Bloomberg Morning time: Australia 04/15/2024

Welcome to DAYBREAK Australia.Maddie Strut, what's in Sydney? We're counting down to Asia's majormarket opens. I'm mad about drool in Hong Kong.The top stories this hour. Well, as the region are confronting thereal dangers of a devastating full scale conflict.Now is the time to defuse and de-escalate.The UN chief telling an emergency Security Council meeting it's time tostep back from the brink following Iran's drone and missile attack onIsrael. The US and Israel are weighing theirnext steps after allies helped mostly.

Foil the first strike on the Jewishstate from Iranian soil. And Tehran saying the attack marks a newequation, signalling a much bigger response to any further Israeli strikes.Let's have a look at how markets are reacting so far.This is the very early moments for for Brent crude, WTI gold.All of these starting to come on. The dollar index, of course, trading ina much larger range. But what we are seeing so far isactually Brent crude really not rising that much at all.It's it's moving pretty much flat at this point in time.You're still sitting above that $90 a.

Barrel level.You're above 85 as well on WTI. But certainly there is that question.If we see the conflict widening even further, could we be looking atsomething that's more like 00 a barrel and expecting a further flight into someof those more safe havens? You do see the dollar gold a little bitbit there. What could be keeping prices perhapsfrom escalating a little bit further? Well, there's two reasons here.You've got firstly, the Iran, the US, they were able to intercept a vastmajority of drones and missiles. And then adding to that as well, you'vegot the Biden administration commenting.

That they're not going to be supportingany sort of Israel counterattack. That could be something that's cominginvestors nerves a little bit for the time being.But let's also take a look at US futures and see how these are coming on line forequities and also for treasuries. Again, really just monitoring whether weare seeing any sort of flight to safety here.It's fairly flat so far. But as we said, Heidi, these are theearly moments. There's a lot we still don't know aboutthis and also what the next steps could beyet.

The markets bracing for more uncertaintyto come as we continue to get really the details across to us.The UN Security Council has just met to discuss Iran's attack on Israel.Secretary-General Antonio Guterres says it is vital to avoid any action thatcould lead to major confrontation on multiple fronts.Bloomberg Balance of Power and Cojo. Matthew joins us now from Washington.And Joe, there is a scramble, a diplomatic scramble to avert a broaderregional conflict. And in fact, this huge salvo of ofdrones and missiles really exactly the kind ofpotential result that global powers have.

Long feared when it comes to thisregion. That's exactly right.We all grew up thinking this was the impossible, something that we wouldactually never see with Iran conducting a strike directly against Israel.But there's a sense of, I guess, relief at the White House, even victory.They're calling this an extraordinary success.The fact that they blocked 99% of these rockets and missiles, the fact thatwe're not talking about casualties this morning, it's truly remarkable.The president not only convening, as he says, our G7 allies, but he took timetoday to call the pilots from the two.

Fighter squadrons that fly F-15 fighterjets that helped to knock down those missiles overnight.They are trying very hard to frame this as a success, while at the same timeputting an end to this. Their real concern right now is thatIsrael is, of course, going to conduct a large strike of some sort inretaliation. The United States is doing everything itcan now, along with its allies, to keep that from happening.Yet the lack of damage, though, and casualties in that.Do you think that that also indicates perhaps Israel actually could limit anysort of counterstrike?.

It's a great question.I don't think anyone has an answer to that right now.What it does tell us, though, is that this attack by Iran was very carefullychoreographed and it was very carefully telegraphed.Not only did Israel have hours notice on the launch of these drones, as you know,we were talking about this four and 5 hours ahead of time, but they had a goodweeks notice from Iran in a general sense, knowing that a retaliation was inthe offing. This was said to be in concept, an eyefor an eye. But of course, Iran did more than that.And this is significant to think that if.

Some of these missiles and rockets didget through, we could be talking about hundreds of Israeli deaths today.And the fact that we are not brings us to a different point in thisconversation. The White House is hoping that thismight be the end of it. It's an interesting dichotomy, isn't it,Such fine calibration of this attack. And as you say, we'd.I'd been bracing for this for over a week and at the same time, closer thanever to a broader regional complex. And I do wonder the way that things aredone now with no further developments, does that allow both sides perhaps toclaim a degree of victory here?.

They might, although it does seem thatIsrael is determined to do something at this point.And as far as what happens at home, there is a very important politicalramification here as the House of Representatives potentially prepares avote on funding for Israel. It may be tied with funding for Ukraine.Both of these are very controversial with their respectivesides of the aisle here. Progressive Democrats are very concernedabout sending more money and materiel weapons to Israel, while manyconservative Republicans do not favor at least those aligned with Donald Trumpsending money to Ukraine.

So if these are, in fact bound togetherhere and see a vote next week, it is absolutely unclear if there is a pathfor it to succeed. Bloomberg Balance of Power and Cojo.Matthew Dowd with the latest. Let's get some more insight now fromAmin Saikal, who's the adjunct senior fellow at the Azerbaijan JournalismSchool of International Studies, joining us.I mean, really great to have you with us.I suppose I'll start off with the question that everyone is asking.Do you expect a retaliation from Israel? And if so, what does that look like,given we've just spoken about the.

Foreign collaboration and choreographyof what we saw from Iranian soil? But there's no question that the Iranianresponse was to Israeli bombing of their Iranian consulate in Damascus last weekor the week before. And therefore, I think it was a measuredresponse on the part of the Iranians didn't want to do it.They really didn't want to get into a war with Israel.But Prime Minister Netanyahu has been vowingfor a long time to do whatever Israel can do in order to prevent Iran fromproducing nuclear weapons. And he has he had vehemently opposed theJuly 2015 Iran nuclear agreement, and he.

Had called on the Biden administrationsince the start of that administration, not to negotiate with Iran.And he had also vowed that that if necessary, Israel would act on its ownin order to prevent Iran from acquiring nuclear weapons.So now Prime Minister Netanyahu does have apretext in order to attack Iran. So retaliation on the part of Israel isnot out of the question at this point. What are the chances to you of thisspiraling into a broader regional conflict that so many fear?Well, I think it can easily spiral into a much larger conflict, simply becausethat.

Iran and the Islamic Republic of Iranand Israel have been archenemies for a long time.And of course, the United States has always been on the side of Israel andhas been committed to the security of the state of Israel.So if evenPresident Biden may not be in favor of war in the Middle East, then of course,he has said this in the past. But ifIsrael does carry out a retaliatory attack, then the Iranians will respondand the United States will be dragged into a into the war in support ofIsrael.

And Iran will definitely receive a lotof support from Russia and also possibly from China.And as a result of that, I think that the situation could really spiral out ofcontrol and that we may really face, as the U.N.secretary general has said, a devastatingconflict which could take a greater global dimension and therefore effectednot only the region but its consequences affectingthe globe as a whole. Can you give us a sense of of thesignificance of the weekend strike in terms of reaching that sort of point?If you compare to where we were, say, on.

Friday or last week before these strikesreally started to gain international attention or the risk of them.How much closer are we at this point in time?Well, we are very close. If the Israeli leadership decides toretaliate and then the Iranians have made it absolutely clear that they willrespond to that and their response would be harsher.But at the same time, I think both sides have also reached apoint to restore deterrence between them in the sense that the Israelis haveclaimed that they've shot down and 99% of those Iranian missiles and drones andso on, although it must be said that it.

Was not just Israel shooting down allthose drones and missiles.It was really with the extensive help of the United States, Britain and ofcourse, of France and Jordan also played an important role.And and as your reporter said, it was choreographed and related to theIsraelis over a week. And therefore, Israelis and their allieshad been really prepared for this. But if it was an attack which had notbeen announced before and the Israelis didn'tknow anything about it, then I think the casualties would have been higher.And indeed also the impact would have.

Been higher.And that also very much indicated that Iran really does not want to get into awar with Israel.And, of course, the United States also playing an important role.But at the same time, it seems that we are on the brink.And as the U.N. secretary general has said, I think it'simportant that all sides pull back and try to avoid a devastating war whichcould really lay the foundations for World War three.And, of course, Vladimir Putin has said this a number of times, and therefore,Russia would would definitely come to.

The aid of the Iranians as Iran hasprovided assistance to Russia in its operations in Ukraine.In the event that we do see any sort of Israeli retaliation, what would be thetargets of that as well, do you think? Well, definitely I think Israelis wouldtargeted Iranian nuclear sites and also major militarybases. And but the other target would be, ofcourse, Iranian oil resources. And that could have a really globalimpact on their own economy across the world.And therefore, I think this is the sort of thing which has to be really avoided.I mean, Iran also has an important.

Nuclear program.We know for a fact that that Iranian uranium enrichment has reached asomething like 60% and it may have been really higher.And of course, Iran sooner or later would be in a position to producenuclear weapons. And of course, this is what is the majorconcern of Israel, as well as some of its allies.And do the United States, in particular, Israel wants to be the only nuclearpower in the region and therefore have had this age of supremacy in the region?And that's one of the other reasons that Israel will be very keen to findopportunity to act against the Iranian.

Nuclear installations and facilities.But, of course, that could also result in a major war with Iran that nobody atthe end may be able to control it, either militarily or diplomatically.Prior to this, of course, the US did ask China to ask Tehran not to retaliate.They also asked the same of the likes of Turkey and Saudi Arabia.I do wonder when it comes to that dimension of China's involvement,potentially Russia as well. Beijing's calling for restraint, but atwhat point would you see further involvement from these parties?Well, China has a 25 year strategic agreements with Iran, which was signedin 2021, I believe.

Andthey certainly China is heavily involved in the infrastructural development ofIran, industrial development of the country as well as such.It is very a strong intelligence and military cooperation between the twosides. Of course, the Chinese wouldn't want toreally get into war, but at the same time, if they have, there is why theconflict between Israel and Iran, then China will be on the side of theIranians. Whether China will,you know, get militarily involved, I think that remains to be seen.But at the same time, it will provide an.

Opportunity for China to establish itsposition as a world power and to therefore a vis a vis the United Statesand its allies. How much bandwidth do you think there isfor President Biden for the U.S. to continue to support Israel, as theywill continue to do? But, of course, there does seem to bebroader limitations on what that looks like, given President Biden is alreadystruggling to maintain popular support when it comes to the conflict in Israel,in Gaza. I think there's a limit to the amount ofsupport to the United States can provide to Israel.Of course, the Biden administration is.

Very much concerned that it is anelection year and therefore he must do whatever really possible in order to winthe election. But at the same time, he's opposed byDonald Trump, who has declared his 100% support for Israel, thatPresident Biden doesn't want to be upstaged byDonald Trump at this point. But let's not forget that thatunity united cannot be a source of unlimited supply of financial, economicand military aid to Israel, because it's not just that Israel has become isolatedinternationally as a result of the carnage that it's really created inGaza.

But also the United States has beenwidely implicated in the Israeli actions.And this is not a reputation that the United States would react to thatinternationally. And therefore, you're not going to haveto be very, very careful to weigh all the options and before it can continueto provide that the same degree of support to Israel that has done so far.I mean, of course, President Biden has stated that know America's commitment tothe security of Israel is hiring credit, butat the same time, at the same time, he's really trying topressure Prime Minister Netanyahu not to.

Retaliate and therefore ignitea middle East war in which the United States would have to get involved aspart as a strategic partner of Israel. And therefore, that willreally, you know, make the war to take a global dimension.That was Amin Saikal, the adjunct senior fellow at Regent Autumn School ofInternational Studies. Thanks very much for your time thismorning. And as we said, we're keeping a veryclose watch on any sort of response that we're getting to this weekend event.And the latest on this is what we're hearing from the US has just issued areadout of the call between Secretary of.

State Blinken and then also Jordanianforeign ministers, a foreign minister, rather.BLINKEN But essentially what we're hearing here is that the US is saying itdoesn't seek any sort of escalation and also that the US says it's going to becontinuing to support Israel's defense. So that is the readout from that causewe said between the foreign ministers of the US and also Jordan.But the market reaction so far is pretty muted, you have to say really gold justfractionally high here. Earlier we did see sparkle gold spikingas much as 1.2%. But generally that flight to havens likethe Japanese yen, like the dollar, it's.

Fairly rangebound as we get in so far.So telling us perhaps investors are still seeing the risk of furtherescalation contained for now. But you can certainly turn to yourBelinda for more insights on this. You can go to t live, go to getcommentary and analysis from Bloomberg's expert editors.We'll will have plenty more to come on DAYBREAK.Australia. This is Bloomberg. All right.We've been watching the market reaction so far to the weekend attack, the Iranstrike that was launched against Israel.

And so far, what we're seeing in marketsis really just fairly muted given we've got a little flight to Haven so much.We've actually seen US futures pointing a little bit higher at the yen.Little changed, gold a little bit bid. But but again, futures they're lookingfairly steady at this point in time. So markets there really do seem to betaking this in their stride so far. But let's discuss this with our seniormarkets editor and Bloomberg opinion columnist John All says.And John, what we're seeing in the markets right now, is that sort of anysurprise to you at all? And compared to what they would haveexpected on Friday night?.

No, not really.Basically, this I am not trying to downplay the significance of whathappens, the quiet 300 missiles at another country unless the series isgoing on. But it's had been very well trailed.They had more or less the Iranians had more or less told the Americans andvarious neighbors what they were going to do.And that was widely known in the markets On Friday.As we went home on Friday, we knew there was a war that we were wondering whenthe attack was going to happen, not it was going to happen.But wait.

Given the way the attack has actuallyunfolded with what appears to be an extremelysuccessful bid to defend Israel banning anything ifits target, they didn't even seem to aim at major civilian targets, as Iran issaying. As far as we're concerned, we're good.This is we're we're done. This does compared to what it wasreasonable to be worried about. This is about as reassuring, if you cancall a missile attack on a foreign country reassuring.This is about as reassuring a way for this scenario to unfold over the overthe weekend as you could realistically.

Have hoped for.So it doesn't surprise me. You know, oil is fairly flatin the case of bonds. You have this problem that there is asafe haven. It might take yields down, but fearsthat oil is going to go through the roof and force central banks to hike ratesagain, which would take yields up. So, again, now rather frozenas investors try to work out what is the what they are more scared of, what thegreater risk is. John, would you expect investors somesentiment to kind of lose that nonchalance that we're seeing, if youwill, if there are further developments.

Here?Yes, I wouldn't describe it as nonchalance, although certainly ifyou're talking to US stocks or crypto, yes, there been outright exuberance fora while. You do see the VIX, the various measuresof volatility have picked up a little credit spreads which have beenremarkably low, have ticked up a little. In both cases, they have a lot further.They could go if you do actually get a meaningfulIsraeli response. Even though it's fairly clear theAmericans are doing everything they can to persuade the Israelis not to do that.Yes, I think that would have been very.

Scary indeed, because some of thescenarios your previous guest was discussing would begin to become morerelevant, whether Russia would help Iran, whether it whether you would get amore a more generalized conflict that went beyond the Middle East.I would agree that on balance, that's unlikely if it happens.And I guess such a scenario is more likely, they will say a week ago, thenyes, that's that's bad. The risk of being tried, that is really,really bad. You would expect oil to go through theroof and you would expect anything that was prone, you know, disliked risk to bevery seriously damaged by that.

Hmm.Jonathan is our senior markets editor and Bloomberg opinion columnist there tohave more to come here on DAYBREAK, Australia.This is Bloomberg. All right.We're taking a look at a live shot there of Tel Aviv, that skyline, but also howoil prices or oil markets are faring so far at the start of trade.So Brent crude and WTI both little changed at this point in time, stillholding above those those levels, 90, $85 a barrel.But tracking it very much because we saw more than 300 missiles and drones firedby Iran at the weekend.

It is the first time it has struckIsrael from its soil, though many, of course, intercepted with the help ofIsrael's allies, including the US. For more, let's get to our next guest,Tom Kloza. He's global head of energy analysis atOil Price Information Services. And I'm interested for your views thismorning, Tom. We're not really seeing much of areaction. Is that what you would have anticipatedas well? Well, I think there's a big sigh ofrelief in the world and certainly in the US, who probably Israel and perhaps evenIran, that, you know, there was a.

Measured response and there was reallyno horrible damage. So it may be, in fact, that on Friday wesaw the highest prices we may see for crude oil until the second half of theyear and the highest prices for U.S. gasoline futures and until the secondhalf of the year. I'm a little worried about what happensin August, but I think this was a real, realkind of case where it didn't live up to the to the billing and to the worries.Yeah, because there's a lot of talk about just how choreographed this was sothat Israel and its allies could respond.But there is still perhaps some question.

Marks.What does this mean for for the shipping, for instance, in the area aswell? So is that something you're trackinginstead? Well, I think that's the old story,though. The fact that shipping is leading to alot more oil on the water and, you know, some benefits for the people that don'thave to worry about that, you know, And well, crude oil prices areextraordinarily tight, which is very predictable.And there's always a high tide from, let's say, the middle of the winter tothe spring.

And that high tide, if we matched whatit's been in the last ten years, we would see crude oil prices go to about01 or higher. I just don't think there's enough roomto take it up to that high tide mark for the first half of the year.But the second half of the year, and particularly in August, when you havesix or 700,000 barrels a day, less Saudi crude and strong demand, that's a littleworrisome. Tom, even before the developments ofthis weekend, the tightness that we see in the supply outlook has beenworrisome. Do you think that's going to worsen inthe coming months?.

And certainly there's a sense that afurther escalation in this region doesn't help a market that's alreadybeing, you know, these risk being exacerbated by multiple conflicts andand elements at play here. I think it's a mixed view.I think that beyond the next few weeks, we're going to see supply loosen up.We're going to see refineries in the United States and Europe get back intogear. There are tremendous profits to be madeby running those refineries. And we'll probably have a little bit ofan interlude between the two acts of the 2024 play.Again, I'm more worried about late July.

Or early August.The temperatures in the Atlantic Ocean are very warm and conducive tohurricanes. And all of this worry about the Straitof Hormuz probably masks the fact that the U.S.Gulf of Mexico, where you can have hurricanes, knock out a lot ofproduction exports about 12 million barrels a day of hydrocarbons duringsome some days. Let's talk about the demand side alittle bit. Is there really sort of greater optimismthat's driving these dynamics coming from an expected meaningful recovery outof China?.

I think China has been a non participantin most of this. And the worrisome thing forinternational demand is probably the fact that the U.S.dollar has performed very, very well and companies with high growth, for example,India have much more expensive prices than they're used to.We're even seeing in the United States where it's an election year, clearly,and gasoline prices are a prime issue. We're seeing some demand destructionthere. It doesn't make sense in terms of themetrics of what people make and what they can afford.But there's a reaction to high gas.

Prices in the United States that'svisceral. Tom, how robust do you expect the summerpeak season to be? Because expectations have been setpretty high. Yeah, I'm worried about not so much thebeginning of the summer, but the end of the summer.Again, we haven't had a U.S. impact from hurricanes in the Gulf ofMexico since 2021, most serious one being in 2017.Everyone knows about Hurricane Katrina 18 years ago, but what they don'trealize is that we've increased the amount of U.S.refining capacity from Corpus Christi to.

Pascagoula, Mississippi.So there are many, many more refineries, as well as offshore oil that's in thetarget of protect potential tropical systems.Tom, we've, of course, spoken about geopolitical tensions in the MiddleEast, but we're also seeing the Ukraine targeting some of Russia'senergy assets. Is that something they are watchinginstead? Yeah, that is, you know, this is theyear of drone attacks. Back in 2019, there was a drone attackin Saudi Arabia that we thought was going to knock out a lot of production.And drones pretty much disappeared as a.

Factor in the oil markets until earlierthis year. Russia has some additional refiningcapacity. And, you know, I don't think they'regoing to be a major player in gasoline markets, even though they may have toimport it. The problem is we're looking at thelowest point of the year for demand for diesel and heating oil and thosemolecules. And that could be something that hauntsthe U.S.. If Russia does lose 15% or more of itsrefining capacity due to drone strikes. So if you're not so much concerned,perhaps about prices in the nearer term,.

But you're saying in the second half wecould see them moving a little bit higher.What is your sort of target for the end of year or your expectation?Well, you know, by the end of the year, I think prices are going to be way downfrom where they rise currently or where they rise in August.The last 100 days of the year, we'll see a lot more crude coming out.And there tends to be a low tide that basically manifests itself from Octoberinto December and January. I'm really worried about the middle ofthe summer and the middle of the third quarter, and that's where we could havebehind that, which reared its head last.

Year and impacted a lot of refiningcapacity, could surge again this year. Tom Kloza, global head of energyanalysis at Oil Prices Information Services, is with us.Some of the other stories that we're following today.US Speaker Mark Johnson says the House will vote this week to on aid for Israeland may add funds for Ukraine as part of that package.Johnson spoke to Fox News. Iran's attack on Israel gives Johnsonadded momentum for an alternative to a Senate passed aid package that includesfunds for Israel, Ukraine and the Indo-Pacific.The House Republicans and the Republican.

Party understand the necessity ofstanding with Israel. We are going to try again this week, andthe details of that package are being put together.Right now. We're looking at the options in allthese supplemental issues. German Chancellor Olaf Scholz has begunhis second visit to China. He's expected to deliver the delicatemessage that Beijing has not acted on European warnings to end discriminatorybusiness practices. Sources say Schultz wants to persuadeChinese President Xi Jinping that he needs to act soon to avoid E.U.tariffs meant to rebalance the trade.

Relationship.US Treasury Secretary Janet Yellen says nothing is off the table in response toChina's manufacturing capacity. Speaking to CNN, Yellen suggests thatincludes the possibility of additional tariffs to stem a flood of goods intothe U.S. market, sources tell us.The issue of China's overcapacity may be discussed at the IMF and World Bankmeetings in Washington this week. Flags are at half mast in Australiatoday, mourning six people killed on Saturday in a stabbing attack at aSydney shopping mall. The offender has been identified as a 40year old man and authorities say there.

Is no sign that it was an act ofterrorism. He was shot dead by a lone female policeofficer who has been praised as a hero by Prime Minister Anthony Albanese.Eight survivors, including a nine month old child, remain in hospitals acrossSydney. More ahead on DAYBREAK, Australia.This is Bloomberg. Let's stay on the Middle East conflictnow because U.S. officials and their allies are focusingefforts to ensure that any retaliation from Israel doesn't raise the stakes toohigh and trigger a full blown regional war.For more, let's bring in Nick Wadhams,.

Who leads our US national security team.And Nick, I guess one of the most straightforward ways to stop Israel fromraising the stakes too high is if Tel Aviv itself doesn't want to raise thestakes too high, given that it can sort of claim a victory of sorts in thisweekend attack, given it prevented the vast majority of missiles striking itsground. Do you think that they're going to wantto have any sort of large scale response?Well, that's the big question we are really all trying to answer right now.I mean, the signals from the U.S. side are very clear that any responsegoing forward should be diplomatic and.

That Israel basically proved that it hasthe advantage over Iran because it stopped, I think 99% of the 300 dronesand missiles that were fired from Iran into Israel overnight Saturday night.But Israel is singing a very different tune.It says, listen, this is an unprecedented attack from Iranianterritory and we are duty bound to respond in some way.This can't be tolerated and we have the right to defend ourselves.So, you know, in some ways, this is going to be a question of how muchleverage the US has over Israel is going to be how much Prime Minister BenjaminNetanyahu needs to respond to domestic.

Concerns and also to restore deterrence,as Israel, Israeli officials say. So they're saying there will be aresponse. It's just a question of when and howsevere. What is the capacity like for bothIsrael and the US? Right.And I guess both militarily and politically, given the waning supportwe've seen for the operations in Gaza over the past few months?A You know, it's a great question because there's there's been a lot ofback and forth. Obviously, Israel was lookingincreasingly isolated over its conduct.

Of the campaign in Gaza.And some analysts and officials have been telling us in the last 24 hours,you know, this this is a moment where the solidarity is back.Israel and the U.S. are closer together than they werebefore. But the question is, you know, what doesIsrael do in Gaza? It's not finished with the campaignthere. And then again, how does it respond?So the military capacity is vast. I mean, Israel's army and the air forceare extremely robust. So there's a lot they can do.The question is how far they want to.

Push it tobring about a situation that may then push them into the isolation thatthey've been seeing for the last couple of months of the conduct of the campaignbecause. And Congress is set to vote on this longdelayed aid package this week as well. How does what happened this weekend andthese sort of dynamics potentially weigh into that is expected to be, I guess, arenewed show of support from the Biden administration?Well, you know, the big question there is that there is really no daylightbetween Republicans and Democrats on the question of passing paid for Israel.The much bigger question is the aid for.

Ukraine.And that's where the disagreement is. Democrats saying, listen, we are notgoing to split these two things up. If you want this 00 billion or so inaid, it's got to be both Israel and Ukraine.And then also on those four, four, two, one, and Republicans say, hey, listen,let's just pass the Israel package and we can deal with Ukraine and the rest ofit later. So it's not clear to me when MikeJohnson, the speaker, says that they're going to do this this week, if he'stalking about passing the whole thing or just trying, again, to ram through theIsrael side, which Democrats had.

Previously blocked.So I suspect what's happening there is they're still trying to work that out.That's going to be a jump ball heading into this week.Why we saw that sort of support from the U.S.and its allies really waning came down to the escalating public criticism ofIsrael's deadly military operation in Gaza.We likely to see that focus, the military operation in Gaza, change itall. And as well, what does this mean for anysort of cease fire negotiations, do you think?Well, you know, again, a great question,.

Because so much of that remains up inthe air. Right now, it appears as if the ceasefire talks have stalled again, in part because Israel does not want to stop itscampaign. But also Hamas has indicated that itsimply does not have the number of hostages anymore that it could releaseto Israel. So there's a lot of pressure for that.You had a group of seven statement today calling for a cease fire and the releaseof the hostages. So Israel will come under renewedpressure there. But again, you have an issue of whathappens to the rest of Gaza, to Rafah.

Prime Minister Netanyahu has staked somuch of his reputation in terms of protecting his right flank in Israel onproceeding with that campaign. And despite U.S.pressure, all indications suggest that he's determined to go ahead, despitewhat the international community says. So, again, something that we should havea little more clarity on in the next 48 hours.Nick Wadhams, who leads the US national security team coverage there.And subscribers can read more on today's big take on the terminal.That's and our big take. That's your function.Or you can find that over at Bloomberg.

Dot com.More ahead here on DAYBREAK Australia. This is Bloomberg. All right.Taking a look at how gold is faring this morning, You just a little bit higher.We are just watching any sort of demand for haven assets.Gold chief among them. And we've seen that huge run up reallyover the course of this year. A lot of buying coming through fromcentral banks as well. But so far, gold is is fairly steady,7/10 of a cent to the upside. What else we're tracking in the sessionis cryptocurrencies as well.

So you've got the what's called oftenthe digital gold. But we had actually seen some prettyinteresting reaction coming through with Bitcoin prices at the weekend.We saw a pretty significant drop after the Iran strike on Israel, but it hassince recovered that it is now pushing past this point as well.It's a very interesting dynamic for Bitcoin this week because we'reapproaching the so-called Bitcoin halving.What this means is that miners receive less of a reward for mining or tokens orvalidating the transactions. And so that in turn leads to less of asupply in the market and it can put.

Upward pressure on prices.Of course, what's different this time is that we saw Bitcoin reaching a freshrecord high ahead of the halving, and that was after all of the optimismaround spot Bitcoin ETF. So that is what we're tracking there.You are seeing this other tokens really moving to the upside as well.Lots of focus on ether. And we've actually had local reportinghere in Hong Kong that perhaps we could see spot ether ETFs approved in the cityas soon as this week as Solana. Again, it's spiking here, but we arejust, of course, tracking that, tracking those moves in the crypto space.But, Heidi,.

Lots of different gyrations this morningso far, including what we're seeing in the space.Yeah. You talked about the reaction in gold asa haven cryptocurrencies. Digital gold, if you will.And we're actually seeing some sort of reaction when it comes to some of theother haven aspects to folks. Might take a look at the yen, forexample probably doesn't need an excuse to push any higher given we have seensort of some of that daily intervention that's come through.But again, still sitting sort of above that 153 level.Another signal that investors have.

Really kind of largely given up on theexpectation that the yen is going to kind of bust out as any kind of stronghaven role like out of the other currencies that are trading at themoment. So it does still seem like the US dollaris still the only game in town. The dollar has opened a little bit mixedthis morning in Sydney, trading a bit these heightened Middle East tensions.Of course, traders are still kind of waiting to see if that unprecedented wecan strike by Iran on Israel will trigger rounds of retaliation.We are seeing some of the other haven behavior, though, in the likes of theSwiss franc being quoted a little bit.

Higher there as well.We've seen some soothing words through Secretary of State Antony Blinken.We know that the US does not want the further escalation and also some wordsfrom the likes of Beijing as well, calling for restraint in this situation.There is expectation that we could see 127one 270 when it comes to the dollar index, if we do see further geopoliticaldevelopments and of course we did see a gold jumping after Iran's attack onIsrael over the weekend that drove broader demand for haven assets.It gets more when it comes to energy and commodities editor Andrew Jones.And Andrew, when it comes to a.

Geopolitical reaction for gold, that'stextbook. What hasn't really been textbook is thebroader moves that we've seen in this rally.Rap. I think it was about 1.2% at the openand obviously the, you know, the situation.The Iranian strike on Israel has added an extra bit of geopolitical risk, butgold has been rallying very strongly since mid-February on a whole bunch offactors. The big one, of course, is the Fedgradually moving closer to its pivot. We've also had very strong buying bycentral banks.

We've had very strong buying by Chineseconsumers who are worried about quite a few things happening in theChinese economy, particularly the the property downturn that's still notshowing any any signs of ending and the weakness in the stock market there.We have a range of sort of geopolitical risk factors, of course, the MiddleEast, but also the situation in Ukraine. We've got so many elections this year,particularly the big one in the US at the end of the year, which could bemassively destabilizing for markets. So a whole host of factors are pushinggold higher and that the attacks on Israel over the weekend are just sort ofadding a little bit of extra impetus to.

That.Is there any signal of of how far this rally ingold could run? Well, we went above 2400 an ounce onFriday for the first time ever. Look, there are various predictionsaround, but it's it's hard to say really.There are signs, if you look at technical indicators like relativestrength index, that gold is poised for a fall.And in fact, after hitting the record on Friday, it closed quite a bit lower.But yeah, you'd have to say at this point the rally looks fairly stretched.But.

Yeah, it could move higher.It's unlikely to go a lot higher, but it's it's really hard to predict.All right. That was our energy and commoditieseditor, Andrew James. Thanks so much for your time thismorning. Let's take a quick look at how USfutures trading so far in the early moments.We have seen them moving actually just a little bit higher so far.Pretty interesting to end the week as well because we started off U.S.bank earnings and they pretty much disappointed.So given we've got that sort of reaction.

So far, tells us that perhaps theseconcerns around Middle East tensions are sort of subdued for now.But that's the state of play. We see that for four futures.And as we said, more of our coverage coming up in the next hour.We're going to be looking further at what's happened in the Middle East.We'll speak with the Carnegie Endowment for International Peace joining usshortly. Plus, we hear from Nomura about the weakJapanese yen. Questions, of course, whether the yen isreally even still acting as sort of a safe haven currency.You've got a lot of traders as well,.

Still tracking or watching forintervention. But the market opens ahead.We will be tracking those when they come online in another hour's time from now,Sydney, Seoul and Tokyo. This is Bloomberg. Welcome to DAYBREAK Australia.Marty Stroud, what's in Sydney? We're counting down to Asia's majormarket opens. Find out about rulers in Hong Kong.The top stories this hour. A muted early response to Iran's attackon Israel as markets begin to trade or open in Asia.Traders seemingly ready to look past the.

Geopolitics data and earnings that aredue this week. The UN chief is telling an emergencySecurity Council meeting that it's time to step back from the brink of a fullscale Middle East war. While Israel and the US consider theirnext steps. And Tehran saying the attacks mark a newequation, signaling a bigger response to any further Israeli strikes.Take a look at our setting up as we head into Monday morning with Asian marketsand traders waking and really confronted with this risk of a further escalationin the Middle East. We are seeing traders cautious prettycautiously trading into this futures.

Session.You see in Sydney stocks down by about 6/10 of a percent in trading in futureswe've got New Zealand are down by about 1%.We do have CPI that coming through from New Zealand as well as some pretty badservices number numbers out today as well.So quite a bit of concern over how much that will exacerbate.We've already seen as recessionary conditions for the Kiwi economy.Chicago Nikkei futures are looking positive at this point, 8/10 of 1%.We have the yen pretty stubbornly holding beyond that 153 level, reallykind of.

Casting a shadow over even if it'sability to be able to function as a haven at a time when we're seeing otherhaven assets, the likes of gold, the likes of the Swiss franc and even thedollar moving higher, but not so much for the yen still at 153 and Chinafutures down by just about half a percent Bill.Yet again, as you say, not seeing too much of a reaction so far.And this is actually the state of play here.We've got with US futures actually just pushing a little bit higher.We had some pretty disappointing bank earnings on Friday, but that isn'tcasting too much of a shadow just yet,.

Although we did see some weaker tradeinto the end of last week. Bond futures as well.They're just again, fairly steady at this point in time, as is Brent crude,even though you're holding above that $90 a barrel mark.So certainly perhaps it is just that wait and see mode, whether we see anyfurther ratcheting up of those tensions. Now we are hearing that diplomaticresponse now US Secretary of State Antony Blinken saying Washington doesnot want escalation in the Middle East while continuing to support Israel'sright to defense. Lindborg balance of power and CudjoeMatthew joins us now from Washington.

Joe, we're also getting, of course, somecommentary when it comes to the Chinese ambassador to the U.N., again, callingfor restraint and voicing China's concerns over potential escalation.On the one hand, it feels like the developments over the weekend bring uscloser than ever to the brink of all out war in the Middle East.On the other hand, the sort of calibration that we saw and how this wasorchestrated and carried out suggests that perhaps there's room for this to bethe end of it. Well, look, that's true.This requires perspective from a couple of different angles here.You're right.

This was an unprecedented attack tothink that this actually happened. Iran attacking Israel on its own soil,but unprecedented as well was the response, the incredible way Israelmanaged to defend itself with the help of the U.S., the UK and France, toactually have the help of an alliance in this case and do so successfully.No UAV has managed to infiltrate Israel. That is an incredible headline of 30Iranian cruise missiles that were launched.Not one entered Israeli airspace. So the question is, does that representthe response essentially? Do you hit back at an attacker if theycannot lay a glove on you?.

If you look at the statement from theWhite House that followed this attack and look toward the bottom, there's oneline that sticks out. The president says, I will convene myfellow G7 leaders to coordinate a united diplomatic response.That is not a military response and that is not a unilateral response.The president, the administration in this case, trying to widen this to ourallies beyond a standoff in the Middle East to transcend this dispute in thehopes of making this a calmer place. This administration is in a real pickleright now, and it has very few options as it waits to see exactly what Israelwill do.

And when it does come to exactly whatIsrael does. Given perhaps that this assault is moredemonstrated or designed to to show resolve, then rather than overcomingIsrael's defenses, perhaps Israel could look to limit their response.But what exactly does a limited responselook like, do you think? Well, it's a great question because Idon't think they saw the response from Iran as being proportional to its attackon an Iranian diplomatic facility in Syria.That's what, of course, prompted these missiles and rockets last night.I can tell you that Joe Biden did have a.

Meeting today on the phone with theleaders on Capitol Hill. And we just learned this from the WhiteHouse, that Senate Majority Leader Chuck Schumer, the minority leader, MitchMcConnell, along with the speaker of the House, Mike Johnson, and House MinorityLeader Hakeem Jeffries. Mike Johnson has some very difficultdecisions to make this week as they seek funding for Israel.And if Israel does decide to respond here in this does appear to beescalatory, you're going to see more pushback from progressive Democrats.If Israeli funding is tied with Ukrainian funding, that will jeopardizeboth.

So there's an enormous amount on theline tonight for this White House, and that's why you're seeing directengagement with Israel. All right.That was Bloomberg. Balance of power and good dramaticthere. Let's bring in Aaron David Miller.He's a senior fellow at the Carnegie Endowment for International Peace.He previously served as a US State Department negotiator on Middle Easternissues. So, Aaron, thanks so much for joining usthis evening. And as we can see, Israel scored perhapsa sort of tactical security and.

Political success here.And as I note that you write on Twitter, the question is, how can it turn thatinto a strategic opportunity without courting a regional war?So give us more insights into that. But here's what we know.The war cabinet met. Thanks for having me.And war cabinet with three key decision makers, the prime minister, the ministerof Defense, and the former minister of Defense,Benny Gantz. Netanyahu's putative successor ifelections were held today. And two non-voting members.There appears to be consensus on the.

Part of the key three key decisionmakers that Israel needs to respond. But there is a divergence of opinionabout the timing of that response and the scale of that response.And I should say, just for for context and perspective here, this is a verylong movie. Even if this phase, which isunprecedented, both in in terms of what the Iranians did, the first state tostrike Israel directly in 33 years since Saddam Hussein launched 43 Scuds in1991. Even if this is managed successfully,the sources of tensions between Israel and Iran, the competition, the rivalry,the Israeli Lebanese, which is.

Critically important, Hezbollah can dofar more damage, far more damage to the state of Israel right now than Iran.It takes hours for those drones, even the cruise missiles, which are faster totravel 2000 miles. Hezbollah is kilometers away.They have a inventory of high projected weapons of varying ranges, lethality andprecision, capable of launching 4 to 5000 rockets a day.That's going to be a source of tension, Errol.It is not going to be resolved even if we get through this.pro-Iranian militias in Iraq and Syria to continue sporadically to attackAmerican assets, American forces in.

Iraq, Syria, and as we saw in Jordan.And then you have, of course, the choke hold that the Houthies, a small ZaydiShia sect that controls the most populous part of Yemen, able to imposeserious constraints on global shipping, forcing traffic around the Cape of GoodHope, bearing another 3500 miles to the supply chain.So even if we manage this and I suspect an Israeli response is not imminent,this is going to be hanging over hanging over the collective heads of theinternational community in the region for a very long time to come.Given that the attack by Iran was so calibrated, do you think they can stillclaim this to be a sort of success of.

Sorts for Tehran?Well, internally they are already drumming up the notion that theyhave struck the exact quote unquote Zionist entity.You see demonstrations in Tehran. These are all orchestrated andcalibrated. The reality is that the Iranianssuffered, I think, a strategic or at least a tactical defeat.99% of these missiles, pilotless drones, ballistic and cruise missiles.Most the vast majority never even reached Israeli territory.But again, Iran has Hezbollah, and Iran also is a nuclear weapons thresholdstate.

It has all of the elements required toweaponize should it decide to do so. So I guess I'd want to say my judgmenton this. We're going to get through this withoutwhat I would describe to you as a major regional war, something the Middle Easthas never seen before, something that would create spiking oil prices,plunging financial markets and a degree of instability across the regionthat this region has never experienced. We're going to get through this.But the problem, the strategic problem that the U.S.has with Iran is that the international community has with Iran.And clearly the strategic problem Israel.

Has with Iranis not going to be resolved. We're managingand maybe if we're lucky and smart, we'll get through this latest phasewithout a serious regional escalation. But the trend lines on this one do notlook good at all. Could we get out of this with somethingbetter? Because I know you've written about, youknow, the unpredictable predictability of what happens in this region.Right. And how you often have periods ofintense crisis and often horrific situations like what happened on October7th, but then followed by positive.

Outcomes.Are you slightly optimistic that this could be one of the turning points?You know, it's not pessimism or optimism.It's just 27 years of working on these issues, American war making, Americanpeacemaking in the Middle East. More often than not, American ideas getswallowed up by a region in which great powers wrongly believe they can imposetheir will, their aspirations, their schemes, their dreams on smaller ones.Occasionally, with the right leadership Anwar Sadat, Menachem Begin and JimmyCarter, Camp David Accords an effort, at least on the Israeli-Palestinian trackwith Rabin and horrified Israeli.

Jordanian peace treaty, and now perhapsopportunities between Israel on one hand and key Arab states on the other.But the reality is, ladies, you need leadership.You need leaders on the Israeli and Palestinian side and in Washington thatare not prisoners of their ideologies or their politics.You need a mandela declare a Sadat, a big and a King Hussein, a Rabin, to takethe kinds of decisions which are existential, not just politically, butliterally. Ask Sadat and Rabin, who paid for theirlives with their lives for their peacemaking efforts.So, no, I retain a fair measure of hope.

But but right now, what is required toturn October seven, the terror surge and what the Israelis have done in Gaza overthe past six months into anything more positive really does require leaders whocan rise above their partisan politics and risk and in this in this region knowthat that risk can often prove to be fed.We don't have that right now. Should Joe Biden get a second term?I voted and worked for Republicans and Democrats.You can take this as a partisan comment or not.Should Joe Biden get a second term? Should there be a leadership change inIsrael with a government that's prepared.

To be pragmatic and flexible,not what we see now, which is the most extremist right wing government inhistory of the state and significant leadership on the Palestinian side orfrom the Arab states. I think you actually could.There is an opening here. But again, nobody ever lost moneybetting against Arab-Israeli peace. I'd say that based on my ownexperiences. That's a lot.You know, and you said it out there. That's a lot of ducks that need to be ina row. Right.And then a lot of them are not sort of.

Anywhere close to close to formation.But I do think, you know, is it a worthy question to talk about capacity, bothpolitical, economic and just the willingness for the US for for Bidenduring an election year for Israel when it's already got operations in Gaza, thelevel of support that we see waning for those operations for Iran's friends likeChina and Russia, each with their own problems, do you see that comingtogether and impacting the likelihood of sort of major developments goingforward? No, I really don't.I mean, I think you can get British, American and and French consensus, butthe Russians and the Chinese, a senior.

Partner in China, a junior partner inRussia, really are determined, it seems to me,to make inroads in the Global South, to oppose American influence, Westerninfluence, wherever they find it, inimical to Chinese and Russianinterests. The Russian Iran relationship is astrategic one. China obviously is not interested inregional stability. After all, it's the US Navy, frankly,that is protecting. Talk about ironies.It's the US Navy that is protecting the exports of Saudi Arabian oil to China.So it just doesn't seem to me that the.

Vaunted international community has thewill, the bandwidth or the cohesion to complement, to support regionalparties who right now, frankly, aren't interested.Israel is being led by a man, Benjamin Netanyahu, who is on trial for bribery,fraud and breach of trust in the Jerusalem district court three yearsrunning. He has to maintain power at all costs.If he doesn't, he's faced probably with a conviction or a plea agreement that'sgoing to drive him out of politics. Mahmoud Abbas is 89 years old.He's in the 19th year, 19th year before your term.He has no credibility in the West Bank.

And less credibility in Gaza.So, again, no matter what the Americans want and I think the administration'saspirations are well-intentioned, you can't pull the wagon without the horses.And right now you have two leaders in Israel and the putative state ofPalestine that are more interested in keeping their seats than they arerisking anything with respect to taking advantage of whatever openings exist.So again, I think we have to be very realistic.It's going to take time. And as I mentioned, probably once toooften, leadership. Aaron David Miller, always great to haveyou with us, senior fellow at the.

Carnegie Endowment for InternationalPeace. Coming up next, why Oxford Economicsthinks China's growth rate increased in the first quarter but could come at acost for second quarter data. This is Bloomberg. Well, taking a look at the week aheadnow and China's economy will be front and center with the right decision laterMonday and the deluge of economic data releases on Tuesday.Most economists expect the PBOC to hold off on effect on a rate cut to avoidfurther undermining the yuan. Consensus also sees weaker economicratings for China, with first quarter.

Growth moderating to below 5%.Meanwhile, Japan's core inflation may cool in March, but still will remainwell above the BOJ's 2% target. And in the US March, retail sales areexpected to show a slowdown as consumers struggle with higher prices.And that is your week ahead. And though it is a big week, of course,going into that China data and the U.S. decision as well on rates.Our next guest thinks that China's growth rate increased in at least whenit comes to a sequential basis in the first quarter.Joining us now is Luis Liu, has a lead economist at Oxford Economics.But Louise, the cave in, of course, is.

This in front road loading anddestocking going on that's been moved forward, Right.So would that come at the expense of second quarter numbers?Yes, certainly. So if you recall, we did have verystrong manufacturing data and that's what everybody is really excited about.We also had pretty strong export data for January and February.Much was a bit disappointing, which kind of suggests to us that the momentum onthe external front may be fading, which also means that manufacturing onshoremight not actually find a buyer in Q2. So there is some necessary destockingprocess that we think will happen in Q2.

That would drag growth down relative toQ1. How do you feel about the Chineseconsumer in the household in particular? There were some concerns that it sort ofreally stuck on this downward sentiment spiral.Do you see signs of improvement on that? I think so far Q1 has been relativelyresilient compared to what we were expecting.Of course, we did have a pretty, pretty late lunar new Year.That distorts the data a little bit. If you look at it from a month on monthbasis. But in general, I think we went into2024 thinking that perhaps, you know,.

Much of that post COVID recovery hasbasically run its course and it really hasn't.So that suggests to us that, you know, the idea that they are quite entrenchedin this deflationary mindset may not be as severe as we think.Now, the problem is that because of deflationary impulses,households do still face quite high interest rates, real interest rates.So that would also kick back expenditure a little bit, which is why we think thatis the area that the government, if they could, would be perhaps most primed tosupport. I'm curious what your views are with thesort of overcapacity problems that have.

Been discussed in China's economy,Because right now we know, of course, German Chancellor Olaf Schulze, he's gota very delicate message he's bringing to Beijing this week that they haven'tacted enough on on warnings from Europe to end their discriminatory practices inbusiness. Do you seethat issue of of a protectionist backlash hitting China's economy?Absolutely. So I think that is probably that isprobably more of a near-term cyclical risk to the economy, we think.And I say near term because if you look at the long term fundamentals that do alot of demand for some on these.

Products, the Chinese, the Chinese isproducing, especially when it comes to some of these decarbonization greenproducts like EVs or solar panels. The problem is that if you look at thethe messaging between the East built this book of the German chancellor by welook at the messaging between Secretary Yellen as well as outside of the topBeijing officials two weeks ago, it does seem like there is not really muchappetite within Chinese officials to do much about the perceived overcapacityproblem. We do some we do see some evidence ofovercapacity in the macro data. So it is translating true.If we look at the supply side, the.

Demand side and that discrepancy acrossall of these products. But it does seem like so far we won't beexpecting any pushback from the Chinese officials if that's what people arereally anticipating. And it's not just, of course, that focuson China's economy. This week.We've got trade numbers due out from other countries as well.What's the general trend that you're seeing here after the Lunar New Yearbreak? Yeah, we're seeing a bit of moderationafter the Lunar New Year break, which is a bit disappointing because we wereexpecting really the global economy,.

Global demand to kind of do a bit of asteady pickup from here on. But I think across Asian exporters, it'sall. They will publish data later this week.We would see that that recovery is pretty much a bit of a bathtub shape.So, you know, you have a very slow L-shaped type of recovery, which reallyis isn't particularly spectacular. So that kind of suggests to us that, youknow, at least across Asia, we are expecting that you would need to havemore domestic demand support to offset some of these external crisis.All right. That was Louise Louw, the lead economistat Oxford Economics.

And we'll have more ahead.This is Bloomberg. All right.You're taking a look at a live shot of the Tel Aviv skyline there this eveningafter Israel and its allies mostly foiled an unprecedented Iranian droneand missile attack on the Jewish state. No fatalities reported.And also, its army base was slightly damaged, but it is the early part of themorning here. And you can see we are getting a bitmore context on that attack coming through from the United States CentralCommand. So one of the units of the Department ofDefense area of responsibility includes.

The Middle East, but they're saying thatthey intercepted or destroyed at least six missiles that were intended tostrike Israel as well. CENTCOM is saying that is posted tosupport Israel's defense against these dangerous actions by Iran.So some more of a readout again on that weekend attack. I'm alleged as that in my heart in theoffice. From our point of view, this operationis over and there's no intention to continue the operation.But if the Zionist regime takes any action against the Islamic Republic,whether on our soil or in places.

Belonging to us in Syria or elsewhere.Our next operation will be much larger. That was the chief of staff of Iran'sarmed forces speaking on state TV on Sunday.And China, meanwhile, has voiced its deep concern over the escalation ofviolence in the Middle East, calling on all parties to show maximum calm andrestraint. Our chief North Asia correspondent,Stephen Engle, is here in Hong Kong. And Steve, yes, so all parties voicingconstraint here or restraint. What else are we hearing exactly?Yeah, we might get more today on the Monday in Beijing from the Ministry ofForeign Affairs.

But we did get a statement from China'sambassador to the UN essentially saying exactly what you just said, voicingtheir deep concern about the escalation and the retaliatory strike by Iran toIsrael. And again, on Friday, we had also heardthat Wong Yi and Anthony Blinken had discussed this as well.Now, both sides, if you want to call the different sides, the United States andChina, as as sort of proxies to what's happening obviously in the Middle East.And of course, because of China's deep ties with Tehran, both sides betweenChina and the United States have called on the others to play constructive rolesin trying to broker.

Or de-escalate the tension in the MiddleEast. Obviously, China maintains those closeties with Iran. About 90% of Iran's oil exports go toChina. And again, of course, last year we sawBeijing play a critical role in brokering, you know, detente betweenTehran and Saudi Arabia. So obviously, they have some influenceand they are watching the developments over the weekend with, you know,trepidation, obviously. And again, they have reiterated thatcall for a cease fire in the Gaza. Meanwhile, German Chancellor Schultz isnow in China.

He's got a delicate mission of anothersort. So how does he deliver this message totrying to avert an EU China trade war, given we know the long relationshipbetween China and Germany? Yeah, that's right.I mean, obviously, the German you know, the number one trade partner of Germanyis China last year. So he has to walk a tightrope.Obviously, he wants to be able to keep that trade relationship going, but atthe same time, not undermine what has been a growing call from EU leadersabout, you know, calling on China to stop its discriminatory trade practicesand offering subsidies in key critical.

Sectors, including new energy vehicles,EVs. About a third of China's exports go tothe EU. And this is a sensitive time for OlafShort. So he was in Chongqing yesterday.He flies to Shanghai today and then he'll have those key meetings tomorrow,Tuesday in Beijing. And again, like I said, he's going tohave to walk a tightrope not to undermine Europe's increasingly vocalstance on, you know, commerce between the EU and China.So it actually is a very key meeting and trip, a four day visit for Olaf Schulzeto China.

Our chief North Asia correspondent,David Angle, there. And take a look at how we try to, ofcourse, to stand out when it comes to broader commodities has been thisfurther leg up that we've seen in gold and even before the geopoliticaldevelopments over the weekend, we have seen this somewhat perplexing rally thatwe've seen in this gold rush ride. But we are seeing a little bit more sortof further movement, 6/10 of 1% higher as we see really after that Iran strikeagainst Israel, stoking more haven, demand mostly expressed through gold andthe likes of the Swiss franc as well, not so much through yen, for example,this morning, crude is holding pretty.

Steady.We've seen pretty muted trading on the energy front in response to thegeopolitical escalations. And in fact, New York crude is fallingabout a 10th of 1% there. Iron ore is also one to watch, prettyflat at the moment. But of course, it is a big week when itcomes to China. Data expectations that the first quarternumbers will be quite favorable, potentially at the expense of secondquarter numbers looking a little bit weaker.But iron ore really ahead of that 10% weekly surge last week on the back ofthe improving outlook for the Chinese.

Economy.But let's get more on this gold rally, our Asia commodities report, as thebelow growth joins us in Melbourne. And Sibila, you know, the the the Havenreaction is pretty textbook what we've seen as the drivers for the rally untilthis weekend. Perhaps a little bit more confusing.Yeah, definitely, Heidi. I think everyone's scratching their headover gold at the moment because really gold is flying in the face of what weknow of when it should perform well, really with expectations for rate cuts.And they've just been pushed back after a series of really strong economic dataout of the US.

And look, one factor we really can'tignore in the gold story at the moment is China.We've seen just persistently strong demand from both, you know, localinvestors and also the central bank buying up huge volumes of gold.And it's it's kind of a weird reversal in the trend, so to speak,because typically China has been a sector where when prices drop, that'swhen demand rises. But if anything, prices are you know,the Shanghai premium is trading at elevated levels and we're not seeing anydrop off in demand there. And we know China is the biggestconsumer of gold.

So that really can't be ignored in thewhole gold mystery rally story. And you can really see that enthusiasmfor for Chinese gold demand in particular when you take a look at someof their gold ETFs and they're trading at a big premium to net asset values.So are we likely to see a further run up from this point in time?When it comes to China? It's hard.I mean, who knows what will happen, but it's hard to see or imagine a situationwhere, given the the state of the property sector and the equity sector inthat market, it's hard to see. Imagine a situation where investors aregoing to turn off gold suddenly.

More broadly, what that means for thespot price, it's hard to say. We have seen in recent weeks a number ofbanks upgrade their price forecasts for gold this year through seeing $2,500 anounce being thrown around quite a bit. Whether that will happen in the nearterm or a little bit further down the track, it's hard to say.Asia. Commodities are civil aggressor inMelbourne as we continue to watch. Really just another impetus when itcomes to the gains in gold with the geopolitical jitters over the weekend.Take a look at how is setting up when it comes to the start of our cash tradingas we get just about half an hour or so,.

20 minutes away from the start of thatstarted to open to the session here in Sydney.We're seeing, I think, features looking a little bit softer, 6/10 of a percent.Their trade is really moving pretty cautiously in the wake of those attackson Israel by or from Iranian soil that we saw over the weekend.Pretty unprecedented. And really we are still seeing a marketkind of impact of that play through. New Zealand, we're trading is alreadyunderway. We're seeing quite a bit of downsidethere, some domestic factors there. New Zealand services sector that postedthe biggest contraction in two years.

We're also expecting key CPI numbersthis week as well to kind of potentially paint a broader picture around whatthose recessionary conditions look like for the Kiwi economy.Singapore Nikkei futures a little bit to the downside there and we see the yenholding pretty firmly through that 153 level despite of course, haven demandfor other classic haven assets. US futures are seeing a little bit ofupside there 4/10 of a percent as of course we head into a big week forearnings as well. In particular when it comes to the bigbanks, Goldman Sachs, Bank of America, Morgan Stanley, all due to report inthis coming week.

And that's after net interest incomemissed analyst estimates for peers including Jp morgan and Wells Fargo.Although Citi's profit actually was better than expectations.Let's bring in our finance editor Adam. Hey, to Jp morgan.What does it kind of set expectations for for the rest of the year then?I think in many ways, Heidi, it's really just it was an excuse for investors tojust take a little bit of money off the table.They softness around the net interest income numbers had been you know, theexpectations were certainly that things were going to have to soften somewhat.I think maybe that was a little bit more.

Than an expectation.You saw that in the in the share price declined six and a half percent or so.But it doesn't mean your expectations for the rest of the year completely dropoff. I mean, if you think about the way thatDiamond's been characterizing the way that the US economy is developing at themoment, in many ways this is kind of fitting with with the way that he seesthings progressing and I think he's well aware of that, positioning the bank forit for a range of outcomes. And one of those key outcomes, ofcourse, is that rate stay higher and for a little bit longer than you might havethought six months ago.

So in many ways the bank is alreadypositioned for that. I think over at Citigroup, maybeslightly different story. And of course, Jane Fraser's big globalrestructuring still playing through and they're talking about, you know, sevenodd thousand jobs having already been removed.And some of that still has to it still has to play out.So there are kind of other catalysts, I think, for Citi that are still worthworth watching this week. Of course, the big ones, Goldman andBank of America and that that kind of whether we see more of this pressure oninterest income, whether we see more.

Commentary, especially from the CEOsaround how they see the economy and whether or not, you know, some of therepricing from markets in the way that they see the Fed, whether that's in anyway kind of affecting just the way that they position things on the margin atthe bank. But I think all the US banks are prettywell structured now for, you know, a reasonably kind of benign economicenvironment. And and in many ways investors are stillpricing that kind of sector of the market reasonably highly.So you would expect bank stocks to still do reasonably well in this environment.Yeah.

And as you say, given that we've gotsort of that reevaluation going on in these changing expectations once againaround the Fed. So you do think that bank stocks remainfavorable in. Well, I mean, think about how quicklythe market has changed its opinion and it had to reassess in the last fewmonths. Annabel, as as you know well, you know,many forecasts of being thrown out the window from month to month.So positioning your bank, if you're a CEO running these companies, you stillhave to be cognizant of the fact that the economy could could deteriorate alittle bit further.

But you also have to realize that ifinflation stays reasonably, you know, controlled and growth as itseems to be picking up again, then you have an environment which which suitsyou reasonably well, especially when a lot of these banks have already gonethrough the restructuring and the kind of the job reductions in headcount costcontrol. And that sets them up pretty well forthis stage in the cycle. So I think the key is to keep an eye onthat net interest income number from those other banks this week.But just watch that commentary on the economy from the CEOs as they come outthis week.

Pressure on finance at a time hang theirhead of those big US bank earnings that continue this week.Coming up next, Nomura sharing the outlook on the yen as traders weighfresh geopolitical risks. That's not passing through when it comesto a stronger yen, at least this morning.And also looking at the increased risk of intervention.This is Bloomberg. It is time now for Japan ahead.And Japan's call machine orders are due this hour.Be watching. Also, Nippon Steel shares US Steelshareholders voting in favor of the 4.

Billion takeover offer and the fate ofthat deal now resting with U.S. regulators and political impetus,really. Honda also planning to startmanufacturing in its first US made fully electric vehicle at its plant in Ohionext year Bill. Yeah, and Heidi, of course, we'rekeeping a track on how Japanese assets are likely to fare at the start.You're actually seeing Nikkei futures, that contract in Singapore just comingonline to the downside here of 1.4%. The question, of course, how much isthat a reaction to tensions in the Middle East, this this strike by Iran onIsrael over the weekend versus as well.

Other factors that are playing into it,like weaker than expected bank earnings coming through from the US and thenperformance of the S&P 500 into the end of last Friday.But keeping a close watch on what happens in currency markets in turn andyou're seeing the dollar yen here holding very steady at the 153 markthat's despite some pick up or some move that we're seeing into other assets thatare typically seen as safe havens like gold, a firmer dollar coming through it.Actually, let's just take a look at at the the moves we've seen longer term ofthe Japanese yen this year, because when you compare it again to more of the safehaven place, the dollar yen that's.

Weaker over the course of this year.Swiss franc yen though, is a little bit different here.Year on year it's little changed. You did see it a little bit stronger theyen against us with Swiss franc after the surprise cut by the SNB the Swisscentral bank. But certainly let's get more on the roleof Japan's currency, the safe haven, whether that's still in play and bringin Nomura's head of Japan effect strategy Yujiro Goto and Yujiro, I'mcurious for your views. Do you still see the yen acting as asafe haven asset in these sorts of environments?Hi, yes, I think the Japanese yen can.

Still work as a safe haven currency atthe moment, especially because CFTC data suggest it's quite weak in shortpositions held by both everybody's fund and asset managers.So any negative surprise can encourage a pretty strong unwinding, open initialposition in the market. But in terms of the tensions in theMiddle East, we expect an impact on the end.It will be actually mixed because higher oil price, that would be actually aquite a negative for Japanese trade balance and can work against theJapanese yen. And also if that oil price increasefurther, the market could expect the Fed.

Or other central banks to be morehawkish. Hyper long expectation can support thatincreases as well. So I think a position unwinding can besupportive before the Japanese yen in terms of any negative surprise.But oil price movement is acting quite a negative for the Japanese yen.So, Nick, Nicolette, I think these tensions in the Middle East, we have aquite neutral impact at the moment and that we shouldmonitor is where activity in the market increase further from here becausevolatility is a key driver for any encourage trade typepositions.

And if we have spiking opportunity, thepotential unwinding can be more aggressive.So I think opportunity is quite important this week.Yeah, but as you say, it's a question of what we see in terms of oil prices,whether we do reach, say, 00 a barrel that's been mooted by some in themarket. What that means for the Fed, higherTreasury yields in turn, how weak can the yen get from here, given you've alsogot the at least verbal intervention we've seen so far?Yeah. So in terms of the firepowerintervention, I think comments from the.

Japanese official last week was actuallynot as strong as I we expected then that I am broke while 52 of our 53.So there is no higher chance for theJapanese authorities to wait and before underlying trades are even higher.At 54 I want 55, but I think the situation is a little bit different inJapan from a year ago because Japan's inflation is not really much strongerthan 12, 24 months ago. And especially what's important isJapan's increase now is more driven by domestic factors like a subsidy,inflation and wage increases. And in this regard.Two years ago, I think oil price was.

Trading higher.I think higher import price and weakness were at least somewhat positive forJapan because that helped inflation to accelerate.But now probably the Bank of Japan doesn't need to have higher input priceinflation or weakness to achieve 2% inflation and higher input priceinflation up actually negative for the Japanese economy because they are incomemay start crying again even after a very encouraging wage negotiation.So in this regard, the actual function of the Japanese authorities against theJapanese yen weakness is probably quite different now.So not imminent.

But now we can expect Japan can react toweakness by hiking its policy rates, GDP, tourism, market to expect and keepsweakening. So in this regard, I do think that inthe medium into the second half of the year, that is more likely to tradeat 145 or even below.So the upside of that would be that readmitted around the 55.On the issue of intervention, as you mentioned, the jawboning that we'veheard has at most kind of kept levels steady over the past few sessions.How useful and impactful is intervention, particularly when you seethe effect fade pretty quickly?.

Yeah, So I have to say interventioncannot change a trend when the currency market.So any buying intervention will be kind of will have temporary impact.But what's important is again, Japan may start hiking its policy rate moreaggressively, enthusiastic on the half of the year.And also the Fed is more likely to start cutting policy rates in July this year.So fundamentally, it's more supportive before and going forward, probably overthe summer this year. So next month or so for the next fewmonths. Still, Mr.Finance may need to step in the market.

To avoid further weakness.But I think the fundamental story will be more supportive for Japanese yen fromthat June or July this year. So I think a combination of buyingintervention and more hawkish future will be good supportive factor for aJapanese yen in the medium term. You just you can hold for one moment,because we do want to just make mentioned some numbers that have justdropped here. This is the Japan machine orders, coremachine orders coming out for February. And actually the numbers are comingthrough a lot better than what had been expected by economists.So month on month, they're actually.

Seeing them rise 7.7%.The estimate had been 4.8%. And then also core machine orders on theyear, they're actually looking to have contracted, but not as much as had beenexpected, down 1.8%.And then the survey had been for a 6% contraction instead.So it is looking, Heidi, a lot better thanthan than what economists had been expecting.Again, core machine orders, sort of a broader sentiment check on the health ofJapan's economy. AndI just wanted to get your reaction to.

That.I guess, you know, just one more puzzle piece in terms of where we see themomentum for the Bank of Japan. Right.When you hear from policymakers, we hear from the governor, it does feel likethey're not in a huge hurry and therefore there's no immediate impetusto to help the yen strengthen. Yeah, I think that the data just nowsuggests that economic momentum in Japan is really recovering and that wagenegotiation outcome was also quite strong.So, again, I have to say a domestic inflation pressure is now much strongerthan.

A two year ago and that therefore Bankof Japan is still a model going to be gradually a hawkish into the second halfof the year and at the earliest a July could be the timing for the BOJ to hikeagain. And also at the next April DOJ meeting.Also Japan is going to release its inflation forecast and upgrade inflationforecast is quite likely. And after that inflation forecastupgrade, potentially a Bank of Japan can hike its policy rate any time.So and June is probably a bit too early, but the still June meeting can be ameeting which is a decent chance open up huge rate hike.So I think that we still support.

Japanese yen from the monetary policystandpoint. All right, Yujiro, Thanks so much foryour time this morning. That was Nomura's head of Japan strategyYujiro Goto in Tokyo. There will have more ahead.And this is going back.

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