>> good morning and welcome to daybreak australia. the top stories, markets giving a verdict on the dpd victory in taiwan's presidential election, with some saying a move for reaction. reports of new strikes on who the levels -- houthi rebels in lebanon. global conflicts ai hopes for easier monetary policy in focus as leaders head to davos. annabelle: a start of the new trading week in asia and at the start of the day you can see we are looking range bound, not much movement so far but putting it in the context of how we ended last week, wall street shares mostly moving to the upside and traders still continuing to focus and recast

expectations around where the fed goes, how aggressive they will be with the rate cuts this year. that is one focus point. we've been watching that for weeks. it has been playing into the dynamics of the yen. continuing to hold around 145 where it has been the last five sessions. it will be tested as we look at the boj meeting but no change expected yet. a focus on geopolitics coming into taiwan playing into that after the results of the election and traders seem to be taking it in stride. shery: investors giving their verdict on the election of taiwan's president. markets will open in the coming hours. the victory being seen as a blow to xi jinping strategy for the island.

>> we are telling the international community that between democracy and authoritarianism, we will stand on the side of democracy. shery: joining us from taipei is yvonne man. how big of a win was this for the dpp? yvonne: as you say, this is a historic win for them given that no party before has won three terms in a row so this is certainly a milestone and also he won by a comfortable margin but he only got 40% of the mandate, the lowest percentage of votes since 2000. dpp lost the overall majority in

parliament so numbers defied some china threats about the election being a member of war and peace and voters voiced dissatisfaction in legislative ballots. from domestic issues like high housing prices, slow wage growth, less job opportunities turned young voters away so without that clear mandate we are talking about the dpp leading a divided government and they will have to cross party lines to try and negotiate to get any sort of budgets or legislation through and that could hurt advancement of some of their agenda. shery: beijing had already labeled him an instigator of war so what has been the reaction so far to the election victory? yvonne: he is a leader china

dislikes and we've heard this leading up to the election but so far the response from paging has been -- from beijing has been low-key. we got the statement yesterday and they reiterate their stance on reunification. the 40% mandate received could not represent the mainstream public opinion of the island, which is true. if you look at the votes tallied between the main opposition party and the third-party newcomer, those votes combined are more than what the dpp has so you kind of wonder if the coalition party among the opposition had gone through, we would have been talking about a different result here now so how he manages this dynamic will be interesting in terms of that was the statement that seemed to be

more dovish in language and you remember years ago when the president won the second term we heard from chinese state media labeling her as greedy, selfish, evil. this time around they did not even mention her name in the statement. militarily it seems like they are done playing things. the ministry has seen four chinese vessels and a weather balloon so no big show of military force like the scores of jets like when dignitaries are in town and we have seen signs of compromise. we heard in the victory speech saturday, he reiterated that he wants to cooperate with china and we heard from president biden yesterday after this election saying the u.s. does

not support taiwanese independence so some of the language seems to reassure some concerns among beijing but so far very low-key response. shery: tell us more about the taiwan-washington relationship because we have the delegation of former top u.s. officials arriving already in taiwan, what is the visit about? yvonne: it's interesting. obviously everyone has been watching how the presidency will play out. if there is a divided government, does not mean there is the strong mandate and perhaps that is why you are seeing a response from beijing so far but yesterday we heard that this is a u.s. delegation of former u.s. senior officials who arrived in taiwan and that today they will meet with the president-elect advice president-elect, former taiwan envoy to the u.s.

this will be led by james steinberg and stephen hadley. the fact that these are former officials might not be of relevance to beijing in some ways but certainly it will be a big test on the u.s.-china relationship as well. we will see how it plays out. so far i think it is safe to say now we are not seeing a huge showing of military force from china, maybe in a couple months, we have heard that taiwan officials expect to maybe once we get through the winter and have better weather that we might see china wrap up pressure with the military economically on taiwan here right before potentially the spring when he takes office in may. shery: yvonne man joining us from a very early dark taipei. let's discuss more about what

this means in terms of the beijing-taipei relationship. jennifer parker, adjunct fellow for naval studies is joining us. great to have you with us. yvonne was just telling us about how the reaction has been restrained as it comes to just ahead of the elections. could we see the pressure get ramped up after he takes office? >> good morning from camera and thank you for having me. it has been restrained compared to what we saw last 12 months where they were near record numbers of aircraft and vessels crossing the median line in the straight but that said many chinese officials in the lead up of the election said voting for the dpp was voting for war. between now and may we expect to see increased activity from

china. if it reaches the levels of the large naval exercises conducted around nancy pelosi's visits to taiwan, or latching's visit to the u.s. in august 2023, we are not sure but we will see increased activity ramping up today. shery: what is the most likely and dangerous situation when it comes to the beijing-taipei relationship? >> there has been a lot of discussion about the chances of an invasion or blockade of taiwan between now and 2030. at this stage it is unlikely. the risk of rockets shows that zion does not have a high confidence in pla at the moment.

increased coercion through military exercises in and around the taiwan strait is the most likely course of action. shery: what does it mean for the washington-taipei relationship because if we continue to see the flareups around the taiwan straits and tensions escalate there could be a miscalculation from any side of the conflict. >> there certainly could be a miscalculation and not just in the taiwan strait, and szechwan see as well and a number of close calls between vessels. in taiwan strait we saw a chinese destroyer right towards a u.s. destroyer and close range in 2023. there is potential for aircraft or vessels to collide and have potential loss of life so this is significantly dangerous and a good point was the agreement between washington and beijing

last year to restart military to military communications. shery: talking about escalation, we continue seeing tensions in the middle east and especially around the red sea with the u.s. and u.k. launching attacks on who the rebel targets in yemen. is this going to widen into broader conflicts? >> the reason strikes on who the -- houthi targets, i think it is clear from the actions between iran and the u.s. that there is no desire to increase the conflict in the region and strikes occurred a couple days ago and we have not seen a significant response despite the fact that houthi have highlighted that they intend to deliver a significant response. i think likely if they still have the capability to strike merchant shipping in the red sea i'm a we will see that response.

other iranian proxies in iraq or syria attacking u.s. bases, drones, or nuclear appearance with shipping but i do not think we will see a dramatic escalation in response to the strikes. shery: tell us about australian involvement because we know they provided support as part of the mission of the attacks. what role could third countries play? >> australia has had staff members in the fleet for over 20 years so australia's staff members operating with a number of exercises conducted in the middle east with the fleet so australia has played a supporting role in the execution of the strikes but the exact nature of that role has not been

made clear but the joint statement is that clearly most countries are supportive of the u.s. and u.k. actions. shery: jennifer parker, great to have you with us. still ahead, more on the election of taiwan's leader as xi jinping plans for the island suffer a setback. and why some think the u.s. economy is hotter than projected and what it means for the fed. this is bloomberg. ♪

thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

shery: let's take a look at the week ahead. pboc will announce the decision on the medium turn lending facility rate. they signaled they might deploy a monetary policy to boost economic growth. in later this week we will get a snapshot of china's economic performance last year with fourth quarter gdp data and other indicators for december. wednesday bank indonesia will unveil the latest rate decision. we expect them to stand pat as they hike the cycle i made a rupee stability instead of cooling pressures.

cpi prints from the eurozone and u.k.. gdp figures from germany, ppi from japan, australia and jobs data and tsmc data. bloomberg will be in davos for the yearly meeting of the world economic forum, business leaders and bank heads will gather to discuss the theme of rebuilding trust amid the backdrop of geopolitical tensions. our next guest says the u.s. economy is running hotter than projected and she is leaning neutral when it comes to markets. hillary kramer from kramer capital research joins us in new york and it is always good to have you with us so when you say neutral it is still slightly more constructive as you were at the end of 2023. >> i am still passive but it has

to do with so much rotation into other stocks and large investment houses finding opportunities in specific companies. it will not really be about indices this year. shery: you said the u.s. economy is a little hotter than expected and we are getting conflicting data. cpi numbers and ppi numbers surprising to the downside. a bumpy road ahead. how do you invest? >> find the undervalued stocks, the companies that still have a role and are growing and have a positive return on equity to do a lot of micro-investing and look at companies that have specific reasons on the macro side, for example, defense, aerospace, i not including boeing. but certainly the general

dynamics, lucky marketing. -- lockheed martin. these stocks were down or up one or 2% in the last 12 months when you can look at others stocks from royal caribbean up 130% and nvidia so it will be about the rotation, areas that have been unloved and also even some pharmaceutical companies like bristol-myers, just go back 20 years, nothing seems to go right, the stop does not seem to go anywhere. that is the only way because the data is so misleading and controversial in a way because how can the fed be talking about a trifecta of rate cuts on one , and then suddenly you see, ok, we have 20,000 jobs lost at citigroup, real jobs?

and then you say maybe it is possible. shery: we have seen bond yields be pressured which would think it's good news for tech names not turning a profit yet. but you do not like big tech. >> it has gone to big. -- too big and it is worn out and in every indices. there will be too much selling off of that and if we have any bump in the road the first stocks that will be sold off are the tech stocks that have come back and done well. i'm not just talking about ai stocks. this is also alphabet, meta, apple. shery: microsoft just topped apple. >> yes, is the biggest market

cap. at a certain point even though stocks that read ties they can reach higher highs -- stocks can reach highs but they can reach higher highs. how high is too high? if i am microsoft i'm up 300% in five years, maybe it is time to start cutting back and find something where i can have a double or triple in the next quarter. shery: the biggest banks coming out last week are not positive on interest income. >> they are not. at all. the banks have put themselves into a conundrum because they have locked-in, even though some have outs they have locked-in five, 5.2 five rate, 12 month cd guaranteed rate and then the fed

is starting to cut and net interest margins are going to be pressuring the banks. and the bank stocks have already come back, the regionals we talked about for so many months now, which finally came back and came back enough that they were no longer a by. shery: given the rally in u.s. stocks in the fourth quarter, how does this earnings season set up for the rest of the year? >> that was incredible if you think the last 12 weeks of the year, what they did, but we are set up, on earnings we should be fine because ultimately it has become a game more than before. the pendulum has swung all the way back, finding money, and with the layoffs, even though you have billions set aside for

severance, it is sticking it to the side and banks are able to show themselves doing well enough but i think that the credit quality is fine, we just have to realize that the world has changed and electric vehicles are not the future, too many companies are jumping into ai and using it as a buzzword and that will not get us anywhere from car companies are laying off, layoffs announced last week, so it is mixed data and then oil, energy, which is what really determines the inflation rate, those numbers are coming down. shery: every company is talking about ai. it hilary kramer joining us on a cold and snowy day in the new

york studio. you can get a roundup of the stories you need to know. terminal subscribers go to dayb . customize so you only get the news you care about. this is bloomberg. ♪

shery: you are watching daybreak australia. the stories we are tracking now, volodymyr zelenskyy is said to be planning to meet with jamie dimon at the world economic forum. he is seeking to replenish the country's coffers in their fight against russia with calls for help being eclipsed by the israel-hamas conflict.

zelenskyy is set to make a public address at the gathering. houthi rebels in yemen say u.s. u.k. fighter jets have hit targets in the red sea province. the u.s. and allies have been bracing for a response after dozens of airstrikes on target in yemen. coming up, we look at the closer look at the election results in taiwan. this is bloomberg. ♪ c'mon, we're right there. c'mon baby. it's the only we need. go, go, go, go! ah! touchdown baby! -touchdown! are your neighbors watching the same game? yeah, my 5g home internet delays the game a bit. but you get used to it. try these. they're noise cancelling earmuffs. i stole them from an airport. it's always something with you, man. great! solid! -greek salad?

exactly! don't delay the game with t-mobile 5g home internet. catch it on the xfinity 10g network.

>> we are telling the international community that

between democracy and authoritarianism, we will stand on the side of democracy. shery: that was the president-elect of taiwan on his victory. our next guest says the u.s. and china find themselves at odds not because of the disagreement over the status and future of taiwan, but because of the incompatible visions of international order. joining us is a professor of government and bloomberg opinion columnist and professor, thank you for joining us. your reaction to the election results. >> my reaction is that this is no surprise. before the outcome became clear, most of us expected a split outcome, that the dpp will keep the presidency but lose the

legislature, and that is the situation. as far as china, i think they must be very disappointed and -- at the outcome but they also find something to comfort themselves with, that is the new president was elected by a minority of voters and that dpp does not control the legislature. shery: what do you make of the fact that the chinese friendly [indiscernible] gained if seats than expected? how do you expect them to express frustration? >> i think trying to put the best spin on it so far about the same time they are going to keep the new president on a very tight leash. they are not going to cut him any slack. if anything he says or does that

upsets beijing, they will come down very hard on him. that does not mean they would launch an official military attack but they would dial up the pressure. yvonne: it seems this was a missed opportunity for beijing, especially given that fact that you tally the votes of the two other parties and in total they were more than the vote the dpp got. what is the strategy for china moving forward? it seems like the military economic sticks are not working. they forced to change gears on how to better coexist with taiwan? >> i think what that election reveals is the future landscape of taiwanese politics. tpp will remain the largest party and is likely to win

future presidential elections if the other parties do not join forces. the good news is there are a majority of communist people who have differences with the dpp so for beijing to challenge in the future is how to tap into the so-called mainstream, the majority opinion of taiwan. unfortunately for beijing, they do not really know how democratic politics work and do not have tools at their disposal to influence domestic politics in taiwan. yvonne: what will this presidency look like? he campaigned as the continuity candidate and may be following a more cautious way then the president of taiwan covered the island -- governed island. do you think he will try to pave his own path?

it is uncertain. -- >> it is uncertain. there is a lot of pressure on him to be moderate and careful but at the same time, i think his instinct is towards a much more confrontational stance towards beijing because that is how he became the dpp leader. at the same time, he is also -- he is also at the mercy of what is going on in the u.s.. that is right now with the biden administration is very careful about how to handle taiwan and wants to strike a purple -- strike the perfect balance with china and if there is a change in administration in washington in 2024 -- 2025 and a hard line republicans are encouraging china, the dynamics could change

quickly. shery: given the politically charged year in the u.s. with presidential elections, how do you expect that to affect the relationship between washington and beijing, especially around key issues like semi conductors, so important for taiwan? >> i think in the next 12 months china will be careful because it does not do china any good to be aggressive in an election year in the u.s. but depending on who wins in the white house in november and the new administration comes in next january, things could change. if donald trump brings a group of hawks into the administration, for example. shery: -- yvonne: does sticking to the status quo in china mean it could avoid a conflict with

beijing long-term? i am wondering, given the fact that china is dealing with their own domestic issues right now, does it force xi jinping to be more or less aggressive towards taiwan? >> i think the long-term strategy of china is clear. as peaceful reunification becomes less and less possible, china will step up military preparations. china always wants to have a backup option. looking at this election, i think there will be more incentives for stronger demand in beijing preparing for an eventual military you reunification with china but right now there is no evidence that in the next certain number of years, china will take that

step. shery: professor, thank you very much for joining us. it was really good to have your thoughts. annabelle is tracking other reaction from traders and some say this could be a boost for markets but is keeping the status quo so perhaps a lot of it already priced in. annabelle: i think it is about thinking we've got uncertainty or rather uncertainty has been removed now for investors so local stocks already pricing and in the income and you can see here the line and white and significant performance we have seen versus the line in blue since last year and it is about maintaining the status quo and goldman sachs one we have heard

the view from over the weekend as a reaction to the election results if you change i now look at what they are saying because they are not expecting any big changes to come through in economic policy yes they expect geopolitical tensions with china to persist but given they were already elevated we have heard that willingness from the dpp to engage in beige -- engage with beijing and they say any economic could be limited given low levels of activity on balance not really expecting any significant market moves following the polls over the weekend. shery: given the dpp lost the majority of legislation or there could be compromise ahead. what are analysts saying? annabelle: we are hearing it is what it signals for china in turn given that they lost the majority they are we have heard as i said the more willingness

to engage with beijing, these are positives from at least a market perspective because it dials down the tensions to a degree so global investment say china can take comfort or consolidation from the result they are expecting as more balanced representation of parties perhaps more dialogue off the back of it and they have weighed in on the outcome and say it does not really change the longer-term change of de-risking and taiwanese companies will have to look for other investments abroad off the island and also that taiwan will continue decoupling from china given the u.s. is still the biggest kind of export orders shery. shery: we will be watching the market open in taiwan and reaction to elections. we have more to come on daybreak australia. this is bloomberg. ♪

shery: major u.s. lenders rode

off more commercial property loans as were more work on higher interest rates pummel valuations of office space. net charge at bank of america and wells fargo rose in the fourth quarter due to office loans. we learned apple is shutting and ai team in san diego, leaving many employees at risk of dismissal. the group has until the end of february to decide whether they want to relocate to austin and merge with the texas portion of the same team. the unit is responsible for improving apple smart assistant siri. blackrock has agreed to by a global infrastructure partners for $12.5 billion. this brings them into the top ranks of investors who make long-term bets on energy. transportation and digital infrastructure. blackrock will pay $3 billion of

cash and 12 million shares and the deal is expected to close in the third quarter. blackrock clients jumped into the long-term funds in the fourth quarter helping push the firm's total assets to over 10 trillion dollars but the ceo of black rock says there are still signs of uncertainty in the market. >> i cannot control one quarter or another and we had an incredible porter but the fact that stands out for me is that for five years clients were awarded with 9.5 trillion dollars, the new money we received from clients worldwide and so clients have over the long run great needs of putting money to work, we advocate only long-term strategy and that you need to be in the market, not in and out, if you are looking to do that there are many venues to do that. we are trying to help people

build retirement savings, we want people to have a life in retirement with dignity. we spend so much time in our world talking about how we could have healthier lives but we spend no time focusing on if we can afford that longevity. blackrock tries to provide that type of long-term is him. i believe we spend a great deal of time talking about hope in a world today where we have greater hatred and fear, i think there are many opportunities to think about despite all those issues that long-term investing is the way to go and i believe at the moment right now we have trillions of dollars sitting in money market funds and so that is just an indication of fear. we have money -- more money sitting in bank balance sheets and deposits right now, which is an indication of fear or

uncertainty and i believe one of the greatest differences between the u.s. and any other country in the world is the strength of the u.s. capital markets and this is something we at black mark -- blackrock vetted on years ago and so over time we believe the opportunity to invest in our economy and companies and at times when you want a more global view investing in the world, over the long run you will outperform any bank deposit and any money market fund and it is our job to provide the corporate investments for our clients so they can have that life with dignity. >> the form the investments are taking are changing and you announced a new architecture for blackrock, really pushing on to etf's. you have had a lot of success with ishares and it looks like you are doubling down. explain that moving to etf and how far it goes. >> in 2009 we were ridiculed by

most of the financial community, not marrying the culture of active investors with what we were and a massive culture and our clients use both products. our job is to work with clients and provide a whole portfolio solution. but over time more client started thinking about, how do i want to get exposure, do i want this area or product and i can do that through actively investing in etf's. in 2012, we said etf's will be the new engine and that got a lot of ridicule by many in the business community and today the fixed income markets are totally imbued by atf's. so what blackrock we had 290 billion dollars in etf's and today we have $3.5 trillion. shery: if you missed any part of

that conversation, tv is your function where you can watch past interviews and watch us live and dive into any securities or bloomberg functions we talk about and be part of the conversation by sending us messages during the shows. this is for terminal subscribers only. check out on tv . this is bloomberg. ♪

shery: the surprise decline in u.s. producer prices last year reinforced bets on rate cuts this year, coming one day after harder than expected cpi reading . u.s. cpi is expected to get stuck at 3% due to fresh pressures. we were told why we see growth risks ahead for the u.s. and other major economies. >> my major concern is if you look at the important economic

meetings in the world, your resume, u.s., china, all three are having issues growing. the u.s. is the exception but even the u.s. is facing lower household savings, higher debt. it china needs to fundamentally change their economic models. without a healthy germany, europe will struggle. so if you look at who is the local motor of growth it is hard to point to one locomotive, it is how the u.s. will be able to maintain what was impressive growth. on top of that geopolitical concerns and that is why the -- we see buyers where people extrapolate what was a surprisingly good year last year as something to guard against. >> so you are questioning the resilient growth story. >> i smiled when i heard the

conversation before i came on that it is disinflation ahead. it is not. we are already seeing cost push pressures in the pipeline. what has happened to navigation in the red sea is increasing inflationary pressures directly by hiking input put prices and indirectly by causing shortages that then influence other places. then the labor market issue. higher labor costs coming through the pipeline. so you have cost-plus pressures coming in and i suspect we will see inflation at the cpi level get stuck at 3% and then the fed will have to make a difficult decision, either tolerate it for longer, and i was encouraged by john williams and long return inflation target is 2%, or try

to reduce it to 2% to complete and risk the economy. but the notion that immaculate disinflation will continue is something i find hard to reconcile. >> expectations on fed policy in march. what is the threshold to reduce interest rates and how close do you think we are? >> there is a reason they should go in march. the market is overly optimistic in terms of timing and amount of customer. the market should listen to the fed when it says signals around three 25 basis point cuts and i think they will start later than march. shery: it is the time of year again where we have economic, financial, and business leaders gather in switzerland for the

world economic forum. the theme is rebuilding trust. he was a look at the main issues set to dominate discussions -- here is a look at the main issues set to dominate discussions. >> davos home to the annual meeting of the world economic forum. here are three key topics. number one, a dovish pivot. despite the talk of higher for longer -- longer, investors are pricing in aggressive rate cuts by key central banks this year following the cost of living crisis and cycle of global monetary tightening reduced borrowing costs cannot come soon enough. the next question will be if policymakers can pay for avoid a hard economic landing. and rising. -- geopolitical pressure. already grappling with the

ukraine-russia war and the counteroffensive by kyiv has not gone to plan. military aid is not flowing as frequently. and now the conflict between israel and hamas. humanitarian cost has been immense in the war has a potential to spark wider tensions across the middle east with ramifications for global trade. and ai. investigators are -- investors are obsessed with the potential to disrupt the economy. pressure is mounting on tech companies to deliver on some earnings hope and the hallways of power, security and ethical concerns remain. the eu struck a agreement to regulate ai and set the timing for several rules for governments across the globe. davos draws criticism as being exclusive and out of touch with reality but chief politicians

and titans continue to go and as long as they do, the buzz will remain along with potential for meaningful change. shery: francine lacqua with a preview of davos. been up, and outlook on chinese economy ahead -- and insights telling us why the oil supply demand outlook remains bearish. we have some upside when it came to oil prices given the u.s. and allies launching airstrikes against houthi rebels in yemen. at daybreak asia is next. this is bloomberg. ♪

when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

♪