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>> welcome to daybreak australia, we are counting down to asia's major market open bins. annabelle: i'm annabelle in hong kong. muted response to iran's attack on israel. traders are ready to look past geopolitics. >> u.n. chief is telling the security council it is time to step back from middle east war while israel and u.s. consider next steps. tehran saying they signal a bigger response to israeli strikes. take a look at how we are setting up with asian markets confronted with a risk of

escalation. seeing traders cautiously trading. sidney stocks are down by 6/10 of 1% and we've got new zealand down by 1%. cpi prints coming through and bad services numbers today as well. concern as we have seen recessionary conditions for the kiwi economy. we have the yen stubbornly holding beyond 153 casting a shadow over its ability to function as a haven. we are seeing other assets moving higher, but not the yen. still 150 and china futures down by half a percent. annabelle: as you say, not too

much reaction so far. u.s. futures are pushing higher, disappointing bank earnings, although we did see a weaker trade last week. bond futures are steady as is crude. it is wait and see whether we see further ratcheting up of tensions. haidi: diplomatic response, antony blinken saying washington does not want escalation. joe mathieu joins us from washington. you're getting commentary from the chinese ambassador voicing

china's concerns over escalation. it feels like we are closer to the brink of war, but the calibration suggests there is room for this to be the end of it. joe: you're right, this was an unprecedented attack to think that this happened, unprecedented as well was the response, the way israel defended itself with the help of the u.s., u.k. and france to have the help of him alliance successfully, no uavs infiltrate israel. not one entered is really airspace, so the question is

does that represent the response? do you hit back at an attacker that cannot lay a glove on you? the statement from the white house, there is one line, the president says i will convene g7 leaders to coordinate united diplomatic response. not military and not unilateral. the administration trying to widen this to allies beyond a standoff in the middle east, to transcend this dispute in the hopes of making this a calm place. the administration has few options as it waits. haidi: when it comes to what israel does given this assault is more a designed to show resolve rather than overcoming

israel's defenses, perhaps israel could limit their response, but what does a limited response look like? joe: great question, they did not see the response from iran being proportional to its attack. that prompted these missiles and rockets last night. joe biden had a meeting on the phone with leaders in capitol hill and we win this from the white house, chuck schumer, mitch mcconnell and speaker mike johnson and house minority leader hakeem jeffries, mike johnson has difficult decisions as they seek funding for israel and if israel decides to respond and this is escalatory, you will see pushback from democrats.

there is in a miss amount on the line for the white house. haidi: let's bring in aaron david miller. served as negotiator on middle eastern issues. as we can see israel scored tactical success and the question is how can it turn into a strategic opportunity without courting regional war so give us more insights into that. aaron: thank you for having me. the former minister of defense,

and two nonvoting members, there appears to be consensus that israel needs to respond, but divergence about the timing and scale of the response and for context, this is a long movie. the first state to strike israel since saddam hussein launched 43 scuds in 1991, sources of tension between israel and iran,

they can do far more damage to israel right now than iran. takes hours for drones and cruise missiles to travel 1000 miles. they have an inventory of high trajectory weapons of different ranges. watching four to 5000 rockets per day, that will be a source of tension, not resolved. there are militias that continue sporadically to attack. and we have the chokeholds that the houthis are able to impose, forcing traffic to the supply

chain. even if we manage this, this will hang over the heads of the international community for a long time. annabelle: given that the attack was so calibrated, do you think they can claim this to be a success of sorts? aaron: they are drumming up the notion that they have struck zionist entities. these are all orchestrated. iranians suffered a tactical defeat. 99% of these missiles, the vast

majority never even reached israeli territory, but iran has has full up and a nuclear weapons threshold state. all the elements required to weaponize, so i want to say my judgment on this -- we are going to go throug this without a major regional war. something that would create spiking oil prices and instability across the region that this region has never experienced. were going to get through this but the strategic problem that the u.s. has with iran and israel has with iran will not be resolved. we are managing and if we are

lucky and smart we will get through this latest phase without a serious regional escalation but the trend lines do not battle. haidi: could we get out of this with something better? you've written about unpredictable predictability in the region and how you often have intense crisis in horrific situations like october 7 followed by positive outcomes, are you optimistic that this could be a turning point? >> it is not pessimism or optimism, just 27 years of working on this peacemaking in the middle east. american ideas get swallowed up in a region in which great powers feel they can impose their dreams.

with the right leadership, and effort at a peace treaty, opportunities between israel on one hand and key arab states on the other, you need leadership on me israeli and palestinian side in washington that are not prisoners of politics. you need a mandela to take existential decisions, not just politically, but literally ask -- no, i retain a fair measure of hope. but right now, what is required to turn october 7 and what the

israelis have done into anything more positive does require leaders who can rise above partisan politics and risk. and that risk can prove fatal. should joe biden get a second term, take this as a partisan comment or not, should there be a leadership change in israel? with a government that is pragmatic and reasonable? we see the most extremist right-wing government and significant leadership on the palestinian side. there is an opening, but nobody ever lost money betting against

peace. haidi: that is a lot of ducks that need to be in a real. i do think -- is it worthy to talk about capacity, political, economic, willingness for the u.s., for biden, for israel when it has operations in gaza. support waning. ron's friends like china and russia, do you see that impacting the likelihood of major developments? aaron: no, i do not. you can get british, american and french consensus, but a senior partner in china in junior partner, to make inroads,

to oppose western influence wherever they find it. the russian iran relationship is strategic. china is not interested instability. the u.s. navy is protecting the exports of saudi arabia oil to china. so it does not seem that the international community has the will or the cohesion to support regional parties who right now are not interested. israel is led by a man on trial for breach of trust three years running. he has to meantime -- maintain power or use faced with a conviction or plea agreement that will drive him out of politics.

he is in the 19th year of a four-year term, no credibility on the west bank and less in gaza. no matter what americans want, the aspirations are well-intentioned, you cannot pull the wagon without the horses and you have two leaders in israel and palestine that are more interested in keeping their seats than risking anything. with respect to taking advantage of whatever exists. it's going to take time and as i mentioned, leadership. annabelle: always great to have you with us, senior fellow at

the carnegie endowment for international peace. why oxford economics thinks china's growth could come at eight cost for second-quarter data. this is bloomberg. ♪

♪ >> taking a look at the week ahead, china's economy is front and center. most expect the pboc to hold off on a rate cut. consensus sees weaker readings for china. japan's core inflation may cool, but it remained above the 2% target.

consumers struggle with high prices and that is your week ahead. haidi: big week going into the china dater and pboc decision. our next guest talks about the increase. luis, league economists. front routing and de-stocking has been moved forward. louise: you recall we had strong data and strong export data for january and february which suggests momentum may fade which means manufacturing thinks will

happen. haidi: how you feel about the consumer? do you see signs of improvement? louise: q1 has been resilient. we had a late lunar new year and in general we went into 2024 thinking post-covid recovery has run its course and it has not. so deflation may not be severe. because of deflationary impulses, households face high interest rates.

that is the area that the government would support. haidi: i'm curious what your views are with the overcapacity problems in china? olaf scholz has a delicate message for beijing, they have not acted enough on warnings from europe to end discriminatory practices, do you see that issue hitting china's economy? louise: that is more of a near term cyclical risk to the economy we think. i say near-term because if you look at long-term fundamentals, there is still demand when it comes to green products like electric vehicles or solar panels.

if you look at the messaging, between secretary yellen and beijing officials from two weeks ago, it seems like there is not much appetite to do much about perceived overcapacity. we do see some evidence of overcapacity, so if you look at the supply side, it seems like we will not expect back -- pull back from the chinese officials. haidi: focus on china's economy, trade numbers from other countries. what is the trend after the lunar new year? louise: moderation, which is disappointing.

expecting global demand to do a study pickup. across asian exporters, some will publish data later this week. we see that their recovery is slow which is not spectacular. so that's suggests to us at least across asia, we are expecting you would need more domestic demand support to offset external weakness. >> that was louise, lead economist at oxford economics. more ahead, this is bloomberg. ♪

♪ >> you are taking a look at a

live shot of the tel aviv skyline after israel and allies foiled a drone and missile attack. no fatalities and the army base was damaged, but it is the early part of the morning. more context from u.s. central command. this includes the middle east, but there saying they intercepted six missiles intended for israel. hamas is supporting you're probably not easily persuaded to switch mobile providers for your business. but what if we told you it's possible that comcast business mobile can save you up to 75% a year on your wireless bill versus the big three carriers? you can get two unlimited lines for just $30 each a month. all on the most reliable 5g mobile network—nationwide.

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♪ >> from our point of view, the

operation is over. if the zionist regime takes action whether on soil or anything, our next operation will be larger. annabelle: that was chief of staff of iran's armed forces on sunday. china voiced concern over escalation of violence, calling on all parties to show restraint. stephen engle is here in hong kong. all parties are voicing constraint or restraint, what else are we hearing? stephen: we might get more from beijing, we got a statement from the chinese ambassador saying what you just said, voicing deep concern about escalation and a

strike by iran and on friday we heard they had discussed this as well. if you want to call both sides proxies, both sides between china and the u.s. have called on others to play constructive roles to de-escalate tension. china maintains close ties out of iran and last year we saw beijing brokering between iran and saudi arabia. there watching developments with trepidation and and they have reiterated the call for a

cease-fire in gaza. annabelle: olaf scholz is in china on a delicate mission, so how does he deliver this message to avert a trade war given the relationship between china and germany? stephen: the number one trade partner of germany is china last year, so he wants to keep the trade relationship going, but not undermine a growing call about calling on china to stop discriminatory trade packages. one third of ev exports go to the eu and this is a sensitive time for olaf scholz. he will have key meetings

tomorrow. he will have to walk a tight rope to not undermine commerce between the european union and china. it is a key meeting and trip to china. haidi: stephen engle. taking a look at how we are trading, the standout has the leg up in gold before geopolitical developments. a somewhat perplexing rally in the gold rush. a little bit more further movement 6/10 of 1% higher after the strike against israel, haven demand in gold. not much in yen. crude is steady.

muted training in response to escalations and new york crude is falling 1/10 of 1%. iron ore is flat, but big week when it comes to china data expectations that first quarter numbers will be favorable at the expense of second-quarter numbers. iron ore is ahead of the search last week on the back of the improving outlook. let's get more on the rally. asian commodity reporter joins us. what we've seen as drivers until this weekend, more confusing. >> definitely, everyone is scratching their head over gold because it is flying in the face of what we know when it should perform well.

it rate cuts have been pushed back after strong economic data. one factor we can't ignore is china. persistently strong demand from central-bank buying up huge volumes of gold. kind of a weird reversal in the trend because typically china has been a sector where when prices drop demand rises. prices, premiums are trading at elevated levels with no drop in demand, but china is the biggest consumer of gold, so that can't be ignored in the gold mystery rally story. >> you can see enthusiasm for chinese gold when you look at

gold etf's trading at a premium. are we likely to see a run-up? >> when it comes to china who knows what will happen. it is hard to imagine a situation where you can see a situation where investors will turn off gold. what that means for the spot price is hard to say. we've seen banks upgrading forecasts quite a bit. whether that will happen near-term or farther down is hard to say. haidi: asia commodities are corner as we watch impetus when it comes to geopolitical

tensions. as we get 20 minutes away from the start of the staggered open. futures are looking softer. traders moving cautiously in the wake of attacks from iranian soil. still seeing market impact. we have seen downside and domestic factors in new zealand. biggest contraction in two years and we are expecting cpi numbers to paint a broad picture around recessionary conditions for the kiwi economy. singapore futures to the downside in the yen holding firmly despite haven demand for

other classic assets. u.s. futures seeing four times of a percent as we head into a big week for earnings. when it comes to big banks, all due to report this week after income missed analysts including j.p. morgan. citigroup's profit was better-than-expected. let's bring our finance editor. j.p. morgan, what is that set expectations for? >> it was an excuse to take money off the table. softness had been the expectation, that things would have to soften. he saw that in the share price decline but it does not mean expectations drop off.

if you look at the way the u.s. economy is developing, it is fitting with the way things are progressing. one key outcome is rates staying higher for longer than you might have thought. over at citigroup, slightly different story. there talking about 7000 jobs being removed. some of that has to play out, so there are catalysts worth watching. this week the big ones are goldman and bank of america. whether we see this commentary from ceos on how they see the economy whether repricing from

market is affecting just the way they position, but all banks are well structured for a benign environment. investors are pricing that highly so you expect bank stocks to do well. haidi: as you said, given changing expectations around the fed, you think stocks remain favorable? adam: think about how quickly the market has had to reassess. positioning your bank if you are a ceo, you have to be cognizant

that the economy could deteriorate, but you have to realize if inflation stays controlled as it seems to be picking up, you have an environment which suits you well when banks have gone through restructuring and job reductions. that sets them up well for this stage, so the key is keep your eyes on that number. watch the commentary from ceos this week. haidi: finance editor ahead of the big earnings this week. coming up, outlook on the yen as traders weigh risks when it comes to stronger yen this morning and increase risk of intervention. this is bloomberg. ♪ your investment gains as possible?

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♪ haidi: time for japan ahead. we will be watching u.s. steel voting in favor of the takeover in the fate of the deal with regulators. honda planning manufacturing at

its plant in ohio next year. annabelle: tracking assets. contract in singapore coming online to the downside. how much is that a reaction to tensions in the middle east? this strike by iran versus other factors. performance of the s&p 500, but keeping a close watch on currency markets. dollar-yen is holding steady despite pickup in gold. firm dollar coming through.

longer-term moves, when you compare it to safe haven plays, dollar-yen that is weaker, swiss franc and yen is different here. year on year it is little changed. we saw it stronger, yen against frank after surprise cut by the swiss central bank, but let's get more on japan's currency and bring in head of japan fx strategy. i'm curious your views, do you see the yen acting as a safe haven in these environments? >> i think japanese can still work as safe haven currency at the moment. there is quite big short

positions so any negative surprise and encourage a position in the market. in terms of the middle east, we expect the impact to be mixed because higher oil price would be quite negative for japanese trade balance against the yen and also if the oil price increased, the market could expect hawkish, higher for longer expectations as well. so unwinding can be supportive for yen put oil price movement is acting negatively for japanese yen. so i think the tensions in the middle east will have quite neutral impact and we should --

volatility should increase because it is a key driver for trade positions and if we have a spike, unwinding can be more aggressive. so cutting both. haidi: as you say, it's that question of oil prices, whether we reach $100 a barrel, what that means for the fed, higher yields. how weak can the yield get given you also have verbal intervention? >> comments from offshore's were not as strong as expected and

when 52, 153, there is a higher chance for japanese stories. the yen trades even higher but i think a suggestion is japan's increase is much stronger than months ago, what is important is japanese inflation is more driven by inflation, wage inflation. an example of price operating higher, hired import price, somewhat positive for bank of japan. japan does not need higher

import price to achieve 2% inflation and higher inflation could be negative for the japanese economy. investors are declining again. in this regard, reaction function of japanese authorities is probably quite different. we can expect japan weakness by hiking policy rates the yen keeps weakening. so in the second half of the year, and is more likely to trade at 145 or below. haidi: on the issue of

intervention, jaw boning has kept it steady. how impactful is intervention when you see it fade quickly? >> any intervention will have temporary impact, but japan proceeded more aggressively and it is more likely to cut policy rates in july this year, so midterm is more supportive this year. for the next month, still they may need to step in to avoid

weakness. but fundamental story will be more supportive for this year. combination of intervention and hawkish doj may be good supporting factor of japanese yen in the medium-term. haidi: you can hold for one moment because we want to mention some numbers that have dropped. japan core machine orders for february. numbers are coming through better than expected so month on month you are seeing 7.7 percent, estimate had been for point a percent. and orders are looking to have contracted, but not as much as expected, down 1.8% and then the

survey for a 6% contraction. looking a lot better than what economists had projected. broader sentiment check on the health of japan. annabelle: wanted to get your reaction to that. one more puzzle piece in terms of momentum, we hear from policymakers it feels like they are not in a hurry, no immediate impetus to help the yen strength and. >> yeah, data suggests economic momentum is recovery and cuts are strong. so i hope to say domestic inflation is much stronger than one year ago.

and therefore, japan is likely to be gradually hawkish. and july could be the timing for the boj to hike. at the boj meeting, bank of japan will release its inflation forecast. that is quite likely. after the upgrade, think of japan can hike any time. so june is a bit too early, but still june meeting with decent chance of boj rate hike. that will support japanese yen. annabelle: thank you for your time, that was head of japan fx strategy in tokyo. more ahead, this is bloomberg.

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>> stocks watching when trade opens, energy, defense, equities may move after iran's attack.

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>> the narrative of this tap is interesting because it brings us closer to further escalation. on the other hand, the fine-tuning of the attack, how it was intercepted leads us to a scenario where there is room for both sides to be able to move back a little bit, to show restraint. we continue to watch that. interesting when it comes to lack of moves in the yen, something we are watching closely. annabelle: absolutely.