tv Bloomberg Daybreak Asia BLOOMBERG March 20, 2024 8:00pm-9:00pm EDT
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to asia's major market opens and for any investor that was out there concerned about a hawkish adjustment from the fed overnight, it did not come through and the markets seem to be reading a sigh of relief right now. haidi: in fact, when you take a look at the upgrades to pc expectations, gdp and unemployment, perhaps more dovish than we expected and you see that playing out. wit come to japan, watching the weakness in the yen, what we potentially see for the gps, coming after the holiday as well as a new record for the nikkei. annabelle: a lot of different levels to be tracking, and the japanese yen getting closer to the 151 mark. you got the broader index moving higher, strong gains across the board for japanese equities at the start of trade. we are all about the levels but the level to track for the
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nikkei today is a 40,109, the closing record high, so fractionally or very close to that. we will see if that comes into view through the course of the session. what we will be pushed along by is the tech sector in particular, it led the gains overnight, in u.s. equities. were so the nest egg rising 1.2%. we had a trade figures in japan, exports better-than-expected, rising 7.8% in the course of february, the estimate have been 5.1% we have local media saying the boj is already mulling further rate hikes. we have the governor appearing in tokyo later this morning so we will see if we get a sense on his reaction to that decision. japan markets were shut
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yesterday for a public holiday so this is a big catch up. i mentioned the trade figures, we just had trade figures from korea as well. the numbers so far for the month of february, this is the first 20 days numbers, we saw exports rising 11.2%. chip exports, once to track in particular, up 8.8%. so contraction and outbound from china, down the first 20 days of march. a oma said february, the year is flying along. market reaction we are seeing, the kospi up 1.5%, it's that story around the fed and we do have korean officials commenting, saying the decision will be something that contributes to market stability certainly we are looking for quite a bit of green today. haidi: quite a bit of green already when it comes to trading
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in sydney as well. this is a figure of asx, about 8/10 of 1%. huge gains in the u.s. session. most industry groups in the green, we also have a report at 1130 and we should see a rebound in job gains in february. in new zealand, not much of a reaction. the aussie doller holding firm. weakness against all g10 currencies except the yen. u.s. stockpiles falling, the fed of course boosting risk appetite across wider markets and bruising the dollar that tends to be good for crude. we are seeing a third gain in four days. that's have a listen from what
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we heard from chair powell around the reasoning for this month's decision. >> we believe our policy rate is likely at peak for this tightening cycle and will likely be appropriate to begin telling back policy restraint at some point this year. inflation is still too high and bringing it down is not a short and the path forward is uncertain. we tend to see stronger inflation in the first of the year and i don't think we really know if this is a bump on the road or something more. were looking for data that can confirm the low readings last year. my instinct is rates will not go back down to the low levels we saw. haidi: let's bring in our guest, a micro strategist from lombard. we were not expecting fireworks out of this decision. was anything markets can take from that?
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>> if you look at the new dot plots, there was a bit of a market exercise among the forecasters in the fomc, but despite that, members are still sticking to three rate cuts at least for the remainder of the year. there was a bit of an update for the long run neutral rate which picked up by 10 basis points from 2.5 to 2.6. that's basically going to be a main debate going forward because we still think the neutral rate is well below the market pricing at the moment, if you look at the longer dated treasuries. how they upgrade the number in the future will be an interesting debate to watch but we think the fed is still keen
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to bring rates down, because there still a prospect of additional 50 to 75 basis point decline in inflation numbers from here. if that's the case, we will see the rate cuts starting in june, we are still hoping for a full cut and we think the market pricing is a little too much to the hawkers side. you're right about the soft landing for the rest of the year, and those cuts may materialize and take away from our perspective. haidi: what's really been interesting is the dual reaction of boj assets to set the new intraday record, also sustained weakness in the yen spot -- despite broad weakness in the dollar.
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what do investors want to hear from the bank of japan? homin: after this move, the bank of japan is unlikely to make additional adjustments. they just made a landmark decision in the march monetary policy meeting so it's natural for the central bank to put things on hold for a while and see how the economy reacts to it. market assessment is it was a dovish hike. in our view a well-managed dovish hike given it's the first change the country has seen for monetary policy in nearly a decade, especially for the negative interest rate policy. given it is a dovish hike, it's possible for markets to try to push the dollar-yen higher, and if that's the case in the near term, the momentum could remain
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positive. we are not ruling out another hike, we agree there is a possibility of another hike for the remainder of the year, especially if wage growth remains positive, which means eventually in the middle of the year you will see the improvement in real uncommon -- real income for households. excessive weakness in yen might trigger the bank of japan to adjust its policy. this was a risk management move if the economy remains strong with the currency weakens further, we think an additional rate hike, maybe 10 basis point hike, is in play in the second half of the year. annabelle: there's a lot of focus on entry points for other markets as well, china equities stirring a little more investor interest. would you jump in at this point?
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homin: we remain neutral on chinese equity markets. the technical rebound we've seen in the market, given the interventions by the authorities, it's not particularly surprising. when you have a neutral position in the portfolio against the benchmark, you still benefit from the rebound, but is it worth chasing this rally? from a foreign investor perspective it's quite difficult . in terms of the policy framework that the authorities are still maintaining, is still quite piecemeal. we've seen another hint of that from the decision not to change the loan prime rate this week, and the medium-term facility rate before. on top of that, it's possible, generate, february numbers were
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slightly exaggerated by the working date adjustment issues. yes, we have improvement in the volume of activities for the price momentum, we still don't see a convincing game changer yet we are basically neutral on the market, and see if the retail activity goes further in china but that's not the case in our view. annabelle: homin lee there. we are taking a look at the broader landscape for equities today, subtly in positive territory but there are a couple of different sectors standing out and one of those is what we see in the tech space. these are different names linked to micron, micron issuing a profit forecast just after the bell today and we are seeing the stocks soaring today.
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essentially revenue forecast for the quarter, up to $6.8 billion, compared to the estimate of $5.99 billion. we've seen micron surging more than 15% in late trade. haidi: we will have more details on the micron earnings, the ceo says the company has become one of the biggest beneficiaries of the ai boom. this is bloomberg. ♪
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annabelle: just about 15 minutes into trade so far and seeing a lot of green across the screen this morning. chip stocks standing out in particular, not only the story of big tech that was higher on wall street following the fed decision, also another one leading into these numbers, that is micron. we had its third quarter revenue forecast out, a lot stronger than what the consensus had been and we heard from the micron ceo
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saying the company could be one of the biggest beneficiaries in the chip industry from ai. let's bring in our asia editor for technology. seems like there's a lot alike in these numbers. peter: micron was reporting numbers and analysts expected a forecast of about $5.9 billion in revenue and instead the company forecast 6.4 to 6.8 billion dollars in revenue. this is a big deal because the memory industry has been in a slump for a while, people have been expecting a turnaround and it hasn't come, largely because their traditional markets, smart phones and pcs, have been in a bit of a slump. what micron did to surprise investors is they talked about how they are benefiting from ai demand and how they expect that to help them in the future. they put up this forecast and as
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you mentioned, the ceo said they are expecting to benefit quite a bit as ai demand ramps up and that's happening right now. we are seeing corporations in particular, openai, microsoft, etc. investing a lot of money in semiconductors to power this research into artificial intelligence. haidi: does this lend broader optimism for the chips market? peter: definitely and you see it in asia. another player in high bandwidth memory has been taking off, you pair it with nvidia chips, nvidia the most valuable chip company in the world right now. because you pair these chips with the nvidia chips, there's been very strong demand. you are seeing their shares up,
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samsung up, you are seeing this general optimism around how the chip sector, which had been in the slump, especially on the memory side, is coming back. haidi: there's always the geopolitical crosscurrents and overnight we have the news that the u.s. could expand sanctions against huawei. annabelle: really it is trying to limit their ambitions. peter: right. it's a bit of a challenge for the chips industry and provides opportunities. the u.s. and china have been squaring off over many different things. technology has been focused on the chip industry because that's the foundation of what you want to develop, including sophisticated military weapons in addition to artificial intelligence and these technologies you can use in the number of different ways. when sources told -- sources
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told us u.s. is related to another round of blacklisting of companies tied to huawei. the u.s. may decide to blacklist a number of companies helping them with some of their development, including pst and others. we may see that blacklisting. we are seeing this fracturing of the tech supply chain and you need to build up capacity and a number of different places in the u.s. we heard the u.s. could give until as much as $20 billion in incentives to build domestic chips. you see it in japan and taiwan and south korea as well. there are opportunities amid the geopolitical tensions. haidi: peter elstromthere. tech one of the standout sectors so far today. you can see there's a lot of green across the screen today in the session.
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given what we have seen on wall street, the fed indicating that yes, rate cuts are still on the way. moves and treasuries as well, a bit of a rally coming through. moves in the fx space. the trading expectation still in place and we could see a reduction as early as june. that is the state of play as we have through the session. this is bloomberg. ♪
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greater china senior executive. over the years there's been compounding investment in defense and spending a lot on r&d as well. what in this report jumped out as being new? john: the report out of washington overnight, i think it shows the modernization xi jinping has undertaken the last few years with the chinese military is continuing unabated by the economic slowdown we've seen in the country. just a few weeks ago we got from the national people's congress that china's national defense budget will increase more by 7%, the biggest jump in five years. despite whatever headwinds we've seen in terms of growth economically, the money being put into modernizing fighting force as xi jinping would call it, is continuing unabated without any pausing, whatever the economic situation. annabelle: the modernization of
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military hardware but also the question of effective combat operations -- is china any more prepared in that sense for a sustained conflict? john: i think that's a question that will be extremely difficult to answer unless there is an actual conflict. the reason is, all that money xi jinping and china has spent, it's been able to equip the people's liberation army with much more advanced technology equipment, fifth-generation fighter jets, aircraft carriers. until there is a conflict, until the military is actually in action, its ability to fight and win a war is uncertain. i think the target for the pla is to be in a position to try and invasion of taiwan and 2027.
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china's position is it seeks unification of taiwan but it would like to do that peacefully if possible but it has never taken use of force off the table. haidi: how much does that change the calculus for beijing if there is a change in government in the u.s. after november? john: i think it's extremely hard to predict. if that's anything, it's a calling card of mr. trump, if he is reelected. his position on taiwan, there's been less certainty relative to joe biden's position, seeking to strengthen alliances in the pacific and strengthen taiwan's ability to defend itself. whether or not a president trump would pursue the same tack, we have to wait and see. i think how beijing reacts is hard to tell.
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annabelle: that was john liu in beijing. china also watching the russian war in ukraine. russia thought it would be a quick and easy invasion but the ukraine prime minister says u.s. funding could arrive as soon as this month. he says ukrainian officials are in direct dialogue with congress members from both parties. >> we have assurances from the united states senate because they approved and now we are waiting for congress. we have very good dialogues with congressman from both party. we have a support from congress and i believe during the nearest
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time this month or next month, we will have good news from united states and the united states will join a european and g-7 coalition for military and financial support for ukraine in the battle with russia. >> we heard the president of france talking about potentially boots on the ground in ukraine. we hasten to add that that's not something ukraine is asked for but do you take a message from that? is there more urgency in europe and do you welcome boots even in a noncombat capacity? >> i should say that for the last half year or two years of full-scale aggression, the mindset of many european politicians has changed dramatically and it's very good news. we understand russia is a terrorist country and ukraine is protecting european borders. we are very glad president
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macron's communication is much stronger, very concrete and clear and this is what we all need, not just ukraine but all of the european union. we should be concrete, fast and clear. the only way to fight and liberate in this full-scale war is the liberation from a terrorist country such as russia. haidi: the ukrainian prime minister speaking inclusively with oliver crook. the ecb president says the central bank will be able to commit to further rate reductions after a first cut in june. >> this implies that even after the first rate cut, we cannot pre-commit to a particular rate path, however tempting that is and however much some of you would like to see it.
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if we are honest to our methodology and have discipline in adhering to these principles, we cannot. haidi: take a look at how we are setting up across the opening sessions in europe. annabelle: quite a bit of uplift from the gains in asia, that followed through robust gains in the u.s. session as well. the immediate picture could change ahead of the fed decision but we are seeing the certainty now, 1/10 of a percent higher seen trading for euro stocks,
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the expectation, 4.1% is where we came from. unemployment changed, over 116 thousand jobs added to the economy in february. the participation rate ticking lower, to 66.7%. expectations were to stay on hold at 66.8%. full-time unemployment change to the tune of 78,000 positions, part-time in addition of just over 38,000. this follows after we saw unemployment ticking to a new high in the first month of the year, giving the indication that the cooler -- of the cooler they were market and we saw the repricing of expectations and bringing forward bets on interest rate cuts from the rba. now a surprising number, the 3.7% in unemployment down from 4.1%. annabelle: quite a bit of
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strength and you see it reflected in the currency spike, the aussie dollar against the greenback. strength in the japanese economy, some pmi numbers coming out here, at the manufacturing level, improvement from the month prior, still contraction territory but 48.2 come at the last was 47.2. strength in the services sector, further expansion, up to 54.9, the prior reading 52.9, and the compensate -- composite reading likewise. the direction is still upward and you at export numbers for instance we had out for february and again it was the picture of strength, what economist had been predicting. let's look at broader market sentiment, you have those readings but also the u.s. fed narrative playing very much the
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overarching story for today's session, given we saw jay powell not shying away from rate cuts this year so we saw a rally in u.s. stocks, s&p 500 moving beyond 5200, and pretty much every sector is in the green. a couple standing out, gold today, pushing above 2200 per ounce for the first time ever. you can see it pretty much in line with that right now, but very strong gains we are seeing so far for some of the gold movers. it's really the fed story playing into it. haidi: you mentioned the reaction in the markets when it comes to that supplies unemployment number from australia, we've seen three year bond futures dropping in australia after the jobs report. we are also seeing appearing of those gains across the equity session as well, the australian
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dollar extending some of that gain we've already seen in the session. let's bring back garfield reynolds. we are talking about the volatility of this data series, it was supposed to become and has been for a while now us volatile, but this was quite a surprise. garfield: definitely quite a surprise. i will be interested to see the data, if they come out with a caution. last month they said you don't pay too much attention so will see if they say it again. the more immediate picture as far as markets are concerned is this really pushes back on any expectations the rba would be amongst the first movers when it comes to rate cuts this year. in the wake of a slightly dovish fed, we would see something like an 80% chance reflected in cops market but the rba would cut in
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august but that's under 70%. i think it will come into less than 60% which means a coin toss as far as the market is concerned. september will remain more likely as far as the market is concerned, the venue for the first rate cut. we might even get back to a situation we had only a few days ago when the rba was potentially not going until november. annabelle: we will see bets building perhaps again when it comes to the fed. i would likely to see traders edge back into aggressive positioning for cuts? garfield: it depends on the data. we got pce inflation reports coming next week. if those meet expectations, price to the upside, it might limit some of the recent optimism in the bond market.
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but those three cuts, it will take in extorting their set of data and fed speak to push us back below three cuts, act to less than three cuts, sorry. the more likely scenario is exactly if we get a little bit of weakness in the pce data and/or if we get fed speakers doubling down on house assessment that the current readings in inflation are not that big a concern, you almost think they might be starting to ponder the inflation is becoming transitory again, who knows? be that as it may, the market has a lot more scope to increase the number of rate cuts it expects than decrease after the fed stuck with its dot plots this year. we won't get an update on those until june, which ironically at
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the moment is when the market sees very strong odds the fed will carry out its first cut. annabelle: that was garfield reynolds. we've been speaking to other guests, including our opinion columnist and former new york fed president bill dudley. he says the fed chair is confident inflation is coming down despite the recent hotter than expected numbers. he spoke with bloomberg about the new economic projections and rate strategy. >> i think what people are flummoxed by is the fact that the fed sees stronger growth, a little higher inflation, yet the same number of interest rate cuts penciled in for 2024. i think it almost slipped. -- almostflipped. i think what pal is confident
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about is a couple of things, inflation is coming down, and there is slack being created in the labor market, and the monetary policy is tight but that's why he's convinced they will cut rates. >> is there something incompatible with shifting upward growth target, shifting upward pc for the year or where rates will be and seeing the story hasn't changed, that the inflation target is the same, it just might take longer? >> i think what people misinterpret is the sum of economic rejection is not the fed forecast, it's a culmination of forecasts. they're not trying to ask people to write down certain numbers to tell a certain story, is just a collection of forecasts. in this case, one. moves and you have a slightly different story.
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i think the message is the underlying story hasn't changed. we didn't buy into how good the inflation numbers were last year, we are not put off by january and february, we think we will get more confident about getting inflation down to 2% and we think we will cut ratings this year. timing is uncertain and it depends on the data. >> where you think chairman powell is on this story right now? it seems to me there is a bias to cut interest rates. a guest come on in the last week or so and said this federal reserve wants to cut interest rates. is the bias to cut regardless of what the data looks like? >> i wouldn't say no matter what the data looks like, the fed is still committed to get inflation down to 2%. i think what's driving powell is he thinks monetary policy is restricted. if you stay the current position, it will slow and set
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the stage for less strength in the labor market that would motivate cutting rates. when you get the question about financial conditions, he showed no concern about financial easing and making the economy to strong. i thought that was noteworthy because in the past he's talked about its an important way monetary policy gets transmitted to the real economy but he did not take the bait this time. when he doesn't take the bait, what does he do? it causes financial conditions to ease more. haidi: bill dudley speaking to us earlier. you can watch us live and see past interviews at tv , also look at all of the securities we talk about. you can also send us instant messages. this is for bloomberg subscribers only, check it out at tv . this is bloomberg. ♪
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highs for sk hynix. those micro numbers soaring after ai growth, helping to support the revenue forecast, the sales output -- outlook exceeding what was estimated. speaking of earnings, looking at tencent, reported lower than expected 7% rise in revenue. annabelle: yeah, even after the gaming sales disappointed and we know the firm is planning to double its stock buyback program to at least $12.8 billion this year with us now is our guest from citigroup. we saw the move in tencent adr's overnight so it seems like the buyback program was at least enough to try to appease or impress investors to an extent that was that more of a focus for you or a miss on headline expectations? >> i would say double down on
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the shareholder returns is a reassurance. aside from that, other than just looking at the total revenue growth, i think investors should pay more attention to the gross profit growth, which is growing at double-digit. this quarter is 25% your of your growth and it's been accelerating the past few quarters the main reason is tencent has been focusing on the higher quality revenue stream, which to some extent is net revenue but higher margins. the vas line is pure profits and the video advertising is relatively higher margins. the financial business services line, it's also kind of pure profit. so if you look at the gross profit line, each of the major business lines, gross profit is
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increasing substantially, especially in the business services line. annabelle: we talk a lot about chinese consumers swapping something expensive for a cheaper alternative. is that some thing that can hit the margins you were talking about? alicia: not necessarily. i think for the down trading, if you think about more under e-commerce but for tencent, if you look at higher margins on the e-commerce livestreaming, they only recognize the fee they are taking. it doesn't matter the prices, they are only taking a transaction fee, like a service fee. many games -- minigames they also treat as a platform for developers. haidi: what are we seeing when
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it comes to the strength of the business that relies on this ecosystem? alicia: the wechat ecosystem? one of the key highlights is video account, recognized as advertising revenue. besides that, i think the video account echo system has been facilitating and nurturing a lot of the content creators and it has helped integrating the programs and livestreaming e-commerce. there's quite a bit of monetization going on, not just from the advertising perspective. i think reading the wechat ecosystem, highlight last night is also the wechat mini program search, which is growing nicely and it's still early in the
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monetization effort. haidi: there is another one seen as a broader barometer of the chinese economy and strength of the consumer. the numbers were pretty strong. is it largely on the external push we've been seeing for overseas expansion? alicia: for pdd, not just overseas driving the number, i think domestic is also doing very well, so the online marketing service online group 57% and is way ahead of expectation. this is mainly the domestic advertising recognized on the pdd domestic platform. which we recognize from the strong oms revenue translating to potentially gnv's escalating in q4, from the promotion.
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even though there is a lack of true transparency on the disclosure, i think they did highlight the consumers, it's kind of increasing demand and spending, they are aiming for a high-quality product, that pdd will provide to them, this is on the domestic side obviously on the overseas business, we recognize the revenue growing like 357% year-over-year. i think a large part is contribute in from timu which we think is a must 30% of total revenue for the quarter. annabelle: how much can timu stand apart from competition? there's a lot of focus on shein as well and they've had a downgrade.
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is that likely to shift the dial in fast fashion? alicia: i think temu mainly comes from domestic competition, maybe amazon in the u.s. they just launched the semi manage model last week, it's very early but they are on boarding local sellers. they will be risking a little bit from the potential change on import tariffs. annabelle: alicia, our guest. bringing attention to some of the movers today, chip stocks being watched and we had some headlines at the top of the hour around south korea's trade numbers, the exports to china rose 7.5% on the year. chip exports rose 46 point 5%, just a correction on an earlier headline. the focus on chip stocks through
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annabelle: watching fx moves closely this morning and one of those in particular is the japanese yen, you can see we are pushing close to the 151 mark, up against the greenback by 3/10 of 1%. we are hearing from japanese government officials saying they are watching these moves with a high since of urgency. this is the finance minister speaking in tokyo, he's also saying he will refrain from commenting on the fx levels. something to track today. haidi: let's take a look at some of the corporate stories we are following this hour. the u.s. justice department said to be poised to sue apple as soon as thursday for violating antitrust laws, apple accused of blocking rivals from accessing hardware and software features of the iphone. the doj has already sued
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google, while the ftc is pursuing cases against meta and amazon. we have learned that barclays is set to eliminate hundreds of jobs in the investment banking division amidst attempt to cut costs. the job cuts will probably affect staffers in growing markets and research. annabelle: we are waiting for shares of trial holdings to start trading in tokyo after its ipo raised $256 million with shares sold at the top of the range. are asia equities reporter joins us. i've been watching this closely. right now we are at 5.5 to 4.8, so we are getting closer. perhaps we will see a bit of a pop. >> that's right, i think we are all waiting for this to start
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trading. it's an interesting day to start trading in the japanese market given what we've had for the back of japan, it's a positive day for japanese stocks. we still don't have a price and it could come at any point, it's typical for japanese ipos to wait some time to find the sentiment in first day of trade, so there's no big surprise so far what we are expecting is a very good performance for this share. the ipo itself went very smoothly, very good demand for the stock, it priced at the top of the market range. we know there's been a lot of excitement and interest not just domestically but by foreign investments -- investors for japanese stocks. we haven't had a lot of ipos of what we would call a midsize beyond the $100 million mark so
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there's expectation this will trade up once we have a price. haidi: certainly such interesting times for japanese markets with the exuberance in the japan equity rally, could we see more ipos soon? filipe: when you talk to bankers and investors, there is space, there is appetite, there is a market favorable for ipos. especially when you compare to the rest of asia. i think the only market where we hear such excitement is india of course. also for domestic reasons. if you look at hong kong, if you look at southeast asia, mainland china, there's not a lot going on when it comes to new offerings, new listings. specifically about japan, there's a lot going on. we see a lot of activity in the secondary market, blocks of big
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names. a lot of companies are disclosing their shares in holdings they have in groups. when it comes to ipos, not nearly as much as we could have or even what we've seen in the past year or so for example. this is the biggest ipo so far in 2024. were talking 225 million dollars, still smaller than last year. haidi: our asia equities reporter. that's it for "daybreak: asia," but market coverage continues with the start of trading. this is bloomberg. ♪
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