This is DAYBREAK, Asia.We're counting down to Asia's major market opens.And Paul, I think probably one of the key things we're going to be trackingtoday is just whether this ends up being a sort of wait and see session, giventhe amount of different items on the data docket, but also key earningsreleases that are ahead. Yeah, that's right.And it was a rough ride for markets, of course, last week.A number of unappealing superlatives set by a number of markets, including theS&P. The Nikkei had a rough week as well.China did pretty well, though.
It's going to be an interesting session,though, as you say, to see how investors respond and whether or not they respondat all. Yeah, well, of course, some of theaction in the Friday session was down to the tensions in the Middle East.It sort of dissipated throughout that day of trade, but it was that close ofWall Street. And as you said, that big drop that wehad in the likes of Nvidia Tesla, in fact, the worst drop that we've seen forNvidia in about four years. What we're tracking today, though, inthe session is is the outlook for the Japanese yen still trading here veryclosely to that 155 mark.
We do have the BOJ decision coming upthis week and it really is sort of a catch 22 situation for for BOJofficials. Given that you've got a weak yen thatcould be adding to the inflation story, but still they're not likely to hike atthis point in time. Weaken, of course, it supports theexporters today. We're just seeing stocks a little bitfirmer. But in the context, as we said, that bigsell off that we had on Friday, given the news of the retaliatory strike forIsrael on Iran, a drop during our trading hours.So we did see shop losses there,.
Particularly in the tech sector.Let's change on. Take a look at what we've got for Koreaat the start here, because, again, you are just seeing moving a little bithigher. We've actually got some trade datadropping as well. First 20 days of April, numbers fortrade and exports rising 11% on the year.Something that is positive, of course, not only for Korea, but it is considereda bit of a barometer for global trade, as that could perhaps play a little bitinto the story. Korean one, again, you're seeing it alittle bit firmer here, but it has been.
Against that backdrop very much of KingDollar. So just recapping there, those tradenumbers for the first 20 days of April, exports up 11.1% on the year.Imports as well, gaining by the same magnitude or rather actually I shouldcheck, have just misread that one. But we do have, as I said, the first 20days of trade data dropping and imports rather a rise of 6.1%.So a reversal from a contraction the month prior.Well, we've just opened for trade here in Australia or close to it as astaggered open, but we are seeing some pretty modest gains.BHP among the early movers, that stock.
Better by 1.4% really continues a themethat we saw towards the end of last week, even though we saw losses on theASX gold stocks in particular. Well, energy stocks did pretty wellalso, but we're seeing Brent crude coming off some of its highs at themoment, off by about two thirds of 1% in the early going.The Aussie dollar holding pretty steady there, just above $0.64 and sims ofyields here in Australia, we've got the yield just creeping up a little.It did slip in the early going, but we've open for trade in the US debt aswell in Japan. So let's take a look at how we'retracking there.
Bonds have been heading for their worstmonth of the year and we're seeing a bit of a tick up in yields at the moment.The two year just knocking on the door of 5% now.So it'll be interesting to see whether or not it crosses that threshold.As I guess, Delia, Diana Masina noted that the yield curve is still invertedand it's going to be an interesting week as well.There's $183 billion and two, five and seven year sales coming up.So we're going to have fun watching the markets absorb that Annabel.And what else? Markets are going to be absorbing iscertainly the big report that we've got.
Coming out from big tech earningsarriving this week right in time for investors looking for an AI poweredrebound or perhaps not. We'll see what comes out.But let's bring in our next guest who is cautious on the famous is Vicki CheeAsia equities portfolio manager. Rebecca.And yet we've seen so much optimism that I would it would lead to these bigproductivity gains really boost bottom line to companies but you're a littlebit more cautious it seems. We've been in this beautiful rally forover one and a half years now and Asian semiconductor supply chain has beenreally fully participating in this I.
Thematic.And the way that I look at it is really I think as a sector, we're definitelyhaving some kind of risks of overestimating the near term importanceof of this whole new infrastructure investment in a I and I think I'mcautious in the sense that expectations would have to be rebased.And some of the stocks have definitely rallied way more than they deserve andearnings probably would not be able to support that.So overall, I think stock selection remains to be very important.Which companies can actually deliver the earnings and have the pricing power inthis whole rally.
And that can sustain that with earningsand some of the stocks. Unfortunately, I don't think they willbe able to keep going. So what what sort of timeline are youexpecting to see any sort of gains from I on?I mean, it seems inevitable that I will change our lives perhaps in really bigways. But.But are you saying that the timeline has been pushed out or have you sort oftoned down the FOMO in a meaningful way? Yes.So I think for investors, this is obviously a very important thematicthat's going to lead to extremely strong.
Productivity growth down the road.But indeed, timing is the big question and it's been extremely risky tounderweight these thematic for investors in the region and globally up to now.But I think again, at this moment we are not seeing the killer apps comingthrough, right? So even though we're all usingmeeting those functions in different apps to to help us using these apps, butthey are not in terms of profitability and revenue impact, that's significant.That's enough to support sustained infrastructure investment in thesemiconductor supply chain. So I think as investors, on the onehand, we need to be aware of the market.
Momentums and cannot be too underweightgiven the very strong momentum. On the other hand, from earnings andstock selection perspective, we need to be very careful and selective.Yeah, it was a very rough week for I.T. stocks last week in both Japan andKorea. And the Nikkei more broadly is now downabout 9% from its March peak. But we've got a chart on the Bloombergterminal here that shows the CSI 300 was actually up last week and is now beatingthe Nikkei. Do you think this is maybe the start ofa trend? Maybe we're seeing some profit taking inJapan and a bit of investment in some of.
Those really beaten up Chinese names?Absolutely. I think there's been definitely a veryvolatile shift happening in the market and in Asia.We've seen currencies move very dramatically and China is well has beenthe drag of the market and that has stabilized somewhat.So I expect this kind of volatility to continue with the rates confusion in themarket or a reset of expectations in the market.In terms of the Japanese market. We still hold a very positive viewthere. But obviously the yen has been a verystrong focus for investors.
So the way that we look at it, we needto be very focused on selection within Japanand what we still like is really the Japanese properties.So we still see the domestic Japanese property as one of the promising areasto invest in. Do you also like some of these othernames that have perhaps been a bit on the nose recently in particularly oil,energy stocks, fossil fuels? They have been doing quite well, perhapsat the expense of some of the more sustainable investments.That's a great question. And I'm often asked by investors, how doyou actually look at sustainability in.
Asia in this kind of light?And my answer would be that we are still in the very early stages ofsustainability development within Asia. And I think the conviction from the topto the bottom in Asian countries is very high.So sustainable development remains to be an area where there's often overlookedby investors, especially oil prices doing well.It seems to be much simpler to just investing oil and invest in the brownenergies. But actually Asia sustainabilitydevelopment is still very much ongoing and I would actually like to argue thatthere is a tremendous investment.
Opportunity here for investors toachieve alpha. So actually excess returns over the oilstocks by investing new energy infrastructure in Asia, by investing inthe electricity grid across the region, and by investing in, for example,natural gas, which is also an important residual fuel for a lot of Asianeconomies. Something else that might take a littlewhile to bear some fruit is is Korea's value up program.And we've seen investors leaving that market just because they've been alittle bit disappointed with what they've seen so far.But how long do you think until we start.
To see any sort of concrete returns?And in comparison, for instance, what we've had in Japan,we've definitely seen that that episode before.In Japan, it took a long time for the consensus to be built and for thecorporates to actually step up, for management to step up and to really takea closer look at their shareholder return programs and really commit tooptimizing their balance sheets. So in Korea, we expect something similarto happen, but obviously the markets recognize a similar pattern and haverallied up very, very quickly and again, indiscriminately.A lot of stocks went up all at once.
And in our experience as one of thefirst institutional investors that signed up to the stewardship code inKorea, we see tremendous differences in divergence among different management ofdifferent companies. So the companies that will change willenjoy a much better valuation over time compared to the companies and themanagements that are very slow to move. So again, we believe this is thisremains to be a very interesting thematic for investors to invest in Asiaas we're trading at such a large valuation discount compared to theglobal peers. And this would be another question aboutthe stocks stock selection.
But we remain optimistic about value upprogram in Korea. All right, Vickie, thanks for your time.That was Vickie Chou, the Asian equities portfolio manager at Rebecca.And we are just pretty much being on 10 minutes into the session so far.But at tracking tech stocks in particular, these are names that arelinked to Nvidia. And of course that story on Friday wasthe significant drop that we had for that US based chip maker.But we, we all chip chip company, but we are seeing companies that are linked toNVIDIA as well. A little bit weaker so far in thesession.
The biggest decline that we've seen forthat company in four years. Super Micro as well.Another A.I. name that had been sort of seen as an AIwinner, a slumping sharply on Wall Street.So that's one thing that we're tracking. The other one is Nissan.We were just saying that stock come online, pretty big drop.So far. We have the biggest decline actually,we've seen going back to two March. But we have got Nissan under pressure sofar, given its full year profit has missed estimates.Its full year operating profit coming in.
At $3.4 billion and that was 15% lowerthan it forecast as recently as February.So, Paul, really that story of sales just falling short of expectations.Yep. Yeah.Nissan declining a little bit in early trade.Still to come, our exclusive conversation with Philippine FinanceSecretary Ralph Recto. We're going to discuss his outlook onmonetary policy and the weak peso later this hour.First, though, a US bill forcing tech talks, Chinese parent company to sellup.
That could become law within days.We're going to discuss the implications of that next.This is Bloomberg. A bill forcing tiktok's Chinese ownerbytedance to divest its ownership stake is on a fast track to becoming a law inthe US. The legislation was included in acrucial aid package for Ukraine and Israel and that was passed by the Houseover the weekend. Global business editor currently joinsus now. Karen, the author of this bill, MichaelMcCaul called Tick tock Spy billion on America's Phone.So this app isn't going to delete.
I mean, this bill is not going to deletethe app from Americans phones. I mean, how is this going to work?What's the next step? Yeah.No, it's not. And it's crucial to remember that ticktock is used by tens of millions of Americans, especially young people.And it's really become a staple of life in the country.People are getting political news from it.They're getting recipes from it, exercise plans.It's not just about keeping in touch with your friends, your potentiallylooking at removing a major source of.
News.So I think a lot of people are concerned about not just what the removal of TikTok or a change in TikTok would do for that group of people, but also how TikTok is using data, how Tik Tok might be using what people are posting.And I you know, there's been a lot of debate about that in the Americangovernment and among American people for a long time now.And it seems to be coming to a head with this.Karen, We know that Tiktok's making some personnel changes in the US in thispreparation to really fend off of the the US law but to a possible US law.Is there any way that the US really.
Misstep or tick tock rather in the USmisstepped here? Is there something they could have donedifferently to convince lawmakers? Well, it's interesting, Annabel, thegeneral counsel of Byte Dance and Tik Tok in the US, Bloomberg is reportingexclusively that he is going to be removed from the role in the wake ofthis. But Tik Tok and Byte Dance are sayingthat that is not the case. And we're also reporting that they'regoing to pursue exhaust legal action. So it's going to be interesting to seewhat they're able to do and how this plays out, especially leading up to theUS elections in November, where the.
US-China relationship is obviously goingto be a focal point no matter who gets into office.So we're going to be watching this very closely to see what it means for Tik Tokand also what it means for that relationship as a whole.And what's it going to mean for Bytedance and its bottom line?You know, it's interesting because Bytedance is obviously a Chinesecompany, and China in recent weeks has been fairly restrained on the US.It's it's a held back. So it's going to be interesting to seeif this is something that really pushes China to say something or if it's justgoing to deal with it as it comes.
That was our global business editor,Karen Lee, there. And sticking with China becausePresident Xi Jinping has ordered the biggest reorganization of the nation'smilitary since 2015. It's a move that will affect the forcein charge of capabilities, including cyber warfare.For more, let's bring in Greater China senior executive editor John Lu, who isjoining us this morning in Hong Kong. And John, how much is this aboutpreparing China for modern warfare? Well, I think it has to.I think that is a big part of it. If you look at what they've done,they've elevated the importance of.
Aeronautics.They've elevated the importance of cyber.Those are both areas where there's intense competition with the UnitedStates. I think that's probably the drivingforce there. There's obviously another factor here iswe've seen a big turnover in the defense arena in terms of personnel where thedefense minister removed the the head of the strategic support force that isbeing now removed. That person has not been seen for awhile either. And so there is some political sort ofthings happening underneath all this as.
Well.A drama, also got Secretary of State Antony Blinken heading to China.The latest in quite a long procession of U.S.officials to head over to China. In what respect is this mission going tobe a bit of a diplomatic tightrope? So on one hand, Secretary Blinken ismaking this trip because of the meeting between President Xi and Biden in SanFrancisco, and they are trying to continue the sort of detente that hascome out of that meeting out of APEC at the end of last year.On the other hand, there are lots of problems, the biggest problem of whichis Russia, Ukraine and Chinese support.
Of Russia.Secretary Blinken already talking about earlier last week how howhow much objection there is to Chinese supplying Russia with so-called dual usetechnologies, things that can be used for missiles, but also used forcommercial purposes, for cars, for electronics.And that is a big issue that we are expecting Secretary Blinken to bring upwhen he is in Beijing. And again, it really comes back down tothat sort of competition and returning to that idea of China's military.Do we have clarity? As you mentioned, these personnelchanges and people that haven't been.
Seen in public for a while.Have we got clarity on who really is leading these key positions in China'smilitary at this point in time? And alsobecause there's been that question in the past of China being prepared interms of weapons, but strategically not ready either for combat.I think Xi Jinping has made it very clear that his objective is to get theChinese military to the point where it could fight and win a war, whether thatis, in fact, the condition that the military finds itself in today, I thinkthat's questionable, especially if you have so many high ranking officialsbeing moved around and removed at the.
Same time that that effort is not goingto change. Because even though we may not be we maynot have great certainty about who's in charge of the military, any specificrank we know we know very well that Xi Jinping is in charge and it's very clearwhat he wants to do. All right, great.China senior executive editor John, do you there?Well, the US House of Representatives has passed $95 billion in fresh aid forUkraine, Israel and Taiwan. And this ends a six month long politicaldeadlock. The Senate is expected to pass thepackage later this week.
This aid will strengthen Ukraine.We did lose the initiative there. Now they have all the chance tostabilize the situation and to take the initiative.All right. For more on this, let's bring inBloomberg's Michael Heath. Michael, that was like pulling teeth.It took a long time to get there. Can you tell us how important this isfor Ukraine? And as November gets closer, is there achance this could be it? Yeah, Paul, good points.I mean, Winston Churchill once said that the US always does the right thing afterit's explored every other option.
And this is really a case of that.Look, it's hugely important for Ukraine. Russia was taking advantage of its lackof ammunition, of its struggles to get enough men into the line so it wouldhave a morale boost and it will also probably stabilize the situation, asPresident Zelensky said, which is hugely important that been on the back foot andRussia's been taking advantage of this. Russia watches very closely what goes onin terms of the US Ukraine relationship and Ukraine's relationship with theWest. But you're right.And, you know, in November, if you if you get a Trump administration and Trumpis so positive towards Putin and you.
Know, it's been reported fairly clearlyjust he has almost sort of this idolization of the Russian leader,there's every chance that the plug could be pulled and then it's really going tobe up to Europe to step up. Can Europe do it?It's fairly doubtful. So, I mean, Ukraine has an enormousamount riding on this election and Russia is really got the wind behind itat the moment. The other thing with Russia, you alwayssay is the longer war goes on, the better it gets.And you can see it's starting to improve now as well.So Ukraine desperately needed this.
And Michael, part of this funding isalso going toward Israel. We understand we're hearing from fromNetanyahu that that could partly be spent on operations in Gaza.It doesn't really seem like that is the direction that the White House wouldwant, even though they did call for further assistance.Yeah. I mean,look, the Israel side of it, I think it was essential that this that thispackage linked those two together just to get everybody on board to pass thatit was just so important to pass it. And the US is never going to leaveIsrael without without the ammunition.
And the wherewithal that it needs.But yeah, look, Rafah will come back on to the agenda.Obviously everyone was very, very closely focused on Iran and and Gazasort of took a back seat to that Israel's strike.Iran has played it down and everyone has praised it in the West, even though theydidn't want his rule to retaliate. It strike was was very much a just acase of look where we can get to you, but let's leave it at that.And around playing it down sort of means that this is this is quiet and thingsdown. But I think the US side is importanttoo, because even putting aside Rafah.
And the worries there, the baseline hasrisen for fighting between state to state, fighting between Israel and Iran.And obviously you've got Hezbollah on Israel's northern border as well.So, you know, Israel's security position is has has deteriorated slightly interms of Iran now showing its hand with this.But I guess, you know, it really depends what if Israel does go ahead with roughwith Iran. Folks back in the background, if itwaits a bit longer, then people will keep focused on that.But the US was always going to support Israel here and always ensure it had thewherewithal.
So though, though, if it goes on andattacks Rafah straight away, perhaps not look so good.But I think in the case of Iran, everyone knew that they had to havethis. That was Bloomberg's Michael Hayden.And we'll have more ahead on DAYBREAK. Asia.This is Bloomberg. There is no such thing as free trade insteel. The market in steel globally issignificantly distorted by what we are calling the non-market policies andpractices coming out of China. All right.That's US Trade Representative Katherine.
Tai speaking there to Bloomberg.Let's take a look at how some of these commodities are tracking at the moment.Iron ore prices softening just a little while.Of course, iron ore very much a bellwether for what's going on in China,very important to Australia as well. Currently declining by about 1.2%,seeing a little bit of softening of the oil price as well.Brent crude now 8679. This is, as we've been discussing, thattension in the Middle East, just de-escalating a little.Israel and Iran seem to be on some sort of off ramp in terms of dialing back thetension a little bit.
Gold price that's also backed off a bitas well, 2398. So back from the 2400 high.Gold still up 10% this month. Still to come, big banks, including UBS,HSBC and Morgan Stanley are cutting back on jobs in Asia.Recruitment agency Robert Walters is going to join us to share their outlookup next. This is Bloomberg. We're hearing it's all big tech rightnow. So some of the headlines are thisquarter is about big tech. Big tech has great balance sheets with alot of cash and very little debt.
Megacap tech companies that aregenerating extraordinary amounts of cash flow, they're still actually doing verywell. Tech is a big part of the quality story.And we would expect for this quarter in particular for many of those companiesto lead on earnings growth going out for 1 to 3 quarters.I mean, it is going to start broadening out.You can't have tech be the only thing that does well if you're starting to seeeconomic weakness in other places. We're just ramping up earnings seasonnow, and I think that's going to be a good distraction for the market to beable to sort of have a look at what's.
Actually going on, to see whether thelofty valuations are actually supported by the fundamentals.Bloomberg TV Guess they're on us. Tech earnings is going to be a very bigweek for us. Takes in tech earnings as well with theMagnificent Seven. Many of them reporting.And on that topic, we've got the results of our live Pulse survey.I do love a good survey. There were 409 respondents to this.So that gives you a sense of the margin of error.But will this ending season give the S&P 500 a boost?Well, a lot of optimists out there, 63%.
Think so.37% think that it's not going to be so good.And we could see the S&P take another leg down.And a couple of other questions there as well that stood out to us.What is the biggest headwind to 2020 for earnings globally?Ten year Treasury yields climbing above 5%.Well, they're not there yet, but certainly the two year yield is knockingon the door of that company's not delivering on I that's another concern.Oil that's a distant third. One more question we want to take a lookat for you was what would be most likely.
To make your add exposure to dividendstocks? Well, it's not the Fed.It's an underwhelming earnings season, which would make 42% of our respondents.That is, 172 respondents, in fact, would make them want to add exposure todividend stocks. So there are a number of other questionson that Pulse survey. But those are the the three that reallystood out to us. Bell.Yeah, Paul. Something else that really stands out tous and just given the number that we've been seeing, is.Is job cuts always something that's very.
Closely tracked by our audience?But this graphic here taking a look at some of the ones that have beenannounced, either by the company perhaps, but more likely down tosourcing different organizations are Reuters is playing into this, but thelikes of Deutsche Morgan Stanley, HSBC, UBS, Bank of America, all some of thenames that have reduced headcount just in the last few months, Hong Kong,mainland China, they've certainly bearing or been bearing the brunt ofthis. So let's get more with our next guestwho says that there actually could be further reductions to come.John Mulally is managing director for.
Hong Kong Robert Walters.And where are we, do you think, in the redundancy cycle at this point in time?It's a good question, Annabel. And it's you know, it's not it's veryhard to call us. I mean, we've been speaking to a lot ofclients right now who are saying that we're kind of really at the bottom interms of where those cuts are. I mean, this has been happening now foralmost two years. You've had a glut of hiring from thebeginning of 2021 to the middle part of 2022.And by mid 2022, when we're speaking to the banks, it was clear that the revenueis coming through and the pipelines.
Coming through weren't really supportingthe amount of hiring they had done. So I think you have to consider wherethe where they were coming from, from a base perspective to where they are now.The sense we're getting is that there's probably going to be a little bit moretrimming over the next kind of quarter, quarter and a half, but that as we gointo the second half of the year, there will be some improvement, but that isn'tgoing to necessarily result in hiring anywhere near the levels of 2021, butprobably some more cycle hiring. All right.Towards the latter part of Q3, maybe early Q4.Yeah, we talk a lot about about.
Pre-COVID levels.I mean, when we go back and we're going back to pre 2019 sort of hiring trends,or is this about creating sort of a new normal as well?Yeah, I mean, I suppose the reference point we're using is 21 and 22, and thatwas where there was a significant amount of hiring in well, it was a kind of aquasi post COVID bump in terms of recruitment.That's the kind of benchmark where we're looking at going back to 2018, 2017isn't necessarily relevant to the world we're in right now.What impact is this type of job market having on salary expectations?I suppose people have become a lot more.
A lot more amenable to making that move.There are less, less positions out there.And you know, when those supply demand factors favor employers, what you get isa a candidate market that is more open to making moves.I mean, if you look at the percentages, people are moving, say, two, three yearsago, you're looking at 25, 30%. You're looking now closer to ten, 15%.And again, in certain parts of investment banking, especially at thesenior level, people are moving for kind of, you know, flat rates really, they'renot really looking for percent, just are looking at where are the opportunities.To what degree do you think hiring is.
Really depending at the moment on thestate of the Chinese economy? And are you seeing any signs ofencouragement that. Again,it is in Hong Kong, especially for investment banking.It is hugely dependent on the Chinese economy and hugely dependent oncompanies coming to market, looking to raise capital through equity or debtissuance or engage in M&A activity there.Again, the sense we're getting is that's where we're at.You know, they're calling this the kind of bottom of the market and that thingswill look to improve over the next.
Couple of quarters.I think with banks, though, given how they've gone on this cycle of hiring andthen immediately, almost immediately having to reduce workforce, they'regoing to wait for more than just one quarter of activity before they reallystart ramping up hiring again. Jonathan, any specific sectors or rolesthat you think are most at risk? Clearly, anything in the IPO sector,given the given how that market has performed in Hong Kong, you know, equitycapital markets, they tend to be more at risk because there's less activitycoming through. But again, we are looking.I mean, financial services is a very.
Broad spectrum of of of firms, ofactivity, of functions. I think we tend to hone in on frontoffice investment banking jobs, especially when these job cuts, thesejob cuts come, and especially because they are some of the highest earners inthe in the industry as well. We talk a lot about the the the thecompetition war between Hong Kong and Singapore.Where are we at in that as well? Because a couple of years ago it wasthat story of everyone was sort of fleeing to Singapore.Now there's sort of the question mark, are they coming back and and are youseeing sort of different salary.
Expectations between the two cities aswell? I would say that the salaries acrossHong Kong and Singapore now are broadly similar.It used to be the case up until probably about three years ago that Hong Kongthere was always a little bit of a premium.Hong Kong was seen as a more expensive place to live for, for a start.And just to kind of did this, the deal size and deal pipeline in Hong Kong wasalways heavier and and more attractive thanSingapore. So as a result, bankers in Hong Kong,you know, commanded a bit of a premium.
Now it's kind of flat in terms of peoplecoming back from Singapore to Hong Kong. I think there's an appetite for thatfrom individuals. However, the job market itself isn'tsupporting that. So it's, you know, bankers and financialservice professionals will go where the opportunities are.Right now in Hong Kong, there's a paucity of opportunities.So that is preventing that degree of migration that we potentially would beseeing in a healthier market. And is there any sort ofpreference for other places like Tokyo, for instance, or Dubai, even, you know,for people that are looking or chasing.
More Dubai, at least a low, low taxrate? Yeah, I would say the Middle East and tobuy is a more realistic option for for bankers being out of jobs here inHong Kong. Tokyo tends to be one.I mean, I suppose a little bit more of a language requirement, too.It is a very distinct market where specific network and track record andexperience is required. I think Dubai is more of a realisticoption. All right.John Mulally, managing director for Hong Kong, added Robert Walters, thanks somuch for joining us.
Well, let's take a look at how atracking on markets at the opening bell. And I were wondering if maybe investorswould sit on the sidelines today. No, they have decided, in fact, thatthis is very much looks like a dip worth buying.Here in Australia, we've got the ASX up about one and a quarter percent at themoment and we're seeing equities rebounding everywhere.The Nikkei better by 6/10 of 1% and the course be better by three quarters of1%. In terms of sectors, it's a pretty broadbased rally as well. It's really only energy here inAustralia is in the red.
In Japan it stocks having a rough day,but elsewhere pretty much every other sector in the green in terms of tech.Let's take a look at some of these Tesla supplies as well.Well, they're all doing pretty well as well.And that's notwithstanding our expectation that we're going to have apretty interesting earnings announcement from Tesla this week.Its stock has slid more than 40% this year amid slumping sales.We saw a lot of redundancies at Tesla over the weekend and also thisannouncement from CEO Elon Musk that, well, maybe we're not going to do a lowcost vehicle after all and the focus is.
Going to shift to robo taxis.So yeah, upheaval the watchword at Tesla at the moment, but suppliers stillperforming pretty well in the early going here in the Asia Pacific.Well, the IMF's first deputy managing director says the potential for oilprice shocks from escalating tensions in the Middle East would be problematic forthe global economy. To Gopinath also discussed the outlookfor US interest rates at the IMF spring meetings.This is a risk we worry about if there is a serious escalation, which means amuch more wider regional escalation than what we've seen so far.Yes, we could have a severe oil shock,.
But we're not there yet.And as you can see in terms of oil prices went up some, but it's come backdown. We have supply excess capacity in SaudiArabia. We have non-OPEC countries putting a lotmore oil out on the market. So there are other sources of supplythat can, you know, buffer these pre shocks.But if there's a large scale escalation in the Middle East, that is the problem,is that the line in the sand, $100 a barrel amount would consist of theshock. I think you're going up $100 a barrelwould be problematic.
But even going from here to $100 abarrel would be very difficult for countries to deal with.We're still fighting the last inflation fight, which is to bring inflation backdown to target. One thing that the IMF has talkedextensively about is concern about sovereign debt, in particular in theUnited States and the overhang there. What's the outcome of that?Is the fear of some sort of sort of slug flirtation or just sort of a sluggishgrowth kind of picture because of the overhang is at higher rates andpotentially a Liz Truss moment, which I've been talking about and get shotdown all the time in the US.
But is there something like that thatcould potentially happen? You know, the US is running very largedeficits for a country where demand is very strong and there is still the lastmile in terms of bringing inflation down.So for all those reasons, the deficit, we have a deficit of 7% of GDP.It needs to be lower. And if you project out, it's going tostay at those high levels for a while. That has consequences, of course, fordebt servicing in the US. But in a sense, the bigger problem is interms of spillovers to the rest of the world, because for the rest of theworld, when you have so much of debt.
Being issued by the US that can crowdout the lend and borrowing from other countries, the cost of borrowing goes upand their debt servicing costs go up by much more.So, you know, I wouldn't say the US has a debt sustainability problem now, butat the same time when the US is borrowing that heavily, that causesrates to be that much higher. It has implications for the rest of theworld and for, you know, corporations and households in the US.How much higher I mean, could you see rates staying here between 525 and 550for the rest of this year for even into next year?That would not be our baseline.
We would expect to see rates comingdown. So right now there is a fix for gettinginflation back to target. So we expect that to will come down.You know, it's going to take a little longer, but we expect that to come down.The question is whether it comes back down to what we saw in the decade afterthe GFC. And there you know, right now thatdoesn't seem to be the case. That's IMF First Deputy managingdirector Geeta Gopinath, speaking with our colleague Lisa Abramowitz.And Australian Treasurer Jim Chalmers says next month's budget will cut thegrowth outlook for most major economies,.
Including key trading partner China.Trauma says Middle East tensions are casting a shadow over the globaleconomy, compounding concerns about lingering inflation of weaker growth.He says these headwinds were central to his discussions last week in Washingtonwith G20 finance ministers, the IMF and. The World Bank.Plenty more to come on DAYBREAK. Asia.This is Bloomberg. Elon Musk has decided to postpone histrip to India. He's blaming the delay on pressingissues that Tesla, which spent the weekend cutting prices for its cars anddriver assistance software.
And that's ahead of earnings expected toconfirm the first revenue decline in four years.Musk has also staked the company's future on a next generation self-drivingvehicle concept called the Robo Taxi. And for more on today's big take, let'sbring in our global business editor, Peter Vercoe.Well, Peter, kudos for Tesla for cramming a year's worth of headlinesinto a few days. What's going on?Yeah, great question. What is going on at Tesla?It has been a crazy week, even by Elon Musk's standards.I think it started last weekend with the.
News that Tesla was going to cut 10% ofits global workforce, which was about 14,000 jobs, and that came out in like alate night memo on Sunday. So quite a lot of people, workers whowere affected from that unawares. Then during the week we saw the recallof the Cybertruck, pretty much all of the 4000 odd cybertruck that it soldalready have had to be recalled to fix a faulty accelerator pedal.Tesla's trying to put the $56 billion pay package for Elon that was struckdown by Delaware court back to shareholders for a vote to get thatapproved. And then on the weekend, the news justdidn't stop with the price cuts.
Discounts to full self-driving packagein America. And then the last minute decision tocancel the trip to India, which was scheduled for this week.That all comes ahead of what is now shaping up to be a crucial earnings callon Tuesday. The numbers are looking pretty bad.We've also already seen a drop in first quarter deliveries.And I think what investors are going to be looking for is really some clarityfrom Elon Musk about what is happening at Tesla, what the strategy is goingforward. Yeah.And is that something that he's likely.
To deliver?Do you think he can give that that level of clarity and transparency in somethingthat's enough to try and provide comfort?Ah, well, who knows? You know, Mask is a mercurial characterat best. Three months ago on the earnings call,he was talking up progress on what was then known as the mass market car, whichgot a, you know, a price range of around $25,000, which is something investorshave really wanted to see from Tesla because they need to broaden their salesbase. Then mid-week, that seems to have beenditched for what he called a balls to.
The wall effort on autonomous drivingand the robotaxi. You know, that's a pretty sharp U-turnin strategy to make with not a lot of warning.So I think there's going to be a lot of interest in this earnings call.Not so much, I guess, on the earnings, but more on what Musk is going to sayabout the the outlook for Tesla, where it's putting its resources and how muchprogress it is actually made on this Robotaxi We were talking a moment agoabout whether or not he's going to be on this call because sometimes he isn't,but it's hard to imagine how he can skip this out and who's going to show up,which.
Elon MuskYeah, well, given that he came the India trip, which would be a big deal inIndia, India is in the middle of elections.For Narendra modi, it would have been quite a prestigious trip to have Muskshow up, the photo opportunities for that sort of thing.He was scheduled to be there today and he pulled the pin on that justyesterday, you know, probably not long before he was scheduled to fly out ofthe US. I think he has to be on this earningscall. If he isn't,people are just going to be asking more.
Questions about what is going on.That was our global business editor, Peter Vercoe there with what's going tobe one of the key earnings announcements that we're watching for this week.But coming up, the Philippine finance secretary flags a possible delay in ratecuts as the peso weakens. We'll have our exclusive interview next.This is Bloomberg. Taking a look at how currencies arefaring this morning that read through that we've really got from the screenright now is that the dollar is fairly steady against some of its majorcounterparts, perhaps the Aussie dollar. There a little bit more of a standout,but also tied to to commodity prices and.
Tensions around the Middle East.But what has been really the key dynamic that we've seen in currency markets thisyear has been that surprising dollar strength because a lot of investors werecoming into the year thinking that the dollar would weaken because the Fedwould be cutting rates. But instead it's very much the flipsidescenario where you've got resurgent inflation, a strong U.S.economy. There's no need or justification for JayPowell to reduce the benchmark. So that is certainly playing into thedynamic that you also see for the Japanese yen.They're holding very close to 155, but.
Certainly as well, that big impact onemerging currencies. And the Philippine finance secretary,Ralph Recto Francis is warning of a possible delay in rate cuts.That's if the peso weakens past its record low of 59 per dollar.He told us exclusively that the delay should not affect the Government's 6 to7% growth goal. For the last 20 years, we've had thisrelatively stable currency, more or less from 55.Since 2004, $0.55 to one U.S. dollar.Today, it's something like 57. So not that bad as far as thePhilippines is concerned.
Are you worried about it potentiallyweakening into the 59 arena? Because 57 really, I think, was a linein the sand for the Philippines and now feels like it's been pushed to 59.That's a possibility. And that would affect also our abilityto reduce interest rates moving forward, they suppose.So if we see the peso weakened past 59, potentially, you're going to have tohold off on interest rate reductions. That's right.Wow. That's a big step in potentially.How much? Potentially.But yeah, but but how It's impacting all.
Of us.That's right. Do you think because,you know, starting where we started with Yellen having this meeting with hercounterparts from South Korea and Japan. Do you think because the United Statesneeds South Korea and Japan and the Philippines similar as partners againstChina, you almost have a little bit more leeway if you wanted to intervene andprop up the currency. Not so much in so far as against China,but really it's more about economic cooperation between the Philippines, theUS, Japan, ASEAN, Korea, not so much about propping up thecurrency.
But even if we hold off in reducinginterest rates, we expect the Philippine economy to grow between 6 to 7% thisyear. So even if you hold off on.That's right. That's right.What is the growth outlook for the Philippines, though, if we docontinuously see a stronger dollar and potentially the Fed hold rates into nextyear, which is what one Fed governor said yesterday, potentially with thebenefit to the Philippines, is that our revenues increase with the hiringof foreign exchange U.S. dollar.Second, we have a robust OFW remittances.
And we have a strong BPO industry.So we earned something like $100 billion, including exports and tourism,roughly in a year. That's Philippine Finance SecretaryRalph Recto speaking exclusively with Bloomberg's Annmarie Horden.Time to check some of the stocks to watch when markets open in Hong Kong andmainland china. Keep an eye on Asian chip and airrelated stocks after Nvidia tumbled by the most in four years on Friday, andthat led a broader sell off in US tech shares.Asian EV makers going to be in focus as well.This is after Tesla reduced prices of.
Its best selling models and the latestsign of persistent weakness in demand. Okay, let's take a look at how atracking for futures as well. Before we get to that, though, Bell,you've got some breaking news about Honda.Yeah, that's right. This is actually a scoop that's justcome out from Bloomberg here. We're hearing that Honda is nearing adeal with Canada to produce electric vehicles.This is a Japanese firm, of course, but looking to build EV vehicles in theircomponents in the province of Ontario. So that's what we're hearing fromsources.
The deal could actually be announcedwithin days here, but it does involve a multibillion dollar commitment by Hondafor new facilities. That's what we're hearing from sourceswe said not yet announced publicly, but we will be tracking Honda.You can see that around 1.5% to the upside.But that's it from DAYBREAK. Asia and our markets coverage continuesas we look ahead to the start of trade in mainland China and Hong Kong.
