>> welcome to daybreak asia. >> a rally driven by the dovish tilt paid. central bankers signaling no rush to join the u.s. pivot to rate cuts. china looking at efforts to stem drags. shery ahn: another rate decision out of peru. the central bank has cut rates to 6.7% from 7%, in line with expectations. this is the fourth straight month the bank of peru has cut rates, to a 14 month low. november inflation coming in lower than expected. peruvian economy has

contracted three straight quarters. not surprising we see this cut. it follows brazil's cut yesterday. mexico holding unchanged today. more monetary policy decisions, including latin america central banks. haidi: it's all about central banks. the ecb and boe decisions to contend with. still seeing upside. sydney being driven by the fed narrative, as the rally started to sputter overnight. we expect optimism over china, loosening of restrictions on the real estate. we also saw the jump in middles around the cyclicals rally overnight.

that should play well on the australian mining stocks. corporate jumping on the 11 month. also the supply cut news. sydney stocks up. we are watching the potential for a near-term pullback giving the rsi is the highest since november, 2020. it doesn't happen often. shery ahn: it happens often in the u.s. the s&p has been around those numbers for a while. haidi: [laughter] shery ahn: perhaps one of the reasons we saw u.s. stocks rising, but the gains more muted today. futures online, downside .1%. concern, the markets have gone too far, too fast. there is optimism over a potential soft landing. u.s. retail sales rising.

in november, jobless claims dropping to the lowest level since october. the treasury was another rally. off session highs and the 10 year yield, holding below 4%. crude upside. haidi: go back to the other central banks in europe. no hurry to join the u.s. pivot toward cuts in '24 as investors insist they will embrace easier policy soon. christine lagarde reiterating the commitment to keep rates high to tame prices. >> our job is to receive the target sustainably. we are making progress. it's come down from 11% to 4.5%. it will come down further. we have to achieve it sustainably. there's more to do. i'm courage.

we've got more to do. that's what we will do. >> we did not discuss cuts at all. no discussion, debate on this issue. everybody takes the view between hike and cut is a plateau, a beach of hold. it's like i don't know, liquid gas. you don't go from solid to gas without going liquid. haidi: i thought that image, a beach of hold, may just settle in and get comfortable. >> could be. i was having an image maybe she would like to come to sydney,

where it is so warm. even if central bankers understandably are keen to push back against the idea of a rapid vivid -- that would mean they had gone too far. they wanted to trust what they've done. getting inflation under control. they've got it under control early enough, without having to go to high too fast, so they can get a soft landing. problem is, wave after wave of investor bids that haven't succeeded. they will have to cut earlier and faster than they think. global investors go off the fed. the fed told them higher for longer. we are not thinking about cuts. bam, the fed is saying we will

cut three times next year. you must've been six? the same response is playing out at the moment for markets, where there has not been a huge pullback. i think there will be, on a tactical view, as soon as, later today, when europe and the u.s. comes in, if not today, then next week. we are almost at christmas. there's been a great rally in the final quarter, all the more impressive by the fact we had difficulties in september/october. a lot of investors are looking at their books, the end of 2024, saying we are sitting pretty. maybe we should take risk off the table. that momentum for more rate cuts , risk rallies, that will hold into next year.

let's see if 2024 ends up going more smoothly than 2023. shery ahn: garfield reynolds. the outlook for monetary policy into 2024. al husseini is here. great to have you. we are talking how the ecb and boe pushed back on eminent cuts, on the back of peru and brazil cutting. we saw the diversions in '23. will there be a convergence toward the path of easing in 2024? >> i think that is right. major emerging market central banks were ahead of the fed. they are now in line, starting to ease. the fed is giving them room. the fed is ahead of the ecb and boe.

as inflation comes down in the u.s., they can accelerate their transition to easing. in the next 12 months, it's likely other central banks will catch up. japan and china being outliers. haidi: what do you make of the decision yesterday and chair powell's commentary? it was taken as dovish by the markets. going into this, we thought it would be a hawkish hold in order to not let the markets get ahead of themselves. what happened? >> the story in some ways is simple. inflation has come down faster than anticipated. that put pressure on the fed to adjust policy to reflect the reality. throughout the year, the fed was nursing residual doubt about whether inflation was coming down sustainably. that doubt is starting to dissipate. we are starting to see the fed act. it's ahead of other central

banks. it's reflecting the fact the inflation story domestically has been good. shery ahn: at the same time, the labor market seems resilient. retail numbers surprising upside. is all of this ingredients for a soft landing? >> it is too early to tell. we need to take powell at his word. the best way to predict future is to manufacture it. the fed is trying to manufacture a soft landing through a two-stage process. one, easing monetary policy to reflect the slowdown in inflation. two, potentially easing policy to reflect upside risks to unlimited. that's the story for the second half of next year. shery ahn: i wonder if it will be another year of american exceptionalism in economic strength. the expectations for china to make a comeback next year are almost nil.

what will the global picture look like? >> this is a difficult question. expectations are modest, if you look at forecasts by the fed and ecb. sub potential growth across the board. same time, we see monetary policy ease on margin. that should be supportive of growth. this intersection of things getting a little better, starting in the fourth quarter this year from a monetary policy perspective. at the same time, the aftershocks of all the tightening of the past two years. how do those things connect in 2024? it's a massive question and too early to tell. shery ahn: when it comes to china, but are we expecting in terms of fiscal support? the fed will start cutting rates. perhaps the pboc has more leeway?

>> the chinese story has been disappointing. haphazard policymaking. fiscal policy, monetary and credit policy not in sync to revive confidence. we see that in the form of consumers becoming conservative, porting liquidity, saving excessively without spending. on the corporate side, not a lot of investment or hiring. until the government can get policies in sync, it's likely china will remain in a place where growth is sequentially week. shery ahn: have we seen japan move more in sync? when do you expect a pivot? >> it is strange. conversation at the boj is the right one. what are the preconditions to exit this policy of negative rates? are we confident inflation is

sustainably close to 2% over the course of the next 18 months? it's happening at the wrong time, just as other central banks are getting ready to ease. we see that in the strength of the yen. that fits back into weaker inflation down the line. it's a fragile environment. they have a small window to act. i wouldn't be surprised if there action is aggressive relative to central banks in the u.s. and europe. shery ahn: good to have you with us. more to come on daybreak: asia. this is bloomberg. ♪

haidi: bloomberg economics

seeing the pboc holding the rate. key data for november is out in a few hours. what are the expectations on domestic activity indicators? >> morning. the data released won't look pretty based on what we have learned from the survey results. industrial output may have shown a decline from the previous month. the contraction in property investment may have worsened compared to october. we are not doing year on year comparison. last year's base was low because of the pandemic. the only other comparison could

be misleading. deflationary pressure could be persisting. it's november already. everybody's focus should be on next year's growth. there's been talk about china may be ambitious not share. that means more stimulus would be in the cards. shery ahn: some of that coming in different forms, whether perhaps, what can we expect from the pboc on the mlf rate and given we are seeing more action from the authorities, with regulations, we are now hearing homebuying restrictions are easing in beijing and shanghai? charlie: the latest policy signal from the conference his

there will be more room for fiscal stimulus, monetary policy will only play a supportive role. mlf, the expectation is it to stay unchanged. the main reason is policymakers are not keen to further expand policy. the room for cut is limited given bank profit margins are under pressure, also a further cut in policy rate would begin depreciate terry pressure -- depreciatory pressures. beijing and shanghai just announced they will lower the document threshold for first and second time homebuyers.

that's impressive. they are the most important housing markets. this will probably trigger improved confidence among buyers. shery ahn: janet yellen planning to visit china again in '24, this time with a focus on what she calls difficult topics. she's expected to map out her priorities for relations with beijing, when she speaks in washington later. jody, we've seen her building up contacts inside china with high-level officials. what are we expecting from this second visit during her tenure as secretary of treasury? jodi: she's looking to continue this dialogue she began in her visit in july to china. she deepened it at the aipac

conference last month in san francisco when she met with the vice premier. she was part of the delegation that went with president biden to meet xi jinping, the chinese leader. she is viewed as somebody who has relationships, the understanding that they can get in the room and talk. she has said she will uphold administration policies, the tough on china policies about export controls, for instance, and really trying to, the national security concerns the u.s. has. same time, she believes and continues to say, expected to say tonight, that there are plenty of areas the two parties should be working on together. she does not want to see the u.s. walk away from the table and throw up their hands and say we cannot do business with china. she wants very much for the economies to be aligned in areas

where she thinks possible. that is the message that have been well received by chinese officials. haidi: it's been quite a week for the russian president, that marathon press conference, the message of confidence. same time, we see more difficulties on funding the ukraine war. the hold up in the u.s. and eu? jodi: president putin had a four hour press conference yesterday. we are glad in the u.s. we do not have to sit through those. his message was clear. we will continue the fight in ukraine. he tried to frame it as a larger fight, that this is something the west doesn't want to see. he said they will not back down. he tried to make a case they have the upper hand against ukraine.

certainly there has been a reluctance in the u.s., among republicans, now we are seeing divisions in the eu about continuing to fund, at a high level, the war in ukraine. he is running again. he will be the longest-serving leader in russia since stalin. if he gets a fifth term in march, he is expected to serve another six years. to 2030. these expected to win. most of his opponents are in jail or exiled. it is a tightly controlled election. his message on ukraine was unambiguous. haidi: jodi schneider, with the latest. more to come. this is bloomberg. ♪

shery ahn: citigroup is shutting down the municipal debt business as it seeks to increase overall returns. sally bakewell leads u.s. finance covert. this business they dominated. how significant is this? sally: it was the powerhouse in this $4 trillion market for state and municipal debt. it underwrote significant projects. all of that said this decision has been a long time coming. deliberations over whether to exit have been ongoing for months. ultimately they decided this was no longer viable for a bank seeking hard to improve returns and prove to investors when it

sets guidance, it can stick to it. the bank had to abandon or miss a lot of its goals. haidi: so much going on. what does 2024 have in store for further restructuring measures? sally: when frazier unveiled the big restructuring in september, potentially the biggest shakeup in decades, they decided to focus on five businesses. in doing so, there will be substantial layoffs, which have already started. the bank made an effort to exit retail operations, which it has been continuing to do, and almost completed. it's been going through dramatic change. this business decision, 8500 staff in texas, the biggest state for muni bonds

underwriting, that state became a hurdle for the bank because it passed legislation that prohibited government entities from doing business with banks that restricted firearms policies, and the texas politicians deemed citi to be one of those and froze it out of a lot of bond deals. it crimped a lot of revenue. it had been facing these goals. it wants to be the premier bank for international corporations and the muni business, with this texas issue, that became incompatible with the goal. shery ahn: it is still a fact the bonds and work on public-private? sally: correct. it will also have a private placement business. nonetheless, this is a significant exit.

haidi: thanks sally. the latest developments on citi . lots more to come. this is bloomberg. ♪

jerry: the ie slashing the outlook for fourth-quarter demand growth. sue keenan has more. we are seeing gains in the asian session. su: climbing from a five-month low in the new york and london sessions leading to asia trading. all of this running with the broader market risk on rally on signs the fed's aggressive hike cycle might be over. at 3% gains for west texas intermediate and brent. the broader oil market plagued by oversupply. adding to those concerns, the latest comments from the iea, global oil demand growth is slowing sharply as economic activity weekends in key countries mentioning china as one of them. the iea is slashing estimates for this quarter slicing about 400 barrels a day from its

estimates of consumption growth and continuing to suspect growth rates to decelerate dramatically next year. also note greater than expected supply from the u.s., brazil, guyana offsetting opec output cards squeezing the saudi's. one report is the increasingly apparent loss of oil demand growth momentum reflects deterioration in the macro economic climate. you are seeing how powerful the fed push was in terms of pushing oil prices and all commodities higher because the latest prices are still in the green despite a bearish report. it's important to realize the daughter was weaker and that spurred buying in china. what is important is despite the past two days rally, the big picture, oil prices fall into five-month lows below 73 in london for brent camus below 69 in new york. and china's economic outlook as

darkening as output is swelling from exporters with a record smashing supply waiver from the u.s. that the iea notes is wheezing saudi arabia and other core middle eastern producers out of the prime markets. shery: we saw a big rally for metals, especially copper. su: cover had the biggest jump in 11 months up 3% in london trading, a big move for a commodity that has moved sideways in recent months for a number of factors. it gave a lift to metals including gold and silver. commodities really soared. you can see the bloomberg commodities index posted the best day of the. that's talk about copper. a bunch of setbacks. a key mining operations tightening the market and arranged a large surplus going into 2024. a son but i the dollar again

after the fed meeting also strengthened buying in commodities with copper lose some gains in the latest trading but gold and silver really retaining big gains. trade is now looking to the economic data and interest-rate policies in china later on friday to really give another push perhaps to some buying in the commodities. again it's a great day for copper and some other metals based on the latest risk on trading. haidi: bloomberg's sue keenan there. metals and minors are one of the segments we are watching so far as we see trading in australia looking better from a big rally that she just talked about. across all the cyclical commodities. in particular when it comes to copper. that could also get a booster depending on what we get out of china's domestic activity numbers, whether the industrial production might show any upside given how bad the flow has been

when it comes to china at the moment. look at the rally we have seen in australia. the a a six to hundred up by .6%. we are saying -- seeing about 1.5 percent higher in energy and materials and real estate doing well but lacking -- lagging some growth rate sensitive stocks, i.t., consumer discretionary, the broader communication center as well. we are looking for hints of weakness in the rally given we are starting to see australian stopped entering overbought territory for the first time since february of this year. the 14 highs since the highest november 2020. watching new zealand we had a contraction that was unexpected for the quarter gdp. a little downside in trading in qe stocks. chicago nikkei futures positive. at this point .3% higher. the bulls say the impact of the yens rebound on japanese stocks is likely to be contained for

now as they given remains relatively cheap and corporate earnings have become less susceptible to fx fluctuations. our senior asia stock reporter joins us now for more. when you look at whether or not the japanese equity rally can maintain momentum into 2024, what happens to their currency thing potentially a smaller role? hideyuki: yes, that seems to be the case. of course, the yens impact on the stock market is always a complex issue. but when you look at the fact japanese sharp rises have been relatively resilient to the yens gains over the past month, that seems to be showing the japanese company's earnings have grown more resilient to the yen

fluctuation. now, the bank of japan's corporate survey has shown the japanese companies, assuming the dollar/yen exchange rate of about one thing -- 139 for the current financial year. you might think that might means given the yen is now at 141 or 142, that may seem like a very small margin. actually, that is talking about the annual average. even if the dollar falls to, say, 135h, very few japanese companies likely need to revise down their earnings estimates. haidi: the fact we are seeing the broader japanese markets not react as fiercely to a stronger yen, is that a consequence of japan not necessarily being so export dependent as before? hideyuki: exactly.

if you look up the exports, japan's exports peaked almost 10 years ago and it's been sort of flash. that is partly -- sort of flash. that is partly because many companies shifted production overseas. a survey released by a government affiliated bank this week showed the overseas production by japanese companies hit a record high of 37%. so, that is one reason. another reason is of course the make up of the japanese stock market has changed over time. so, automakers are still a very important part of the market. but, the waiting -- there waiting has dwindled a little bit compared to, say, five or six years ago. so, that is another reason why the japanese market on the whole is becoming less susceptible to

currency fluctuations. shery: our senior asia stock correspondent there. prime minister fumio kishida reshuffled his cabinet trying to contain the fallout from a funding scandal. he replaced four ministers, among lawmakers accused of concealing income from fundraising events. let's get more from politics reporter isabel reynolds in tokyo. we know this that have been replaced include some high-profile politicians including the chief cabinet secretary and at the trade minister. how significant is the reshuffle? isabel: pretty significant. in terms, perhaps, first of all, replacing the trade minister is a key position for japan at the moment. that is the person in charge of japan's push to get back into the chip industry, to become a major player in the semiconductor industry like it was in the past. they have brought in someone new, but it is somebody that has experience.

mr. sato has experienced in energy. he has been in the cabinet before. it's been a very deliberate move to get people that have already been added to read if they had skeletons in the closet presumably they had that should have come out already and they are probably relatively clean. the biggest part of this i think is to try to improve his popularity ratings that this week thank to 17%, much worse than it has been in a decade in japan. haidi: what are the prospects of him being able to do that and where there other standouts in the new lineup for you? isabel: i think the trade minister is the biggest most important swap. but, really it's a very wide-ranging scandal. it has really disillusioned the japanese public with the party as a whole. it has been in power for -- since 1959. the chances of improving his image are relatively slight

because he has not managed to create a new image with cabinet. these are people everyone has seen before. it is not so much a refreshing or novel image that he is managing to project. if he does not managed to improve his popularity there is a chance he will be forced to step down. most people i have spoken to say the most likely timing for that would be after the budget passes in the spring in march of next year. when they start to look for a new leader after that, what they may look for is someone unconnected with all these factions within the ldp that have been accused of wrongdoing in their fundraising. so, people like potentially japan's first woman prime minister. a lot of people have mentioned that possibility as a way of refreshing the government's image and restoring public trust. haidi: our politics reporter

isabel reynolds with the latest in tokyo. or to come on a break asia. this isberg. ♪ hey, doc, if you had to choose, would you give yourself a root canal or run payroll? oh, run payroll. paying my team with gusto takes just a few clicks. they automatically file my taxes for me too. can i run payroll too? choose payroll without the pain.

shery: you are watching daybreak a check. these are some of the latest stories. china relaxed homebuying curbs in beijing and shanghai,

extending an unprecedented housing downturn. authorities cut down payment ratios for first and second homes who was low as 30%. more residences will also qualify for lower mortgage thresholds. china's november activity data dump is due in a few hours. bloomberg economics says you're on your industrial production and retail sales may look more solid than in reality saying that more potential recovery is likely to emerge from the less scrutinized month on month figures pre-the ppo see holding the one year friday at 2.5%. they say the big fund in -- injection in november suggest the central bank is opting to use liquidity instead of rates to add accommodations. haidi: the latest unemployment numbers off a survey from china and expectations are it will remain unchanged at 5%. alternative data suggesting the chinese labor market is weaker than what official numbers show.

for more miriam wickersham the direct manager of a china focused recruitment agency joins us. from your point of view, how do labor market conditions for china look at the moment? miriam: labor market conditions at the moment are challenging in china. the economy is recovering much more slowly than we had originally hoped. you are seeing challenges across many energies -- industries. haidi: in particular looking at the segments where do you see more strength and where do you see weakness? miriam: we see a lot of weakness in use employment and we see the strongest level in the mid-level recruiting, mid-level managers

that have a strong technical background. we see the new trend of weakness in senior hiring slowing down significantly. >> what about government hiring. are we seeing a pickup in momentum there? >> definitely. the government is taking a lot of measures to revive and strengthen, especially the use of unemployment. government, state owned enterprises. the military. they are trying to do a lot. overall the total amount of employees that can be joining the government is still an overall need for additional vacancies.

haidi: what do you see as the broader trends looking to 2020 for? miriam -- 2024? miriam: i believe china will slowly recover and the next year will be better than 2023. we saw an uneven recovery in my opinion across different industries. however the market is strong. there is a strong domestic market as well and we see a lot of elements taken by the government. i believe the economy will pick up and the labor market as well. haidi: what about ex-pat candidates? are we seeing that big? the fact that that is out of the covid zero. are we seeing few and foreign candidates now and less interest when it comes to working in china?

miriam: we are definitely seeing a lot less foreigners. a lot of foreigners have left during covid. for a variety of reasons. what we are seeing at the moment in fact is a localization strategy. small and medium multinational companies are localizing in china. we see a lot of contracts being ended and replaced by chinese nationals. haidi: great to have you with us mariam wickersheim. we are getting monthly activity data, the employment surveys and the mls decision from the ppo see. -- pbo seat.

all past interest rate increases continue to be transmitted forcefully to the economy. tighter financing conditions are

dampening demand. this is helping push down inflation. euro system staff expect economic growth to remain subdued near-term. beyond that the economy is expected to recover because of rising real income as people benefit from falling inflation and growing wages and improving foreign demand. >> i think the persistence of inflation remains an issue. that is something we discussed a lot at the committee. we have seen an unwinding of many of the big shocks we had last year, particularly, related to the war in ukraine and so on. my view at the moment is it is really too early to start speculating about cutting rates. we have to see more progress.

i am encouraged by the progress we have seen, very encouraged. but, it's too early to start -- stop regulating. >> for the time being, monetary conditions are adequate. in a few months we will look very carefully at the new forecast in march. the finding on -- depending on the situation then we will adopt monetary policy. haidi: european central bank leaders there on the current state of inflation and their future right strategy path. it's been a busy week when it comes to our central-bank decisions. as it -- it's interesting. we heard from christine the guard talking about a whole beach you could stay on for a while on hold. i wonder how much of a real substantial gap there is between what we heard from the fed and

where we see the boe and ecb, whether it is just down to communication. the fact that chair powell really acknowledged the potential for easing and the fact that the european central banks are quite happy for the lead on this one? shery: it was interesting to see that pushback especially when it comes to eminent rate cuts when we heard from chair powell that the fomc those rate cuts were discussed and when the appropriate timing would be. perhaps european central bank's are taking it more easy, holding back. norway pushing ahead with a final hike. .25%-4.5%. norway talking about how the economy is cooling but inflation is still too high. what a contrast to other emerging market central banks. brazil cutting rates by 50 basis points. in our earlier peru also cut

rates and now we expect perhaps mexico to be next. they held rates steady for a sixth consecutive meeting. we continue to watch a divergence when it comes to monetary policy with emerging markets at a central banks really having gone ahead of the curve on the tightening and the easing. will 2020 for be more of a year of convergence towards a path of easing heidi? that's a key question. haidi: of course. we know how much central banks potentially converge in 2024. there are two outliers. the pbo seat and the bank of japan is not likely to be part of the new policy finale for 2023. looking ahead to the final by -- bank of japan meeting we are expecting to really hold on december 19, scrapping the negative rate by april is how markets are seeing at -- that at the moment. when it comes to the bank of

england and the u.k. economy. the boe should be cautious when it comes to cutting rates according to michael saunders. he says the central bank need to balance inflation pressures with sluggish growth. officials in england kept rights at a 15 year high thursday. >> lower potential growth has weighed on the u.k. economy significantly over the last few years. real gdp on the ims figures for this year will still be below the 2019 levels in the u.k. -- and the u.k. over that time has been the worst performer among g-7 countries. is not likely to get any better in coming years. low potential growth does not really make the u.k. more inflation prone. because, it also bears down on the pace of demand. so, low central growth is neutral in terms of the output cap, what matters for the inflation prospect. it means the u.k. is also stuck

in a low growth rest. as for the fiscal arithmetic, there are lots of moving parts. lower bond it since the autumn statement will help the physical arithmetic. if the ob are projected lower migration that would harm it and there might be other moving parts between now and the budget. i think it's too early at this stage to have an assessment of whether the fiscal position will look better or worse. but, the physical space, in any case, is very limited. the government's fiscal plans at the moment rest on large unspecified, and frankly, implausible cuts in real public spending over the next few years.

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shery: this is daybreak asia counting down to asia's major market opens. after muted gains on wall street investors are wondering if the market rally went too far too fast, especially given the s&p 500 is again in overbought territory. haidi: slightly less common for australian sucks to be overbought. it is potentially putting out risk we will run out of steam before an actual santa claus rally before christmas. lots of central-bank action this week. more to come ahead of the bank of japan and china's domestic activity data dump later today as well. >> how we are setting up for market opens across japan. we had incredible strength for the japanese yen again given the weakness. the greenback has fallen to the lowest level since august. the yen about 14227 level. a little bit of a wrestles -- of a reversal from strength

earlier. coming from a time when we saw stronger yen pressuring japanese stocks in the previous session and the likes of exporters like toyota contributing the most to the topic stop. we are seeing relief for equity markets in japan. look at the jgb tenure yielded 12. -- 10 year yield as well. we are headed toward the boe j -- a boj decision for you how the cost fee --kospi's opening at the moment, gain of .5%, the highest level since september given the rally in yesterday's session and the korean won strengthens against the u.s. dollar headed towards the 1290 level after being one of the top performers in the previous session. a weak dollar story and also because we saw foreign stock and flows into the south korean market.

haidi: in australia overbought territory. looks like australian stocks are overheated potentially setting up the book -- possibility for near-term pullback. we have seen upwards of .6%. really it is energy and some of the minors giving the set to close rally we saw across metals in particular with copper outperforming in the complex. we continue to watch to see in terms of weather that really has legs as well. look at the aussie dollar. 67 trading at the moment against the greenback. that divergence playing out with the labor market numbers here in australia, the rba expectations versus the fed's dovish pivot story perhaps setting up an interesting discrepancy there. crude is largely unchanged after a pretty eventful week of trading for energy markets. this is true across treasuries as well.

we have seen it treasuries extending gains in the overnight session. some of the cash buying action has come through to try to chase the next leg of this rally, if you will. we are potentially also looking at some possibility for correction they're given a bit of reassessment of just how strong the pivot narrative has been. our next guest says he has turned more positive when it comes to japan and it is now is before -- preferred non-u.s. market. kieran calder is ahead of asian equity research at uv people. perhaps low hanging fruit has already been traded for japan. what are you looking out for the next leg of the rally going into next year? karen: --kieran: we published an outlook for next year called back to the future. the topline view is we think central-bank dominance will give way to fiscal dominance over the

next year. within that, we still prefer the u.s. and technology in terms of global equities for exposure to innovation. outside the u.s. we -- our preferred non-us market is japan. i think there are a few tailwinds, obviously, for japan this year. as you said, may be the low hanging fruit has already been captured. obviously we had the tse pushing corporate governance reform. it's debatable whether we have seen that peak or knocked over the peak is ahead. we have seen a changing interest rate regime that is ongoing. we have seen the warren buffett halo effect, which is restricted to a small number of holdings. i think japan has benefited from the fact it is not china this year. looking forward, i think the fourth could probably continue. not china. we think the best a story for japan is amongst the financials

where the changing interest rate environment is something really positive for japanese financials. haidi: does strength and weakness in the yen make a big impact at this point for the broader markets or for earnings in japan? herein -- kieren: if you look at the almost 30% at the peak returned from yen-based topics this year, it was less then 50% of that for databased investors. so it's absolutely a factor. it's been a factor for a long time. when you look at the strength of the yen at the moment, the major exporters, it will likely mean a reversal of yen translation benefits they have had over the course of this year. we think this is definitely something to watch and very important especially for non-yen investors.

haidi: what are your expectations for china? we have seen extended extremely cheap valuations. do you see opportunities if we see more support from policymakers going into next year? kieran: our expectations for china are not very high. look, it has been a real headwind for growth globally over the last couple years. starting with a few self-inflicted policies that are hard to reverse. ultimately for china, the property sector has to be resolved area if that was easy to do it would have -- resolved. if that was easy to do it would have already been done. the main issue for china is it that. it spreads to other sectors, financials, consumer, and center. so we think in terms of more piecemeal policies, that won't be the answer. it has to be an ultimate resolution of the property sector.

haidi: what to you going into next year is the biggest risk potentially for asian equities that we are maybe not paying enough attention to? kieran: i think probably the biggest risk for asian equities notwithstanding china, the obvious risk, will be related to interest-rate policy. the fed thinks they have inflation under control. self leading is kind of the immaculate conception of outcomes, but it looks like that is where we might be heading for. if there is a reversal of inflation pressures, that could come from a few different areas, then, that might mean a reversal in interest rate expectations and expectations for easing in the second half of next year or even the second quarter. probably that would have a negative impact on asian equities. the other thing we have to be aware of is the u.s. political

cycle because it is quite likely that, or, there is a nonzero probability donald trump will be a major figure in that and this, obviously, we know what the playbook for that looks like last time. it was not generally positive for asian equities. haidi: what are your expectations for the bond market? kieran: for bonds, obviously they are not specifically my area, but the other side. we expect rates are coming down. that's good for bonds. specific areas of the bond market we like. we like the 81 market that is coming back after the depths of

march with the collapse of credit suisse. from an equity part of view, really my focus, we generally do prefer asia. japan and asia. and, tech in the u.s.. haidi: kieran calder head of equity research for asia at ubp. coming, a preview of chinese activity data and the pboc mlf rate call. we go live to shanghai next. this is bloomberg.

♪ haidi: looking ahead to china's

monthly liquidity operation and the release of key economic data for november. the pbo is holding the one-year mlf ratec at 2.5% . we have seen yet more measures are from the government when it comes to trying to shore up, or, at least prevent further indications of a slowdown. what are we saying when it comes to the domestic activity data tron today? >> the economy deteriorated in november. indicators like industrial output and property investment may be worse compared to a month ago. retail sales might be the only bright spot, partly driven by car sales. there in mind ppi and cpi remain in negative territory, especially ppi. deflationary pressure is still a huge concern for the chinese economy.

last year was because of the pandemic. if weight -- we use a year-to-year comparison it could be misleading. it's november. people should be switching focus to next year's growth. there has been some expectation that the gdp target for next year will be around 5%. that means china will have to have more stimulus measures. shery: we are seeing some homebuying restrictions eased. how much will that help? charlie: it remains to be seen. shanghai and beijing are among the most important property markets in china. it is seen as a benchmark. if the measure can stimulate new ways of buying interest, probably that will have spillover effect to the rest of the country. the property industry is among

the biggest worry for the chinese economy at the moment because it accounts for anywhere between 18%-20% of overall gdp. measures are being rolled out this year to boost demand. buyer confidence remains low. investment is still in a downward spiral. that is huge for a lot of investors playing the market. today, the amount of rights still for review, we expect based on our survey it is likely to be kept unchanged. the room for further reduction is limited. depreciation of pressure is a concern and the bank profit margin is already shrinking. shery: the shanghai bureau chief charlie zhu with the latest on the chinese economy.

that's preview the market open in china with asian stocks reporter jamie yu. we had a rally on the feds dove is privet and chinese stocks underperforming that rally. what do we expect today? jeanny: some good news from the u.s. overnight but most chinese stock investors, their attention has been focusing on the data dump this morning. like what charlie just said, we don't expect a very strong reading from the november data. perhaps the only bright spot is the retail sales given the ev sector that is relatively stronger versus the others. still, i think people are really concerned about the consumption trend, given the sluggish property market. and also, the takeaways from the central economic world conference.

we are still dragging the market. most investors we talked to are still wondering what is next for -- from china in terms of all the fiscal and monetary policy boosts for the market, which is still yet to be enough. we are seeing accelerated selling by foreign investors in chinese stocks over the past week. so, year to date i think the inflows are really small. and we might see the first year of investors net selling of chinese stocks. there was the end of this year. i think most of the data pending is still very important. haidi: where are we seeing the most weakness in sectors? jeanny: most of the weakness -- this is a very good question.

property, you can see all the property stocks, and most of them have already become any stocks -- penny stocks after months of shareprice punch. i guess this is still one of the most volatile weaknesses in the market. i guess the other thing is for the chinese technology stocks. things are not really rosie apart from some of the names expanding very actively in the overseas market like pdd. for heavyweight names like ali baba, they are still caught up in the very very sluggish consumption sentiment in china. i think investors that don't really have that much confidence on those stocks, those names are dragging the whole market performance. haidi: are asian stocks reporter jeanny yu.

we will bring you u.s. treasury secretary janet yellen remarks shortly as she speaks live addressing the u.s. china business council. this is bloomberg. ♪ (adventurous music) ♪

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you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh >> all past interest rate increases continue to be transmitted forcefully to the economy. tighter financing conditions are dampening demand. this is helping push down inflation. euro system staff expect economic growth to remain subdued near-term. beyond that, the economy is expected to recover because of rising real income, as people benefit from falling inflation

and growing wages. and, improving foreign demand. >> that is what they should do and must do and do do. i think the persistence of inflation remains an issue. it is something we have discussed a lot. we have seen an unwinding of many of the shocks we had last year. particularly related to the war in ukraine. there is a persistent element to it that we have to take out. i view it the moment is it's too early to start speculating about cutting interest rates. we need encouragement. i am very encouraged by the progress we have seen, but it is too early to start regulating. >> anaesthetist spec for the time being, -- in that respect at the time being monetary conditions are adequate. we will look carefully at the new forecast in march and depending on the situation then

adopt monetary policy with the goal of really maintaining inflation using price stability over the medium term. haidi: european central bank leaders on the current state of inflation and the inflation fight and where a great strategy goes from here area let's bring cash from here. let's bring in the bloomberg great strategist. what do you see across european assets particularly vis-a-vis how they settle across u.s. assets given it is pretty clear european policymakers at this point are happy for the fed to take the lead and happy to sit in the space of hire for longer. david: yes, certainly, they were, all the central banks, particularly, nor gets bank which unsuspected lee raised rates. but when you look at the ecb and boe they were happy to push back against the right pivot stance. the boe, three members voted for a rate hike.

they adopted a hawkish stance. even with the ecb christine the guard was like, we are not ready to lower our guard. the rhetoric coming out of the central banks was more hawkish than how the markets interpreted the fed. having said that the market still said you are putting next year whatever you say. look at the ecb compared to the fed. most -- both markets expect both central banks to cut 150 basis points next year but it's looking for the fed to take the lead. look at the march pricing, the second meeting for both central banks next year. for the fed the market is expecting about 20 basis points of rate cuts, 80% probability of a rate cut compared to 60% for the ecb. the economic data coming out is actually weaker in the euro zone compared to the u.s.. but, the market goes, we think the fed will cut first. it's a bit odd. but at the moment, yes, in terms of which central bank the market

thinks is the most dovish common definitely the fed. shery: that is why we saw pressure on the u.s. dollar today even more. the euro rallying on the others, the pound climbing. how does that bode for the japanese yen? david: you see a slight bit of weakness today. there was not a big selloff yesterday to the dollar yen when london came in, the most liquid market. they looked at the move and chopped around with it. i think the focus quickly comes to the bmj -- boj next week. if it does nothing you have to expect weakness near-term. hedge funds may use is the opportunity to reload positions. certainly implied volatility will be crushed if they do nothing. the focus is really on what does the bpj do next week and do

they send allies an imminent i think you won by the april meeting change in policy. haidi: great strategist david finnerty there as we continue to watch the trajectory of central banks going into 2020 for. -- 2024. russian president vladimir putin says he's not backing down or planning to compromise on the war on ukraine saying that peace can only come once moscow's goals are achieved, a confident message ahead of presidential elections in march. >> peace will come when we reach our goals you have mentioned. coming back to those goals, they remain unchanged. i will remind you, this means de-nazification and a

demilitarization of ukraine to a neutral status. haidi: eu leaders agreed to open membership talks for a historic political win for keo's. the hungarian prime minister opposes the move saying ukraine is not ready. kyiv is facing uncertainty over future financial aid from the u.s. and europe. the european council president says the move provides a clear signal of hope for the continent. looking at how european stock futures are opening at the moment. this is a picture of what we saw. the wall street rally running out of steam a bit but still strong gains in the asian session that could provide more of a positive lead. euro stock 50 futures up by .10%. ms ci europe trading stronger as

well as we watch weakness in german dax futures given the recent rally across that market. the rally on the fed pivot before the boe decision and now potentially the idea we could see hire for longer, both out of the boe and ecb in this inflation fight. that will weigh on sentiment. ftse 100 futures up by about 1.25%. shery: look at treasuries trading in the asian session. seeing a bit of the game we saw in the new york session being reversed with yields a slightly higher. still the 10 year yield below the 4% level. we have really conflicting views about where treasuries are headed. jeffrey gone law coming out saying we could see the 10 year yield falling towards a low 3% range because the fed is likely to slash its target by a full

two percentage points next year while bill rose is dismissing all that saying yields are already about where they should be with the 10 year yield and around that -- at around that 4% level. really is to do with the fed rate trajectory. we have seen more indications of a resilient economy in the u.s.. u.s. retail sales numbers unexpectedly rising in november. and it jobless claims dropping last week to the lowest level since october. perhaps it is not surprising we are seeing a little bit of a more optimistic outlook for the u.s. economy. you can follow more on all today's stories and trading on the markets alive the power goes out, and we still have wifi to do our homework. and that's a good thing? great in my book. who are you? no power? no problem. introducing storm-ready wifi. now you can stay reliably connected through power outages

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shery: we have japan's preliminary pmi numbers for

december. the deposit data coming in at 50.4 which is in expansionary territory after falling into contraction for the first time in almost a year in the previous month. when it comes to the manufacturing pmi we are still in contraction territory, 47.7. and the number has worsened from the previous month in december. when it comes to the services data it is actually improving with pmi coming it at 52, rising from 50.8 for the month of december. we are getting a mixed signal but it seems manufacturing continues to worsen while services is improving and the composite is in expansionary territory. haidi: all of that ahead of the december 19 decision from the bank of japan as we set up that finale going into the end of the year. japanese prime minister fumio kishida has reshuffled his cabinet st tries to contain the fallout of a funding scandal.

he has replaced four ministers who were accused of concealing income from fundraising events. if you take a look at this reshuffle, who is in, out, and what are the most significant changes for you? isabel: the top of the list is definitely the trade minister was among those implicated. he is out and replaced by someone who was seen as less of an expert on the chip industry, but he is supposed to be an expert in energy. so that is him. the other one that is very important is the chief cabinet secretary. he has been replaced by a close associate of mr. kishida. he's a fluent english speaker pete you will be in a much more high-profile position.

and potentially one day to be prime minister in the future, who knows. also the agriculture minister has been replaced as well as the internal affairs minister. shery: how much will this actually help prime minister kishida's popularity, which we know has really dragged throughout his tenure? isabel: right. things have gone from bad to worse over the past few weeks. there is a huge scandal that was probably the broadest scandal to hit the ruling ldp since the 1980's. it is very difficult to say how far it will actually go. his support has fallen to 17% is the worst in well over a decade for a japanese prime minister. whether or not it will go up because of this shuffle, that seems doubtful. but looking further down the road we have reports that prosecutors could start questioning lawmakers as soon as next week. it is looking like more of a slow motion car crash.

the consequences of this scandal could go on for months. so we don't really know quite at this point where it is headed. shery: isabel reynolds joining us from tokyo. let's bring in mieko nakabayashi , a professor who seriously served as a member of japan's house of representatives. give us your reaction to this cabinet reshuffle. mieko: isabel's expression of slow pressure appears to be very good. it looks very good for the prime minister. if he does not handle this very well, he may you -- lose his position as prime minister. however, he appears to be happy and sad. the happy part is coming from abe crash and problems. he has been in a very difficult

position for a while since he became prime minister. he got so much pressure from the right wing. he could not even place the people he wanted. he had to balance with the right, left, middle, and everything. but now he appears to be no longer needing to care about the right wing people. so he seems to be really relieved. but at the same time the other faction that is the center of the finding -- funding scandal is the biggest faction. therefore it is very difficult for prime minister kishida to hold his power unless he has great support from certain people. and he may lose that big support because of the scandal. shery: so if we do see the abe

faction taking a big hit, what does that mean for policies like abenomics? we know that has continued into kishida's tenure. mieko: that is right. he succeeded abe's policies. and maybe for a while it will be kishida's policy. however, he may shift more. for example, to a more financial budget discipline type of thing. that means he has to deal with big tax policy changes and so on. however, his presidential election is coming up next year in september. he may not be able to change his policies for a big time because his first hurdle is to overcome the presidential election and the following year, a general

election will ensue if he waits until the tenure matures. that means of course he can call for a snap election anytime but he is looking at is very low support rate. shery: which i guess is my question. will he even be able to survive until the party leadership election in september? will he need to leave before that? and if that happens, will we need to go back to remember the revolving door of prime minister's we had before shinzo abe? mieko: it depends on the colleagues of him. he code -- could be pulled down by someone. but at the moment it does not seem to be anyone challenging him seriously. i think his biggest challenge is tokyo prosecutors. if they find some really hard

evidence and difficulties in political leadership, kishida may be considered to be responsible by the people. in that case, there could be some challenges within the ldp. shery: the ldp is taking a hit with the abe faction because of this. where is the opposition in japan? is there even in opposition in japan at this point? mieko: opposition parties are split. there are a few opposition parties who are gaining steam because of this funding scandal. however, they are still too weak to take over the ldp, unless the people started to have a huge rage. if they got so much anger and think of punishing the ldp for a while, then there may be some kind of possibilities.

but those parties are not very proactive. they are reactive depending on how the tokyo prosecutors are finding facts and how ldp members are reacting to this scandal. but please remember, this scandal is really based on the abe faction, not the kishida faction. as long as tokyo prosecutors are focusing on other factions, kishida has some room to maneuver. so we will see how we can handle it, well or not. shery: how is the japanese public taking all of these political scandals? not just that but the broader state of the economy. i talked to all of my friends in japan and they seem very downbeat about the japanese economy. they are calling the yen trash at this point. mieko: exactly. inflation is kicking in.

therefore people are very unsatisfied with the state of the economy. and kishida is even talking about raising taxes. and then this financial scandal, or funding scandal, i mean. the funding scandal seems to be not recording things accurately while people are paying tax. and the tax authority is really harsh to everybody, to really be responsible paying all sorts of taxes. therefore i think people are really not looking at this funding scandal lightly. the kishida administration's fate is also depending on people's reception of their state of economy, their taxes, and the policies that mr. kishida is proceeding.

and how he is reacting to all of those facts within the ldp. is he trying to make abe faction's responsibility, or is he taking it seriously as ldp government and trying to reform the founding system of all sorts of activities? that is very important. and people are expecting that mr. kishida is somehow drastically changing the founding system. not only reshaping a few cabinet members. shery: if prime minister kishida does not survive, who would be next in line? i have been hearing everything from the former defense ministry to more. who could be his successor? mieko: leo's you just mentioned are pretty popular among japanese people. however, they are not that popular among ldp members.

therefore, mr. kishida may be thinking of someone who can succeed him from his faction. however, interestingly, because the other faction is almost gone from his cabinet, another faction is kicking in. it's the only one so far strongly supporting the kishida administration. therefore, someone from that faction may have some kind of chance. shery: it is really interesting to see japanese politics because it is not really to do with public sentiment, it is more about the politicians themselves electing their leaders. mieko nakabayashi, it was really great talking to you. we have more to come on daybreak asia. this is bloomberg. ♪

haidi: as geopolitical tensions surrounding taiwan continue to simmer, social media is giving beijing a revenue of influence. musicians are using tiktok and other apps to build larger fan bases in taiwan. for more on this we are joined by betty hou.

what impact have we seen when it comes to the people in taiwan? betty: we are seeing a lot of prominent examples of how chinese soft power are becoming more and more popular in taiwan. experts are telling us the possible impact would be subtle and incremental. it would essentially make taiwanese people's views on china more positive despite the fact that it is adding a lot of pressure in terms of military oppression on taiwan. shery: how are we expecting all of the social media influence to affect next month's election? betty: we are expecting a very critical election next month. the impact of soft power on the election directly is not very

evident yet. we do not know what impact it will have on the election. the impacts are more subtle and long-term aspects. it will basically reduce the mentality of opposing everything china among the taiwanese. so we will have to wait and see where we actually do not know what the impact is going to be. but it will definitely have a long-term and incremental impact. shery: betty hou there. you can get more on taiwan decides, a special report featuring bloomberg's exclusive interviews with all three presidential candidates. catch it on bloomberg tv every thursday in asia and wednesday on the u.s., also on youtube. take a look at how markets are trading early in the asian session. of course we saw those muted gains across the world given

that the rally seems to be losing a little bit of steam with the ecb and ble pushing back on eminent rate cuts. we are seeing the nikkei continue to gain ground, about 1% at the moment. this perhaps a bit of a rebound in consolidation given we saw japanese stocks decline previously. a lot to do with exporters that took a hit, especially the likes of toyota motor. given the stronger japanese yen. right now we are seeing some downside on the japanese yen at the 142 level. but we are still around the strongest levels against the u.s. dollar since august. we are also setting up for the boj decision next week so we will be watching the japanese markets to see how we set up for that decision from the bank of japan. the kospi also gaining 1%. we are already at the highest level since september. asx 200, this is interesting

because stocks have entered over volatile territory for the first time since february, and entering that is not that common for the asx 200. this is bloomberg. ♪

haidi: i think it is an understatement to say it has been a bit of a busy week when it comes to central bank decisions. of course we kicked it off with the big one with the fed. it did not disappoint. the market was looking for the support for its narrative that the fed would pivot to a dovish stance and rate cuts would be priced in going into next year and that is exactly what it got. the acknowledgment from chair powell that that pivot is really on the cards despite a lot of caution around the fact the fight against inflation is not quite done yet. there is a lot of uncertainty as to whether, yes, we are at 4% which is better than 6%, but still far from 2%. can we stick the soft landing all the way? really interesting but we heard from the ecb and the boe overnight as well. shery: they pushed back on the narrative we might see imminent rate cuts.

perhaps a given what we have heard from chair powell, they are sitting a little back, letting the fed do the job. first go ahead and make those dovish pivots next year. it was really interesting to me that chair powell acknowledged rate cuts were discussed at the fomc meeting. we were going into that fed meeting thinking perhaps you don't want to give the markets too much because you don't want to loosen financial conditions but now we have the 10 year yield below 4% so that is really surprising and perhaps not surprising the boe and the ecb pushed back. when it comes to other european banks we are seeing them be a little bit more careful. norway for example actually hiking rates for the last time this year. their governor also saying, yes, the economy is slowing down but inflation is not where it should be. quite a divergence from developing economies. brazil cut rates this week, peru cut rates today, mexico held rates for a sixth consecutive meeting.

so really, that divergence narrative of 2023, perhaps more of a convergence one next year into the easing path? haidi: you know what will not be converging is the boj. for the pbl say -- pboc. that will be super interesting going into 2024. that december 19 meeting is one of the final curtain calls of 2023. the pboc, we have the ratesetting today, but certainly there are no expectations. in fact pretty low expectations in terms of how much more monetary easing could actually be put through and be implemented and be effective next year. there is a lot more expectation for industrial policy support, may be fiscal support from china going into 2024. we have already seen some more loosening when it comes to restrictions around mortgage lending and homebuyers, first and second homebuyers being announced for shanghai and beijing as well.

that is ahead of the domestic activity data dump later on today. certainly china, both the domestic economy, the challenges there as well as its relationship with competitors, with allies and trading partners, is going to be another wildcard for next year. shery: geopolitical tensions especially between washington and beijing. maybe we have seen a bit of a softening of the stance between them, especially with the thawing of that relationship. we have seen more movement between them, high-level officials continuing to talk. we know that secretary yellen is going to be headed again to china next year. we are expecting her to give a speech at any moment. she will be speaking at the u.s. business council meeting in washington, d.c. we will be looking forward to what she has to say, as she has hinted that when she heads to china the next time around this would be her second trip to china after the one in july to beijing. she said she would be really

touching on those more challenging topix that need to be addressed between the two sides. haidi: yeah. we are hearing that when janet yellen speaks in the next few minutes, she will be talking about highlighting investments under the biden administration, strengthening supply chains, deepening u.s. relationships abroad, and of course that is what we have been talking about, her renewed plans to visit china again in 2024, seeking to deepen these areas of cooperation, improve communication with beijing, even that fine balancing act of continuing to confront beijing over national security concerns and human rights concerns as well. it will be very interesting to hear from janet yellen today when she does speak, given just the precariousness we still see in this bilateral relationship. shery: we have heard analysts say perhaps secretary yellen has been playing the role of good

cop in this u.s. china relationship because she has continued to keep meeting with lots of high-level officials. we know last month in san francisco she was already talking with the vice premier. when she visited beijing in july as well she had very high-level conversations. but the fact remains that the thorny issues are still there. washington will not be easing when it comes to pursuing the export controls and investment restrictions that have anchored beijing. so what can really be achieved in this meeting, this second visit is not quite clear. but at least we know the two sides are now talking. haidi: this idea of a course correction, that was a remark that was made alluding to the fact that things have changed under this administration. that could potentially change next year being an election year, and that injects added volatility. we will be hearing from janet yellen shortly. take a look at how we are seeing

futures trading at the moment. quite a bit of upside in the cash sessions already in asia, despite that pullback, the running out of steam for this fed pivot rally we saw overnight. we are still seeing quite a bit of gains in asia. this is the futures picture, s&p futures looking pretty flat. across the rest of asian markets that are about to join the fray, taiwan futures up about .5%. ftse china up .7%. we could see positivity given it more loosening of real estate regulations plus the data dump due later today. watching dollar china given the backdrop of broader dollar weakness. much more to come, including hearing from janet yellen. this is bloomberg. ♪

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yvonne: