>> welcome to "bloomberg daybreak: australia." i'm paul allen in sydney. the markets have just come online. annabelle: i'm annabelle droulers in hong kong. the top stories this hour -- asia, getting a positive lead in with the old swelling as the treasury cuts at its quarterly borrowing estimate. the nasdaq getting ahead of earnings with tech mega caps. the biden administration seeks to response to the attack and jordan that will not trigger a regional escalation. evergrande's liquidation order is posing a big test for international creditors as beijing faces a property downturn. paul: let's take a look at how we are shaping up for this tuesday trading in the asia-pacific. the asx, showing modest gains.

today could be the day we see a record on the asx. we are at seven 580. the number to watch, 7632, for the all-time high. yields, falling modestly. the aussie dollar, breaking through the 66 cent u.s. level. new zealand has been trading for a little while now. we've got the nzx losing about a quarter of 1%. the nikkei, in a positive session. the yen, strengthening just a little, relatively, 4750 at the moment. futures for china, in negative territory. we have gotten rather used to that story. [laughter] annabelle: that's right, paul. the other story is the amount of gains we have seen in u.s.

stocks over the course of this year. the s&p 500, crossing that 4900 mark in the prior session. a record high for the u.s. benchmark. the nasdaq, getting as much of 1% ahead of key earnings this week from alphabet, amazon, meta, microsoft and more. a really big few days ahead for that market. a lot of investors focused on those numbers. the data with the jobs report. but the move today focuses on the action in the bond space. u.s. treasury, surprising traders. it came down to it cutting its borrowing estimate to $760 billion -- quarterly borrowing estimate to $760 billion. paul: let's bring in our mlive contributor, garfield reynolds, here in sydney. we have seen yields declining. what part of the curve is looking more vulnerable here? >> the short end, because this

has really emphasized -- this was one of the three big risks for bonds coming into this week. this one turned out not to be a risk. we didn't get the increase in expected borrowing which many had been looking for which might have set yields up across the curve, but further out, that's usually where things like supply risk have a bigger impact. now one markets are going to pivot rapidly to, what does the fed say tomorrow? that's more about the short end of the curve. we are waiting to find out whether or not we get those rate cuts -- when we get those rate cuts and how many of them we might get. that is the sort of thing that matters more for the short end of the curve. annabelle: give more context on what markets have been expecting, the numbers that came

out, and how it sets out some further quarterly refunding announcement from the treasury later this week. >> markets have been looking for something like more than $800 billion as the borrowing estimate. it came a net $760 billion -- came in at 760 billion dollars. it's been driven by an improvement in where the treasury's cash reserves are. it's not because there's been an improvement in the current fiscal situation, the deficit's still getting larger, but as i said, they are in a better position with what they've got on hand. they are also looking forward to the second quarter, a return to normality in the second quarter. the treasury ends up paying down its debt. that's when you get the big tax receipts coming and. the expectation is they will have a net borrowing need.

there's that going on. what we are looking for with the actual announcement is a slight increase in the longer term note auctions, 10 year particular might actually increase. this is seen as the last hurrah, the last increase for a while. the market will be less concerned by that increase in the option size to start off with because the picture going forward looks so much less concerning than many had thought it might. annabelle: that was our chief rates correspondent for asia and mlive contributor there. joining us is belita ong, there are some strategists saying treasury refunding has more market moving potential than the fed this week. where do you sit on that view? >> thanks for having me back. we are not experts at u.s.

monetary policy or fiscal policy, but we have to watch it because it impacts everything else. with that said, it seems that the fed is on hold for the time being. pending further data. what they are looking for is a sustained path toward the 2% goal. i don't see monetary policy being much of a factor in the markets until the march meetings. with regards to the treasury, it is clear they will have to increase over time. the past might be uneven -- the path might be uneven, because it is seasonal. the question we should think about is despite the liquidity in the treasury markets, will we get to some point where global investors will tire

of buying u.s. treasuries and cause an increase in the u.s.? we will just have to keep an eye on the ongoing liquidity of the treasury market. annabelle: one of the factors that plays into the demand for treasuries is geopolitical risk. which ones are you watching in particular? >> geopolitical risks are impacting everything at this point. two wars we are looking at, especially the one in the middle east is of particular importance because it affects the price of oil and that tends to be pervasive in production supply chains, that is very important to watch. the thing to watch of course is iran's participation, or growing involvement in this crisis, which could be very bad. that's probably the most

relevant concern geopolitically on markets. because of its impact on inflation. with regards to other geopolitical risks like the u.s. elections, they will come and they will go and likely they will increase divisiveness ahead. we might get a reprieve if the republican president chooses to try to end the war in ukraine by not providing support. whichever way it goes, the u.s. is essentially a growing deficit country and without some sort of comprehensive plan as to how to reduce that deficit, there will be pressure on the interest rates going forward i believe. paul: more presently we do have a fed meeting coming up this week. no change expected. rate cuts have been receding as well. bearing in mind the geopolitical risk you are talking about there , are you reevaluating

expectations around timing and how many cuts we get? >> i think the. paula -- the fed's dot plot is something to look at this year. it all depends on the data we get. there is some concern about employment from the most recent data we have seen which shows that with the earnings reports that have come out, 20% of the companies reporting currently, we've seen something like 13% of them talk about layoffs. which is unusual, an unusually high percentage talking about layoffs in their financial releases. more typical numbers -- something like 7% in a strong, growing economy. perhaps we see weakness in employment numbers going forward. these are all factors causing changes, ai, people hoarding capital before this year,

we will see how it turns into the employment numbers. paul: belita ong of dalton investments. we will come back to you in a moment. still to come, washington, seeking a response to the deadly attack on u.s. troops in jordan without sparking a wider war in the middle east. we will hear more from the u.s. defense secretary later this hour. we will talk about the downfall of china evergrande and what liquidation means for china's property sector. this is bloomberg. ♪ much? nahhhh... [inner monologue] another destination wedding?! we just got back from her sister's in napa. who gets married in napa? my daughter. who gets married someplace more expensive? my other daughter! cancun! jamaica! why can't they use my backyard?! with empower, we get all of our financial questions answered. so we don't have to worry. can we get out of here? i thought you'd never ask. join 18 million americans and take control of your financial future

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annabelle: now that a hong kong court has ordered the liquidation of evergrande, the big question is whether that decision will be followed in china where the bulk of its assets are located.

let's bring in our chief north asia correspondent, stephen engle. it gets interesting now. >> now, what happens? there a hong kong court order for the liquidation from yesterday. will that be followed in the mainland where there is a different legal system? it takes direction essentially from the communist party. if there is a dispersal of these assets, is it going to happen in china? there is no precedence for a large company like this with the spaghetti bowl of but= liabilit -- with a spaghetti bowl of liabilities and priorities. who is going to be left with the lion share and who's not going to come out happily? will it undermine essentially -- the bonds and shares are traded here in hong kong but the bulk of the assets are located on the mainland.

how does this get to be up -- divvied up? it's a complicated process. this doesn't happen in china, liquidation. it's called an open disposal. where there will be essentially direct restructuring going on behind the scenes while the company continues to operate, albeit on a restricted basis. hna group is one example. the company that got into many different businesses. mainly hong kong airlines and the like. that process took four years. it was a bit messy as well with criminal proceedings and the like. that's the closest analogy we can get. evergrande, who knows how long this could potentially take? we have seen the economic czar and china had a meeting calling on all the municipalities and cities across china to follow the central government's orders to pretty much returned

discipline and follow through on central government policies to clean up the property mess, because it's leading to the stock market mess, lack of confidence in china overall, so, again, lots of issues to talk about. one thing you think about, if this will be contagion to others and no white knight coming in, like beijing coming in to rescue the insolvent developers, you have to look at things like presales that are in escrow right now. those presales, which these developers needed for financing and then dispersal into other higher-yielding assetss or investments, he is warning, city governments, you watch the presales sitting in escrow in case they are dispersed elsewhere if you know what i mean, basically raiding the cookie jar while authorities are trying to figure out how to unwind what was one of the

largest developers in china. paul: i know this is a tricky one. what kind of timing are we talking about for this unwinding? when it happens, will it be a liquidation? will the usual people be at the front of the queue this time? >> everyone will be putting their hand out, saying, "what about me?" we saw that with the coupon payments. it will all depend on if mainland courts back up what the hong kong court did yesterday. that's -- how long is a piece of string? we simply don't know how long this is going to take and if there will be compliance to that hong kong court order in mainland courts. those assets -- we can't tell. the bloomberg economics' eric j. will be on later,

hna's process took about four years to unwind and essentially be restructured into what it is today. it's going to be a long process, definitely. annabelle: that was bloomberg's chief north asia correspondent, stephen engle. let's bring back belita ong of dalton investments. the pessimism surrounding china is entrenched. what are you seeing opportunities out of that instead? >> it is still early. so much is wrong with the economy and financial structure in china. it bears watching. the market is cheap. there are good companies. there are people who are hard-working, disciplined. it certainly bears watching. we are looking. but we are not yet finding. it's early -- i think the way

this bankruptcy of evergrande works itself out will be very interesting and instructive. it will either assure foreign investors that they will be dealt with fairly or not, and perhaps it will also sort out where people stand, in in terms of their ownership of unfinished apartments in china. it certainly bears watching. annabelle: when you say that you are not finding anyopportunities just yet, what are you looking at? is it sector-specific? is it more the price story? >> we have been out of china for a long time. we started getting nerves in 2020.

we've had no exposure whatsoever. what would bring us in is some sign that there is a return towards a market where minority shareholders will be fairly treated. essentially permission, or the government n interfering -- the government not interfering with the capitalist system. perhaps we can get something closer to that, than where we are now. but relations and business is good. but we have to know that management of companies we invest in have priorities that align with hours. we look for that -- that align with ours. we look for that. paul: how is it influencing your strategy when it comes to china, the yuan? >> it is undergoing pressure because of taking -- because of foreigners taking capital out. it's possible the chinese government devalues, which they

have so far resisted, to stimulate exports. the problem with that is, you typically want to do that when you have an economy where the currency is too strong. which is not the case in china. when you apply a solution of devaluation, you are seeking a short-term solution that does not develop into the long-term. they could do it. if they did, we would look for companies that might benefit from stronger exports. but i think there's plenty more they can do before developing the yuan. paul: a market that is more optimistic would be korea. companies are trading at a discount. can you give us ideas there? >> korea is an unloved market and has been for quite a while. there's widely publicized

corruption at the tables. in korea, something like 75% of household wealth is in real estate, reflected in a soaring real estate market. pretty heavy financial debt on the household balance sheet. the program government -- the korean government, seeing what's happening in china, they are quite nervous about this imbalance of assets allocated to real estate. they want to try and encourage their public and pensions to invest more in the stock market, which has been languishing for over a decade. they've taken some steps to try and improve things. the president in his first public appearance, he showed up at the opening day of the korean stock exchange and essentially

talked about how he wants to remove the korea discount. his reforms, he talked about, included simplifying the tax treatment of investing in stocks or removing capital gains on tax -- on stock investments. he talked about reducing state taxes. it's the highest state taxes controlling families to keep prices low. that's dampened the performance of korean stocks. if you reduce that, thatallows prices to increase . that's also helpful. and these measures if taken together with some of the things japan has done, which has helped the japanese market, such as most recently the naming and shaming lit --

shaming list of companies, it could help restore confidence in the korean stock market. the other thing happening in korea, too, is, by taking these steps, it is readying the korean market to be accepted into the wider index. investors are based on indices. goldman sachs said it would bring around $55 million immediately into korea. that's very helpful. there are many things that are interesting. paul: thanks so much for joining us, belita ong of dalton investments. you can get a round up of all these stories to get your day going in today's edition of daybreak on dayb. you can customize your settings so you only get the news on the industries and the assets that you care about. this is bloomberg. ♪

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paul: you are watching daybreak: australia." elon musk says the first human has received a brain implant and says the patient is recovering well with promising neuron spike detection. this will enable people with paralysis to control external devices with their thoughts. it's raised more than $500 million in venture capital since 2016. shares of irobot tumbled after amazon scrapped its takeover of the roomba maker. the company saying the deal has no path to regulatory approval in the european union. irobot announced its ceo is

stepping down, embarking on a restructuring plan that will cut 350 staff. gulf's pga tour is close to finalizing. sources say the initial investment could be about $3 billion with an additional charge from the saudi public investment fund. we have plenty more to come on "daybreak: australia." this is bloomberg. ♪ ♪ ♪

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annabelle: you are watching "daybreak: australia." the japanese employment data shows the market remains relatively tight at the end of last year so their jobs to applicant ratio you can see, a fraction lower, 1.27 from 1.28. there are 127 jobs being offered for every single 100 applicants. telling us there is still a shortage of workers, across many sectors in japan. the unemployment rate, meanwhile, 2.4%, the prior reading had been 2.5%. a slight change there. certainly something the bank of japan will be watching very closely. they want to see higher wages, which from was -- which promotes

inflation and so on. we have another one to note on the data docket, retail sales, due in the next hour. we are setting up for some modest gains across the board. new zealand, a little bit of an outlier. we are seeing some weakness. u.s. futures, trading fairly flat at this point in time, crossing the key 4900 mark, hitting a record high in the prior session driven by the surprise moves from the u.s. treasury, cutting their quarterly borrowing estimate to $760 billion. quite a busy action-packed session. we are also on watch for aussie stocks to hit a fresh record high. paul: that's right. the number to watch there is 7632. we are watching u.s. officials,

president biden seeking a response of the deadly attacks on u.s. forces and jordan. that is tough enough on iran and its proxies while avoiding a wider conflict. patrick ryder spoke with bloomberg earlier. >> we will take deliberate, appropriate action. our focus is not to broaden the conflict. we've been very focused on ensuring the situation in israel does not broaden into a wider regional conflict. unfortunately what you have are iranian proxy groups exploiting the situation, conducting these types of illegal attacks against forces in the region to preserve space instability. we will do what we need to do to protect our forces. while also cognizant of the fact that we don't want a wider regional conflict. >> for the perpetrators behind these attacks -- >> who were the perpetrators behind these attacks?

>> we are confident this particular attack was by iranian backed proxies. we are working on the attribution piece right now. it carries the signature of hezbollah which has conducted attacks in the past. this is something we continue to look at specifically. >> when you look at this, -- people listening to what's been developing in the middle east, what's the difference between those groups and iran themselves? >> for a long time, i ran has used proxy groups around the region to enable itself to have plausible deniability and to implement policy, and importantly essentially try to expel the u.s. and other countries at odds with its own policies and views from the region. this is in large part what you are seeing in iraq and syria. these proxies and to a degree

iran exploiting the situation, attentions in the middle east -- the tensions in the middle east. those forces in iraq are there at the invitation of the government of iraq to assess and the lasting defeat of isis. that's what we continue to remain focused on. >> does iran have plausible deniability this morning? >> we know these groups are backed by iran, with the support of iran. we will hold them accountable. >> iran accountable, or these groups accountable? this is the issue, which one is it? >> i'm not going to telegraph or forecast our response. we know that iran is behind these groups. we are not seeking conflict with iran or seek war with iran but we will take necessary measures to protect our forces and respond in a timely matter of our choosing -- in a timely

manner of our choosing. paul: the u.s. department of defense secretary, patrick ryder, speaking with jonathan ferro. this is the ny crude price, $76.95, giving some of the ground we saw yesterday. daniel, we are awaiting a response aruond this time -- around this time. what are you anticipating? in terms of where the oil price goes from here. >> i get a sense of the geopolitical risk premiumwe've seen in oil markets does seem to be abating a bit over the years. the reaction to these types of events are becoming less pronounced on oil prices. the market's certainly in this period is taking a bit

more of a cautious view around the risks around supply. those risks have risen sharply. the escalation of the conflict and potentially iran and the u.s. becoming involved more directly does what the market is more concerned about. i do feel that they don't want this to end at this point. but it does feel like it is a slippery slope. we are being dragged into it. the fact that we saw an oil tanker hit last week brings to home the real risks, if this does become an uncontrollable escalation and implications are quite significant. paul: we do have a chart

showing the time spreads suggest more and tightness in the market, do you expect a response from opec-plus? >> i think there will be eight wait and see approach taken by them. the data so far suggests the cuts we have seen being relatively limited. they will walk a fine line. saudi arabia in particular wants to see cuts from other members before they really start to pull back the lever on their side of things as well. the fact that we are now seeing an increased number of ships moving away from the suez canal, pushing around africa does ultimately lengthen the time that oil is on the water and thus restricts supply and tightens the physical market at the moment so that is what we are seeing today. but the oil price is not

reacting as a consequence of any sort of longevity to that type of issue. paul: coming back to the russian vessel being targeted, does that promise [indiscernible] does that change your thinking at all? >> any sort of link, be it diverted, i suppose, will result in these tankers being targeted. i do think it changed the view of what could potentially happen to oil supply through that route. the market's subsequently pushed prices up to reflect that. but it's not a wholesale change which would only come if we do see the u.s. and iran become directly involved. annabelle: i wanted to shift to another sector see -- supply-side issues -- seeing supply-side issues.

the metals sector as well. what are you focusing on in particular? >> this has gone unnoticed. we have not seen a sudden selloff which has instigated this. but the price sensitivity of the market seems to be quite high at this point. maybe that's a result of the balance sheets of a lot of resource companies which have grown thin over the past few years. certainly there reaction to the weak pricing has been quite strong and quick. we have seen it in copper, the critical minerals, even in markets like aluminum and the like, signs of that emerging. for us that will be about how obviously further high cost supply reacts to the current situation. certainly it is under pressure. the market's doing what

the market does. naturally rebalancing it. if we do see that occur at the same time demand rebounds, we expect a more positive second half of this year. that's when we will start to see prices react. for the moment, i think, with chinese growth easing -- using lower, the supply disruption will have to continue for the market to rebalance. annabelle: i wanted to pick up on the point around china. what are you expecting in terms of their demand? for that drive up prices in the second half? >> we are seeing demand from new sectors really supportoverall consumption at the moment despite a suppose that weak sort of broader economic backdrop. coming from clean energy technology, the ev market,

renewable energy, they have been strong, having an impact on overall demand. clearly with gdp growth threatening to fall below 5%, maybe towards 4%, the broader manufacturing and construction sectors will see some weakness. that's going to be an issue and the shorter term. we will see other markets start to rebound and fill that gap. we are looking to india and some of the developed markets that get through this initial period of tighter monetary policy to come out the other end relatively ok. annabelle: that was daniel hynes, the senior commodity strategist at anz. let's take a look at the other geopolitical stories around the world. qatar says negotiations to free hostages taken by hamas are

making progress. they say talks are moving to a place which could lead to a potential permanent cease-fire. qatar is the key mediator of talks -- in and hamas. >> the progress we are making in the last couple of weeks is, we are in a much better place than we were a few weeks ago. annabelle: the biden administration is warning that it may restore sanctions on venezuela's energy sector if the government upholds its ban on the opposition candidate from running for president. existing sanctions were suspended for six months through april. washington will consider other measures if machado is caps off the ballot. we have learned russia is considering an indefinite suspension of wartime capital

controls aimed at easing pressure on the ruble after international sanctions over russia's or in ukraine. the restrictions require exporters and oil producers to repatriate 80% of their overseas earnings. 90% of that must be sold for robles. up ahead, china's economic challenges and energy transition plans. bloomberg any of things the momentum for renewables will continue. find out why -- bloomberg nef thanks the momentum for renewables will continue. find out why, next. this is bloomberg. ♪

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paul: despite the headwinds in china's economy, they expect growth in renewable energy to remain robust this year. our next guest joins us for more. talk about the outlook for china this year. >> actually, last year, china has been navigating through the headwinds of economic challenges. the beginning of last year, we were expecting much lower growth. we ended up with 5.26% in power demand growth last year. everyone was expecting 6.1% growth but it ended up

at 6.7%. this is an intensive industry. as well as high-tech manufacturing. a series of incentive policies were carried out in july. these have been effectively boosting the power demand growth. they are designed to last two years. it's been extended to this year. the most promising reason we think the power demand growth will remain at a healthy rate this year. but the growth rate will likely be lower compared to last year because we think the very low demand growth in 2022 will exceed this year. we are looking at around 6% in

2024. annabelle: what's the most interesting development to watch in china's energy market this year? how could it impact the rest of the world? >> this year, the most interesting story to watch is the surging demand for solar capacity. last year and this year, there is very high growth. the growth last year was 145% higher than the growth in 2022. what china has added in 2023 is more than the entire addition from 2020 through 2022. the surging demand of solar has definitely elevated industry expectations. there are also -- there are also more optimistic

factors which might make growth higher. china has a very efficient supply chain that could enable massive deployment of the solar capacity. the chinese government has raised the target by 25% compared to last year. such large demand would have a profound impact globally. the massive demand here has not only brought new technology, but also has driven down the cost -- so globally, there will be higher efficiency globally. that could also help with -- that could help globally for higher solar installation this year. paul: do you believe china's

on track to reach the carbon emissions peak in 2024? >> that's a very interesting question. the answer is yes or no. power generation emissions could peak this year. we might see mild growth this year and the massive solar addition will contribute to that. under evaluated is the recovery of hydro-production. china's hydro production continued to drop for three years. this year there are indicators saying the water dams are full of water this year so it is impacting a recovery this year. these will not last into next year.

maybe this year coal production will peak or won't grow compared to last year. but this situation is not likely to happen next year. we will see emissions continue to grow before 2030. annabelle: thanks so much for your time. you can watch us live and see past interviews on tv. you can dive into securities or bloomberg functions we talk about or become part of the conversation during our shows. this is for bloomberg subscribers only. check it out at tv. ♪

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annabelle: we've got less than 10 minutes until the start of trade in tokyo. toyota will be one of the companies we are watching at the start. it suspended shipments of 10 models due to testing issues. our next guest will kick us off with what exactly has happened. >> toyota just found out its subsidiary, toyota industries, had been issuing

certificates which were not true, they wererigged. the finding came after the investigation with the forklifts led to the diesel engines in toyota auto cars. when they found out the certificates were not up to the mark, they decided to suspend the production of 10 of its models. yesterday toyota's president pointed out that the problem lies within the communication and the company -- lies within the communication in the company. the issues have not just been happening with toyota industries but also other subsidiaries of toyota. paul: what is toyota's

plan to resolve these issues? >> well, sato yesterday said they will make a system that will work properly and also said the problem lies at the understanding of engineers toward certification. they need to raise the understanding toward certification and build a system of management where communication is proper between the workers and management. other than that, they said they will rebuild the whole management in toyota industries and make efforts. no specified plans are out as of yet. we are expecting toyota to give comments today or very soon regarding the issue. paul: aviation reporter sipriyah singh.

byd missed earnings estimates due to a global demand -- gm's boosting its quarterly dividend by one third to $.12 a share. the payout will come on march 14th for investors holding shares the first of the month. the announcement came ahead of the quarterly earnings report for the carmaker do later tuesday. the market opens in seoul and tokyo. we are watching for that potential record for the asx. more in a moment. this is bloomberg. ♪

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>> this is "bloomberg daybreak: asia." we are ahead of trading in japan, south korea. a lot of markets born into green. strong moves in the u.s. session overnight. still there's the question of what happens in china next given the fate of evergrande. paul: that was very interesting, the winding up of evergrande yesterday. we will see how much more that court decision holds in mainland china. we've got the oil price moving, the asx close to a record, on the eve of a fed decision as well. annabelle: also some data to note, japan for instance, putting out its employment data in the last half hour or so telling us the employment market was pretty tight toward the end of last year.