♪ >> welcome to daybreak

australia. we are counting down to asia's market opens. >> i'm annabelle droulers. ahead of u.s. inflation data a big tech rally within a whisker of big tech rallies. heidi: tariffs on imports after president biden accuses china of treating on -- cheating on trade. paul: i'm paul allen words the government handed down a budget that is handing down cost-of-living relief. >> i'm avril reporting live as the countries leader prepares to take power.

unprecedented challenges facing the new prime minister. annabelle: counting down across asia. u.s. futures are steady in the context of a run of in the prior session. a new fresh record high, tesla and nvidia and optimism around stocks. game stock was up 60%. adding to gains. a few points to know, producer inflation data topping forecasts. beneath the surface there were details that offered relief and we can get more details in a moment. hearing from jay powell. heidi: big focus, the number

caused a reversal, maybe the data is softening because inflation is very sticky. we are watching what the number has to hold. futures looking like a move upwards. it's 50 minutes from the start of cash trading. nikkei futures looking positive. watching tech stocks we saw mega caps leading the recovery ahead of the inflation number. china futures are soft. hong kong and korea are closed on account of the buddha's birthday. one of the travel despite not seeing a market reaction is how we digest tariffs.

are they significant? take a listen to what we heard from president biden and katherine tai. biden: i want fair competition. you're not competing, that's not competition. that's cheating. we've seen damage in america. catherine: we are interested to see how china responds. this is not intention to escalate or confront. it is a set of defensive measures with the investments we make in green and clean technology. annabelle: china blasted the move, vowing to take action. it has yet to unveil any response. stephen engle joins us for more.

we knew this was coming. what stands out to you? stephen: that was fleshed out with the announcement, everyone knew this was coming and it was telegraphed by u.s. officials to beijing with trips by u.s. officials that something like this was coming. this is the culmination of a two-year review of trump tariffs and none were rolled back. they were added onto key areas as we heard from katherine and joe biden. he areas that are key to china's ramp-up of manufacturing. we are talking ev's, batteries, solar, chips. cranes are added, syringes,

needles, surgical gloves. in a lot of different products in the increase of tariffs. janet yellen said this will not cause a rise in u.s. prices, this could stoke fear of raising import costs. here is a statement from the ministers of conference in beijing. they will safeguard their interests in the u.s. should correct its wrong action and cancel additional measures. beijing added tariffs where political manipulation ahead of november. this is something trump waiting on. he said forget the increase in tariffs, it should be 200%.

donald trump has talked about 60% tariffs. going to get interesting. the question is what can china do, we don't know. perhaps on their export controls and key minerals but again that could undermine efforts to shore up confidence and attract investment. we will see. heidi: how nuanced these tariffs were, there were key and careful exclusions. >> the u.s. solar industry has -- has argued, not rightfully so , but it has been justified by ustr, starting a process for the exclusion of 19 products essentially for equipment.

that industry is not there yet and if the u.s. raises the price essentially it could raise their costs and hinder efforts to supply chains. arguing about tariffs and equipment to raise costs. something interesting on the batteries, yes biden raised tariffs but they did not raise the tariffs for the batteries that go into solar and that is a key designation not to hinder the industry which is dominated by china.

annabelle: that was stephen engle. we have some leadership changes or resignation at openai. this is the company that brought chatgpt to the world. the founder is leaving and the trajectory has been miraculous, he says. but he is exiting. it has been a very interesting time. he voted to oust sam altman and managed to survive the toll molds. he is excited for what comes next, something quite meaning will to him personally. haidi:'s trillion delivered a

budget surplus with a return to deficit. jim chalmers says the imprint will ease cost of living. jim: this shows we are realistic about the pressures people face right now and optimistic about the future. this reflects ambitions and aspirations to make australians beneficiaries of a world of change. >> paul allen is in canberra. without stoking inflation, what do you .2 when it comes to the disappearance of surpluses? paul: surplus, 9.3 billion aussie dollars. that is locked in with a few weeks left and then we're back

into deficits. double what economists expected so how did it evaporate? commodity prices are forecast to come down. iron ore is $60 per ton in the budget forecasts are conservative. prices have been dialed back and there is spending. $26 billion in tax cuts. $300 billion worth of energy bill relief. then expansion of rental assistance. also feature made in australia plan, $27 billion cost spread out over one decade. the surplus has evaporated.

annabelle: we getting closer to the election next year. is this a budget that has that vote in mind? paul: that is a question for the finance minister later on. i am anticipating one of the benefits is getting to choose the election and you want to keep opponents guessing. but if cpi comes down plus the rba eases, that equals in early election. that is the great hope, cost-of-living relief without inflation. that is a point of debate between the government and economists. bloomberg analytics has published a note saying this will push back rate cuts, the

treasury is forecasting inflation at 2.75%. that would open the door to rate cuts. however, that is 12 months earlier than the forecast at target range. treasury and rba are not political, so there is a disconnect here. haidi: paul allen, more analysis on the budget with all and katie will be joining us. we will speak with liz taylor. partner sharing their investment strategy as rates might be cap higher for longer. ♪

♪ >> i do not think is likely that the next move would be a rate hike. it is more likely we will hold the policy rate. the u.s. was notable for the lack of inflation. higher than we expected, these were higher than anyone expected. so what that is told us is we will need to be patient. haidi: jerome powell on the fark against inflation. rounded out by the consumer

numbers. let's bring in a senior advisor in sydney. this balance is a challenge, it is front and center. when you look at subsidies for all how much does that complicate the picture? guest: the government has been at pains to work out recessionary impact and they ensure us they are considerate. but the health of the consumer has been dire. cost-of-living has been stressful and we calculate that at 150 billion dollars. that's looking at rising interest rates, cost-of-living,

inflation and tax brackets. these measures address concerns. we saw the energy subsidy in combination with tax cuts and rent relief. they are trying to provide relief to cost-of-living pressure and we'll see how that goes. heidi: we've seen health care, are you able to action those? lucy: there was some net benefits. australian clinical labs should see benefit from indexes which we have not seen in 25 years. critical minerals through the future in australia project with

tax cuts for producers and uplift from mineral resources and a lithium play. these are at the margin and we will need to see how things play through. the biggest advantage from these measures as well as other reasons to believe the consumer would approve are listed retailers and we think there will be a lift from budget measures and rates, inflation, these things will increase per capita consumption that has been depressed. annabelle: any retailer stand out in particular? lucy: flight century is one despite covid and the lockdowns

in restrictions, it emerged a better business, it brought the cost of operations down as it closed stores so it is in a great position to take advantage of the uplift in spending. the impact has not been equal so flight center is in a good place. we've seen a decline in airfares so for flight center who package travel offerings, reduced spend should see customers adding on cruises and hotels. that is one in the retail space that we like. others -- others there, premier investments likes meikle.

and other brands with international expansion. retailers have done well but still a lot are priced on a basis below the market. if we see strengthen the consumer throughout the year. haidi: egot trip.com, what is interesting in china is we are seeing more people taking trips but the average spend is still pre-pandemic levels. what are you thinking about chinese consumers? lucy: chinese consumer has been under pressure and a lot of that is around confidence levels across the share market in the property market in impact that

we've seen play out really well this year, so whether there is more to go, we are happy to hold onto that. but back to the consumer, we are seeing the politburo saying they might add support for the property market through buying excess inventory and apartments in china which they set a floor and provide stimulus could be a turnaround for the confidence in chinese consumers which would be remarkable. so if we get that confidence back we may look to recipients of that faced offshore. one is lululemon. they are an athlete or brand and we seen revenues increasing year

on year so forcing growth out of china and if we get a rebound in consumer confidence, there would be ways to play from an offshore perspective. haidi: senior investment advisor. more to come, this is bloomberg.

♪ >> it is the end of an era as the prime minister prepares to step down, handing power to lawrence wall who is facing geopolitical challenges. avril is in singapore. it is true that this is the end of an era. a careful handover and that does

not dismiss the policy priorities. >> that's right. this has been a well telegraphed transition, but challenges abound for this new leader who was praised for his leadership. a diverse electorate is demanding transparency in the wake of a scandal which saw a top minister charged with grafting. the incoming leader has pledged to boost social safety nets ahead of election that needs to take place by november that some say could come as soon as this year against the backdrop of the

ruling party sliding. this could be the first key test for the lead up. challenges abound. as we see the trading partners going tilde to over tariffs. foreign policy credentials have not been tested as one observer put it, we have not quite seen his policy path articulated for singapore, these are the challenges. for the new lead up. annabelle: well telegraphed, but what changes fifth any after the election next yeah? >> right, so the message of policy continuity is the

singapore way. whether we will see changes seems to be something that is not determined. we have seen how lawrence opted to keep the cabinet of his predecessor intact. he will have the old guy by his side. he also has the outgoing prime minister tapping on political influence, that should leave the leadership in good standing. >>

♪ >> counting down to the market open in sydney and tokyo.

positivity, following the session. the s&p hired of been a record. tesla, nvidia continuing to see traders piling into gamestop. amc is another one. futures are not changed, but australia, the budget is in focus. the government prepares for an election. they've been trying to rein that in and contain inflation. some are saying impulses are restrained, others are concerned. not just inflation focus, it's a global theme, but powell

speaking overnight. saying the fed is likely to keep rates higher for longer against inflation pressures. we had ppi harder than expected. u.s. inflation cpi reading coming out today. expectation is moderation so that would offer relief in that is why you're seeing the run-up. currency space, really keeping our eyes on the dollar gauge trading study. seeing dollar strength against g10 counterparts, tracking the yen close to 157. haidi: bank of america says

japan uses treasury holdings and applications for debt markets. reduced demand may push up rate and titan spreads. they say japan spent tens of aliens on deposits and stepped in on two occasions to bolster the yen. carlisle's jeff curry's bullish ahead of the summer driving easing. he told us more on his outlook. jeff: demand is not spectacular but it is above long-term average growth, you're going into the driving season. global warming means cooling will create more demand. we did not build inventory so the story is intact.

haidi: can it comes to trading in oil, crude is seeing to clients, u.s. inflation data is a? with the elevated levels of producer price inflation, declined when it comes to trading but recovery of 6/10 of 1% in crude, above $78 per barrel, producer prices rising. he components are muted and we heard from jay powell that the fed must wait for evidence that inflation is cooling. doubling down on higher for longer, looking to the consumer price data. we've seen crude within that narrow band ahead of a data released had reporting of

outlook capacity upgraded. watching iron ore, over the past few sessions it has extended declines. up by one quarter of a percent. the default shows that the debt crisis is far from played out. more ahead, this is bloomberg. more ahead, this is bloomberg. u know what's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does.

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guests: thank you. host: i like to talk about yesterday, what was the feedback you got? guest: we went through short-term plan and wanted to give investors a feel for the longer-term plans for which we have ambitious plans. feedback was positive. there are questions around parts of it. everyone wants us to go faster increasing revenue but our focus is a solid foundation and we will build from there in 2030. some themes around business, in japan and the trust bank, came

around building a platform and within the wholesale business, the ambition is to change our mix, move ourselves to less capital businesses inside the wholesale business in across the group and a lot of discipline within the firm. april, the feedback was people felt we were saying the right things, it was positive and always people want us quicker and faster. host: the biggest goal was doubling trust for by the end of the decade that involves making the division self funding and allocate resources. explain what that means?

guest: sure, there seems to be a lot of attention but what we are saying is we would think carefully. obviously wholesale business is a revenue generator. we are saying that as a proportion of capital was deployed over five to seven years, it is unlikely the business will take a higher percentage. over trying to explain is the wholesale business is not shrinking, not stopping. we will keep investing in the mechanism is retained earnings. funding is evidently true, but we're formalizing it.

growth in financial resources will be financed. that creates an incentive structure for the business 2 -- 2 -- two grow its profitability and focus on less resource intensive is mrs., it aligns interests across the group. but it also reassures both investors and employees we will continue to invest. >> another goal was to cut the cost to income ratio. how do you plan to do that without sacrificing growth? guest: we've done a lot of cost reductions so last year we committed to $150 million in we've exceeded our target by the

end of the year, we will delivered $250 million. more efficiencies to come. we globalized which allowed us to eliminate duplication and give a better face to our clients who are global. there is a lot to do. some cost efficiencies can be done quickly and there are some that require more change or technology investment, things we will work on, bigger issues like location. our ratio has been too high and our structure is the income side with ambitious plans to increase the bottom line over the next few years.

we want to see the ratio getting toward 80%. >> thank you for joining the program. last time you were on the show you spoke about the japanese yen and you are saying it could gain to 140. we're trending closer to 160, but what is your outlook. christopher: forecasting is dangerous. what we know is rates overshoot. and clearly we've seen intervention. i still do not have a major change to my view that there is no reason the yen should not strengthen. the reasons are we see good momentum in the japan economy, inflows in japan markets and we

think that the differential is going to narrow. part of the reason we tested 160 is because expectations have been priced out, which was a forecast in the year in line with our forecast. we think ultimately the fed will cut rates later in the year. we think the boj will do limited tightening so we see the differentials narrowing, fundamentals are strong and international investors are underweight and japan so we expect to see inflows into japan. i would say are median term view would be that the yen goes toward 145, possibly would 40. after that, it is open because

we don't know the direction of policy in 2025. in the meantime we will test 160 markets. we've seen determination from authorities to defend the yen so my view is unchanged. over time the yen will appreciate. >> speaking of policy shifts, how is japan performing since the boj change policy? christopher: japan fixed income is a much more interesting market when you actually have interest rates were fixed income so it has been an interesting time. the level of interest in japan is higher including fixed income. our expectation is inflation will stay elevated.

we'll see higher -- higher numbers. so we certainly think jgb yields can exceed 1%, the first time in a long time so japan mixed income is more dynamic. host: we've seen rates traders in high demand. hedge funds are hiring traders for portfolio managers. what are they doing to attract or train? christopher: it is a priority to have world-class traders in our businesses. these markets will be interesting in hedge funds will look for talent. double edge sword, traders are good. there are few places that have a

yen franchise as powerful as ours. if you are one of those, nomura is the best place to be. we will be fine. i do not want to be complacent because talented people are desirable and i will create a working environment that talented people want to stay in. host: you mentioned yesterday that you want to become one of the top 15 managers in asia. that is very competitive. how will you achieve that? christopher: the growth we have shown, $6 billion of net new money, we doubled profitability the last year and are seeing strong momentum. there is an appetite for japanese or asian wealth management company, and

alternative to something american or swiss. the global capabilities we can bring in the service levels are competitive so we were aiming in the short run, we've got a new business, we will go on to 60 billion. we have hired talented people and clients are believing in the offering and brand. so it is an ambitious target but i have very little doubt that we will succeed. host: christopher, thank you. back to you. heidi: bloomberg's russell ward. more on australia's budget. goldman sachs saying it will result in rates on hold. let's return to paul allen with our next guest. all: thank you very much. i am here in canberra with the

finance minister to about the budget which was handed down and minister, thank you for joining us. i want to start regarding nation, billions of dollars in spending, inflation risk, how do you tell them that they're not right? >> it is hard to find a group that agrees but you need to look at the budget, delivering back-to-back surpluses, showing spending restraint through savings or prioritizing across budget. we have put back all the revenue back to budget repair, lower interest payments. that tells the budget responsibility but we have had to work out ways to provide relief without adding to inflation so the budget does a

lot of things and i support the view that there is restraint. we had to say no to a lot of things. paul: on inflation if there is a short-term drop longer-term pressures remain in place. what is the plan to address that? >> the reserve bank and treasuries see inflation continuing to moderate. inflation had a six in front of it, we would like a two in front of it. decisions we have taken, whether it be medicines or rent assistance, putting downward pressure on inflation which we think is a good outcome. it provides cost-of-living relief for households. paul: we had a couple of

surpluses and commodity prices are down. deficits look structural at the whims of the global economy. do you have the stomach for what needs to be done? katie: we put our shoulder to the wheel looking to find savings. we found report writers station -- re-privatizations. there is a lot more to do. we need to look at reforms in age care, defense and heavy lifting in terms of looking to find out how they make room for priorities. lowering debt so interest payments are lower, they are structural pressures and they do not decrease. we need reform in all of those areas.

paul: australia be the of many countries but let's look at the spending. you delivered cost-of-living relief. tax breaks for australians. was there a sense that may be those high income earners this? katy: cost-of-living elements are targeted, rent assistance, medicines, i we can provide those. the most efficient way to deliver a short-term relief on electricity is -- the minute you move outside of concessions it is broad-based. paul: in terms of tax incentives, this was a centerpiece the budget. those tax breaks do not start until 2028. can you explain the reason for

the delay? katie: renewable energy superpower has the production tax credit system that we want to put in place. the reason we don't start until 2027 is production. to make the investment produce green hydrogen, refining and processing critical minerals before they can get a tax benefit. there is some views on that. but were looking at a range of grants. we've got our national reconstruction fund with support for the government in the short term. paul: is this the last budget before an election or one more? katie: there will be a budget in march, alexion by may but that decision is for the prime minister. paul: i wasn't dissipating that

kind of response. there is a risk in the election, i know the labor government has been trying to position itself as responsible. have you left your flank open to an attack with the deficit? katie: we've been honest about the pressures, we work hard to deliver. those do not happen on accident. there is commentary that they just happen. there is no shortage of calls for spending. the services that help with inflation, but india, defense and interest on government debt, structural pressures that we need to work on and reform. paul: thank you for joining us. we will leave it there with the budget in surplus.

we will see the return of deficits. back to you. haidi: paul allen. coming up, australian shadow treasurer joins us for the opposition view on the federal budget and singapore's future. the prime minister will be sworn in. breaking news, we are hearing the president has informed the president, jean-paul that he is out of the company after extended disputed tension between the state-controlled giant in the broader in -- broader government. we've seen the settling down of tensions as a government battle over the chief executive. we had a dispute inside the administration causing shares to

swing wildly. reported rumors he would be fired. after a few weeks that were called for the ceo. we are now hearing that magdala will be the new president. she was the general director of the national petroleum agency so we will bring you more details, the former ceo under fire who wanted to bring down fuel prices and create job creating investments. the market opens in sydney and tokyo are next, this is bloomberg. ♪

annabelle: we are counting down to asia's major market opens. we are on the eve of the u.s. inflation print but traders seem to be interpreting it as a risk-on event. haidi: particularly after producer prices showed stickier inflation. we heard commentary from jay powell suggesting higher for longer is still where the narrative is. this kind of push and pull between fiscal and monetary policy is present here in australia with this budget that delivers subsidies to just about every household how is that going to potentially translate into that inflation battle being won? annabelle: certainly could complicate the picture for the rba moving forward. we have the opens of japan and australian. south korea shut today for a public holiday as is hong kong. japan coming online this morning and we are in the thick of earnings season for japanese companies. lots of different announcements last week and this week. to