting this week.Let's get some analysis with Jp morgan, head of Australian Equity Research JasonState. And Jason, good to have you with us.It hasn't been a bad season so far. No, it hasn't, Heidi.I think we started with really a bang last week and there were some fantasticresults from a series of retailers, the number of companies.Since then, though, we've had a couple.

Of pockets of turbulence.So the fast start is still a good start. But we have seen some signs in certainsectors of a bit of weakness. And I'd probably point outcommunications services and a bit in the mining sector.But so far I think it's confounding some of the very negative expectations that afew in the market had on the way. And the narrative is always veryinteresting for some of the stalwarts like financials, Aussie financials andbanks, for example. Right.And to some extent that's the argument that perhaps they don't get as much loveas fundamentally they should.

Where do you see the opportunitiesfalling here? Well, certainly with the banks, theyperform tremendously well. And often the view from offshore is thatAustralian banks are too expensive, can't invest in them almost.It's a better idea to short them. It tends not to be the case.We have a consumer in Australia that is still well capitalised.Clearly there are certain segments of the economy where there are pressures,but by and large the consumer's well capitalised.We're seeing that mortgage cliff pass without falling off, which I think is isreally important in the context of the.

Underlying picture.So financials have done well, but they are all trading at quite full levels asa result of that. But if you look more broadly around themarket, we see good earnings growth opportunities over time.Sound health care, that's a sector that had a difficult 2023.But you look forward now and there are opportunities.That being said, for health care so far in the results season has been patchy.I wouldn't say that it's been the best season to this point, but really ourview is looking out 6 to 12 months. Discretionary, I think is where wefocused a lot.

It's not a huge sector in market capterms in Australia, but it is a sector that has displayed that resilience ofconsumer demand. It showed the quality of some of thecompanies in the sector. I think that really stood out.You're seeing margins better than expected, you seeing managements able tomanage what is a moderating price environment with really effective costcontrol. In terms of the financials, we obviouslyhad the big news yesterday with ANZ getting the green light to takeoverSuncorp consolidation in the space, pretty unusual in Australia.Do you expect to see more of it?.

Well, I think this is obviously a hugedeal that took a long time to get through and it raises ANZ position inthe mortgage market, gives them a greater share.Hard to see a lot more happening. We have seen in the past the regionalsand speculation regarding the regional banks, obviously seeing within certainparts of the financial sector, outside of banks, you know, attempts atconsolidation and some consolidation happening.But I think when it comes to the Big four, given the challenges that ANZfound in going through this process with Suncorp, hard to see more consolidationin that area.

But as you move down the cap spectrumand out of the banks, I think that's still an area where there might be theprospects of some consolidation. They just want to get back to your pointon materials earlier, we're going to hear from Rio Tinto a bit later on,obviously really exposed to what's going on in iron ore, what's going on withChina demand, what are your expectations for the space?So we've we felt that the steel demand picture has been more robust certainlythan expectations. So that's that's put us in a.In a view around the mine is that certainly for the bulk names, thepicture is more positive than the.

Generally downbeat view on China as awhole. But there have been some issues,certainly for a number of them in terms of costs, low returning projects.So it has been a difficult start to the year for the mining sector at large.Clearly, lithium is a different story altogether.But we do look at the large miners see continuing strong cost control.There still is this value of a volume mentality and discipline that does seemto be working, and most of them are trading at levels in our view, thatdon't represent how strong free cash flow is in the context of where iron oreprices stand today.

So we are still constructive, I guessaround the sector, but understand that there still are a lot of concerns aboutwhere does the economy in China go from here?Does it sort of hold up as policy stimulus comes through or is there thisrisk to the downside that you see further weakness in housing thatundermines the steel demand picture? Jason, I know you've covered our broaderAsian markets at points in your career as well, and it is interesting thatAustralia is always seen as a very domestic focused market, perhaps not asexciting. How do you compare the value opportunitywithin Australia to some of the market.

Darlings at the moment, like Japan,Korea, India? Well, I think we have amarket outlook here that if you're looking for income, clearly we have ahigh dividend yield in most markets. That has always been a point ofattraction for certain investors. What's interesting to us this year isnominal growth in Australia. It looks like it will be very strong andit will be stronger than a lot of developed markets.And part of the emerging market, which to us is a really important measurebecause that tends to drive underlying earnings growth.And for us therefore when you look at.

Sectors that are in a resilient positionin terms of the customer base, in terms of their business model that are gearedto the economy and this nominal growth outlook, we see quite a positivepicture. In terms of Australia, it would sit forus in a global context, probably at neutral, which is not that helpful, butit's certainly not a market in the past which has been seen as more of a, youknow, an afterthought or often an underweight.And we tend to say to a lot of international investors who we speak to,Australia's probably too underweight in your portfolio.It is seen as that domestic market, as.

You point out, but we feel that it'sprobably under held certainly across certain sectors.So we think that if you look at the long sweep of history in our economy, you'regenerally tending to get resilient economic outcomes, good nominal growthand generally consistent earnings plus dividends.One of the things we're looking at today is the narrative that perhaps centralbank tightening isn't over. Possibly we might see one more from theReserve Bank of Australia as well. It was a good year for the ASX last yeardespite all the tightening. Can that continuewhere we sit in terms of valuation of.

The index since its current levels arejust above what our valuation is And certainly what we're thinking of in thecontext of valuation is some easing on the right front.So a rate increase would, would would put a question mark over where we standand certainly the minutes, you know, pointing to that have led us to sort ofrethink, oh, in a situation whereby inflation is a bit more sticky,therefore you might see another rate increase.But what we've seen so far and results season is earnings upgrades.And clearly that's what feeds into our model that values the index as a whole.So it probably offsets one another.

But I would say if the RBA is back withone or two more rate hikes, which obviously would be a big surprise in thecontext of expectations a month or so ago, then that does put a question markover what we saw as last year's strong performance.So I guess we wait to see. It still feels to us, as are the cutscoming. But you know, yesterday sort of put aquestion mark over that or a sure thing. Jason Steed, thanks so much for joiningus. Jason is head of Australian Equityresearch at Jp morgan. And you can get a roundup of the storiesyou need to know to get your day going.

In today's edition of DAYBREAK, Terminalsubscribers go to Derby. Go.This is also available on Mobile and the Bloomberg Anywhere app.And you can customize your settings so you're only getting news on theindustries and the assets that you care about.This is Bloomberg. You're watching DAYBREAK.Australia, some of the corporate headlines we're tracking this hour.Citigroup raised CEO Jane Fraser's pay about 6% to $26 million in 2023.The bank awarded Fraser one and a half million dollars in salary and 24 and ahalf million in stock based incentives.

And cash incentives awards.The increase in pay comes after she initiated what's billed as the largestreworking of Citigroup in decades to make the firm more competitive.Last month, the bank said it would cut 20,000 roles in its bid to boostreturns. Bloomberg has learned India's marketregulator found a haul of about $241 million in the accounts of ZeeEntertainment. Sources say the amount is some ten timesmore than initially estimated by SEBI investigators.The issue was a blow to Zee. Less than a month after its merger withSony's local unit collapsed.

China's two main stock exchanges havefrozen the accounts of a major quantitative hedge fund for three days.That's after Ningbo London Investment Management Partnership dumped $360million of shares within a minute on Monday.The Shenzhen exchange says the move disrupted normal trading order.The ban is the latest move by Chinese regulators to reverse a slump in stocksthat is now entering a fourth year. Plenty more to come on DAYBREAKAustralia. Stay with us.This is Bloomberg. We are just about half an hour into thestart of trading here in Australia.

We're just getting some data crossingthe Bloomberg. This is the Westpac leading index, amonth on month number for January, seeing a little bit of a decline, butstill holding pretty close to unchanged, to be honest.Coming in at 9703 there with the six month annualised growth seeing a declineof about a quarter of 1%, we're seeing a little bit of weakness when it comes todwelling approvals, a little bit of weakness when it comes to thecommodities in the industrial products side of things as well.But let's take a look at how this is feeding through to the broad picture.Pretty muted trading because Asian.

Stocks really kind of set to follow whatwe saw in the US trading session. Traders really weighing big techprospects, all of all of which almost entirely is based on what we see out ofNvidia's highly anticipated earnings that really drag Wall Street away fromall time highs. And that is a picture we're seeingAussie stocks off by about 4/10 of a percent flat trading session there inNew Zealand and Singapore. Nikkei futures signalling a little bitof weakness as we see Japanese stocks in the previous session falling with, ofcourse, that December 1989, record highs still in sight.We saw quite a bit of weakness across.

Japanese insurers, in particular, theworst performing sub index that we saw on the topics.And speaking of the topics, there is sort of some parts of this marketsuggesting that that perhaps as we wait for the Nikkei to hit that record high,that some of the value names on the topics may actually start to outperformeven more so than the Nikkei from this point, despite being the less loved partof those Japanese markets. But so much of this poll really remainson what we get from Nvidia. And of course, that's going to play intoa lot of those chip names that are trading in Japan.Yes.

Some of those tech names going to be infocus as Japan's Nikkei closes in on that record.And our next guest remains very bullish on Japan, a 55,000 target on the Nikkei2 to 5 by the end of 2025. Joining us now is speckle expertdirector at Monex Group. I mean, yes, but we are watching this1999 record of 38,915. You see the Nikkei blowing through that.Where do you expect to see the biggest gains?Look, I think that it's going to be pretty broad based.The Japanese market is not like the US, it's not the Magnificent Seven.It really is the benefits of really a.

Decade long restructuring, lowering,break even points, you know, having superb operational efficiency.That's what's going to drive Japanese visibility of earnings continue to grow.And as a result of that, you know, earnings growing 30, 35% over the nextcouple of years. Therefore, the Nikkei going above 50,000towards 55,000 is not an absurd forecast.Well, we are, of course, watching the Bank of Japan for potential tighteningor at least a normalization of rates. But can you see a scenario wheretightening could actually end up stimulating the Japanese economy,especially for households that have a.

Lot of cash saved up?You know, you put your finger on the pulse here.You know, the Bank of Japan getting away from zero interest rates, which has beenwith us for almost one generation and nudging rates higher to begin tonormalize liquidity in the front end of the market.That's a positive number one for the banks.Number two, for the Japanese insurance companies.And last but not least, Mr. and Mrs.Watanabe is also going to benefit because finally those deposits, youknow, are going to earn some interest, I.

Think.Yes, but there is a bit of squaring up to do to think about record highs inJapanese markets, a continuation of this rally when the economy has slipped intorecession. Right.Is it because of the sort of Warren Buffett style of trade that theseJapanese companies that are in focus are making most of their money overseas?Heidi, you make the important point, number one.You know, the decoupling of the Japanese stock market from the Japanese economywill continue, will actually widen further.Just think about it.

The economy now, 40% of Japanese liveoff their pension. They don't live off employment income.They live off the pension, which is a state pension.So that doesn't really benefit very much from the stock market going higher.But the key point is, you know, that corporate Japan has got therestructuring, has got the global footprint and has got the eagerness toactually invest in new for profit enterprises.Just look at Nippon Steel, you know, buying U.S.steel. This is the Japan that we want to see.We want to see a Japan that expands.

Overseas where a young generation ofCEOs is actually taking bold decisions to grow for future earnings.Yes, but how does the yen play into this?And of course, that feeds into along with the recession is what we expect interms of the timing from the Bank of Japan.Right. Do you think policy change and theimpact on how the yen trades is going to have a meaningful impact on how Japaneseequities trade? Look, the arithmetic and, you know, theeconometrics is very simple. For every ¥10 of yen weakness, you'readding a windfall of 8% to Japanese.

Corporate profits because the overseasgearing is just so very high here in Japan.So, yes, the exchange rate does matter, which is why I personally am morefocused on the domestic plays here in Japan.That starts with the banks. It goes into the real estate companies.It goes into anything that looks and focuses and makes money from theJapanese domestic consumer here recovering.So focus on the domestic Japan rather than the export Japan.Okay. We are, of course, waiting, as Heidimentioned, on video results and the.

Whole idea of advanced chips, artificialintelligence, a key theme at the moment. And we've got Japan spending big in thisspace, which companies look like a buy to you.It's interesting, right? I think, you know, when you look at acompany like NBC, for example, right. When you look at even a company likeFujitsu and very, very important, one of my favorite stock picks in Japan is NTT.The telecommunications giant pays a huge dividends and it's got a new CEO andreally is going to be a huge backbone beneficiary of the air revolution.Yes, But always great to chat with you. Yes.Pickle expert director at Monarch Group.

As we continue to watch for thatDecember 1989, record high insight for the Nikkei.We are seeing a bit of softness, though, across broader Asian markets.And you can watch it live and catch up on our past interviews with thatinteractive TV function that's at TV Guide.You can also dive into any of the securities and the Bloomberg functions.We talk about joining the conversation as well.You can send us instant messages during our shows.This is for Bloomberg subscribers only to check it out at TV.Go.

As we have been discussing, it'sprobably the most highly anticipated earnings report this week.Nvidia going to be posting results on Wednesday after the bell in the US.That's been the S&P 500, its top performing stock so far this year thatrides the AI frenzy and it's now the third most valuable company in the US.Nearly $200 billion in market value at stake as investors see if one of thebiggest stock run ups in history was justified.Options markets are implying a 10.6% move in the stock price on the sessionfollowing its earnings release. That could results in one of the largestsingle session swings on record.

Well, Japan is embarking on its mostambitious chip development program to date, and it's looking to leverage USconcerns over supply chain security and return to a game that it once dominated,such as in Chitose, Hokkaido. The foundations are being laid for therevival of an industry Japan once dominated.In three years time it's intended there will be an advanced chipmaking foundryon the site, producing cutting edge two nanometer chips.Conversely, advanced chip manufacturers concentrated in a handful of countries.An alternate technology. There are geopolitical economic securityfactors involved to survive as a nation.

Japan needs to be a global main playerwith technology. We can clearly demonstrate that withsemiconductors as electric vehicles, AI and advanced weapons development spurdemand, the US is encouraging its allies to shore up supply chains and limit therisk of overreliance on China. Because of the geopolitical risk betweenChina and Taiwan. We are not expanding in mainland China.We are building a large factory in Thailand.Also, our presence in Germany and Japan is increasing.Taiwanese circuit board maker Ernie Micron has been operating here for sometime and now with government backed.

Rapida setting up the longer term visionis to build Hokkaido, its version of Silicon Valley.Further south in Kumamoto, the world's largest chip maker, TSMC has a $7billion factory gearing up for production and another one in thepipeline. The Japanese government is pouring a $28billion into its chip revival strategy, with the city of Chitose experiencing aproperty boom. As a result, unfashionable companies andmanufacturers have been moving overseas and now we are beginning to see a trendtowards a return to Japan. I believe repeat is exactly the kind ofbusiness development that will give.

Young people the opportunity to makedifferent choices in their hometowns. At the moment, Japan has a shortage ofskilled chip industry workers to move in.Once the construction crews move out, the hope is build it and they will comePaul Allen. Well, one of those firms in Japan eyeinga slice of the chipmaking pie as homegrown venture capitalist is lookingto mass produce state of the art two nanometer logic chips in 2027.From a starting point of zero for all. Bloomberg Intelligence Japan technologyanalyst Masahiro Keisuke joins us now from Tokyo.And Masahiro.

What's the biggest challenge for them tobe able to get to this ambitious goal? Yes.Regarding the rapids, they should have a bit more experience and actually theydon't have experience. And if we look at, for example, Samsungor Intel, they have extensive experience.But for example, Samsung suffered from their low production end and theyprobably made that loss last year for their foundry business, even though theyhave extensive experience. And probably one reason why Samsung hadthe difficulties that they went into. Three nanometer technology as well as anew transistor technology, it's called.

The gate all around and the rapids atthis time trying to do that, probably do pretty similar things with thatexperience. Still, that should be the biggestchallenge for rapid test at this point. So what's going to be required for rapidis to not just succeed in two nanometer development, but but survive as well.Yes. Regarding the rapids, probably we mighthave to be a bit patient and maybe time or money would be necessaryat the initial stage. Rapids should be facing the lowproduction field as well, so they make some losses and in that case, maybeJapan, Japanese government, they may.

Have to keep funding rapids and then itprobably rapids can take some time to to build a new technology.It may take maybe, you know, a few or more years.But as time goes by rapids, we will be able to establish some experience andwe'll migrate to the two nanometer technology.And once they can get to the point, it might be easier for them to furtheradvance to the say, you know, 1.41 nanometer technology after that.So probably time and the money it would be necessary for rapid tests.Bloomberg intelligence analyst Masahiro Kazuki there joining us and taking alook at some of the political headlines.

That we're tracking this morning.Analysts from Nomura and Barclays expect the Bank of Thailand to resist any callsfor any off cycle easing to support the economy.That's despite growing political pressure.Thai prime minister shot to television, has called on the central bank to holdan unscheduled meeting to cut rates. Says the data indicates that thenation's economy is in crisis. The boats rate setting panel isn'tscheduled to hold its regular meeting until April 10th.A Pakistani political party controlled by Bhutto Zardari says it will join acoalition led by Shahbaz Sharif in a bid.

To form a new government.The move follows talks to keep rival Imran Khan out of power.The new administration will have to shore up the economy and negotiate a newloan with the IMF after the current program expires in April.More ahead here on DAYBREAK Australia. This is Bloomberg. To the Lions.Eddie, now with the Singapore Airshow, continues this Wednesday.The exhibition is showcasing a shifting competitive environment for aerospaceand defense firms warning of supply chain challenges ahead.Bloomberg's Avril Hong is at the event.

And joins us now for what are we hearingfrom these companies? Yeah, guys, it's the second day of theevent in the Lion City. It is back in full force this year.But based on the conversations in the past day, you really get the sense thatsupply issues continue to dog the aviation industry.Airlines still face pilot shortages. Airbus saying that Carrier is expressinginterest in lone pilot operations. This might be something that passengerswill necessarily welcome with open arms, but it could go some way in helpingairlines to reduce their back up staffing needs.We also see jet shortages, and that.

Could mean increasingly that airlinesare turning to China's Comac as a possible alternative.We are hearing the strongest or one of the strongest endorsements yet for theChinese jet. Make the report, as you all say, Not tounderestimate Comac. It could be a force to reckon with.And then as we see these supply gaps, airlines have really been struggling tofill demand. That has meant that some flight routeshave just not returned and cities have just dropped off the internationalFlight network. It is the supply dynamic that's thebackdrop against which the conversations.

At the air show are taking place onaverage. You've got some more big interviewslined up today. What's coming up?Absolutely. We're going to be talking all thingsaviation, including on flying taxis. Germany's LILIUM has big plans for thePhilippines. Speaking of, we are also going to betalking to the chief of Cebu Pacific to find out about growth plans and whatthis means for potential jet orders. We're not just talking about commercialaviation. We'll also be talking about businessjets.

We've done so aviation, not just becausewe're tracking the flight paths of Taylor Swift as well as Elon Musk, butbecause we want to find out where demand is headed as the pandemic induced boomfades. And speaking of supply gaps, oneglaringly obvious one is in sustainable fuels.We'll be talking to Honeywell to find out how their technologies can help toplug that gap. For Avril Hong.They're at the Singapore Air Show. So we'll be back for some of thoseconversations throughout the course of the day.In the meantime, let's take a look.

Across energy markets.This is how we're tracking when it comes to WTI at the moment.New crude trading just over $77 a barrel.A little bit of positivity, but pretty steady trading, really, these signs of atightening market buying. Still with these concerns overlackluster demand, the Chinese demand picture continues to weaken, all kind ofcreating a whole lot of uncertainty for as to how global crude balances areshaping up. That push and pull when it comes tosupply and demand continues for energy. We just got a bit of breaking news onthe Bloomberg terminal here out of.

Japan, and it is trade numbers for themonth of January. We've got two exports rising, 11.9%,that's a bit better than expected. The expectation was for an increase ofnine and a half per cent imports, meanwhile contracting by 9.6 as well.And of course Japan, a very oil dependent economy as well.So the trade balance adjusted ¥235.3 billion.That is a surplus and we were expecting a trade deficit.So a big beat there for Japan's trade numbers for the month of January.And we've got the yen right now just hovering below 150.Let's take a look at have a tracking on.

Markets.Meanwhile, here in Australia, we have the ASX a little bit softer at themoment, off by about 4/10 of 1% right now.We are watching a number of companies out with earnings today, including theoil producer Santos. We had a full year profit miss there.A little bit later on we're going to get the big iron ore miner Rio Tintoreporting. That'll be after the bell coming out ofLondon. National Australia Bank was out with atrading update, too. And the Woolworths CEO, Brett Bender,she's retired as well.

Okay, let's take a look at how we'redoing in New Zealand. The market there, flat Nikkei futures,meanwhile, suggesting that, no, we're probably not going to take out thatrecord today. The 1989 record being 38,915.But it looks like we're going to have another down day on the Nikkei e-mini.S&P futures, meanwhile, looking kind of flat at the moment Heidi.Yeah, take a look at some of those movies.And you mentioned Woolworths. Of course, that has been a challengingweek reputationally for the Woolworths CEO who has just announced hisretirement.

The head of loyalty memberships will betaking over as the CEO. As we see that leadership change afterreally what has been a viral clip that we've seen all across the variousplatforms after his interview in domestic media.This is a picture when it comes to some of the other stocks that we're watching,Santoso, the full year net income missing estimates, but the companies saythey're exploring options to unlock value.We've seen profits slump over 40%, but the chairman saying that the oil and gasgiant, despite last month ending those deal talks with the larger rivalWoodside, looking for ways to attract.

Interest in its portfolio on the back ofthose full year earnings slumping as a result of lower prices.Also watching the National Australia Bank there as well to coax ongoingresilience in the economy, saying that most of NAB's clients are coping withthe challenge as well in order to cash profit for the first quarter of 1.2billion USD, with a credit impairment of 193 million Aussie dollars.Some of those higher reason Aussie home lending and business lending volumegrowth as well, weighing as well. So we are seeing a little bit of upsidethere when it comes to trading in the Australian lender.Exxon Mobil has pledged not to curtail.

Exploration or production plans inGuyana as Venezuelan President Nicolas Maduro continues to ramp up histerritorial claims in the region upstream.President Liam Malone spoke with Bloomberg TV.We've been very clear. We're staying very focused on executingour operations within our defined contract area.That's what we've been do and that's what we intend to continue to do.And, you know, as we talked about, this development has many years ahead of itand we're not going anywhere. So, you know, fundamentally we'redelivering and we're developing and.

We're continuing to spread the benefitsto Guyana within our area of operations. You know, the matter for discussion withthe borders is really a government matter.Of course, you know, we take the necessary precautions from anoperational perspective, you know, to the extent we can.But but fundamentally, our focus is on doing what we say we're going to do,doing that within our approved contract area and continuing to do that.And that's the reason why we're talking about this, is because Venezuela'spresident was talking about barring you from exploring certain waters, inparticular that it was talking about.

Near Guyana, right off the coast that itclaims as its own. Are you planning on exploring thoseareas? Is this a point of contention?You're talking to the State Department or is that not in your purview and youcan continue with the production that you have planned without that?Those those were those words that got discussed are in our in our contractarea. And we do plan on proceeding with themhere in the coming years. But are you concerned about Guyana'sability to defend itself? It's not just the rhetoric from NicolasMaduro.

It's the fact that we have seen insatellite imagery him building up his own military on the border.You know, again, that's honestly a metaphor for for the governments.Clearly, you know, given the nature of our operations, were informed as to asto the nature of those discussions. We've been pleased with the discussions,were very supportive of Geithner's position that this should be resolvedthrough the ICJ process. And we'll continue to stay engaged withthe. That is the Exxon Mobil upstreampresident Liam Malone there we got the market opens in Seoul and Tokyo.Coming up next.

It looks like we're probably not goingto take out that record on the Nikkei today, though, does it?You know, looking pretty muted across the region and in the names of one inthe words of one analyst, I should say, we've got, what, almost 800 companiesreporting this week. There's only one that really matters forthe market at the moment. And video is the one we're watching togive us some indication of where this driven rally might head next.This is Bloomberg.

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