Bloomberg Morning time: Asia 02/05/2024

This is DAYBREAK.Asia. We're counting down to market opens inJapan and South Korea just a few seconds away now.And Heidi, really, what a start to the week here.You've got the US strikes on Iraq. Who sees as boosting tensions in theMiddle East? You've got these expectations around theFed. How that's changed following the US jobsreport and adding to it all, you've got Beijing.That's pledging assistance for its local stuff.A.

Pretty busy start to the year that we'vehad. Right.And certainly we're continuing to also watch for bread and butter the factthat, yes, we're watching the Fed, we're also watching the RBA, the firstdecision of the year to take place this week as well.And really watching as with every central bank this year, the signalling,the communication is going to be key. Yeah, that's right.Certainly want to know what they're going to be indicating around Fed ratecuts. We do actually have, Heidi, some linesthat are just dropping now on Jay.

Powell.And I think you maybe have some more context on those for us.Yes, that's right. We are hearing from Jay Powell at themoment. Andreally in terms of this is, of course, an interview when itcomes to the 60 Minutes interview that he's doing on CBS, the transcript thatwe're getting through. Jay Powell saying it's unlikely the Fedwill have the confidence to cut in March.That's really interesting, that rate forecasts are not likely change muchsince December.

That integrity is priceless.And that's a quote. They don't consider politics, of course,lots of concerns as to how potentially the Fed might be impacted going into akey political year for the US, not to mention the geopolitical overlay thatyou spoke about right at the top, how this is impacting oil prices, energyprices, supply chains again being impacted and how that feeds to routineplay. And Chip, I'll say that they're makinggood progress, but the job is not done, that the risk of moving too soon wouldbe inflation settling above 2% and falling into that trap, saying that thethe Fed is on a path to price stability,.

But they are committed to fullyrestoring price stability there.One big factor, of course, he mentions pandemic effects in the inflation surge.They don't see the economic turmoil of China as having a big impact in the US.We kind of talk about that a lot as to whether that sort of export, adeflationary spiral could be something that impacts major economies outside ofChina. Bill.Yeah, that's right. We're really seeing sort of that storyof us strengthen and China really not playing too much into their thinking atthe Fed, But the market reaction we're.

Seeing, it is very clear here becauseyou've got those yields that are continuing to move higher following whatcame through in the Friday session as well.It was that blockbuster US jobs jobs report telling us that the US economy isreally powering ahead. And we saw that reflected in the themarket reaction because we had US stocks really liking the tune of that.Let's take a look at how those dynamics we saw in Japan.They're just coming online to the upside.But let's take a look at Korea, because we haven't seen the Cosby trading justyet.

And you can see here, yes, that's Japanstocks that are moving to the upside. But let's take a look at the costs.B, likewise, See that that good news is flowing across in the session.So far, actually, not the same story here.A little bit of weakness creeping in. But we also have, Heidi, Aussie stocksthat are one hour into the session. That's right.One hour into the session has been a pretty tricky session so far forAustralian equities, and we haven't really seen that this is a market thatis struggling to kind of extend to new record highs despite starting off theyear so close, but extending those.

Losses now, downside of about one and aquarter of 1%. We're seeing the steepest losses throughmaterial that's down by over 2%. Real estate is also off by almost 2%.And energy, despite the fact that we do see oil prices higher on the back ofthese increased geopolitical tensions, the airstrikes that we've been talkingabout, the energy sector trading in Australia is down by just over 1% at themoment. Also watching the Aussie dollar, 6504 iswhere we're trading at the moment. We had a fifth straight week of declinesfor the Aussie dollar. We're heading into the RBA decision thefirst of the year where economists are.

Unanimously expecting governor will lookto keep that cash rate at 4.35%, probably maintain that hawkish stance.Given that Australian inflation is higher than what we see in the US andthe cash rate is about one percentage point below the Fed's.But this is a revamped communication regime that we're expecting from theRBA, so a lot of scrutiny on how they use that communication regime and whatwe hear in terms of signalling for inflation expectations to come.Right. And also taking a look at what we'reseeing for treasuries at the moment as we continue to kind of digest themessaging from Chair Powell as he tells.

60 Minutes that the Fed is likely towait beyond March two, really stressing the caution on the danger of moving toosoon on rate cuts, the idea of integrity and really being able to in a permanentand significant way reinforce price stability.The 2024 rate forecasts, he says, probably haven't changed dramaticallyfrom what we saw back in December, saying that the Fed wants to see moreeconomic data to assure that inflation is on that sort of sustainable path to2% or potentially risk getting stuck above 2%.Right. So really waiting beyond March two,we're going to see some repricing, some.

Sort of changing of expectations when itcomes to how markets potentially react to this.Yeah, well, I mean, we're seeing that reaction there, I guess, Heidi, Yieldscontinuing to move higher as Powell continues to press back on these marketexpectations that we'd see a cut as soon as March.Let's get more on that now and bring in Ken Peng.He is Asia Pacific head of investment strategy at Citi Global Wealth.And Ken, I'm interested in your views that we just have these lines coming outfrom Jay Powell pushing back on these market expectations.What's your take on it so far?.

Sure.Actually, I think this current market situation is similar to last summerwhere we had a series of strong data and then it kind of got revised away.For example, this payroll, you know, you'll note it, right?The household number was actually down. Inflation was actually down by 700,000over the past two months. And then when you to look at total laborinput, which is average hours, times, payrolls is actually down in January.So it's been flat for the past 12 months.So, you know, it's that the US economy is doing fine, but I just don't thinkit's all guns blazing.

You know, ADD, as I said, the payrollsheadline what seem to suggest so far for the Fed I think their their own forecastis I think 75 basis points this year. And Powell seems to reaffirm that in hiscommentary as well. So, look, I think March has always beenkind of too much of a rush in our view. We do think that middle of the year ismuch more reasonable and we stay by that view at the moment.Another line that came out from this is, is Jay Powell saying that the greatestthreat to the global economy is geopolitical risks.Right. How is that likely to think or informtheir thinking around Fed rate cuts, do.

You think?I, I think, okay, First of all, the situation in the Red Sea, it isincreasing shipping costs, but it's not completely stopping it.Right. Because you can just go around Africaand it does not it's not directly affecting the final product and itdoesn't really affect that much trade related to the US.So I don't I don't actually think that's, you know, if it stays regionallike it is now, I don't really think this is going to be a major factor forthe Fed. But of course, if it expandssignificantly, that will be a very.

Different question.So the market dynamics.So we have really seen them agitating given we're continuing to get this pushback on Fed rate cuts, even though we do have that strength.But you said that you didn't think that the US economy is quite as strong as theUS jobs trend suggests. How do you expect equities then toperform? US ones, I mean.Yes. Look, I think the last year is very muchabout the Magnificent Seven. So far this year they've been leadingstill.

I think a lot of it has to do wheneverthe market is uncertain about rates, they will go to those very fewcompanies. So the performance becomes very narrow.But, you know, like I said before, this this initial strength coming out ofpayrolls probably gets revised the way as time goes through.So so I you know, once the the rate cut expectations come back in again, I thinkwe'll see broader performance coming out of the US equities.Generally speaking, you know, last last year, out of the 11 sectors, the onlyfour that had positive earnings growth this year, I think all of them has agood chance of generating positive.

Earnings growth because rates andinflation both lower. Can I want to talk about China?CC vowing to stabilize markets. It's unclear to what extent they'rewilling to go to. I don't think we're going to get thekitchen sink approach from Beijing. Anything short of that?Is that going to change the ultimate narrative when it comes tohow investors feel? Right.Well, I mean, if we get this 10 trillion,that will be helpful. But but even the previously rumored 2trillion hasn't really kicked in yet.

Right.So. So I don't know what the what the exactplan is. But I think so far, what we see isthey're throwing a lot of money at a problem that is not caused by the lackof money. Right.Credit growth, like total social financing, if you will.Last year, it was twice the speed of nominal GDP.So there's no lack of money. And and so what lacks confidence andwhat they need to do is to generate more economic dynamism by reducing controls,reducing regulations, by pushing forward.

Governance so that companies are moreencouraged to increase their own, you know, perhaps dividend paymentsbuybacks, similar to what Tokyo Stock Exchange is doing.It's it's not setting up stabilization funds.I don't think that's going to be very helpful in the long run.But of course, given how, where where we are in terms of valuations andsentiment, it might not take that much to have a little bit of bounce.But then, you know, I think the longevity of that rally is still verymuch in question. Is is it in question?Because ultimately this is if you if you.

Accept that this is a structuralslowdown, that Beijing knows that it's a structural slowdown, it knows it has tokind of just muddle through, try not to have the rest of the property sectorimplode. How do you invest around that if bigstimulus is not going to be the answer? I think we will have to focus on thesectors that are not politically sensitive and still able to generatemoney. I think tourism is one of those sectorsthat's moving forward. China is trying to use the tourism,I guess, industry to to try to restore some consumer spending.Aside from that, I think the sectors.

That are getting specific governmenthelp should be should be doing relatively better.But, you know, if you're looking at the semiconductor supply chain, I thinkthere's probably better destinations for investment in the US orEurope or even Japan compared to, you know, Chinese names, you know.I'm actually on that point of of semiconductors because you're seeingthat that bifurcation, I guess, between the US and Western countries.Do you prefer then, if you're going to go into that sort of sector to look fornames that are in Korea and Taiwan instead?Yes, I would actually, because they are.

They have they have been trading at adiscount versus us. And I think in Taiwan's case, there wasa lot of geopolitical baggage. But I think at least at least thecross-strait relationship is stable for now.So so I think I think the the the discount that's these Asiansemiconductor names should narrow as we as we go forward,because they're very critical to the global supply chain, this wholeincreased sensitivity of security right now.Ken, great to have you with us. Ken Poe, Asia Pacific head of investmentstrategy at Citi Global Wealth.

Let's take a look at some of the earlymovers at the moment, particularly as we are tracking one stock inparticular. This isas we're watching Panasonic as one of the stocks.And it is a big week for earnings, of course, particularly when it comes totech main focus. We're seeing that sort of idea beingtracked rising after the third quarter operating profit beat estimates, andthat is being extended into the regular session.We're seeing Panasonic up just about 4% there.The Consumer Electronics Group reporting.

Operating income for the third quarter.That was a beat on expectations. A lot of analysts said that was actuallya positive, some surprise and perhaps that the markets were a little toopessimistic and that bearishness that it's held will potentially begin tofade. There's quite a bit of interest inPanasonic's acceleration of the restructuring efforts, as well as astrong battery efforts across the North American market as well.Bloomberg Intelligence expecting that it could achieve its full year sales andOPI profit for the 2024 fiscal year. We are also watching as they arelaunching the Alzheimer's drug Lacombe.

In China, according to reporting fromReuters, they're seeing growth accelerate significantly in 2025.And of course any kind of pharmaceutical approval or release in China a big, bigdeal. We are, though, seeing stock down by6/10 of a percent in Bell. Yeah, one to keep tracking in a lot of,as you said, a big focus on earnings in this session today.We're seeing the likes of Mizuho, for instance, also rising.But let's move ahead to what we're checking in the next few minutes.China pledging to stabilize markets after shares sank to a five year low.We're going to be discussing Beijing's.

Effort to shore up investor confidencewith Credit Agricole. But first, we'll get the latest on thecrisis in the Middle East as the US threatens more strikes against Iran'sforces and its proxies. That and more ahead.This is Bloomberg. Well, the Biden administration says itwill carry out more attacks on Iran's forces and its proxies in the MiddleEast after three days of airstrikes in Yemen, Syria and Iraq.Let's get the latest from Bloomberg's Michael Hayden.And, Mark, I suppose multiple questions. Does this deter or does this really justelevate tensions across the region or.

Does it further US strategic interests?It's hard to see how it does, Heidi. And I think it's almost likethey have to do it, they have to respond.Does it do anything? It's hard to say because they they alsoflagged this so far ahead of time that it was almost like they were saying tothe Iranians, get your people out of here.So we don't escalated while they're still targeting weapons depots and thesesorts of areas. It I mean, it sends a signal that the USwill respond. Does it deter?It's very, very hard to see how it does.

That.What it does do, though, is it further destabilizes Iraq, which is, you know,obviously it's had Iranian strikes on it there and now it's got US strikes there.Syria has also been at the center of that series, obviously had a civil war.But Iraq is sort of you know, the US has obviously spent a lot of time trying torebuild Iraq and now it finds itself forming it.So it's it's really it's an awkward situation where they've got to be seento be doing something and they don't want to overdo it.What's the outcome of that? I think not.Not a lot other than for those obviously.

Under the bombing.So this is probably likely to continue how much impact it has on on Iran'sproxies? It's hard to say that it really detersthem. Certainly the Houthis.There were there were strikes on them recently as well.And they said, well, that means war. We'll we'll keep going.So it's very, very difficult to see this as changing the ball game.Secretary of State Antony Blinken is also going back for a fifth tour of theregion since the war broke out back in October.Is that likely to move the dial at all?.

Yeah, I mean, it's interesting, isn'tit? I mean, they're obviously very, verykeen, the US, on getting some sort of deal in Qatar as well in the region onsome sort of ceasefire deal here with with Israel and Hamas.Now there was quite a bit of movement or seemed like movement last week.The weekend prior there was a meeting in Paris of security chiefs from fromvarious countries with stake, a stake in it.Hamas hasn't responded yet. An offer has been made.Prime Minister Netanyahu has said that Israel hasn't agreed to everythingthat's in the media.

So it's we're sort of in a gray zonethere. And national U.S.national security adviser Jake Sullivan said the ball was really in Hamas'scourt and he didn't sound terribly confident that a deal was was going tocome to pass. But I think that's the big next stepwe're coming to. I mean, if if there's a possibility ofgetting a prolonged cease fire, of releasing these hostages and obviouslythe Palestinians being able to get more aid to the people in Gaza, being able toget more aid, that may well be a stepping stone to actually bringing anend to this conflict, but that the hopes.

Aren't great at the moment.Certainly the reports I'm showing a lot of confidence on any of the sides yet,but we really do have to wait to hear what Hamas says on that.Yes, certainly. And escalating.That was Bloomberg's Michael Hasan. We can take a look at how oil isreacting to the events as well over the weekend.And crude is a little bit higher in in early trading using Brent crude and WTIbut steep weekly loss the the five sessions prior this.So a bit of context also around that. Let's bring in Bloomberg Su Keenan inNew York and sue.

Yeah oil really sort of caught betweenthis these these supply but also the concerns around demand as well.Yeah, there are a number of bearish factors that caused oil to be down morethan 7%, both West Texas Intermediate and Brent last week, which we'll get to.But you can see there's a lot of green on the screen nonetheless, as this muchawaited response by the U.S. and its ally, the U.K.has now occurred over the weekend, this has been the first chance to react.U.S. and allies targeted who these sites in13 locations in Yemen. Again, it's the biggest barrage by thesetwo allies since the initial attacks on.

January 11th.But as you can see by this Bloomberg chart of these attacks by the Houthisbegan in the Red Sea in November. And even though the Biden administrationhas vowed to end them together with allies, there's been mixed results sofar. As we just heard, these attacks havebeen continuing, even as we see U.S. Secretary of State Antony Blinken againheading to the Middle East for a fifth trip since the Israel-Hamas war started.Now, let's get to some of those bearish factors.As Annabel mentioned, there's certainly a supply issue, but what really pushedoil prices down was a combination of.

Factors that caused the biggest weeklytumble since early October. There are reports of a potential ceasefire. Early talks to sort of pause theIsrael-Hamas conflict. Fresh indications the world's marketsare adequately supplied. And you've got a number of differenttechnical factors. West Texas Intermediate, its promptspread turning into contango, which is very bearish.And there was a breach in two key oil market technicals that triggeredalgorithmic selling. We will see.The dangers in the Red Sea have caused a.

Major shift in the way oil is beingbought and shipped. Yeah, initially when we started seeingthese disruptions in November with the first of the hoodie attacks, a lot ofanalysts weighed in that it was was temporary and we saw a lot of shipstaking alternative routes going around the tip of Africa, for instance, a lotmore costly and delays. But since these attacks have beguncontinuing and disrupting global trade, we're now seeing major shifts, namely,according to one ship tracking firm. We're seeing a lot of the world's globaloil buyers opt for local cargoes over their traditional oil buys, and they'relooking for an easier route.

So, again, there's been a big downturnin the amount of traffic and a change in the way oil buyers purchase oil as aresult. Bloomberg Su Keenan with the latest onoil. Much want to come here on daybreak.Asia. This is bloomberg. A Bloomberg Opinion columnist, MohamedEl-Erian says that the blockbuster US jobs report presents a problem for theFed. He told us that a march rate cut is nowoff the table. What an amazing jobs report.It just confirms that this is an.

Exceptional labor market that's going tofeed into the exceptionalism of the U.S. economy.I do think it's a bit of a headache for the Fed because of the wage growthnumbers. Lots of people have been warning aboutwage growth, about service inflation, and that just we emphasize that warning.And then finally, for the markets, look, this means march is off the table.March should have been off the table for a while, as you and I have discussed.But this mean march is off the table. It also means that you are more likelyto get this week cuts that the Fed has signaled 3 to 4 rather than the highernumber that the markets has been.

Romancing.Do you think that may is potentially off the table to Mohamed, given the factthat we're seeing wage pressures that are going in the wrong direction for theFed? You know, I was with you last week and Isaid June is what I think should happen. And what I think is likely to happen andthat this report just feeds into that. Mohamed, so what do you what do youthink it means in terms of the US election?Can they come closer to the election now given March is off the table?What's the window they actually have? So I'm going to ask you whether youthink the Fed is influenced by politics.

I tend to believe the view that the Fedis apolitical and that they will do what they think is right for theadministration. This is a two sided sword because on theone hand, it is good for them that the economy is doing so well.On the other hand, there is concern that as you get closer to the election, youstart is going to start getting the weakening that results from buffers.Balance sheets haven't been used to power this economy.So, you know, it's good news for them right now.But I think that they have to keep an eye to what's going to happen closer toNovember.

I'm looking through these numbers andthe revisions are just sort of stunning as well.I mean, everything is just being revised up to the upside.Also just coming in hotter than expected.Mohammed, what do you make of that? The fact that people are getting itwrong and they're not getting it wrong for the weakness, they're getting itwrong for the incredible strength under the hood that's behind some of thestrength that we've seen so far. And that has been the consistent story,Lisa, for the last 18 months. You know, I keep on reminding peoplethat going into 2023, the consensus is.

Consensus was recession.We ended up with a nearly 5% growth rate in the third quarter, 3.3% in the fourthquarter. Estimates suggest that strength remainsand pending corrections from Mike McKee, who's looking at the details.This at first sight. And I just had a very quick, quickglance. It looks like a very broad basedstrength. That was Bloomberg opinion columnistMohamed El-Erian speaking there. And we'll have more to come on DAYBREAK.Asia. This is Bloomberg.

All right.Just getting you some breaking news here in Sydney.This, of course, as we head into big decision week here in Australia, thefirst meeting of the year expecting a hawkish hold.Ahead of that, we're getting the trade numbers, imports rising 4.8%.Month on month. We're seeing rise of exports of 1.8%month on month and imports of 4.8% rise month on month there as well.We're also getting the trade surplus numbers of just shy of 11 billion Aussiedollars. The expectations were for about ten anda half billion Australian dollars.

So when it comes to the.The exports month on month of 1.8% is a slight acceleration from the previousmonth. Imports bouncing back from that almost8% decline in the imports reading for the month of November.BELL And also just taking note of the PMIreadings, so just head out. So these are the private surveys, thefirst one from Japan Bank, that's for Japan.And you can see the services, PMI, the composite readings, both of thoseactually seeing improvement from the month prior and still in expansionaryterritory.

So good signal there for Japan'seconomy. What you're seeing to the flipside ofthe ratings for Hong Kong and Singapore, because both of those are deterioratingthere you can see that the reading for the latest period is Hong Kong movingback into contractionary territory. So 49.9, Singapore as well as slightlyslipping. And it is that story perhaps of of theChinese economy and that weakness and the response as well that we're seeingbecause we've had authorities again promising support for the nation'sbattered stocks after the Friday market rout led to an outpouring of frustrationon social media.

So let's get more on that now with ourchief North Asia correspondent, Stephen Engle and Steve.Yeah, we're getting more promises again. We're getting, again, a lack of details.And I think the response to it that I think is pretty telling in futuresbecause you've still got Chinese equities that are setting off forfurther weakness today. Yeah.And keep in mind that we're heading towards the big week long holiday inChina when people, you know, supposedly go back to their home towns and there'sa party celebrations and the like. But the market has been absolutelyhammered.

Whatever kind of stimulus or talk ofstimulus or jawboning that was done earlier last week fizzled out by Fridayand there was chaotic trading. The CSI 300 was down 3.4%.So we've seen monthly losses now for six months in a row, $6 trillion worth ofmarket capitalisation wiped out. People are getting quite skittish ifthey haven't already been, you know, over the last six months.Obviously, Now, the CCRC, the securities regulator, out with a statementyesterday, not surprising given the route on Friday, essentially saying andI will paraphrase their statement, policy makers vowing Sunday to preventabnormal fluctuations.

But again, it didn't say how itnecessarily would do that other than it would give or provide more medium andlong term funds into the market. And then the third point, crack down onillegal activities didn't mention which of those illegal activities they weretalking about except malicious short selling and insider trading.But again, it's short on specifics and again, how much this will prop up themarket. We're not sure.There's been a lot of scuttlebutt and talk over the last month of the need fora stock stabilization fund. How big would that be?Where would it come from, whether.

Offshore?And so is providing, you know, liquidity into the market.But right now, you know, many analysts say it needs some sort of jolt shot inthe arm right now. You know, and in the meantime, the sortof the risks keep piling up. There's obviously the big issue, the bigelephant in the room about the property sector, the structural slowdown, a lotof the political uncertainties. Donald Trump saying that he might hemight put in more than 60% of Chinese goods to be, you know, tariffs, thatkind of thing. A lot of.Sure,.

Absolutely.I mean, the weak Chinese economy and also lack at least the perceived lack ofconcrete steps to prop up the property market.And also, you know, the political the geopolitical tensions, U.S., China, andyou mentioned Trump. Trump's now again restating that hewould like to impose upwards of 60% tariffs on Chinese imports to the UnitedStates if he's elected president in November.Goldman Sachs out with a note late last week, essentially saying that clientsonshore in China is saying and investors are saying that a re-election of DonaldTrump is their top concern.

Yeah, again, there's a lot ofuncertainty and we have to question what kind of jawboning from Chineseauthorities in the CCRC will actually work.We do have the CAC cas Chinese Academy of Social Sciences.It's a think tank tied to the Chinese government.How much the top authorities in Zhongnanhai listen to cars is somethingthat should be debated for another time. But essentially a top APA academic,they're saying there needs to be a immediate as soon as possible stockstabilization fund fund in the tune of ¥10 trillion, 1.4 trillion U.S.dollars, with about 300 to 500 billion.

U.S.dollars needed almost immediately. So we'll have to see ahead of the lunarNew Year holiday that's coming up, I believe, starting Friday and through theweekend. And it's a 40 day period, but peoplewill be traveling probably for about ten days, see if we get concrete steps fromauthorities in China ahead of that holiday.That was our chief North Asia correspondent, Stephen Engle there.And let's get more on that now with our next guest.Zhang Chia is a chief China economist at Credit Agricole and joins us here inHong Kong.

And I'm interested in so far just whatSteve was saying there about the sort of policy response we've seen.If you were to put it on a scale of 0 to 10 zero being nothing and ten being theabsolute maximum they could provide to the market, where would you say we're atat this point in time? I think certainly they are showing astronger demand and a willingness to stabilise the market and also instabilising the economy. I think that is a positive signal.But the whether this is significant enough to meet market expectations, tomeet the needs from the market and also to stop this such results sentimentright away.

I don't think is sufficient yet on thescale. I will say like six.I think they could definitely do a little bit more and I think there willbe more policy easing on its way throughout this year as well.So more rate cuts. What sort of number you were expectinghere? What else would you be thinking as well?I think there have been showing like a joined the act from multiple fronts.Monetary policy easing, definitely. And the fiscal easing would be also verycritical because governments more often the government is spending are very muchneeded because of the lack of demand.

From the private sector.The specific address to karate, prolonged to property slump and also topop up more confidence into the stock market to, you know, are all veryimportant tasks for the government to do.So I think it will be a joint act and hopefully that will see more of thepolicy collaborations around that. We're often trying to to understand thebottom for for China's economy and bottom for China's market.Do you think we've seen the worst yet? I think that is the very interestingquestion for every one of us who'll watch Chinese markets.I think given, you know, the concerns.

From the markets because of the veryweak data, because of the to continue the property slump, because of theinefficient policy easing, despite the old, these are positive signals.And also, you know, the relatively elevated risk premia that people put onChinese asset because of no structural had wings because of the geopoliticalconcerns. I think whether we are finding them theabsolute bottom for the market I think is still a debatable question.That said, morals and the you know, the easing measures, supported measures arecoming out and hopefully that the would help to some extent.But you know to go for a more.

Sustainable footing around all of themarkets, really we need to see more of the concrete evidence of a sustainableturnaround in the data and the macro fundamentals itself, you know.Georgia. How sticky, how entrenched is thedeflationary cycle for China at the moment?The down confidence spiral, The down demand spiral.I think currently still we are seeing more of this disinflation, therepression, rather than reflationary pressure.If you look at the CPI pie and also GDP deflator is now all negative readings atthis moment.

So the people's Governor Pan alsomentioned that there is a substantial gap in the price levels to meet thetarget level. So these are all the telltale signs.If you look at the latest on the upcoming data, for example, China's CPIand the CPI data for January, they are also likely to show that China stillhave this this inflationary pressure is is I think mainly is because China'sdemand to remain quite is sluggish. But on the other hand, China still havemanufacturing overcapacity in a number of sectors, including the consumerdurables as well. And the people's confidence level isquite low.

Their expectation is quite weak.That I would also keep the expectations of price relatively low.So there is, I guess, one prevailing narrative that they knowthat this is a struck down slowdown that China needs.This is a structural adjustment if they can prevent, you know, an unrulysituation when it comes to the rest of the property sector, then they can getthrough this. What happens when you have an additionalstressor like Trump, like a tariff of more than 60% on Chinese goods?I think the talk about a further trade tariff hike would definitely hit Chinaand also more broadly and for the other.

Asian exporters and for the worldeconomy as well that but beyond that trade concerns andthere will also be other kind of policy, I'm sure the uncertainties and also thepotential changes to the geopolitical tensions and the US-China relations.I think that put all that together is quite a lot of is uncertainties that themarket may not like it or see as favorable for China.Joe, great to have you with us today. He's the chief China economist at CreditAgricole. Let's take a look at how all of this isexpected to play into Chinese markets. Mainland and Hong Kong markets open inabout an hour.

And we're joined by Asia stocks managingeditor lending to an end ting. So we have the pledge from the CAC totry and stabilize markets. We're talking about this significant,more significant than previously announced stabilization fund, but alsoa lot more uncertainty with investors ever more concerned about US politicsto. Yeah, I thinktoday the market is going to shape up to be a very volatile session again, evenmaybe more volatile than what we saw on Friday.The reason is because there's enhanced concerns about the plans to share beingforced to liquidate.

Right.That's something we were highlighting on Friday.The balance of margin financing in the onshore market dropped a lot last week.That is really a showing a sign that some of the investors, they have pledgedshares. They've met with margin calls and theymay not be able to post more margins. And those shares were being forced toliquidate. And then Friday, I think that number waspretty huge as well. So we'll have to see how that plays out.And potentially if shares fell more, we'll see more of those investors facingmargin calls.

And that's a very much a vicious cycle.And the will also be looking for signs ofnational team support. On Friday, we saw a huge amount of sortor I should say, reversal of northbound flows going from negative to positive toend the day. So that's potentially a sign that somekind of funds are being used in Hong Kong to flow money into the onshoremarket to prop up the market. Yeah, it's just that story of investorsin China that are just looking for alternatives, looking for differentoptions to not stay invested in Chinese equities so that that's money that'sflowing in to foreign stock ETFs.

How do you think that's playing into thepicture as well? Well,yeah. I mean, that's just a painting.A very desperate, desperate picture of investors looking for some returnelsewhere just because they can't really get any return at all from onshoremarket. They can't be shorting onshore marketeither. So because of capital control, the onlyway to get their hands on those offshore assets is to buy some ETFs listed onshore, but tracking the offshore markets.And that comes with their own sort of.

Risks as well, because because of thevery intense demand, the ETF premiums have gone bonkers.Some of those ETF prices have gone 40% above the true value of the underlyingassets. So investors could be facing doublewhammy risks if the overseas markets face a correction or if the premiumsuddenly disappears. There is no win there.All right. Just stocks managing editor commentingto the point to come here on DAYBREAK Asia.This is Bloomberg. Take a look at some of the stocks thatwe're watching closely at the moment,.

Seeing some significant moves in whichI'm a chemical is one of them. We are seeing downside of over 10%falling after it projected a wad of full year net loss.We are, of course, really in the thick of earnings season across the Japanmarkets with a number of key earnings expected this week as well, includingsome big ones like Nintendo. But Sumitomo Chemical dropping the mostin a year. We're seeing huge volumes as well,quadrupling average for this time of day.That is lower than any close since July 31st, 2020, that we saw in one of thosedeclines here.

The broader topics is up by just about ahalf a percent there. It's what is a broadly a pretty tepidlower day across the region. We're also watching as or the Japaneselender continue to be in focus on the Friday session that plunged for thatsecond straight day, losing about 33% of its value in that two day stockmeltdown. We are now starting to see a little bitof a recovery, 2.3% higher for Azura. This, of course, after the bank saidthat it would have its first loss in 15 years due to these bad loans tied to USproperty. But just that two day tumble wiping out33% of its value equivalent to about.

$870 million in market cap.So a little bit of a recovery, better thannone, Bill, yet.But as you say, certainly failing in comparison to those moves we had lastweek. It is that earnings focus, as you say,and this week we've also got Asia's tech giants like Alibaba, who are going to bereporting their numbers following the pretty choppy results that we have fromU.S. tech companies.Alibaba. As I said, those numbers will be closelytracked.

The company is dealing with internalturmoil and a stock market round as well.So let's get more on that now, bringing our breaking news editor Felix Tam andFelix. Yeah, just kick us off with Alibaba.What are we expecting this week? Yes, So Alibaba, we may see the growthmomentum to continue and we may see the first quarter path a bit because of thestrong revenue into T-Mobile and also the tobacco businesses and is offsettingsome of the weaknesses in the overseas sectors.And for the policy side, we see China is pushing a household consumption andwhich can support Alibaba.

And for the company Southeast, we'resuffering the top management and also organization.So they are going to focus on the e-commerce and cloud businesses.We're also watching smoke as well. Yes.So we just mentioned a lot of optimism, but this is not the case for thesemiconductor industry. So may see operating income slump about80% because of the sluggish demand in the smartphone and also the hardwaremarket. And a few days ago, US added morecompanies to the list of firms that they consider helping the Chinese military.So this is an election year.

We may see these kind of back and forthbetween China and us on the macro side. So for us, maybe we need to payattention to the capital expenditures as well as the pie strategies.There's also the the tech numbers from other regions.Japan really is a standout. Yeah, exactly.So we can see the earnings estimates of the SoftBank group.So is Investment Fund, Western Fund. We may see the listed companiesproportion to have a break even this quarter.But 4 to 10 though, we are expecting the week again to support this sales despitethe intensifying competition with the.

PS5.So overall, I would say that for the region, no, that outlook, we may need towait until later this month or next month for companies like Tencent.Breaking news at a tough time, setting up what is a busy, busy week of earningsahead here in Asia. And be sure to tune into BloombergRadio, too. You can get more from the day's bignewsmakers and get in-depth analysis from our DAYBREAK team there,broadcasting live from our studio in Hong Kong.You can listen in via the app that's Radio pass or Bloomberg Radio dot com.This is Bloomberg.

Take a look at the reaction across U.S.treasuries. We're seeing Treasury futures reallyextending those losses. Investors interpretingthose CBS 60 Minutes headlines to rule out a Fed interest rate cut before June.We're also seeing delay in leading a broader dollar bid in the early part ofthe Monday session there as well. We did hear from Fed Chair Powell.Policymakers are likely to wait beyond March to cut rates, really seeking toexplain the rationale in terms of eventual reductions to the more broadpublic audience for this interview. But that wait and see approach very muchbeing kind of reiterated.

And we are seeing about markers a littlebit rattled, but still futures to pricing in five Fed cuts this year.Yeah, the question is when. I guess if you're saying that pal'sruling out by by the first half of the year.But yeah the market reaction we're seeing because you got Treasury yieldsas you said that are moving higher also in reaction to the to the jobs data fromFriday because that showed us economic resilience, the market reaction, higheryields also leads to a firmer dollar. And you are seeing here and that pictureof dollar strength, it's higher against the Japanese yen, against the Koreanone, quite a standout there that move.

Korean one.It is a closely traded currency or restricted trade.So you do often see more market reaction in that.But the Aussie and the Kiwi likewise, those ones are moving to the downside.Let's just shift though, because, Heidi, I want to I want to talk about somethingthat that very, very big story in Hong Kong at the moment.I don't know if you've been tracking it, but we had so much expectation thisweekend because we had we had a friendly match that was being played by the HongKong side and into Miami. So this is the league run by DavidBeckham.

And they were in the city for a friendlymatch. And it didn't really go the way thatpeople were hoping for because people had really doled out a lot of cash forthis. A lot a lot of a lot of cash and a lotof hope that they would finally see Messi play, but not the story.He sat on the sidelines for the entire length of the match.So you can just think about the sort of reaction we're hearing, not just fromthe fans. It's a little bit wider than that.Yeah, very unfriendly, a very unfriendly reaction and unfriendly, I think thefans would say.

Situation there with, as you say, he youknow, we saw boos and jeers on Sunday, the World Cup winner sitting out.His team's friendly with a local team. We couldn't even hear the stadiumannouncers so loud after the final whistlethat we saw those speculators really booing the club's players, that theycollected the trophy jeering David Beckham when he tried to give a speechchanting refund refund from the more than 38,000 spectators.And I suppose the point is that the government also said they were extremelydisappointed by the arrangement, saying that it might have even deductedsponsorship because of his failure to.

Play.The event gets $1.9 million in matching funds and 1 million Hong Kong venuegrants, according to the government. But also I suppose it's interestingbecause this was kind of the big hope for Hong Kong after it missed out on thelikes of Coldplay and Taylor Swift. Yeah, that's right.And Tatler, that's the event organisers saying that they didn't know anythingabout it, but the fans want a refund. The Government possibly wants a refund.Nobody is happy from what was supposed to be a very positive experience for thecity.

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