>> you watching "daybreak: asia" coming to you live from new york, sydney, and hong kong. haidi: we are counting down to the market opens in tokyo and seoul. >> asia sent for a weaker opening as bets further and one on imminent fed rate cuts. >> a cautious message being reinforced in davos. we hear this from the mastercard ceo and ims managing director. plus, apple ordered again to stop selling its latest smart watches over a patent fight with samsung over its own expanded health tech push. annabelle: we have the open of the asx 200. you can already see tracking the moves we had on the wall street session, so not going into too many details, but a headline we had the u.s. retail sales strong reading coming through telling

us that the consumer is resilient, and perhaps the fed really will not have any need to start cutting rates as soon as march of this year, so traders are continuing to push back their bets, and that is driving yields higher. we saw treasuries moving and you can see that again in the aussie three-year. the 10-year at the start of the day. it is also a story of u.s. dollar strength and we have seen that across the course of this week, so the aussie dollar trending back across that 65-cent level. you can see that express because we have the a sx 200.3% to the downside, but this is a fifth straight day of losses so far that we are seeing. >> let's change on because that is the dynamic we are expecting across equities in asia today, qe already online. nikkei futures, the chicago contract, even though we had seen that dollar strength, that move in treasuries leading to japanese currency weakness because the yen trading at 148. china the other partner is

causing investors and a lot of concern in the asia region because we had more signals of economic weakness coming through in the chinese economy. that really spooked investors in the hong kong session yesterday. also mainland equities, so it is that selling pressure we are really not seeing stemming just yet, even though there are actually signals of the national team in china stemming in dubai once again. shery: we do have an alert crossing the bloomberg. when it comes to sheryl sandberg, i suppose incrementally steps away as we have seen her transition away from this company that she has become really quite synonymous with. sheryl sandberg to exit meta's board. according to axios, she will become an informal advisor in may. the former chief operating officer planning to leave the board of directors according to

axios to become the informal advisor to the company. this has been sort of a long time coming in terms of the story, right? she joined the firm back when it was just that small start called facebook. shery: take a look at how futures are coming online, muted at the moment after stocks and bonds felt in the new york session. the fear gauge vix jumping to the highest level since november, briefly topping it's 200-day moving average. we are watching some idiosyncratic news around apple as well, down for a second session, given that the challenges continue in that dispute over a patent with maximo. at the same time, we are following oil prices carrying on from the wall street session, but it has been the push and pull when it comes to tensions in the middle east versus, of course, the crude production halts we have seen here in the

u.s., given the cold front that we are facing, but it is really to do with expectations of where the fed goes from here, right? those aggressive bets on the easing having pared back a little bit, so we have the treasury selloff in the u.s., the 10-year yield topping 4.1%, the two-year yield topping 4.3% and really reacting to that resilient economic data we have been seeing, especially when it comes to retail sales topping expectations. not to mention the fed beige book was talking about really strong consumer spending. haidi: let's get more when it comes to the latest eco-data. steve matthews is with us. what sort of jumped out to you in terms of the implications of the retail sales numbers? steve: the retail sales numbers were the strongest in three months. december is an important month with the holiday season, and it required wall street and

government forecasters to raise their forecast for gross domestic product, which will be reported for the fourth quarter, which will be reported next week . the atlanta fed for example raised its estimate of gdp for the fourth quarter to 2.4% from 2.2%, and that is above trend growth, and it is much stronger than anyone was expecting. wall street economists all last year were expecting the recession really starting in the first quarter, and we have gone through each quarter, and then the final quarter, yet again, the story is that the growth will be stronger, and that is a reason the fed is not in a hurry to cut rates. if the growth is going strong, then, you know, there's no rush to do anything to try to create more growth.

shery: we have seen the narrative of strong consumer spending being reflected on the fed beige book as well. steve: that's exactly right. the beige book is a report of the 12 fed banks in which they report a lot of anecdotes from business contacts and nonprofit contacts, and it is just kind of lazed through with details of businesses that were seeing stronger growth. in new york in particular, it was doing really well. hotels were packed, retail sales doing much better than expected. you just saw this kind of detail throughout where there is an increased optimism about 2024 throughout the 12 districts. shery: u.s. economic reporter steve matthews. our next guest says investors have largely hung the mission

accomplished banner on the fed's chances of achieving a soft economic landing. great to have you with us. we saw bond yields falling towards a 4% level when it comes to the 10-year yield. we are paring back some of those aggressive easing expectations at this point, but where are we headed for the rest of the year? >> one thing we definitely expect to see is continuation of the trend we had in 2023 whereby what is going on with the 10-year treasury yield and interest rates is probably the single biggest determinant of equity prices. you saw for example when the fed announced that her pivot in december. you've saw a rally in everything. we like to say that investors got a great 2024 during the fourth quarter of 2023. with respect to what we can expect this year, there's certainly some promising factors. inflation continues to drop. it is not dropping in a straight line, but when you look at the

latest inflation figures, over the last three months, you take a three-month core inflation and annualize that, you are looking at 2.4%, close to the fed's target, and some of that data is stale with respect to shelter. if you plug in real time shelter costs, it appears inflation is already at or near the fed's 2% target. as inflation pulls back, it does give the fed a lot of leeway to reduce interest rates. not necessarily due to economic softness, but just because if inflation is lower, your real interest rates are already kind of restricted, so they may cut those this year. investors really have hung the banner on a soft economic landing. when you consider that the news should be good for stocks, but with the s&p trading at 22 times forward earnings, that's more expensive than it has been about 75% of the time, so returns

might be a bit muted simply based on what our starting point is for stocks. >> especially given we are seeing the slight pull back at the moment. does that mean you can find better valuations in other markets? what do you like? >> there's two ways to approach this. one is when i say better markets, you might just think of better markets than the united states. a lot of what drove the market was that magnificent seven, big tech stocks. as a result, one of the things we have sin -- we have seen since that pivot is the fed made a broadening of returns. a lot of what did not do as well last year is starting to fare better. some things that have been left behind like utilities, like health care, even financials and regional banks. there's a lot of names in that section of the market that have gone basically nowhere for two years even while earnings have

grown, so you have better entry points and better valuations for good, old-fashioned stock pickers. you have opportunities there, and as well, whereas the u.s. market is trading above this -- above its long-term averages, overseas markets are still offering pretty good discounts. >> given that we also have a stronger u.s. dollar to contend with, what international markets could benefit in this environment? usually when we talk about international markets, a strong dollar does not help, especially in smaller market emerging economies. >> with the fed being one of the first central banks around the world to pivot to softening interest rates, that could lead to an easing of the dollar. usually if the dollar starts easing off, that ends up being great for emerging markets investors for a couple of reasons. one of which is simply a lot of countries have debt denominated in dollars. that takes the financial burden off of them as well as if you

invest overseas, the returns you garner back here in the united states in dollar terms end up doing better if the dollar weakens a little bit. japan has been on a tear, but that said, valuations have gotten a little bit richer. i mentioned emerging markets equities are attractive in three-point valuations. likewise, you have china. it is not for the faint of heart. the s&p right now, if you look at its 10-year average, is trading at about 20% premium to its 10-year average whereas msci china is now trading at over a 30% discount to its 10-year average. there has certainly been a lot of concern when they unlocked the economy from some of the covid lockdowns. that has been a little bit bumpy, but if you think about it, if you have had your leg in a cast, you take that cast off, you've got to walk before you run. a lot of the headwinds in china

such as the lockdowns and regulatory crackdowns on tech giants, some of those headwinds are turning to tailwinds this year. again, investors do need to be selective, but there might be opportunity simply based on entry point valuations at 20-year lows. >> china has continued to disappoint despite the fact that it is pretty cheap relative to other markets. investor confidence seems to be lagging, not just that, but consumer confidence among their own citizens seems to be lacking and domestic demand is not being propelled at the moment. in which sectors would you be able to hedge given the uncertainty of the market still faces? >> i think some of the places investors should look, you need to be wary of property markets. there could be some over valuations. investors have to be specially selective if they looking to banks, but i think you have to probably take advantage of this low, near term entry point to take advantage of some

longer-term secular trends, if that's the growing of the middle class in china. likewise, health care is a good place to go as well. >> good to have you with us. senior portfolio manager at nf j investment group. annabelle: just one mover we are tracking this morning, qantas and, the national carrier in australia. -- qantas and -- qantas airways. loyalty business is australia's biggest loyalty program. a significant change. andrew glanced replacing olivia worth. qantas, we know an airline still grappling to win back the confidence of consumers in australia. >> after what was a challenging

year. coming up next, samsung i am growth for its latest smartphone series powering a range of new features. we get the details next. this is bloomberg. ♪

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>> apple has to start -- stop selling its smart watches with a blood oxygen feature in the u.s. it is another setback in the iphone's maker patent dispute. how does this rank in terms of best to worst case scenario and what happens from here? mark: this is a bombshell. i would put it in the worst case scenario category. this means that apple's two-week stay being able to be sold is over. at this point, apple either has to stop sales of the apple watch tomorrow morning, 2:00 a.m. pacific time or instead, they have to remove the blood oxygen feature from the device, so this does not put apple in a great position. obviously, the apple watch is extraordinarily key to the company's bottom line and its future, but at the same time, i think if apple makes the

decision, which i believe they have, to simply remove blood oxygen and continue selling the device, i think they will be in good shape. i don't think there were many people buying the watch specifically for that feature. i don't think it is a huge deal. it is more of a small victory, but any time you get apple to remove a feature, it is a pretty big development. >> the company is facing challenges on multiple fronts. we are hearing it could face a doj antitrust case as soon as march. >> my colleagues in washington, d.c., are reporting the doj is taking an increasingly strong look at the company and some of their practices related to how they prefer their own software over competing software, how they tell you that -- tally their hardware to a stronger degree than third-party hardware. i believe the justice department will wait until march to do anything because they will have to see first how apple makes changes to its practices in

response to the european union's digital markets act, so once we see how those initiatives are resolved, we will have a better idea if the doj will move forward or not. >> last year was such a challenging year for sellers of handsets. what are we seeing from samsung in terms of trying to get more of that competitive edge? >> samsung is all in on artificial intelligence. they released their samsung as 24 line this morning. instead of focusing on hardware changes or camera changes, they are all in on google gemini models to integrate features like circle an image or video to get more information to summarize something in your notepad, to take an audio recording and summarize that. one really cool feature is live translations. you can be on a phone call with someone around the world, talking to them in your language and they will hear you in their language and vice versa, so some

deeply integrated ai features. >> bloomberg's tech reporter mark gurman with the latest. let's turn to japanese tech giant nec. it is see growing demand for its japanese language generative ai which was launched last year. it's ceo says they are seeing applications booming in 2024. >> last year, we launched japanese language-based our own generative ai. very compact and very well functioned to suitable situations, and also it's very secure. >> what are the future investment plans since there is great demand for it, and what are your targets? >> actually, this is coming from

the other decision which was made three years ago. at the time, our researchers pushed me to invest into buying agc for their own researches. at the time, i did not imagine how this is leading to our innovations, but at that time, we invested about 100 million to provide the r&d environment to our researchers. they come up with the ideas and create very compact size and versatile and very easy function to the digital environment. that is the kind of investment we made first. next year and this year, we continuously invest into this field, into the foundation

model, and also the applications. i believe that application is blooming this year. >> you can get a roundup of the stories you need to know to get your day going in today's addition of "daybreak." it is also available on the mobile in the bloomberg anywhere app. you can personalize those settings so you just get news on the industries and assets that matter to you. this is bloomberg. ♪

>> welcome back. the ceo of standard chartered says the market is getting a little bit ahead of itself on interest rate cuts this year. we spoke to bill winters at the world economic forum in davos

where he told us the global economy is putting up well despite wars in the middle east and ukraine. >> i must say, 2024 is starting off, from a banking perspective, quite well. we are always concerned how the problems of the world will affect our customers. so far, so good. i think the economy is in a reasonably good place. the tensions carrying over from last year are still there. the war in the least is a big problem and there are concerns that will spread, but it seems manageable from an economic perspective, although perhaps not from a humanitarian perspective. likewise, the conflict in europe . i won't say we are used to these things, but they have been around for a while. it would appear no one has an interest in taking very substantial specific conflicts and turning them into major global operations.

i hope i'm not wrong on that. >> the market is definitely present in a lot of cuts from the fed. we could see a lot of volatility. >> we could. i think the fed has done a good job of forecasting and indicating forward guidance their intentions. i think the market may be ahead of itself in terms of rate cuts this year. i have no doubt that we will get to rate cuts at some point. i suspect it will be later in the year. we have this debate within standard chartered all the time. we are positioned from a treasury perspective. we are partially hedged, but we are ok. quick to bill winters speaking with francine lacqua at davos. the latest on the corporate front and some of the stories we are watching. shares in charles schwab had some losses after the company reported fourth quarter profit that was down by almost half. net new assets were also down 48%. bank deposits declined to 1%. the ceo said 2023 was his worst

time at the company since the internet bubble burst in the year 2000. japanese bank planning to ramp up its expansion into private markets. the company's money management arm is considering buying a stake in a u.s. or european firm specializing in alternative investments. tasers -- it is targeting an increase in asset management. coming up, take a listen to what your next guest inks -- ♪ ♪ ♪ ♪

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>> we have breaking news.

goodyear is planning to doing -- to name stellantis executive mark stewart as chief executive officer following a pressure campaign from activist investor lvmh investment management. goodyear is expected to announce the appointment as soon this week. a representative for the company did not immediately respond to a request for comment, but we know that a manufacturer initiated review to maximize shareholder value last july after shedding jobs to deal with softening demand and spiraling inflation. we are now hearing from people familiar with the matter that goodyear is planning to name stellantis executive mark stewart as ceo as soon as this week. we continue to watch those market expectations about fed rate cuts. that may be a little bit premature according to the imf's managing director.

she said the battle against inflation is not over yet. >> going into 2024, the u.s. did very strongly. the euro area less well. we had upgrades for several of these countries including china in the second half. that said, i think we certainly should not be jumping the gun and thinking everything is done. when it comes to inflation, the job is not done. i think markets have become exuberant expecting as many rate cuts as they put in. i think it is important to put -- to be cautious, take time, look at the data that has come in and move slowly. >> again, do you worry about a mistake if we cut too much too quickly? if you study the inflation numbers, we just cannot quite -- cannot quite declare victory yet . >> it is a combination of both. if you look at inflation, it is

coming down, but still not going down very fast. i think we still have some stickiness in services inflation. wage growth is still quite healthy in many countries. there are still some downside risks. the problem is that if you cut rates and that totally solidifies expectations of the direction of travel, and that is hard to unwind. therefore, given where we are, given the road to resilience of the economy and labor markets, it is important to take the time. francine: is it really about how china, the economy will perform? >> china's economy, the latest number that came out for the year as a whole exceeds the target they had set. that is, i guess, the good news, but on the other hand, there are some different issues in china. of course, you have aging demographics. you have a property sector still in a very tough spot.

local government finances are also in a tough spot. if you look at projections going out 4 or five years, we have growth at about 3.5 percent. these headwinds play an important role in our projections. that said, the chinese government has stimulus ability. it can do the reforms to change the course, but there are headwinds. >> the imf deputy director with our colleague at davos. to give you china's economic weakness and to chart that market reaction, we look at what are some pretty horrible numbers for hong kong. annabelle: it is in particular because yesterday was that continued selling pressure from a lan equities, and also on the hang seng, but it was hong kong that bore the brunt of it, down nearly 4% and of the close. putting it in context, it was the worst today we have seen for equities in the city in more

than a year, about 15 months. 100% of the index members closed in the red, so it was really very broad-based, that pressure coming through, and a lot of anxiety in the market because trade volume, 70%, 80% above their averages and at least $100 million in value erased as well. when you talk about value being erased, let's bring up this chart. take a look at how much is being pulled out of hong kong and mainland equities because nearly $6 trillion has now been taken off. it is really these concerns we have continued to see around china's economic weakness. that is playing into it. there's geopolitical tensions and rate differentials as well because investors are preferring to stay in money markets instead of putting money into stocks in the city, given hong kong very

much caught in following the fed with hk expressing concerns around what is going on in mainland china's economy. when you look at how much has been erased, that also puts perhaps that question of if the market cap we have seen, how much is erased, if that will change where the biggest markets in the region are, and india could soon overtake hong kong, making it the fourth largest stock market in the world. it really has been a big run up we are seeing. in indian, japanese equities. we are also seeing a lot of selling pressure so far in korea this year. >> that has been a turbulent stop for the year for a number of these markets with a lot of uncertainties. a lot of uncertainties when it comes to the chinese consumer, the market is affecting tech, apple and samsung in particular. it has been a very challenging year for handsets.

samsung is iron double digit growth when it comes to his latest flagship smartphone series. it is being powered by a series of ai features. last year, samsung lost its top spot in global smartphone shipments to apple. for more, the asia-pacific associates director for mobile phones research joins us. great to have you with us. i got your reaction when it comes to the big samsung unveiling. do you think this a iphone will be enough to get back some of that market share? as a broader market, it looks to be quite challenging this year again. >> for me, i feel that these kinds of announcements or features that samsung has introduced on its phone, it brings a refreshing change to the market. a lot of people were saying they

are board of small incremental changes in the hardware year on year. it is probably something new for them to try on, something new to entice them to come and try these new devices. >> you have said you expect more of the recovery in lower-priced components. that tells me perhaps the chinese manufacturer is in the rents as well. what is the outlook when it comes to this rivalry between apple and samsung this year? >> i think it will just get even more intense. both are valuing for the premium segment of the market, and in the last few years, we have seen the premium segment has outperformed the low end segment, and both apple and samsung have been valuing to take their share of the pie in this space. apple has done tremendously well coming to the top of the market,

and with samsung introducing their new galaxy range with these ai features, i think the competition will get more intense. now we see announcements from all other major vendors talking about ai features in their phones, and at the same time for samsung, i think it will be tough as chinese players start to double down on efforts to also expand their share in the low end segment where they had lost some share in the last couple of years. >> it sounds like you think ai components or ai features will be the new theme across the board for the different brands. what are some of the challenges that come with unleashing this sort of ai technology on your phone? >> so far, we have just seen a smart set of features. ai on smartphones has been there

a long time. we have seen some of the tools baked into photography, into natural language processing, but now we see more of it across the board. with that, i think we will also have to find solutions to issues like security, privacy, authenticity of the photos and the other content being generated through these ai tools. this is something these players will have to figure out as we go along on this journey. >> apple is facing some challenges with the latest setback in its patent dispute. how big a deal is this? we spoke with our correspondent about it earlier, who said ultimately there are not a lot of people buying apple watches just for the blood oxygen feature, but is this incrementally another issue for apple to contend with? >> definitely so, but at the same time, the watch is not the

biggest revenue generator for apple. i think the bigger challenge for them is how they can answer, as other competitors are talking about ai in smartphones. it is not as though apple is not incorporating ai, but it is more about making more noise about what the iphones can do with these features compared to some of these other players. >> how are you assessing the chinese market? clearly weakness for the china consumer, not to mention some of the pr regulatory government banned headlines we have seen affect apple. will that play out in a meaningful way? >> yes, we have seen this in the china market. the ability to import components

was impaired. we saw a shift in terms of premium customers moving from wally to apple and with wally -- with huawei coming back into the mix, we see consumers coming back from apple to huawei. we will see this shift continue to happen in 2024, but at the same time, i think it is also challenging because the consumer buying problem has also suffered in china in the last couple of quarters, couple of years. it will be difficult for these players to gain shares, especially when it comes to the high end segment of the market. >> what about the product lineup for apple going into this year? any of these upgrades are semi-upgrades going to be making a meaningful difference? >> i think we will have to see what apple announces for their

iphone 16 lineup. there are rumors apple will incorporate more ai and machine learning features into photography and productivity-related features. i think we have to see what finally gets announced, but i think what we need to look at in the midterm is how apple performs in the first half of the year. interestingly, in the past, we did not see the kind of discounts for the iphone lineup that we have been seeing in the past year or two, and that is probably apple's reaction to market demand which has been slowing down, and these price discounts helping demand in the consumer sector. >> much more to come here on "daybreak: asia." this is bloomberg. ♪

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>> you are watching at daybreak asia. him and's who the rebels saying they have attacked an american vessel -- yemen's who the rebels -- yemen's houthi rebels. the latest attack came after the u.s. designated them a terrorist

group. that partly unwinds remove president biden made early in his designation as the u.s. sought to ease a humanitarian crisis in yemen. we continue to see support in the asian session. middle east tensions have led to some gains in the price of oil. bloomberg's su keenan joins us with the latest and a lot of that demand could come from china. su: china is the world's largest consumer. its economy expected to rebound, as is the global economy, driving a robust search in demand by 2025. in the monthly report they just released, you see .8 million barrels a day.

if this bullish outlook will be borne out or not remains unclear, but it means oil markets are set to remain in deficit through the end of next year. that is unless saudi arabia and its allies decide to boost output significantly, and at least one analyst is predicting that will happen. then saudi arabia may end voluntary crude production cuts later this year. that would put downward pressure on prices. meanwhile, opec issued the forecast a little earlier than normal. this was an effort by the opec secretary-general to push back against expectations that climate change will kathy use of fossil fuels. as for this year, opec expects global oil demand to increase by

2.20 5 million barrels a day. the coalition due to hold an online monitoring meeting on the first week of february. in fact, on february 1. >> it has been such a choppy session. >> there is a lot of volatility. as we just saw, the latest developments are a big part of the volatility. concern about geopolitical risk, concern about the israel-hamas war could expand beyond gaza, so there is that. meanwhile, you had the stronger dollar, which is typically bearish for oil, so there were wild swings, ending with a gain

we are seeing in asia. it is important to point out that a critical gauge for supply and demand settled in a bullish structure known as backward as asian. we have not seen that since november. to sum it up, there are a lot of issues. we have a major stream of frigid weather. new york got by with adjusting of snow but very cold temperatures out in the west. we have seen an interruption in the state's refineries. more than half of oil production is off-line. that is as much as 700,000 barrels a day not being produced. one private equity trader saying the latest political incidents good insight short-term short

covering, but long term, this is only providing a buffer for an otherwise weak fundamental environment. bigger picture is lower for oil prices. >> coming up next, we take a look at the market in tokyo. there are still signs the rally is losing steam after what has been a strong start to the year. this is bloomberg. ♪

>> a big miss for japan core machine orders for the month of november. month on month, a contraction of 4.9%. the expectation was for a contraction of less than 1%. when it comes to the year on your number, we are also seeing a 5% contraction, much larger than the contraction we saw in the previous month of around 2%. not to mention that the expectation was for actual growth of around .1%. both the month on month and year on your number for core machine orders in japan missing to the downside. we know this is a leading indicator of japanese business spending, so this perhaps not

boding well for going forward. the month on month number contraction of 4.9% for the month of november. signs the market may be overbought after its recent rally. we have our stock reported joining us now. i want to ask if this rally has finally run out of steam, but we talk to analysts who seem to be pretty upbeat about the japanese market. >> hi there. yeah, exactly. in the very short term, the market seems to be running out of steam after a very strong rally last week. we just did a report from the minister of finance on japanese stocks last week, probably one of the biggest on record.

that was the main driver of the market. when things like this happen, this tends to last longer. that is why many analysts are still optimistic about the japanese market. japanese retail investors got a new tax-free investment. while we still do not have exact data on how much they have bought, anecdotal evidence suggests it is very strong. many analysts still seem to be optimistic about the outlook.

>> some analysts bullish to the point of seeing the nikkei hit the record in the second part of the year. is there still the carrier over the same this time is different beams we saw driving the rally last year? >> yes, basically the theme is the same as last year. i guess it is a question about what kind of evidence we can get this year. people have been expecting inflation will take hold in japan. the key question here is if we are going to get wage increases. many companies have promised big pay rises, but we still have to wait for a few months to see if that is really happening.

>> our senior asia stock correspondent with what stocks are doing. trade begins in korea and japan in a few minutes time. samsung in focus, targeting double-digit growth for its latest smartphone series. we will also be watching some of these japan airlines as well. the number of foreign visitors to the country recovering to some 80% of pre-pandemic levels. worth noting that japan airlines is appointing a former flight attendant as the first female resent. this is bloomberg. ♪

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>> this is "daybreak: asia." after another day of losses for u.s. stocks and bonds, we had more positive retail sales data, not to mention the fed beige book leading traders to pay her back those aggressive bets on fed easing. >> this is really good news is bad news when it comes to market expectations for fed easing. more broadly, global central banks are scratching their heads in terms of what the next steps will be and how quickly we will get there is really the topic of debate, if you're talking about fed speakers or conversations taking place. let's get you to belle to see if we will see any kind of joy at the open. >> i don't think so. we have the open for japan and korea, and as you said, it

really is that assessment of the latest u.s. academic -- economic data. that signal of resilience is bad news for asset classes. we saw u.s. stocks, bonds drop in the pricing session. you are still holding above the 4% mark. that leads to dollar strength. it leads to japanese currency weakness. it had been positive for japanese equities, but perhaps a little bit do for a pullback to a degree given we had seen such a run-up not only over the course of last year but also the start of 2024. there's also the signals we are still getting in japan's economy. a big drop on what we had been expecting from economists, down 4.9%. a lot more than had been expected by economists, as i said.

a reason the doj does need to keep its dovish policy settings, but not much reaction. equities, as i said, .2% to the downside for the nikkei. let's switch and see what we are seeing in korean training sessions so far. we have seen emerging-market assets under pressure. today fairly steady, but we did hear from fx authorities, unnamed, but saying the one weakness we have seen this year is somewhat excessive. we are also keeping an eye on what is happening with samsung because we did see unveiling a new flagship phone and we are seeing samsung rising a little bit to start the day. to australia, we are one hour into the session for the asx 200. we are looking ahead to economic data in this hour, so 30 minutes from now, we will get the latest jobs numbers, and we are expecting to see a slowdown.

important because the rba meeting is just a few weeks away. we are tracking if we can expect to see any sort of talk of cost -- talk of cuts on the horizon. the rba one of the central banks said to stay higher for longer. the aussie dollar, as i said, unchanged at this point and we are seeing wti a little higher, but it is really that choppy session because investors are looking at what we are getting in supply. lower supply from the u.s.. on the flipside, continued concerns we have around the health of the global economy and chinese demand really part of that as well. >> i want to bring on our next guest who says it is a new era for asia in emerging-market equities in asia and india. that euthanasia and em strategist at morgan stanley joins us. wonderful to -- the chief asia

and em strategist at morgan stanley joins us. wonderful to have you. a particularly vigorous start to the new year. this is the number, isn't it? do you think we will get there sooner first half or more of a second half story? >> we are very bullish japan and have been for some time. in terms of the topics target we have at the moment the base case 2600. we have made some very good progress towards that, but the bookcase is coming into frame, particularly as we were mentioning that the yen is tracking somewhat weaker than indeed we are the consensus was expecting and we are getting continued gains by japanese corporate's in terms of the global sectors in which they compete. one of the things that is so

exciting about japan is 2/3 of sectors in japan are improving operating margins versus global peers, and that is not just a yen weakness story. his it's a cycle that has been going on for at least a decade now. >> a lot of this has been based on the big fanatics that have been in place for some time now. i do wonder, has it actually materialized? i guess it is supposed to be the best in class for japan, but they have failed to present plans to improve governance in share prices. we are also seeing a failure to present what they intend to do. how much progress to do you need to see to justify the exuberance we have when it comes to japan equities right now? >> there are a very large number of stocks listed in japan, in

the thousands, but if you look at the large cap names, particularly look at performance in terms of corporate return on equity, when i picked up coverage of japan, they were delivering about 4% r.o.e., which is closer to about 10% now, and the market was trading below book value, and now we are looking at the market moving into the central zone of global equity markets, having been somewhat in the wilderness for 20 years prior to 2012, so it has been a long journey and not every japanese corporate has participated, but large-cap stocks have already been doing well for some considerable time. >> your other leader in the asia story is india. i the premium valuations we have seen up to this point in 2023 justified? >> that is the second most expensive market in the world

after the u.s. corporate r.o.e. is around 6% but you are paying around four times price-to-book for that. the issue is how sustainable that is in a nominal gdp environment that is probably at least 6%. one of the remarkable things about india is its transformation and strong inflows from fbi and private capital. his it's realistic to think of 12%, maybe even 15% compound nominal dollar eps growth, but you certainly are paying up for that and it's not as cheap and market as japan is. >> how much is india benefiting from the geopolitical flows we are seeing away from china and this de-risking, decoupling move? >> one of our big investment

themes is the multipolar world theme which we have been writing about since 2018. you are seeing a number of dimensions around trade, which i just touched on foreign direct investment. broadly speaking, india is advantaged in the world we are now in as indeed is japan. >> i said de-risking and decoupling, but what is the risk that orderly de-risking becomes decoupling, and what would that mean for chinese assets? >> we frame it more in terms of what we call a multipolar world, but i understand the terms you are referring to. in relation to china, what you are seeing is that chinese exports increasingly are successful in what one might term friendly geographies. yet, you have challenges in

relation to chinese exports, and particularly, this sort of technological transfer issue or the restrictions i have put in place on chinese acquisition of technology. they are leading to some degree of de-risking, even to some form of decoupling. >> it has been a horrible couple of days for chinese assets, and hong kong chinese listed assets in particular. i feel like the levels you guys are looking at are perhaps even more bearish than a lot of other investment strategist we have spoken to. do you think there will be the big bang stimulus that seems to be at this point the threshold for international investors to be compelled to even buy cheap valuations?

>> we think stimulus is needed in relation to the consumer and that the key to the situation in china right now is the consumer and particular consumer services spending needs to come to the fore. china is exhibiting signs of what we have called a 3d problem, a demographic deflation problem, and consumers are starting to tighten their belts, pay down mortgage debt for the first time ever, and when we actually look at the nominal gdp growth environment, it is completely different than what we are seeing in india and japan, not showing signs of recovery, so for the first time in 30 years, japanese nominal gdp growth of last year exceeded that of china and india and indian growth is getting on ahead of that of china. china has really moved into a much slower growth path, and corporate earnings expectations are not up to speed with that. we are continuing to see

downward revisions to earnings estimates for china and hong kong, where as we get continual learning estimates -- continual upward earnings estimates are india. >> are we talking about direct payments? is that something that would potentially lift the weight of what we are seeing as a deflationary circle in a circle of downward demand and confidence? >> yes, i think things like consumer vouchers or other measures to support the consumer and also private business investment, which is weak -- they are actually needed. in terms of the quantum, i think we are looking for a needed stimulus of at least 3% of gdp or maybe higher, bearing in mind how big the property sector was at the top in early 2021, and the significant reduction in property sector activity and all

the ancillary services that feed into the property sector that's now ongoing, plus the effect that is having on the consumer psyche. this tendency of consumers to be unwilling to take on new debt, even in a lower interest rate environment, is very familiar to people who lived in japan 30 years ago. >> really great to have you back with us. always good to see you. chief asia em strategist at morgan stanley. it has been about 11 minutes since the start of trading in japan. what's moving? >> it has been a little bit interesting because we are seeing the nikkei turning positive. we came online into the red, but there are some sectors helping it turn positive once again. one of those is what we are seeing in these tourism-related stocks because we got the tourism numbers out yesterday afternoon, and we are seeing pretty steady recovery for the economy. japan overall welcomed 25

million tourists in 2023. around 80% of pre-covid levels at this point, but that is the biggest number we have seen since 2019. into the end of last year, we started to surpass pre-pandemic levels. a week yen, that is part of the story, but certainly a lot of travelers looking to go to japan as well, so that is supportive for some of these stocks. another group of stocks we are watching this morning, the kospi still fairly flat right now, but we do have some samsung and samsung suppliers hosting modest gains. samsung unveiling the latest iteration of its galaxy product families, the most direct rival it has two the iphone. loss of -- lots of new capabilities. in built text translation.

it uses and capabilities not only of samsung but also of google, and some analysts saying this new smartphone could post the biggest galaxy sales in eight years, so samsung looking to take a large share of the ai phone market in the next year's, and the galaxy as 24 is seen as being pivotal to that, so the stock is higher today and also some of the companies that get a lot of sales from samsung as well. >> coming up next, we will be hearing from hong kong's finance secretary and why he is upbeat on the city's property market in the long term. 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?

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>> there is maybe a lack of conviction in the markets at this point. we have seen the 10-year once again over 4%, so when you start combining higher interest rates, a lot of geopolitical flashpoints around the world, some concerns that may be the growth rate in china was lagging below what people were expecting it to be, all those things get

together and create an environment where investors are set. >> hong kong's finance secretary says he is upbeat on the city's property market in the long term. he told us the interest rate environment should be more stable this year and is already seeing signs of capital inflows in the city. >> i think the market has been affected by sentiment, but going forward this year, the interest rate is going to be coming down, so i'm optimistic about january 2024 and 2025. >> it is about confidence and trust. how does it get fixed? >> there could be some misinformation. if i look at the total bank deposits of the hong kong

banking system, at the end of december, it was about 5% higher than last year, so the figures indicate that indeed, net capital flow is inflows instead of outflow. i think this it's important to communicate with the investing public. >> what is your pitch in davos? does it involve at all the rapid recovery of china? >> china is recovering. at the committee meeting last december, they stressed stability. stability about the property market, about local government deaths, about following expectation of china's economic growth. 2023, the economic growth was about 5.2%.

this year, 2024, the target is about 4.6%, so it is on the right track. as to hong kong, i think now could be good timing for long-term investors, no matter if it's our real estate market or the long-term market. >> there is not stability just yet in china or hong kong. property prices have been on the decline. how do you arrest the problem? >> it is on the decline because the interest rate was high. geopolitical tension was challenging. people were concerned about the economic recovery, but going into 2024, the interest rate environment got stabilized. interest rate cut is coming. the economic situation, particularly in china and developing asia, are very positive. i do think -- say, for example, for the property market, the pent-up demand is there.

when people are more clear about the interest rate environment, then i think they would be able to better assess when to fulfill their demand. >> are you considering other measures to bring that demand? what are some of the things you are thinking about? >> i'm afraid i would not be able to comment on that, but let me assure, the hong kong government has been monitoring the situation very closely. our policy is to have a very healthy property market which grows in line with our economic development. >> went to you see that happening? -- when do you see that happening? >> in the medium to long term, i'm positive. >> you can get around about the

stories you need to know to get your day going in today's edition of daybreak. visits available on the blue -- on the mobile in the bloomberg anywhere app. you can customize your terminal so you just get news about the industries and assets that you care about. this is bloomberg. ♪ never waking up from anesthesia -- 1 in 185,000. validate your parking or just see how it goes? what? why stress about the unlikely? does a killer clown worry about being struck by lightning -while winning the lottery? -sure don't. but your odds of falling victim to online crime are 1 in 4. you need aura. you, your family, all protected from scary online stuff. [ laughs ] protect everything your family does online with aura.

>> welcome back. cbs news says the u.s. has conducted before the round of strikes on houthi targets in yemen after a third commercial vessel this week was attacked by a drone launched from hout hi-controlled areas. earlier, washington redesignated the houthis as a terrorist group, partly unwinding a move by the biden administration as

the u.s. sought to ease a terrorist crisis in yemen. >> the european central bank president says a rate cut could come later this year. she says more evidence is needed before policymakers can be sure inflation in the euro zone is under control. >> i'm confident that short of another major shock, we have reached a peak. we have to stay restrictive for as long as necessary until we get to that state until we all say we are confident it is debt -- it is at percent medium term. a lot of people think we are overshooting or taking risks. i think the risk would be worse if we went to fast and had to come back tomorrow tightening because we would have wasted all the efforts everyone has put in the last 15 months.

>> if you get this wrong, does it hurt the credibility? >> credibility matters, let's face it. when we say we will get to 2% medium-term and this will happen in the medium as we define it, if people believe that, and they should because we will do it. it matters. it is a component in the chemistry that determines inflation going forward. >> the timing is quite fluid, but there seems to be a majority of the governing council that expected by the summer if not in the summer. >> you have talked to some of them. they have spoken recently, and each of them has their view, which i respect completely. we generally coalesced towards the decisions we make. some have their local investment data. they have their respective inflation rates, which are different from one country to another. it is their job to say it is

likely that. i would say it is likely, too, but i have to be reserved because we are also saying that we are data-dependent and that there is still a lot of uncertainty and some indicators that are not anchored at the level where we would like to see them. quickly u.s. -- >> the u.s. election. >> yeah, let me have some coffee. [laughter] >> how worried about you -- how worried are you about the u.s. election? >> it is for the american people to decide who they want with their politics, government, and future. obviously, we are all concerned because the united states is the largest economy, the largest defense country in the world and has been a beacon of democracy with all its upside and downside . this is what they should be considering, and of course, we cannot interfere with their

choice. it is their choice, and that is the beauty of democracy. we have to be extremely attentive and anticipate, just as we do with inflation. >> ecb president christine lagarde speaking with francine lacqua in davos. looking at how european futures are opening, it has been a difficult environment for risk trading. futures largely unchanged at the moment. we did see european stocks dropping for a third day on these concerns over china's economic growth data disappointing. investors continue to be concerned about the path of central bank policy. hsbc worrying

haidi: a challenging session for

markets at the moment as we have variable risks to be concerned about from china's long make -- economic slowdown, the data, and the uncertain path to easing from major central banks. this as we get job stayed out of australia released today. the employment change seeing a contraction of over 65,000 jobs from the broader employment picture in nostril you, really giving back all and then some of the previous month. quite a bit of turbulence. on a plummet rate staying on hold at 3.9% -- the unemployment rate staying on hold at 3.9%. it's a little softer than expectations.

over 106,000 full-time jobs have been taken from the economy following a 57,000 gain. part-time unemployment, though, seeing a gain of 41,000 for the us trillion economy. this is potentially streaming into what we see from the rbi, amid declining consumer confidence going into the start of the year. household, individuals anxious about finances clearly going into what has been a series of rapid rate increases. that market reaction as well in the dollar and trillion stocks. a pretty sharp decline in employment in the december reading. annabelle: we have a sx shares -- asx shares down. there are concerns around the

prospect for rate cuts, very much the bond space. yields moving higher at the front end of the curve, that's the two-year. the three year yield just adding again as investors think the fed will be looking to delay any sort of rate cuts and the rba we know is likely to stay higher for longer. strong u.s. retail sales, and also concerns about china's economy, the big selloff yesterday and equities in hong kong. we are seeing modest gains and investors are still nervous. a mix in the downside with the dollar strength and the move in treasuries. in terms of what is standing out, still japanese equities,

modestly higher at this point in time. let's bring up the terminal chart and look at how much investors are continuing to favor this market. this chart shows. -- shows a three-month high, preferring this market for a variety of reasons, geopolitical and also dovish doj, the japanese currency weakness, quite a long list. where else investors are choosing to pull their money is korea. this chart shows the daily stock market flows. yesterday a very bad session, $800 million of shares sold alone, one of the worst starts to korean equities at the start of this year.

that's a correlation we see between south karina -- south korea and taiwan, these markets are very reliant on the health of the tech sector. haidi: we will get more indication from earnings results today. tsmc will report for the corner -- quarter results. there are signs of a widely anticipated recovery in chip demand, data showing november marked the first time in a year global chip sales rose. the executive vp joins us from taipei. give us an idea of the robust demand for chips will be reflected in the results. >> good morning.

i think for tsmc, this year has to get much better yield than last year. there were a lot of challenges last year. it is expected this year due to the utilization, it's coming up to 80%. the process notes beyond that, this is where the high-volume consumer-electronics customers like apple and even intel are utilizing the manufacturing capabilities of tsmc to bring out chips for the increased demand. for example the pc notebook market. haidi: i wanted to get to that because we've seen softness not only in the pc market but also the smartphone space.

when can we expect the rebound and how much would that benefit tsmc? marco: that's correct. the biggest sales last year with a six and seven nanometers because they are used in smartphones and this dropped significantly. everybody was hoping it would continue to go up but you have to understand, we have today more phone contracts than people living on earth. we have a certain saturation in the market. what it could benefit is you see a shift globally on more higher and smartphones that use more content and more advanced products. this can drive, even the stagnation of the volumes, output because of the products going on the smartphones. haidi: when it comes to advanced

ai high-bandwidth memory, that race dominated by certain names. how does tsmc compete in this space and can we expect this to become challenging in the years to come, given governments around the world are investing so much in the sector? marco: tsmc is not playing directly in the memory field but they are building the core processes for nvidia, amd, which is using it. market like nvidia, it's also the packaging. this was a challenge for tsmc, especially last year, ranking up. we've seen the numbers. amazing numbers from nvidia in

q3, how much revenue they were able to capture for this ai and it continues to drive them up there was a bottleneck and this was advanced packaging. the capacity can meet also the demand. companies around the world can get their hands on ai chips . you mentioned that others have benefited from being early, but don't get this wrong, micro technology and also samsung are working hard on the ketchup. there will definitely be also more competition in these memory players.

shery: what about the decoupling of supply chains in the semiconductor space in 2024 and beyond? marco: many countries have special subsidy programs to be able to attract semiconductor companies to their region. tsmc has made the move to three major regions. usa expansion, japan expansion and europe expansion. europe is a little special because there think it is called esmc, where you have like 30% of the company owned by european companies where they are able then basically to secure supply, especially in europe, there is a strong automotive industry and they hit very hard during the covid time and the supply chain challenges. there is a way europe tries to

mitigate or balance this out in order to build up also like a smaller version of the semiconductor ecosystem. i think worldwide, the most complete semiconductor system is in taiwan. even there, they need chemicals from japan to manage this, or a quitman from europe. -- or equipment from europe. the semiconductor industry is highly connected globally. decoupling is almost impossible. de-risking to an extent is possible and also necessary not only because of political reasons, but also when you think about japan and taiwan -- we are living in an earthquake region. we've seen this before. i think people, companies and activities are more concerned to have more regional perhaps to

build more resilience against a supply chain disruption. shery: interesting. marco, good to have you with us, joining us from taipei. more to come. 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

shery: time to look ahead to the market opens in hong kong and mainland china as mixed economic data reinforce bearish sentiment. some big outflows on wednesday. charlotte yang joins us from hong kong. what can we expect today? charlotte: it was so painful yesterday, even longtime china bullish developers have started asking what are we waiting for? china is such a waiting game, and the remarks at davos, i think investors are lowering expectations. currently there is no conviction. that said, i think there could be some of the courageous investors willing to fish at

this level. after the valuations, and for specific stocks, falling below the initial ipo price. worth watching. -- domestic travel stocks. there is a city in the northern part of china that has been attracting a lot of attraction from tourists. it has improved sentiment in the domestic market.

traders are often looking at trade ideas but at the moment, they like good ideas. we are seeing particular interest in more focused firms. haidi: charlotte yang with us. china's population fell to record lows in 2023, and the demographic shift could pose challenges to a government already contending with deflationary pressures and a structural property crisis. joining us is our economics analyst. they told people to have more kids, they try to dismantle the one child policy, but it is proving to be not that much of an incentive. >> at this point the demographics are challenging and

it will have a significant long-term growth impact. we know the population started to decline in 2022. in 2023, the trend accelerated. there are varied concerns and increasing job and income and security. we have done projection, the acceleration in the population decline and the property slump. growth could decelerate to 3.5% by 2023. that is a significant downward revision. we are looking at growth above

4% before 2030. it is quite a worrying trend. shery: it doesn't help we continue to see chinese people hoarding cash because you're not seeing that strong safety net. how does this compare to japan in the 1990's when we also had a declining, shrieking population combined with people really scared to spend. how detrimental is this for the chinese economy? >> the experience with japan, there are some similarities. certainly china because of the declining population and the

uncertainties people are facing, increasing precautionary spending. also a lack of alternative investments. there just hoarding cash. one potential difference we are not seeing yet, could be the government, chinese government learned the lesson from japan's experience. therefore it would increase spending at a time during japan's experience, and the private sector people, households and companies try to reduce spending whilst the government is trying to reduce spending at the same time. i guess one of the lessons from

japan in that period is the government might do a bit more to boost the overall demand of the economy. haidi: such a tricky demographic position to be in. our chief asia economist with us on beijing's economy. we are looking at trading in australia, down across asset classes. weakness of about half a percent, paring some of the steeper losses in reaction to the unemployment numbers. fewer people were seeking work, but the shedding of over six 5000 jobs -- 65,000 jobs, we are seeing that repositioning in swaps trading, boosting bets on the rba cutting by about 55% chance it will lower borrowing

costs in the august decision. the aussie dollar also seen a loss as well. more to come. this is bloomberg. ♪

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in india and said it's a great time for investors. >> it's twofold in terms of a lot more clients and customers from all over the world are willing to be delivered out of india, much more validation of the talent we have and how we can upscale that talents. they are much more willing not just to go to the main cities, like bangalore, but tear two and three cities. what is buoying india's growth is the extremely young demographic, digital natives feared i think it's a great opportunity even domestically. when we think of software and the large buyers echo system in

the country. i think india is going to be a good strategic market for us, which it hasn't been historically. >> what kind of investments are you looking at? >> because we are an indian based organization, we have our largest investments, off the 250,000 people we have, a majority are from india. we continue to open new i.t. delivery centers in tier two and three centers. looking at the network of talent. we've had phenomenal growth the last year. we've got 2.6 million learners, out of which 50% are women working in training and scaling in. development. we have a health care to --

health care that is growing. because we have some global customers as well as global companies coming and setting up strategic excellent centers in the country, there's a big opportunity to work with them on the health care needs for their employee base and setting up health care services for each one of them. at the moment they are in the process of exploring opportunities in the semiconductor space as well in the country. i think there's a lot in the works and it is a good time to be in india. haidi: the hcltech chair speaking to us. we are watching as rockets open in hong kong and mainland china. we are keeping an eye on samsung suppliers, the smartphone maker unveiling the galaxy s24.

a focus on the ai elements in this range. some of the usual suspects when it comes to handset providers. shery: this is the picture across the futures space as we continue to watch the offshore you on -- yuan against the u.s. dollar as we continue to see dollar strength as treasury yields and level bond yields continue to rise. bloomberg markets: china open is next. this is bloomberg. ♪