Bloomberg Damage of day: Australia 12/01/2024

Although.Good morning. Welcome to DAYBREAK Australia.I'm Heidi Stroud. What's in Sydney?We're counting down to Asia's major market open.Good evening from bloomberg world headquarters in New york, I'm VonnieQuinn. The top stories this hour, a volatilesession on wall Street with stocks and bonds gyrating as a US inflation pickuptemper is bets on a Fed rate cut in March.Also ahead, Bloomberg learns that a national security review of the US steeltakeover by Nippon Steel could last much.

Longer than the companies have signaled.And I'm Yvonne Man reporting live from Taipei.The day before an election set to give investors their first major geopoliticaltest of the year. Let's get a quick check on Wall Streetand where the session ended. Just a few points either way for majorindices. So the S&P 500 down just three points, afraction of a percent. The NASDAQ 100 up 2/10 of 1%.But it was a very volatile day with very small ranges for the most part.This after the inflation pick up, the ten year yield perhaps showing more of areaction, in fact, down about five basis.

Points now below 4%, which is key tothree 9658. And then we had Iran seizing an oiltanker in the Gulf of Oman, and that sent oil prices higher.But we still around the $72 a barrel mark for WTI crude.For more now on the U.S. inflation trend, let's bring inBloomberg's global economics correspondent, Andy Curran, who's inWashington, D.C.. So end the Fed will be concerned aboutsome of the underlying measures, such as shelter, inflation, How concerned?It wasn't a great inflation reading. Prices for housing, for energy, for usedcars, for airline tickets.

All were ticked higher in December.In fact, prices for auto insurance in all of 2023 rose by the most since 1976.So the data for December suggested that the kind of US disinflation story seemedto have lost some momentum over December.There's still some stickiness in the system, as economists describe it.And this is where it does kind of concern that it may be the sort of theexpectation that prices for goods and services would come off the boil asevery month went by. Will, Maybe that's not such a surefirebet. As you say, the core core reading thatthe Fed likes to look at that seems to.

Be heading in the right direction, or atleast not taking off, not really any kind of major alarm bells for the Fed.It's only one month of data. It doesn't suggest that this inflationstory in the US is over, but at the very least, I think it does give pause forthe whole time. The whole idea that US inflation isheading back to the target, heading back to pretty quickly.And of course the question is how this feeds into Fed expectations.Right. We heard from Loretta mester a littlebit earlier. Take a listen.Think March is probably too early in my.

Estimation, for a rate decline because Ithink we need to see some more evidence. I think the December CPI report justshows there's more work to do and that work is going to take restrictivemonetary policy. And do you think that really doessuggest that there is further to go and that perhaps there's now moral more ofan argument for the camp of staying higher for longer out of caution?Well, I think at the very least it pushes back against this idea that theFed were going to cut rates in March. Some.Some big houses out there and Wall Street, including Goldman Sachs, werereckoning.

A rate cut could come as soon as then.But analysts look at these numbers and I think it'd be hard to justify a rate cutgiven given the figures that we got today.Like we had some Fed speakers out, like you mentioned, Loretta mester, one ofthose making the point that it's probably too soon to be talking aboutthat. And remember, Ms..Mester is among those who is expecting rate cuts this year.Wales and Thomas Barkin at make the point he needs to be convinced thatinflation is heading back down towards 2% target as well.Like I say, it's only one data set for.

December.It doesn't necessarily mean the US disinflation story is over, but I dothink it gives pause to the rate cut debate and probably at the very leastsuggests that the Fed won't be moving sooner and moving more towards thatmidyear pointed out seem to be to take from a lot of economists following thisstory today. Bloomberg's global economicscorrespondent indicated that in Washington.Let's get some more perspective with Ahmed Rezko, who is the chief investmentofficer and senior. Great to have you with us.What do you make of this rating?.

It feeds into Fed expectations.Does it kind of underscore the ways that investors and markets have gotten aheadof themselves? Look, unfortunately, I don't think oneprint and especially this print has not really change the narrative so much.We're still in a disinflation trend in the United States.But I do think that it's going to at least raise some eyebrows at the Fed andamong investors into perhaps thinking that they have been a little bit tooexuberant in pricing and too many rate cuts from the Fed.At this point, the market's pricing in roughly 150 basis points of rate cutsfrom the Fed.

That's more than double what the Feditself has told you that they want to do or project to do for next year.So I think at the very least, it gives us pause.But I don't think it's enough to change the current trajectory that we're onright now. We've already entered a period wherewe've seen valuations extremely high profit margins potentially coming underpressure. So where do you see opportunities givena lot of the uncertainties that are at play here?Well, we think for opportunities for this year, you really have to look atsome of the the losers from last year,.

At least not as big of the winners fromlast year. Remember last year?Yes, the S&P was up 26% and a lot of investors kind of get caught up withthat number. But the underlying trend was one ofconcentration of of returns among a few names.In fact, if you strip out of the top seven names, the index didn't do ordidn't have nearly as part of a year. So I think for investors, they want toremain in or at least want to deploy new capital in some of those more being downsectors, some of the sectors and companies that did not participate inthe rally last year.

Okay.Or do you still prefer us overinternational? We do.And part of the reason why I know that the U.S.is a lot more expensive on across many metrics is not just relative valuation,but across many metrics. The reason why we're sticking to ourcall with overweight in U.S. versus other sectors is because we dothink that there is a greater than what the market is currently expectingprobability of a recession next year, a mild one.And in those cases, U.S.

Markets and U.S.assets tend to outperform. So that's really the core reason forthat. What about the markets?Where are you seeing opportunities across bonds, across fixed income.What does your sort of portfolio look like going into 2024?Yeah, so that's our favorite place to be right now.I got to tell you, the Treasury market, especially the long duration Treasurymarket, is where we want to be because we think in either instance, whether weenter a recession or mild recession towards the back end of 2024 or whetherwe just narrowly escaped one through a.

Soft landing.I think the long bond, the longer dated U.S.Treasuries are the place to be, because in the first instance, let's say thereis no recession, you will at least find the carry or receive the carry from thattrade. We think fair value in case of norecession for the U.S., ten year is somewhere between 3.6 3.8%.And in case of a recession, we do think the ten year will fall slightly below3%. So I think in either instance, if you'regoing to deploy fresh new capital today, our highest conviction trade is inlonger dated U.S.

Treasuries.In other parts of the fixed income market, we're preferring investmentgrade over high yield. We've done analysis of asset pricemovements in and around the last hikes from the Fed and the first rate cuts.And in all instances, we find that investment grade and higher gradecorporates tend to outperform high yield.So we would prefer investment grade over high yield, but specifically focused onthe rate market. We like longer dated U.S.Treasuries. How focused are you on geopolitics as amain risk this year?.

Yeah, we think it's a major risk.And actually, we think the main geopolitical risk is not where mostpeople are focused on right now, which is in the Middle East, although we dothink that that's a source of risk. We think the United States is actuallymost likely to be the biggest source of geopolitical risk this year.We're really focused on the U.S. elections here in November.And let me tell you why. We're at a point in the United Stateswhere the country, as we all know, is evenly divided.It's very well polarized. That is well known.But what is, I think less understood is.

That half of the country sees the otherhalf of the country as an existential risk to the country, which means nomatter what the outcome, whether Biden wins or whether Trump wins, we'reexpecting a lot of civil unrest, uncertainty, perhaps even protests andviolence, no matter what the outcome is. And of course, depending upon who wins,there will be political ramifications, mostly in the foreign policy space thatwe have to closely monitor. But we think the U.S.what could potentially be the biggest source of geopolitical risk for 2024.Yeah, which is interesting because, you know, I'm sure you, alongside a lot ofother investors, would would see that as.

Perhaps ironically translating to tohaven demand for US stocks and the US dollar.Yes, that's right. I mean, remember, at the end of the day,the dollar really is just the cleanest dirty shirt out there.Remember the dollar? Unlike other currencies and other bondmarkets, people own it not necessarily because they want to, because they haveto. It's the most it's the deepest andliquid and most liquid bond market in the world.So in moments of crisis, it still retains its safe haven status, althoughit will do so less on the margin than it.

Has in the past.So we're definitely complementing our safe haven plays with other assets likeone that we particularly like a lot is gold.I'm address Guy is a chief investment officer at Insignia.Let's take a look at how Asia markets are shaping up as we head into theweekend, this final Friday, Friday. This is the fray, I should say, as weset up the picture here in Sydney. We're seeing a little bit of downsidepressure there when it comes to trading going into the cash session in about 50minutes or so off by just about half a percent.We're seeing the Aussie dollar more or.

Less on the front foot at the moment, 66and 19, we were trading shy of that 67 level.We did see the US dollar really kind of easing, reversing some of those gainsalongside Treasury yields falling after markets in a lot of respects, largelykind of downplayed that faster than expected US consumer inflation reportfor December. We saw the Bloomberg dollar index easingjust about a 10th of 1%. We saw a rise of less than half apercent after the CPI release there as well.Taking a look at what we're expecting when it comes to the start of tradingacross major Asian markets.

And it is a bit of a mixed picturethere. We already have New Zealand Online offby about a 10th of 1%. We could see, Vonnie, just a mirroringof what was really a volatile session on Wall Street overnight, that kind ofwhipsaw price action.Right. As as traders will continue to try anddecipher what this one inflation print means to these fed expectations.Exactly right. And let's not forget we get another onein the Friday session, right. With PPE, which also has elements thatplays into the whole thing.

Coming up, we'll take you live to theMorgan Stanley Global Alpha Investments conference in Hong Kong.The event brings together investors and top leaders in business and finance.You can catch our conversation with Morgan Stanley's head of APAC WealthManagement in the next hour. But first, voters in Taiwan preparing topick their next leader in an election that could change the course of US-Chinarelations. We're live in Taipei, next.This is Bloomberg. No, she won't.I hope that after I'm elected president, China will understand that peacefuldevelopment is the responsibility of.

Both sides as well.Taiwan will not change its position of friendship, the hope for cooperation,peace and prosperity. The two needs.Well, first, we must have sufficient national defense capabilities.Second, we need to tell China that we are willing to have dialogue with you.They might look friendly to us. But does this mean that we stoppreparing for war? This is too dangerous.Too dangerous. I wonder, Angie, when the Taiwansecurity issue is a problem for the whole world.Peace and stability across the Taiwan.

Strait are necessary elements for globalsecurity and prosperity. So beginning during my tenure, I willnot tackle the issues of unification. I will not tackle the unification issueduring my tenure. cross-Strait relations should not onlyrely on one side, it was off on those. Why do you worry about what will happen30 years from now? At least I understand that Taiwanesepeople do not want reunification within ten years.The three contenders to be Taiwan's next president are speaking ahead ofSaturday's election. It's a vote that carries seriousimplications for geopolitics, trade and.

Investment.Joining us now from Taipei is Bloomberg Markets co-anchor Yvonne Man.And so, Yvonne, plenty of reasons for a global interest in this election,obviously. Yeah.And I think that the amount of global interest we've had seen leading up tothis election is something that we really haven't seen in many years.And in fact, this is one of the most hotly contested elections we've seen indecades. And you got to ask why.And what's really at stake here? And I think it's because of this highlevel of tension between the U.S.

And China.Now, you have Taiwan's position, of course, in key supply chains like thechip industry. That certainly is leading to a lot ofimplications of what the outcome could be.And what does it mean for the global economy as well?And then you got to wonder, right, this is a chance for the Taiwanese voters todecide what the future of Taiwan is going to be.Is this one that is going to be closer with with China, which is exactly whatthe opposition parties, the KMT and TPP, are vowing for what you heard just now?Or is it a chance to fight for democracy.

With, of course, the US backing, whichwould set the course for the DPP to win a third term in a row, which issomething that we haven't seen before here in Taiwan.Ivan, are we seeing any signs of Beijing trying to meddle in this election?And how does that potentially play out with the result on Saturday?Yeah. You guys have been reporting about someof this, right? Some some indications that we've seenthat China is trying to interfere in this election and everything in the formof Chinese balloons, which we've seen have passed by across the media line ofthe Taiwan Straits almost every single.

Day this month.Also, some even flying around the island as well.And then there's forms of sort of economic coercion, Right.With Beijing suspending some of these tariff concessions on some Taiwaneseproducts and warning that more could come.Then you've seen some maybe perhaps dirtier tactics out there.Of course, we can't verify where they came from, but even just fake videos ofpresident tying one has have been surfacing online as well.So, you know, this is something that I think Taiwanese voters are used to.We've seen this in the past.

So certainly there is still a level ofdiscussion here of how far Beijing will go in interfering further or evenshowing their displeasure if the DPP, in fact, wins another term.It's hard to say at this point, right, because, you know, there is a sensethat, you know, of this whole San Francisco sentiment that President XiJinping wants to maintain the sort of optimism that carried on in Novemberafter meeting with President Biden and then again, also China going through alot when it comes domestically in its economy right now.Does it have the capacity to continue and talking and interfering in Taiwan?That's also up for debate.

We had President Tsai was saying maybeChina right now to consume domestically, to even think about, you know, some sortof invasion with Taiwan also. So certainly, you know, there are limitsto all this. Maybe no drastic actions in terms of theBeijing response. But certainly I think it's safe to saywe could still see some pressure applied by Beijing in the next coming days orweeks. It's interesting, though, Ivan, isn'tit? Because, you know, most elections are,at least in some part, about pocketbook issues, but this one seems different.Is it just about China, this particular.

Election, or are there other domesticfactors at play? I mean, that certainly is a keynarrative in the headlines here. US-China relations, cross-straitrelations. That's what the global I thinkInvestment Committee is very, very attuned to here right now.If you ask the local mom and pop here in Taiwan, what matters to them.Yes, China is important. But let's keep in mind, this is also anelection that we have to talk about the economy as well.Domestic issues, right. This is a Taiwanese population that isalso among many economies dealing with a.

Cost of living issue.Inflation is high. Wage growth has not picked up.In fact, it's been slower than expected as well.And housing affordability is certainly a key issue here in Taiwan.So I think especially when it comes to some of the young voters here, I thinkthey make up about a fifth of the population.It's not so much about China in some ways, but also about the economy, whichhas shown some signs of fragility here as well.The government was talking about their growth forecasts for last year.It's about less than one and a half.

Percent, which is the slowest we've seensince the global financial crisis. Yeah.Bloomberg Markets going to have our man there on the ground for us in Taipeiahead of that key vote this weekend. We'll get more expert analysis, too, inthe next few hours as we count down to Saturday's vote.That's in addition to those full results and analysis from Monday.This is Bloomberg. These are the US National SecurityReview of Nippon Steel's takeover of US Steel is likely to last until late thisyear and possibly into 2025. Bloomberg Su Keenan joins us now.And so that's a lot longer than the.

Companies have publicly indicated.Yeah, this defies the indications. We initially heard from both NipponSteel and US Steel saying that the $14.1 billion deal would likely be completedby the end of the summer. In fact, U.S.Steel CEO reinforced this in a December earnings call completion by the secondor third quarter. Sources close to the matter, however,tell Bloomberg that a national security review unlikely to conclude until latethis year at the earliest. Bloomberg's report, as you saw,initially knocked shares of the US steel company down by almost 4% before theypared those losses.

Scrutiny by the secretive Committee onForeign Investment in the US, as it's called, is in its early stages,according to sources. The special inter-agency panel, which isled by the Treasury Department, has the power to approve, block or amend deal onnational security grounds, or they can send it back to President Joe Biden fordecision from the Oval Office. Again, while the precise timing of thereview means unclear, people close to the process said they expected it totake about a year or longer and that the process can really lurch ahead or bedelayed due to legal wrangling, as is typical of a review of this kind whereyou have a buyer from Japan or any other.

Foreign company country.So tell us about the concerns that this deal could have as we head into anelection year. You have involved the vote, right?That's where it gets complicated, because US Steel is located inPennsylvania, which is not only a battleground state in terms of theelection. It's also where Biden was born.It's also a heavy union state. We know the union initially and hasvocally opposed this deal. Nippon, The plans immediately touchedoff calls from both Biden supporters and Democratic lawmakers for a close reviewof the deal.

Last month, the Biden White House saidthe deal deserved, quote, serious scrutiny.And that's a call that earned praise from the United Steelworkers Unionagain. They have been opposing the deal fromthe moment it was announced. Now, Trump has said Biden's policieshave weakened the US economy. So that's become an election issue.And two senior administration officials tell Bloomberg they expect the review tobe on the longer side of typical reviews.And these are typically done in secrecy. So there's not much information thatwill be becoming available.

There has been no comment from Nippon orexecutives at U.S. Steel.Back to you. Bloomberg's Su Keenan there.Sue. Thank you.Other corporate stories we're tracking this hour.US air transport regulators have opened a formal investigation into Boeing'sproduction operations following last week's midair indoor blowout.The FAA says Boeing needs to comply with the high safety standards that they'relegally accountable to meet. Regulators grounded 171 of the 737 maxnine jets in operation, prompting.

Airlines to cancel hundreds of flights.Airbus set a sales record in 2023, racking up more than 2000 net orders inwhat has been one of the most active purchasing periods in aviation history.The sales were driven largely by the plane maker's Mega-deals with India'sIndigo Air India and Turkish Airlines. Airbus also beat its annual deliverytarget by achieving 735 handovers. Reuters is reporting that Tesla willsuspend most car production at its factory near Berlin from January 29th toFebruary 11th. The moves stem from a lack of componentsdue to shifts in transport routes because of the armed conflict in the RedSea.

Chinese automaker Geely had also warnedlast week that its sales were likely to be affected by shipping delays.Tesla down about three quarters of a percent now in post-market trading.Plenty more to come right here on DAYBREAK Australia.Do stay with us. This is Bloomberg. We do have breaking news when it comesto a response to these ongoing attacks in the Red Sea by Yemen's Houthi rebels.We are hearing that the UK prime minister, Rishi Sunak, has authorizedjoint military strikes with the US against Houthi rebels in Yemen and hiscabinet has approved that action.

That's according to a person familiarwith the matter speaking. The allies looking to deter furtherattacks on commercial vessels that have been taking place increasingly in theRed Sea. So next cabinet approving that decisionon a conference call on Thursday. Airstrikes are now possible as soon aslater in the evening, according to that person familiar with the matter whoasked not to be identified discussing these private conversations.So that's office has declined to comment for now.We're seeking more details. But the US and the UK had earlier warnedthe Houthis of unspecified consequences.

If they keep up that string of attacksagainst these trading vessels and ships passing through the vital shippingroute. We saw earlier on Thursday the Houthisfiring a ballistic missile in the Gulf of Aden in what US officials say was nowthe 27th attack on commercial shipping by the group since November 19th.We also saw reaction from the Houthi leader as well, saying they're vowing abig response to any U.S. military attack.The leader of the group threatening, quote, that big response to the US andits allies if they indeed proceed with military action against his group, willconfront the American aggression,.

According to Abdul Malik al-Houthi in aspeech on television on Thursday. He says any American attack won't gounpunished. We're now hearing, according to asource, that UK Prime Minister Rishi Sunak has authorized joint militarystrikes with the US against Houthi rebels in Yemen, and his cabinet hasapproved that decision. We'll get more details, Bonnie, ofcourse, on this breaking story as we get them.Exactly. Needing authorization in order toannounce it. Well, turning to another top story, thepick up in US inflation tempering bets.

On a Fed rate cut in March.Here's what some guests on Bloomberg earlier had to say on the latest data.CPI coming in hotter than expected. CEOs are already complaining aboutinflation. They're saying the cost of doingbusiness is higher. That has proven to be very stickybecause of wage inflation. From wage increases to higher interestrates. This economy is rebalancing.The labour market is rebalancing. It's not a sprint.This is a marathon that still puts us on a downward trajectory for inflation.We think that the Fed probably won't.

Start cutting rates until around June.They're going to have to be patient. They're going to have to wait.Push back. The timing of the Fed's first interestrate cut likely not six rate cuts, with the first one starting in March of 2024.And the key thing will be the course of inflation.We see less rate cuts and we see them starting later because the Fed needsmore data around inflation easing. Well, joining us now is Gregory Daco,chief economist at EY. Why?Gregory, thanks so much for joining. Does this prove that whatever about ratecuts, the last mile on inflation is.

Going to be more difficult?I don't think so. I don't think the last mile will be themost difficult. I think we will see bumpiness and we'reseeing that in the latest December data. There is going to be some upwardmovement even as we remain on this strong disinflationary trajectory.I think there are ongoing forces that will continue to push towards moredisinflation as we navigate through 2024.There is an environment where final demand growth is easing.We are seeing an environment in which rent disinflation is likely to pick up.And we're also in an environment where.

Monetary policy remains quiterestrictive. We should not forget that all of thosefactors should provide to be the ideal combo to really push inflation lowerover the course of the next few months. It's interesting, though, becauseshelter prices rose 0.5 percent. Super core services, another one, theFed watchers say 0.4 percent, so the same as the previous month, roughly.That's not a great sign. Is this, Greg?Not a great sign. We're yet to see the fulldisinflationary momentum when it comes to shelter cost inflation.But that actually is one of the.

Reassuring factors because one of thekey drivers right now of inflation is the fact that shelter costs, inflationremains quite high. But if we look at some of the real timedata in terms of rent price inflation, in terms of home prices, we are seeingthat disinflation having materialized. It takes a bit of time to feed throughinto the CPI data. There is a lag because the CPI data isnot just new rents but existing rents as well.So that is actually a reassuring factor. We know that disinflationary momentumwill feed through over time and will lead to lower inflation as we navigatethrough the rest of the year.

So we'll be at 2% by the end of thisyear without too much difficulty. The key question is whether we see somerenewed pressures on the supply side, some potential geopolitical risks.Those are all risks that we could see lead to higher inflation.But if. That does not materialize.We're on a strong disinflationary trend. What would it take, Gregory, for thosegeopolitical risks to have an impact? I mean, we are seeing definitely somedisturbances, let's say. Would they have to escalate in largefashion in order for them to have an influence or would skirmishes like whatwe're seeing be enough.

While we are in a supply constrainedworld? And I think that's one of the realitiesthat we have to deal with that business leaders have to deal with in thispost-COVID environment. We're still in an economy that isglobally rebalancing, both on the supply side as well as on the capital side.And that means that any minor shock to supply can have disproportionatelylarger effects. Now, what we're seeing in the MiddleEast and disruptions in terms of trade routes does have a cost does lead tosupply disruptions that will feed through to inflation.But it's going to be regional and.

Dependent on how long and how severethese disruptions are. I think what we're seeing right nowcould have an impact on European inflation, maybe a little bit to alesser degree on U.S. inflation.But we would need to see much more contagion of the conflict in the MiddleEast to see a broader and more significant impact on globalinflationary trends. And, of course, oil price developmentswould be a key catalyst in terms of guiding the potential shocks in terms ofinflation. Yeah, Reuters reporting earlier thatTesla will hold most Berlin site output.

In terms of its Teslas because of theRed Sea conflict, credit card delinquencies.We got that number today as well. And they're now at a decade high,according to a Fed study. How concerned are you, Greg, about theUS consumer? Well, I think we have to be careful inhow we analyze the US consumer. We're still in an environment where thekey driver of consumer spending activity remains income.And one of the interesting facets of the consumer, as the consumer trajectory inthe U.S. has been its resilience, we have seenthat over the course of the past 12.

Months, despite a historic tighteningcycle, despite these geopolitical tensions, despite credit concerns, wehave continue to see consumer spending. The key reason being labor marketresilience. We have not seen a retrenchment inemployment, and that remains the key pillar of income and in turn, spending.So, yes, there are some cracks in the foundation of household balance sheets,but we started this COVID crisis with healthy balance sheets on the householdside as well as on the corporate side. And that has prevented much moreretrenchment in terms of spending and in terms of investment.So it is something to monitor,.

Especially for lower income families.But as of this stage, the fact that income remains on a fairly moderate butpositive trend is a positive factor for sure.We also saw initial jobless claims and continuing claims remaining low today.Greg, thank you so much for your time today.That's Gregory Daco, chief economist at EY.Why? Heidi?And very few are in Sydney at the moment.You'd be forgiven for being confused as to whether this is Australia, whether inSingapore and Hong Kong.

Such is the level of humidity thissummer. And you know, the country was reallybracing for a summer of potentially destructive wildfires.Instead, we've seen wild storms, heavy rains that have flooded homes anddestroyed crops and begs. Paul Allen joins us now.And it's also been like, you know, four seasons in one day, right.Sunny, one moment and then hailing the next.In the last few weeks, what's been the impact across industry, Acrossagriculture? Yeah, this was most unexpected.As you say.

We were bracing for what was potentiallygoing to be a very severe fire season. And it's been exactly the opposite.Pretty much The state of Victoria has been having a lot of floods.It's been the wettest start of a year on record since records began in 1900 andVictoria. So a lot of damage to fruit orchards.The wheat harvest is going to be delayed and if we look further north toQueensland, they've already had one cyclone, not unusual for this time ofyear, but another is brewing. There's been reports of some sugarfarmers losing up to 60% of their crops. Rail infrastructure associated withsugar has also been damaged.

So if we take a look at some of theinsurers, we've got claims rolling in the damage bill's likely to be in thebillions. And of course for insurers, floods are awhole lot worse than fires because fires just tend to burn vegetation.Floods affect a great deal of for infrastructure, so the damage bill isgoing to be pretty bad. Sounds miserable for very, very manypeople. Paul, what's causing this?When will Australia get some relief? Yeah, well, we do in terms of the cause,we have the return of El Nino after three successive La Nina and that's aterm many people would be familiar with.

Less familiar is a phenomenon known asthe Indian Ocean dipole that was meant to be strong as well.So those two combined was meant to bring these hot, dry conditions and create asevere fire season. But we've got a third one for you thatwe can all now stroke at chins and not wisely about.And that's the southern annular mode, which a lot of people might not haveheard about before. But that's really nullified both.And it's bringing a lot of this warm, moist air.And as Heidi mentioned, Sydney's like Singapore at the moment.It's had its most humid day on record.

Yesterday and today is the same and it'sgoing to keep going for a while. So it all sort of begs the question howdid the forecasters get it so wrong? And we've had the Agriculture Minister,Murray Watt, defending the Met Office saying, look, climate change has meanttraditional forecasting models are just breaking down, they're not reallyworking anymore. So it's making it very, very hard toforecast and get the sorts of warnings that we have become accustomed to.Paul Allen Here in very humid Sydney, you can get a roundup of the stories youneed to know to get your day going. In today's edition of DAYBREAK,Bloomberg subscribers can find that.

Debris go on their terminals.It's also on the mobile in the Bloomberg Anywhere app.You can customize those settings as well so you just get the news on theindustries and the assets that matter to you.This is Bloomberg. UK Prime Minister Rishi Sunak hasauthorised joint military strikes with the United States against Houthi rebelsin Yemen. We learned his cabinet approved the moveThursday. The group have been attacking ships inthe Red Sea for almost two months now. For more, Bloomberg's Nick Wadhamsjoins.

So this is procedural, right?Nikki had to get permission in order to announce what exactly has beenannounced. Well, what we know, nothing has actuallybeen announced so far. This is what we're hearing from peoplefamiliar with the situation that Prime Minister Sunak has authorized strikeswith the US. We've known for some time the US and theUK have both threatened what they say will be consequences for the continuedbarrage by the Houthis against commercial ships in the Red Sea.And after you had the heaviest barrage yet a couple of days ago, 21 drones andmissiles by the Houthis that were shot.

Down by both US and UK ships in theregion, essentially they were forced to respond.So it's appears that is likely in the next hours or days.Nick, what about retaliation? Because we've already heard from theleader of the Who days that what they call American aggression will beresponded to forcefully. Right.I mean, that's the big question. So everything we've heard so far fromthe Houthies is that they will be undeterred by any potential militaryaction. Obviously, we're trying to determinewhat form that action would take, how.

Extensive it would be, how how wideranging across Yemen. But, you know, this has been an issuewith the Houthis for some time. And Saudi Arabia has been engaged in awar against the Houthis for several years now.And the group has only continued to expand and expand its foothold in Yemen.So deterrence efforts and efforts to really roll them back so far have notsucceeded. And it's a big question facingpolicymakers, and it's why we've been waiting for so long for them to takeaction, because they don't want to do so much that the conflict in the regionwould expand to an even wider war.

But they do want to get the Houthis tostop what they're doing. Yeah, I mean, this is really complicatedbecause there are several countries in that coalition that wouldn't want tohave any part of this. Right.Right. But potentially, France would want to dosomething on its own or wouldn't want to have Spain.Qatar has said, you know, do not get involved like this.This is going to be very serious for the region.So this is a very serious action that potentially the UK and US might take.Will other countries join or will it.

Just be a bilateral action?Well, I think, you know, certainly at this stage you would only see bilateralaction. Other countries in that maritime taskforce that were that was established late last month.I mean, they were so concerned about the optics of being associated with thattask force that some didn't even want their names to be known.They didn't want it to be publicly announced that they had joined the taskforce. So there's a lot of sensitivity there.I think what you're going to see is if these strikes do go ahead would be avery explicit statement on the behalf of.

The UK and the US that they are doingthis separately from the task force, which is really, they say, a defensivemeasure aimed at protecting ships and not very intentionally not the groupingthat would be going after the Houthis. And that's U.S.national security at a ten day quorum with the latest.Another story when it comes to geopolitics were moderate monitoring.Papua New Guinea has declared a state of emergency after violent protests thisweek in the two biggest cities. Australia's ABC says at least 16 peoplewere killed in Lucy, an arson attacks. The violence began when police anddefence officials appeared to walk off.

The job over what they're saying was anunexpected pay cut. The Government says an era was due to acomputer glitch promising to fix the problem.The violence comes amid high unemployment and a rising cost of livingin the country. Well, you can watch us live and catchour past interviews on our interactive TV function.That's at TV Guide. You can also dive into any of thesecurities, all of them. But functions we talk about must becomepart of the conversation by sending us instant messages during our shows.This is for terminal subscribers only to.

Check it out.It is at TV. Go.This is Bloomberg. You're watching Typekit Australia and ofcourse a real test, in fact, probably the first test when it comes to theappetite for geopolitical risk for markets and investors as we head intowhat is a key year of elections in 2024. And of course looking ahead to the votein Taiwan on Saturday. Beijing is a huge part of this when itcomes to those cross-strait relations. And we're seeing that sort of expressedwhen it comes to some of these Taiwanese assets as well.It's interesting that we're seeing.

Traders most bullish on the Taiwandollar at the moment in 16 years, even as the broader world really continues tofret about the geopolitical implications of the upcoming election.Investors, at least via this proxy, is looking more or less on fast currencyoptions, looking like the most bullish on the Taiwan dollar in about six years.So suggesting that at least when it comes to markets, the bet is on thestatus quo being maintained regardless of that election or tech obviously isthe other big issue when it comes to Taiwan.Markets and Taiwanese computer maker Icis is expecting PCs powered byartificial intelligence to become the.

Biggest driver of demand in the comingyears. We spoke exclusively to the co CEO as YSU in the lead up to this weekend's election.He told us how the company plans to recovery recover, I should say, from adifficult couple of years. At 22 and 23 is some kind of tragedybecause we prepare a lot of material and the goods.But after the coffee, because the demands suddenly disappear.So we spend some more time to clean our stock.Too much inventory? Yes.Yes.

So the first half of 23 is not good forus. But after we can see our stock and themarket back to normal. So actually, in the second half of theyear of 23, we are getting back to normal.And actually in this year. Q three, we give a relative very goodperformance. What's going to be the drivers for thatrebound that you talked about? Actually, I think of course in the 24the IPO would become a very hot topic because after the opening they releasedthe TPP. I think everyone wants the A capabilityis a high pieces.

Are they going to be a big driver forthe industry going forward? I think I've seen some of the quotescoming from your company saying it's still going to be, at least in the nextcouple of years, a very small part of shipments, maybe about 3%.Do you have a kind of a projection of that, the number of units that will beshipped with AI capabilities if you are talking about this year of cars?Because just as I mentioned, the IPC includes several different factor, thehighway software and always because the in Microsoft they released the always inthe second half. So I think in this year the PC you whereship to the market it will be in Q4 so.

The total number will be limited.And so I think in this year, the APEC share may be around low single digit andmaybe in the next year, this year for APEC around maybe high single digit, andthey will need maybe two or three year to become more mature and the morepopular. Obviously, the supply chain has been abig issue over the last couple of years. That is absolutely exacerbated by theUS-China difficulties geopolitically. Are you moving production to Indiansuppliers from China or is it simply adding in India in addition to what youalready have in China? Actually, because the source is thebrand.

So most of production line we are coldwalk with our items upon a. So actually a lot of VMs because thegeopolitical issue some customer they already asked them to have the differentproduction side so it would depend on the customer's requirement for examplesome US customer they are request the manufacture linehave limitation. We cannot use the factory in China.So we would ask our EMS to support that kind of deal in different factory.I know we're not going to talk about who you want in the election to win.We're not here to talk about the politics, obviously.But what would you like to see,.

Regardless of the outcome or regardlessof which party wins, what would be the business friendly outcome that you wouldmost likely want to see going forward? Actually, I think either TPP all came towin the election. I think the onewho win and when they take the new position, they always want to have thevery good economic and business development in Taiwan.So I think everyone, when they take that position, they will try to provide avery stable and a healthy environment to help the enterprise to develop and tohave the good business and economic status in Taiwan.SS co-CEO S.Y.

SU, speaking exclusively withBloomberg's Stephen Engle and our special live coverage fromTaiwan, continues in the lead up to Saturday's vote.We'll have full results and analysis on Monday.

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