Bloomberg Dawn: Australia 05/09/2024

Welcome to DAYBREAK, Australia.How do you start? What's in Sydney?We're counting down to Asia's major market opens.I'm Annabel, live in Hong Kong. And the top stories this hour.Stock investors playing it safe with Asian futures mixed and Wall Streetflat. Ten year Treasury yields falling for thefirst time in six sessions. An auction draws tepid demand.Shares tumbling on a lukewarm revenue forecast, raising concerns that the techindustries a spending spree may be slowing.And Xi Jinping lines in Hungary touting.

Ties with Eastern Europe as a boon forChina's economy. We are just getting some breaking newswhen it comes to the current account balance for South Korea.Crossing the Bloomberg, we're seeing that number when it comes to the goodstrade surplus number for March widening to just under 8.1 billion U.S.dollars. We are seeing the current accountsurplus also there widening to $6.931 billion there as well.We have, of course, Zain, quite a big move over the past few months when itcomes to the yuan. If you break down those numbers, we areseeing.

When it comes to a bit of an arms race,when it comes to net exports of goods coming through, we've seen a decline inmanufacturing, services, transport, as well as travel and a bit of upside forconstruction and building as well as investment income, particularly when itcomes to contribution of equity income. Let's get you to how we're setting upwhen it comes to the Thursday session here in Asia.This is a picture for futures trading here in Australia.We're seeing futures down by just about a quarter of1%, looking like a pretty mixed start as we have a firmer dollar, a bit ofweakness in the yen that we are seeing.

Broadly the equity session prime for abit of a mixed opening that US stocks kind of ended more or less flat in theWednesday session. We did have the effect of higher yieldssupporting the currency there, so expect to see some weakness across Asianeffects today. Kiwi stocks are off by about 3/10 of 1%in the early part of the session. We're seeing Chicago Nikkei futureslooking a little bit softer at this point, though.Yeah, Heidi. And also taking a look at how U.S.stocks are coming online. And you say something that's really thedynamic of Wall Street as well, given we.

Didn't really see too much movementcoming through and futures as well staying pretty steady at this point intime. We had the likes of Tesla Alphabet,Intel, all of these falling intraday in the session, but ARM is really the onewe're tracking after. As you were just mentioning there,Heidi, that we had a bit of a tepid forecast coming out from the company.It does really perhaps cast a little bit of doubt over the I led or enthusiasm.We've been continuing to see over the course of this year and that big dropthere that you have in after hours at ten year Treasury yields as well,though, just rising a few basis points.

Also continuing to assess really theoutlook from Fed speakers and and the outlook for rate hikes or rate cuts orwhatever happens with rates really over the course of this year.But certainly the Boston Fed president, Susan Collins, for instance, is sayingthat reaching that 2% inflation goal could take quite a bit longer.Take a listen. There's a significant amount ofuncertainty around that. That outlook and the recent data lead meto believe that it's just going to take longer than previously thought.Let's get straight to our first guest. Car Water is senior market analyst atCapital, AKAM.

And Kyle,where does the Fed really go from here? We know they don't want to cut rates,but at the same time, we haven't really seen much progress on inflation over thecourse of this year. So what are the options and also what'sthe market impact from that? Yeah, absolutely.I mean, as you said, it's very abundantly clear that the Fed doesn'twant to have to hike interest rates further.Now, that could be a mistake, quite obviously, and potentially a sort ofbias that's entering into their policymaking that isn't considering thebalance of risks to inflation.

But I sort of see this playing out inthree potential ways. You know, basically that the strategy atthe moment is for the Fed to keep policy at what it thinks is restrictive levelassumes is restrictive levels, and then just hope the disinflation process playsout. I think increasingly, though, we'rerunning into a situation where we're going back to that old question and aquestion that should never have really been straight from two March is how muchdamage does the economy have to sustain, in particular the jobless market sorry,the jobs market has to sustain to be able to get inflation back to target.I think that's a much bigger concern and.

Is likely to manifest in much highervolatility in the bond market and spill into equities as well over the next fewmonths. The last and very unlikely outcome,which would be obviously very favorable for asset prices, is that we start tosee a Fed that at least tacitly acknowledges that inflation is not goingto get back to the 2% target any time soon and is willing to stomacheffectively that 3% right now. Of course we've heard from Fed speakersthat that kind of walking away effectively or at leastprioritizing, if you will, or reprioritizing its dual mandate furthertowards a labour market and away from.

That 2% inflation target is terriblyunlikely. It would be bad for the Fed credibility,but it is that sort of final option in terms how the Fed could play it, playtheir cards with the kind of scenario that we've got at hand.I think at the moment, again, the Fed is clearly banking on that kind of hopestrategy. That hope strategy is probably good formarkets, as we've seen over the last couple of weeks.But if we continue to see strength coming through in inflation data, yes,last week's jobs out, it wasn't very strong, but the economy is still robust.Those trade offs that are inherent in.

Monetary policy, what damage has to bedone to the economy to get inflation back to target will re-emerge.And I suspect that's going to be a driver of market volatility for at leastthe next few months, probably for the rest of the year.Okay. So yeah, increasingly looking likeoption two then as you said, the I can see that you've got a short right now onUS stocks. Yeah.I mean, very, very short term. This this is, you know, days, weeks, ifnot maybe over the next month or so. And that's really a reflection of ourclients and our traders who are very.

Short term in terms of their thinking.The rationale there, though, has a bit of a bigger picture view, which is tosay that really what is sustaining the optimism in equities over the last fewweeks? Yes, we've seen a bit of a walk back ofof the potential for further rate hikes from the Fed and that being priced intothe market. But earnings has at the earnings outlookhas actually improved. It's a narrow group of stocks that'sreally driving that. Of course, the tech stocks that havedriven this sort of outperformance in Q1 earnings and led to these kind of liftin expectations for not just the second.

Quarter but for the full year.But at the moment, if you really look at the that the spreads between bonds andequities, yield spreads between bonds and equities are not particularlyfavorable, which is effectively to say that assuming we see bond bond yieldsremaining roughly around where they are, maybe the two year continues to pushtowards 5%, that really key element is to try and see a bit of a lift up inearnings expectations, which given the outlook from here and the fact thatwe've just come to the end of earnings season is looking increasingly unlikely.So we're looking like we're running into that 5200 level on the S&P 500 againstthe yield advantage in equities is.

Fairly narrow.So in the very short term, this isn't to speak of the fact that the uptrend inequities is still basically intact. It looks like we're sort of going to seean unwanted that post Fed post earnings seasons relief rally.And I think just the risk reward in the very short term looks really reasonablyattractive to short either the Nasdaq or in particular the Nasdaq.But, you know, even the S&P 500 as well, we're hearing from MasterCard, Japan'scurrency cheap, of course, and we tend to hear from them every morning.But it's interesting, the language is slightly different this morning.They said that they're ready for.

Currency intervention at any time.Are we? So my question about the sort oftwofold, one, do you think there's concern about more currency volatilitymore broadly and potentially kind of indications of the early parts of acurrency war in Asia? And is it surprising that we haven'tseen that stronger correlation with the performance in Japanese equities?If so, first part of the question to just begin with, I mean, clearly theonly way that the situation is going to end is if US disinflation.The US disinflation trend continues and we start to see US dollar weaknessre-emerge because of rate cuts being.

Priced into the market or the BOJsteps back into this, sets back into the fold and starts to signal tightenmonetary policy because ultimately the yen will be driven by fundamentals.And at the moment the fundamentals aren't particularly favorable for theJapanese yen. So there's that question of whether theMinistry of Finance will intervene again if it gets close to 60, they probablywill. But they're really just trying tobasically shock the markets as much as possible and give themselves some timeto hopefully see that, you know, the prevailing macroeconomic fundamentalsstart to move in a more favorable.

Direction for them.The second fact that our second part of that question, as you said, is that wehaven't really seen a pickup in the Nikkei despite the yen depreciatingquite significantly and remaining around that 155 level, it would seem thatfinancial stability risk is starting to come into the question and also thepossibility that maybe even if the Bank of Japan doesn't adjust its key interestrate, that maybe it's going to have a more active stance in trying to guidethe ten year JJ be higher, which is obviously negative for valuations inJapan, but also rate raises at the margins, higher risk of marketvolatility.

I think what we're seeing now is thisuncertainty playing out in terms of the currency dynamics as well as where thatsort of ten year magic could head. If, you know, the Bank of Japan has todo something to try and lean against the currency in some way, you know,reflecting in greater uncertainty in risk assets.So that's very much curious. For a while I've been fairly skepticalabout the Nikkei's rally.I was sort of shorten wrong on that one. But now it really does seem to be thecase that, you know, the uncertainty prevailing because of these kind offinancial dynamics and currency dynamics.

Are really playing at market sentimentand weighing on the Nikkei. We're hearing now from Canada sayingthat it's not true that officials spoke about intervention.He's making no comment on whether intervention was conducted.Of course, a lot of Bloomberg's analysis suggesting very strongly that that iswhat has happened over sort of previous recent sessions.But I wanted to ask about China, because I do wonder whether some of the thepause on the Japanese rally is kind of seeing some directed flows now intoChina and Hong Kong. Do you see this as a fundamentalrerating in terms of the upside that.

We're seeing, or does that very muchdepend on further progress on policy and the economy?It's an interesting point about flows, because there was that argument that thereason why Japan was performing so well was, you know, capital was coming out ofChina, both because of, you know, some of the financial stability risks that wesaw there, but also obviously because of the changing geopolitical dynamics andsome of the structural challenges that maybe China is facing.I suspect that that is less of a factor now, just because we are talking aboutmoney that is looking to allocate over much longer term time horizons andeffectively exit China in favor of Japan.

Because of those longer term trends ofdecoupling as well as, you know, the kind of maybe lower trend growth ratesthat could emerge in China. The way that I see China at the momentand the rally is sort of threefold is the technical sentiment element there,is the financial stability element, and then there's macroeconomic fundamentals.The first two have become very favorable for China, and that's because of thefantastic work. Realistically, at least for now, thesituation is very fluid and difficult to contain.So it could change. But the really fantastic work topolicymakers did to restore market.

Confidence, ensure that financialstability risks were at least ringfenced for now and then also probably becauseof interventions from the national team. Every time we have seen a sell off inChinese equities, they've been very quick to jump in and show prices aresupported, which is restore confidence. And again, also had that effect ofdiminishing financial stability risks, at least for now, knowing that there isstill obviously there is major, again, structural concerns about overleveragein some sectors and the risks that that poses to the financial system, bankingsystem more broadly. The fundamental question, though, isstill a little bit murky for me.

And I think what we've really seen is asthose financial stability, risk and technical factors improve, we've seen avery under-valued market price at that kind of discount because of financialstability, risks return to a stronger, stronger position in terms of valuationsor longer term run averages. But we don't have any signal yet thatthat 5% growth target is achievable or that policymakers really want to getthere or have the conviction to get there.So I'm skeptical about the very long run also because of the structural issues.But in the short term, this rally could continue because that market confidencehas been restored because of the hard.

Work and good work of the policymakers.Carl, always great to chat with you Colorado senior market analyst atcapital dot com. Coming up a little bit later onBloomberg Television, CEO Bonnie Chan joins us for her first TV interviewsince taking the top job in March. That conversation is coming up in thechat show 9 a.m. Hong Kong time.But first, President Biden threatens to hold back further arms shipments toIsrael as U.S. unease grows over civilian casualties inGaza. This is Bloomberg.

Chinese President Xi Jinping has arrivedin Hungary for the last stop on his European visit, where he is expected tosign more than a dozen agreements with the Beijing friendly government.Our chief North Asia correspondent Stephen Engle is here.And Steve, we saw Xi in in in Serbia and there were a number of commercialagreements that were reached there. But is this the point where we reallysee the ties get reinforced between China and Europe or Eastern Europe inparticular? Yeah, I think so.I mean, his visit to France was, you know, basically cementing those tieswith Emmanuel Macron and using the.

French visit as a bit of a counterweightagainst some of the more urgent economic issues and politicalissues that have been pressed by Ursula von der Leyen, the U.S.president. And then Serbia was more symbolic.And, you know, talking about that, NATO's bombing, theU.S.. NATO bombing of the Chinese embassy inBelgrade 25 years ago and cementing those ties with the Belgrade government.But now this one to Hungary is really going to bring all these issues togetherwhere we're expecting Xi and the government of Viktor Orban to sign morethan a dozen agreements.

And a lot of them are going to be in thepriority industries that Xi Jinping is pushing the so-called new three,including EVs. Already, BYD in December announced itwould build its first European plant in Hungary.It's underway right now. We're expecting possibly another evenbigger EV plant to be announced sometime today, a signed with Great Wall Motor.We already know that Seattle, the big battery maker, also building a bigbattery plant in eastern Hungary. So clearly, Viktor Orban's government iswelcoming Chinese investment with open arms.And he has been also at odds with other.

European Union leaders, especially overits stance on Russia. He has warm relations with Moscow.He has open arms on with Chinese investment.There's this Belgrade to Budapest, high speed rail that is in the midst of beingbuilt as well. So, again, this is a very strategic moveand start by Xi Jinping, a friendly government in Eastern Europe, at a timewhen the European Union, especially led by Ursula von der Leyen, is reallyhammering home the overcapacity issues and China exporting cheaper prices andovercapacity into European markets. And that conversation with EvangelineAmanda Lang was was very full and frank.

Right.In terms of the overcapacity issue and the implications if Beijing doesn'taddress it, can. And is she willing to do anything toallay those concerns? I think the question is, can he doanything at a time when the domestic economy in China is slowing and unableto soak up that excess capacity? I think we have a full screen quote fromUrsula van der Linde. A sense of there it is.Boy, my producer's right on top of things.Essentially, the at the end of the the quote is, well, that's the wrong quote,but that's okay.

There was another one aboutovercapacity. Essentially, she was saying that shewants to see China act on the overcapacity issues sooner.But that's the big problem right now, is China has all this excess capacity andit is clear across the industries in green, whether it's solar and also, ofcourse, electric vehicles, and that they have to find a way to export it.And that's why we go back again to why Hungary plays a big role.If they're building those plants, obviously in Hungary, then thoseeventually will be classified as domestically built products in the EU.They would not necessarily be tariffs.

Under the proposed tariff scheme by theEEC. All right.Now upwards of 20%. So this is a very strategic move by XiJinping. So we're also later today going to getthose export numbers, Annabel and Heidi, from China, expected to pick up a littlebit in April from those dismal numbers in March.But again, this all plays into Xi Jinping strategy of underpinning growththrough exports if they can't sell it at home.And that's a political hot potato, obviously, in the United States and inparticular in Europe, in places like.

Germany.Our chief North Asia correspondent is Stephen Engle there with his Europevisit. And of course, you know, as thisinternational charm offensive continues for the Chinese president, we're alsoseeing signs of work being done by Chinese diplomats in terms of thecriticism we've seen recently of the US and Western allies approach to dealingwith Israel and the conflict in Gaza. We heard from a top Chinese diplomatreally taking the microphone at the United Nations last week, criticizingthe supply of weapons to Israel by the United States.Very interesting dynamic in terms of the.

Attempts to sort of try and capitalize,perhaps. I would say the the internationalcriticism that the U.S. and its allies have faced oversupporting Israel. And in fact, that pressure continues.President Biden saying that he will halt additional shipments of offensiveweapons to Israel if it goes ahead with a ground invasion of Rafah.He told CNN that the potential loss of civilian life is, quote, just wrong.Bloomberg editor Matthew Hayes joins us now for more.So we've talked a lot about these red lines and what it would take for theUnited States to be more firm.

And in fact, the capability thatPresident Biden has to to be able to push harder on Israel.Yeah, I mean, this is a real shot across across the bow of Prime MinisterNetanyahu. The US has been, you know, reiteratingthis stance for four weeks. We've been following it and obviously itreally hasn't resonated, I think, with the Israelis.And at the end of the day, this is something that will and the US has has astrong case here. I mean, the three and a half thousandbombs, some of them are really quite big ordnance that will cause a lot of damagein built up areas.

So that what they're talking about heremakes a lot of sense. The problem is that the fallout and, youknow, when you try to negotiate a deal with Hamas, which I think is fairlycorrect in saying it only respects strength, the idea that the US may be,you know, going to exert enough pressure to stop Israel from going into Rafah.There's not a lot of incentive to then go and make a deal because they live tofight another day kind of thing there, which is the Israelis point back to theUS as well. But it's a real judgment call here fromBiden, because obviously there's a lot of people in the US who feel very, verytied to Israel.

It's a long term ally and he's he's gotto weigh that sentiment against real unhappiness among among people on theleft. And perhaps, I guess he would suspectmiddle America that this is just carnage that's going on there.And the US does have a place, a role to play here in terms of really pressuringIsrael. And munitions are the great one becauseIsrael can't manufacture these things at home.It does have to it does have to import all of that stuff that Israel's strategyhas always been to produce what can't be produced elsewhere and just buy the restof the market.

So the West does have some leveragehere, particularly the US. Yeah.And Michael, we've heard from a number of top Republican lawmakers who weresaying that that any delay perhaps sends the wrong message here to to to attackally Israel, but also more importantly, to to possibly embolden Iran and anIranian backed groups. It obviously, it's very nuanced.There's no black and white here. But what weight should we be putting onthat argument, do you think? Yeah.Look, I mean, they've got a good point here.I mean, you know that you don't want to.

Be showing a gap between the US andIsrael at such a sensitive time. I mean, you know, it's only a couple ofweeks ago that Iran would rain down a whole series of projectiles and missileson Israel, and Israel is surrounded by Iranian proxies and they all, you know,looking for a chance to have a go at it. So the signal that it sends, I mean,this is this is the what we're President Biden's experience is really going tohave to he's really going to have to draw on it here because he needs to sendthat signal to Israel. And he has said, look, American supportfor Israel is ironclad. It's a signal.It's not a it's not a we're cutting off.

It's not we're going to abandon Israelto the wolves or whatever. But it does depend on on how it's readin other capitals and among Israel's enemies there as well.So it is problematic. And the Republicans do have a good pointon that. The difficulty for the Republicans isthe international the foreign policy credibility, which has always been sostrong. And one of the hallmarks of the partyhas sort of been dented over the whole Russia Ukraine issue and not wanting toprovide support there as well. So they are a little bit marginalized onthat front.

But they do make a good point in thiscase, I think. It's a challenge.That was our editor, Michael Heath. Thanks so much for your time.We'll have more ahead on DAYBREAK Australia.This is Bloomberg. Some of the stories we're tracking thismorning. And shares of ARM Holdings tumbled inlate trading after the firm gave a lukewarm sales forecast for the fiscalyear. The chip designer saying sales of 3.8 to$4.1 billion for the period, with analysts predicting sales of just over 4billion.

The forecast raises concerns the techindustry's spending spree may be slowing.Official Chinese data suggests Apple's iPhone sales that jumped about 12% inMarch. It's an early sign of success in effortsto turn around a decline after Apple and its retailers cut prices.The tech giant last week surprised investors by reporting quarterly revenuefrom China that beat expectations. And you can read more about Apple ontoday's big, big take, which focuses on who may potentially succeed Tim Cook asCEO. Bloomberg's Mark Gurman looks at a fewnames that are emerging as potential.

Successors.You can read that story on the terminal right now as well as on Bloomberg.comand Businessweek. We'll have more ahead on DAYBREAKAustralia. This is Bloomberg. Discussing breaking data crossing theterminal here. This is Japan wages data for the periodof March. Actually, the numbers are reallyundershooting economists surveys here. So the reading year on year has come inat 0.6% growth. That was versus the survey for 1.4%growth and actually quite under as well.

What our Bloomberg economics team hadbeen projecting. That doesn't really bode very well ormeld very well into what we see on real cash earnings basis, given this actuallyquite a big contraction. They're down 2.5%.The survey had been four -1.4%, and again worsening for the month priorreading. So not a great outlook here that'scoming through for for wages growth. It's it's certainly not numbers the BOJis really going to be wanting to see at this point in time, given that they hadbeen all of that optimism around wages growth in the country following thesuccessful wage negotiations that.

Concluded earlier this year.But that's the state of play there. As we said, Labor cash earnings verymuch undershooting economists surveys. Let's keep with Japan now because we'vehad Toyota numbers as well. And the company has issued a tepidoutlook after recent scandals forced it to cut production.That is overshadowing a surge in its hybrid sales that boosted profit lastyear to a record. For more, let's bring in transportreporter Nicholas Takashi and Nick. Well, these are the results that youexpected. Well, in some ways, yes.In other ways, not so much.

Pluto recorded a record ¥5.4 trillion inprofit during the last fiscal year, which exceeded its own outlook of 4.9.On the other hand, the carmaker's outlook for this fiscal year was 4.3,which fell short of the 5.3 trillion analysts expected.Now, Toyota, like other big companies in Japan, is known for under promising andover delivery. For example, last fiscal year it startedoff forecasting 3 trillion and then ended up raising that twice to 4.9 andended up exceeding that by ¥500 billion. Yesterday,like you said, hybrids are seeing a rebound in demand right now.This month, the weekend,.

Which is a double edged sword for bigcompanies like Toyota, is fluctuating increasingly.So how Toyota sort of ride that wave over the next year, even as analystsremain positive, is yet to be seen. Nicholas.This was Koji Sato's first fiscal year as CEO at Toyota.What kind of year was it in terms of the performance and the challenges?Well, just like Toyota started its first year in the top job.Highs and lows made it more than most executives in this industry, at leasttwo CEOs. On paper, it was a banner year forToyota records broken across production.

And sales.It was the first time a carmaker had made more than 11 million cars in asingle year. And share share prices soared decadelong highs throughout throughout the fiscal year.But at the same time, Toyota is recovering from a pair of scandals thatemerged in December and January at a pair of the facilities they had to andToyota industries, which involved a number of irregularities and manipulatedsafety data. Test results, some dating back to thelate eighties. Now, Toyota in response, has promised todial back production to sort of reassess.

What it's doing right and what it'sdoing wrong, what it needs to change and what to do to revise its businessempire. But it's still forward looking in termsof operating income. It's still looking to keep the top spotas as the world's best selling carmaker yesterday.In parallel with that, Toyota's CFO said that they'll have to endure four yearsin China until they have more battery EVs to offer.Obviously, these scandals and the league can sort of throw a monkey wrench intothose promises. But we found out late last month thatToyota is partnering up with China's.

Tencent to code software.And by doing so, it's hoping to certain that sprint as much as possible.Yeah, that's what I'm curious about in more detail, because Toyota is a companyand Japanese automakers sort of generally been perceived being a bitslow on EVs. But do you think that those recent stepsin that space are going to be enough for for Toyota?Yeah, I guess that's the main question on on the mind of not just Toyota as asort of a bellwether for the rest of the Japaneseeconomy, but for other major automakers as well.And Toyota, being the largest car maker.

In the world, is maybe expected in someways more than others to be quicker on this transition.But as you know, it's not known for that.Its goals have been dialed back in in the last couple of months, not least ofall because of the scandals, but also because of higher costs and hesitationon the part of customers who are worried about things like, you know,the cost of the car battery range and whatnot.Just in the last year. Speaking of Toyota or speaking ofsupply, excuse me, Toyota has brought a lot of new insight on the technologythat's developing behind closed doors,.

Solid state batteries and getting acasting, which which is sort of marquee technology.Tesla uses the punch out of these like toy cars.And so Toyota has has laid out as much as it can or as much as it seems to beable to do a road map for for mass producing theseby the millions within the next 3 to 6 years, if not if not by the end of thedecade. So so they've they've overpromised,which is unfair or drastic a lot of ways for a company like Toyota.But they've made an effort to show us the road map forward.That was our transport reporter there,.

Nicholas Takahashi.Thanks so much for your insights. And sticking with EVs because a slowdownin demand for such vehicles is pushing many electric vehicle start ups to thebrink. Two of the largest and most prominentthat's rivian and lucid reported wider than expected losses this week, followedby double digit drops in their share prices.Bloomberg intelligence says bankruptcies in the sector may start to pick up as aprice War squeezes unprofitable companies Heidi. Let's take a look at how we're settingup when it comes to trading about to get.

Under way in just about 25 minutes herein Sydney, across Tokyo and Seoul as well, looking pretty muted.And in fact, a pretty mixed picture given that we had that flat sessionended for Wall Street overnight. S&P futures.When it comes to here in Sydney, off by just about a quarter of 1%.Kiwi stocks are actually off the session lows, but still softer by about aquarter of 1% there as well. Chicago, I should say Singapore tradedNikkei futures are actually in positive territory at the moment.S&P futures, though, looking still pretty muted with South Korean PresidentJones.

Tokyo will hold his first newsconference in about two years today as he tries to set a new course for hisconservative government and has pledged to overhaul his administration after astinging defeat in last month's parliamentary elections.Let's bring in our East Asia government editor John Herskovitz.So, John, what are we expecting today? Well, we're expecting him to lay outwhat he wants to do for the remaining three years of his term.And also, he's trying to change course for his presidency.He suffered a major defeat last month in the election.His ruling party lost seats, the.

Opposition gains seats as a very solidmajority. So he's trying to show that he is adifferent person, that he can communicate a bit better.And he's using this news conference, which is to mark the start of the secondyear in office to show that he wants to communicate better with the people.John, when you've got the the main opposition party with a large majorityin in Parliament, what's actually realistic for you to accomplish here?A U.N. is really limited as to what it can doin terms of legislation. The opposition party is not going to goalong with many of his initiatives, like.

He wanted to increase transparency,corporate values, get get more tax cuts for businesses.The opposition is looking at things like cash handouts for peopleand use a legislative agenda. His pro-business agenda is pretty muchhamstrung. He's going to try to find consensus forthings like medical reform, pension reform, and hopefully see if he can finda way to end a walkout by trainee doctors.It has dragged on for several months. It seems that there's some room forcompromise with the main opposition party, and these may be some things thathe could realistically accomplish.

But his pro-business agenda is hasreally been derailed by the election. Are we likely to see any change toforeign policy? He's drawn South Korea closer to the USand Japan for security reasons like that.At this point, things look like they're going to stay the course with theforeign policy. The the opposition is in favor ofrapprochement with North Korea. They're a little bit they want warmerties with China. But Yoon is going to have a summit, it'sexpected this month with the leaders of Japan and China.And in July, he is thought to have this.

Summit with President Biden and JapanesePrime Minister Fumio Kishida, where they're going to reaffirm the securitycommitments that they've made. So it looks like he's going to be setpretty much for keeping the course for now for his security arrangements, whichare getting closer to the U.S., getting closer to Japan, working on ways toprevent the threats posed by the likes of North Korea.Our East Asia government editor Jon Herskovitz there.We have more ahead on DAYBREAK Australia.This is Bloomberg. A Sydney apartment described as the mostluxurious penthouse in the southern.

Hemisphere has just about everythingexcept a buyer. After three years on the market, theprice tag has just been cut by 10% to still an eye watering 59 million USD.Bloomberg's study party has more on this.And so do you got access to this incredible property?So why has it been so hard to find a buyer?Look, the property was completed in late 2021, which was post pandemic period.We saw Chinese buyers had kind of moved out of Australian luxury property marketaround 2018, 2019 because of pressure from China on capital flows.And China used to be the number one.

Source country for Australia as far asforeign investment was concerned. And this was everything but residentialreal estate was a huge part of the investment.Now they are number four or number five, so we can see that that amount hasdropped drastically. So it's probably the timing, it'sprobably the fact that we don't have as many rich Chinese people who are willingto make that big bet. And also, we only have got Monica todoing this deal the past five months, four or five months now.So they have kind of started doing more of a selling only of late.Yeah.

So stay with us because you mentionedMonica. We're going to bring her in.This is, of course, going to give us a bit more insight in terms of this marketand the dynamics that are at play here. Monica, too, is the founder and directorof the Black Diamonds Group and she joins us now from Los Angeles.Monica, always great to see you. And I guess the question is to you, whyhas this really, in a lot of ways extraordinary property been on themarket for so long? Why has it been hard to find the rightbuyer? I think it's been in the market,actually.

Not a choice, not a really on themarket. It was just the opening up for theinternational buyers to come to experience this incredible penthouse.The in the past few of eight years and the property is not really propertymarket it is only you through the database.You are the first action media, to be honest, to expose this property to theworld. That's probably the reason, but mainlydue to the pandemic. So people are not able to come toenjoying the lifestyle of the crime and the crime.We're sending this amazing penthouse is.

Not just by square meters is aboutlifestyle. If you are not able to travel toexperience that lifestyle, obviously it's really hard to sell.But now we're open. So we're open to all the internationalbias. Hello, I'm Monica.You are in Los Angeles at the moment. Is it related to the sale of thisproperty or are you looking for buyers, American buyers for this property?Yeah, absolutely. You know, as your guest knows, all theinternational superstars stay in the trunk.Taylor Swift, they're doing her concert.

Now.Mark Wahlberg, stay in Akron. So this you know, you come up onanything, you know, compared to this amazing penthouse, hopefully with someof the American celebrities to come and join this lifestyle and hopefully we buyit. And Monica, normally when we look atAustralian property market, it's mostly dominated by houses, land and housepurchases. This is Penthouse on the 81st floor.Why? What makes it unique?Why would anybody pay 59 million U.S. dollars when they are not getting landwith it?.

Oh, I think if you want the land,obviously you can buy some amazing houses in Sydney, in Australia.But this is not about buying a land. This is a buying a lifestyle.So Cronk is actually is that amazing? Six star resorts.Look at the, you know, the picture. Now you have your private pool, you havea tennis court in the middle of Sydney. So we'll have 11 Boston restaurants andsome of the movie stars wouldn't name who that is.They stay in the houses. Yes, we do have a gym.We do have a swimming pool. But you don't have the service, right?You don't have like you live the Boston.

Restaurant, provide you that five starservice and 24 hours concierge. The reason people will buy the penthouseis definitely because of the lifestyle. Monica,we've spoken to you many times over the past few years, and I know you've builtyour business really, with these ultra high net worth Chinese clients.Can you tell us what does your client book look like at the moment?Is there a big shift away from China? Oh, I wouldn't say it's a big shift.We still have a lot of really wealthy Chinese clients, and they put me in aboat in China, live in China, migrant to Australia or other part of the world.And at the moment we have a lot of.

Attractions from Southeast Asia.So our biggest market will be, you know, a number of buyers from Vietnam,Cambodia, Thailand. And of course, Singapore is one of thebig source of our old kind tail. That's actually quite interesting.What are those clients looking for when it comes to Australia, anddo you see it as a challenging environment in terms of foreign propertyinvestors? I thinkcompared to the rest of the world and them, Australia is still the mostdesirable destinations for Southeast Asian and Chinese buyers.The Chinese, it's probably a little bit.

Extra out of stamp duty that otherwise,you know, alone is probably the safest country and the best, best of the bestlifestyle for the international buyers. Monica, by when are you expecting tomake the sale? By when do you think this property willbe sold? As soon as possible.Hopefully within few months. So we think in 2024 you're confident.A super confident we in the first quarter, we're already met our targetand to now we enable to travel around the world to promote Australianproperties. Yeah and you percent confident.Monica, you're nothing if not.

Confidence.Monica to founder and director of Black Diamonds group that joining us from LosAngeles and our economics reporter Swati Pandey.And you can read more on that story on the Bloomberg.You can also watch us live. Catch up on those past conversationswith the interactive TV function that you can dive into any of the securitiesor the Bloomberg functions we talk about.You can join in on the conversation as well.This is for Bloomberg Subscribers only. Do check it out.It's a TV group.

This is Bloomberg. Well, Australia's largest bank hasannounced a 3% decline in the first half profit in its quarterly trading update.Paul Allen joins us now. So we've seen similar results for Aussiebanks over the past week. They've been returning cash toshareholders. This is also a consecutive decline forCBA as well. Do we see them trying to kind of givethat sweetener as well? I certainly wouldn't rule it out.And there's plenty of gas in the tank for that kind of thing.And they're in the middle of another.

Buyback as well.They've already completed $250 million worth of a previously announced $1billion buyback of a profit. Pretty resilient versus peers, unauditedcash profit, 2.4 billion, that's about 1.58 billion US.But that surplus capital, they're carrying $7.7 billion.That suggests there is scope definitely for another buyback.It's a kind of weird one. Commonwealth Bank this is a tradingupdate for the third quarter. They report out of sync with their peersbut in sync with the rest of the market. But the commentary has been verysimilar, what we've heard from the other.

Banks.And Matt Coleman, the CEO, said, look, a lot of households feeling pressure fromhigh inflation, high rates. But he says the fundamentals of theAustralian economy are very strong, unemployment's low and immigration isjust a structural tailwind for the economy right now.And then the home loan growth. How's that holding up as well for CBA?Yeah, well, in this environment of immigration, the property market's beenvery, very strong and home loan growth has been not been pretty strong as well,growing on quarter by $4.2 billion. Commonwealth did say its net interestmargin is slightly lower.

Didn't specify how much lower, but ithas become a lot more aggressive recently on loan writing and has liftedbonus payments as well for its top lenders from 50% of base salary to 80%.And that's kind of interesting too, because it wasn't that long ago that wehad a royal commission into misconduct in the banking industry in which bonuseswere pointed out as being part of the problem here.But Commonwealth says that increase in bonuses is to stop financial staff fromleaving and their top performers going and setting up shop elsewhere.The other motivation is to try and catch up to Macquarie Bank, who we also heardfrom in the past week or so, which is.

Really leading in home loans at themoment. AndI was Paul Allen in Sydney there and taking a look at some other corporatestories we're tracking this morning. And Shopify shares tumbled after theCanadian e-commerce company pledged to continue investing in marketing despitethe pinch in profits. The firm sees gross margins in thecurrent period, narrowing a forecast which overshadowed its strong firstquarter performance. Its US traded shares saw their biggestintraday decline ever, reflecting concerns about future profit margins.Airbnb is providing lacklustre guidance.

For a second consecutive quarter,suggesting growth in travel spending will slow further before the peak summerseason kicks in. It sees revenue for the current quarterbetween 2.6 to $2.7 billion. Airbnb is blaming the earlier timing ofthe 2024 Easter holiday as well as currency headwinds.Nomura has joined Jp morgan in limiting dealings with Asian hedge fund giants, aguarantee which is facing charges in Hong Kong of insider trading.Sources say Nomura won't add more leverage or new positions to itsdealings with to guarantee the fund. Its founder, Simon Sigler, and a formerdealer says they will vigorously defend.

Themselves against the charges.Heidi BELL We are watching, of course, for theBank of Japan summary of opinions just crossing the Bloomberg now, and this isfrom the April policy meeting. One DOJ member saying that the rightpath could be higher than expected then in the market.They could also see the need to raise rates appropriately at the right time.The need to deepen talks on rate hike timing was also flagged by one DOJmember, another saying that consumer spending is a key point.We know, of course, with the weakness that we've seen and again, there's beena lot of domestic pressures on.

Households and consumer sentiment aswell. We are seeing the yen moving justinching a bit higher against the dollar after the summary of opinions.We've seen earlier today that real wages continue to show that weaknessunderlying that underlying trend is staying solid.But the pay gains and lagging inflation every month for the last two years,which is going to really complicate the picture when it comes to how quickly theBank of Japan can move. Yeah, that's right.Certainly something we're tracking closely and also for trading when we getto Pan coming online in a few moments.

Time SoftBank and chip stocks in focuswith aam giving a lukewarm revenue forecast for the year.

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