♪ >> u.s.-china relations aree stranded by a captured drone, john mccain warns of stolen secrets as donald trump says beijing could keep the thing. >> policies for the year ahead, property bubble and corporate borrowing high on the list. rise of the robots. automated solutions to japan's shrinking population. >> hollywood star with a local director proves the right mix. the great wall is a blockbuster hit in china. >> this is daybreak asia from

bloomberg. i am ramy inocencio. 7:00 int is just after mourning, i am he's on man. -- man. lots to look out for this week after the fed as well as the boe . we are focusing on the boj with the two-day policy starting today. following this political storm over the weekend with the china seizure of a u.s. naval drone. ramy: we saw that lock on effect in on u.s. markets, all falling on friday. the dow pulling away from the 20,000 mark. gold also breaking three days of 0.6%.to rise higher there is skepticism over the truck rally if it is something -- trump rally is something you can buy into further. yvonne: and with the markets in

wall street hit by geopolitical tensions, let us see how things are kicking off in the asia-pacific. it could be a rough start to the we do see right now. -- the political background we do see right now. there is a building permit for october, but the kiwi is holding ato three rough sessions 69.67. australia, we are expecting a midyear budget update, the so called me info. would this trigger a down a break for the triple-a credit rating? that is a big question. we see it at 72.83, a bit of weakness. the stocks are flat at the open. china property also later today. japan, the volatile year we have seen in the country, dollar-yen 117.87 right now. it could be a soft opening.

we will have those trade levels out in tokyo today. so for the region, what are you watching in wall street? ramy: a few things, first off on monday, janet yellen is going to be speaking, the first time since the fed raised interest rates. she is talking about the jobs market on monday at the university of baltimore at noon. on thursday, we get third quarter revised to gdp numbers. they think we will see a change of 10%. the futures in asia point to a nervous open. this after u.s. stocks erased gains on thursday, over china's seizure of an american navy drone. now they have to contend with more economic data and the news of president electrons transition plans. su keenan joins us. let's talk about how the week is shaping up, the second to last of the year. su: a big question is the

direction of the market. there was a bit of a fly that had something to do with tensions -- slide that had something to do with tensions of the drone, but volumes will be thin. that could lead to volatility. let's go to bloomberg at 5367. you see investors are rushing into equities, the top level. specifically valued stocks. they were coming back earlier thought, and it is about revenge of value oriented nerves doing that, they are doing well. look at the s&p 500, look at the rally since the election, are we pausing near a record high or setting up for a next leg higher? ame say there is no sign of exhaustion. and the dow has gone up in the election. again, it looks like no time exhaust. ramy: let's go to expectations

for ego data, looking at december 22, chock-full of number personal spending in the u.s. will be out. it is the kickoff of the holiday spending season. cell phones remain a state -- mainstay in the u.s. economy. as youles, existing gdp mentioned, and there is a big ticket with durable goods. that is something we are looking at carefully. with earnings, nike's reporting second-quarter earnings. they were down 18% year to date. they are expected to be down because of new competition from adidas, under armour and more. fedex is reporting second-quarter earnings, up 31% year to date. also there is a lot of travel benefits, travel proxy, strong demand from the holiday deliveries. names, from big

janet, what are we expecting? yellen,re hearing from and also the annual address in moscow. that will be interesting, because there is a lot of calls for investigation into vladimir putin's alleged role in hacking the u.s. election, according to the u.s. intelligence agencies. and donald trump continues to prepare for the january inauguration, he will announce more appointments and have interesting things to say about china. yvonne: let's get the first word let's get the first word news with sophie. sophie: thank you. relations between washington and beijing remain straight after china seized and underwater drone in a gray area. they say it was international, but china says it was near the shore.

washington says the drone will be handed back, though president-elect donald trump said china should keep it. john mccain and three other u.s. senators have called for a congressional inquiry to it appearance of russia in the general election. advisors to donald trump said there is no consensus over moscow's role. they also said president barack obama has no strategy for dealing with russian cyber attacks. airbus has suffered another blow to its troubled aviary program with iran. iran reduced its oil to 100 aircrafts enabled by contract that will no longer include superjumbo's. they already cut production by more than 1.5 to 2018. edwards is the only carrier to give the aircraft a list this week. beijing ordered more than 1200 factories to defend or reduce

production in the first red alert for production. they strengthened pollution measures to help clear the air. beijing is one of 23 cities and easternern china under smog alerts. the air is not expected to improve before wednesday. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: the emphasis for china's economy next year will be prudence and fiscal monetary policy. that was the word as the leaders spoke of the three-day economic work conference. we have more on the latest on that. what does it mean? reporter: a lot of economists picked up on the word neutral. a neutral policy going forward. the bank of scotland saying china has shifted to tightening, emphasis on neutral means monetary policy will be run only

-- regionally tighter. others say it will be a slow shift, but basically describing how monetary policy has already started shifting since --tember, the move to mutual neutral already happening. we can see both china and the u.s., two big economies on the tightening path, same time next year, which would be the first time since 2006. we also have got to remember talking about tightening, even the fed does not know what will happen. china's military policy is having -- monetary policy is having an overhaul. if they don't see any changes, most likely tightening will be done through the money markets, interest rates. they will hitng economic and social targets. that tends to happen. generally there is optimism.

sayingrg economists are -- there was a survey of bloomberg economists saying 6.4% next year instead of 6.3% as in september. ralittmy: a bit of optimism. china's leaders also emphasizing controlling financial risk. what are the details? rosalind: this is a big concern, especially from the markets. they discussed the fact there were asset bubbles, wanting to improve oversight, not systemic oversight risk. they need to deflate the property bubble by quickly controlling speculation and also raining in corporate spending. they laid out steps to limit loans for expected home purchases and the third and fourth tier cities. they are reported to suspend houses that are not for speculation. investors and others [indiscernible]

we can probably see a much bigger should -- cut down on home buying practices in china. u.s.,back here in the said chair janet yellen will speak in baltimore about the labor lock it -- market. gina kelly joins us. yellen lastd from week, what more could she tell us this week? ,ina: it could be interesting because she is talking about the labor market. all of the news during the press conference was on the labor market. she thinks we are pretty much in a slump. she referred back to 2007. she said we are very similar to those levels, and that was pretty much the limit. she feels confident about the savings rates began to

fall again, suggesting we ll not go back to labor market again anymore, and we have seen a pickup in wages. we did hear more about that and how she thinks that should go with monetary policy forward. yvonne: will that give us any clarity about where rates are heading next year? jeanna: not too much, because we are dealing with the situation where fiscal policy is a huge uncertainty. there is a cloud hanging over the entire outlook next year. we have no idea where they will get the infrastructure spending plan or if we will get tax cuts. if they do happen and shake up the [indiscernible] feelis the fundamental [indiscernible] the labor market data. it could all be thrown into upheaval here. yvonne: we heard from yellen, she did not really want to go into their when it came to

fiscal policy and the product of that. if the fed does pursue a more aggressive path next year for spurred by fiscal policy, what does that mean that the rest of the world? jeanna: what we are going to see is more aggressive hiking next year. janet yellen and her colleagues are going to be diverging from what the rest of the world is doing. the bank of japan is on an easy path. they don't expect to hit their inflation target, which they will not overshoot until 2018. it will be sometime before we get that level. yvonne: joining us from washington dc, thank you so much. can australia hold on to its aaa credit rating? the government's latest bucket update. ramy: and will we see further divergence between the fed and other central banks? we have someone from capital bank. ♪

♪ we are counting down to asia's first major market open, trading in sydney underway and up by nearly 0.5%. i am ramy inocencio. yvonne: i am on man. -- yvonne man. korea has maintained a duty-free shopping. the group is being investigated over allegations they paid money to a friend of the president in return for christmas favors -- business favors. there was a ban on products. the world oldest bank is launching a share for $5 billion and avoid government rescue. they will sell stocks to institute investors thursday,

but the office for retail investors ends thursday. separate debt-to-equity swap. yvonne: saudi arabia may decide to lift our ramco in new york despite the new -- aramco in new york despite the new law to sue the kingdom. it could be one of the biggest share sales ever before mr. adel says it is a work in progress. this is amid speculation saudi arabia would reduce u.s. investing because of the law. ramy: let's take a look at economic data that might move that markets. we have diana. i want to ask you your thoughts moving into 2017. we are two weeks away from the start of a new trading year, really, and you are bullish on growth. tell me more.

really are quite bullish, i would say. we think local growth is coming at 3% next year. 2016. it better than it should continue to stay at that momentum we are moving into the global economy, moving closer to the average growth rate, really. we see the u.s. will be a major growth driver next year, and we see the you -- we think the you weakness is probably passed for now. for australia, that would be weaker based on the weakness we have seen over the past few months. ramy: we are getting mixed messaging across the news in the past few days, one from barons expecting a 5% gain in the u.s. -- the s&p. but another saying they are sets just they are skeptical on the truck rally where he where are you in terms of a driver?

we really think that the positive momentum we were seeing in the u.s. economy fundamentally and also across financial markets really started before the election of donald trump. high sizes of inflation already because commodity prices were picking up. that was a key driver. we saw that affecting prices in the u.s. and across china, which normally is a leading indicator for consumer enterprises. in the u.s., consumer spending is still holding up recently well. most importantly, business investment cycle looks to have turned to the upside now. you are seeing manufacturing investors starting to recover, and high commodity prices will lift mining higher. ramy: looking at valuations in the u.s. and asia, i want to show you the market relative

valuation of several of the key equity indices. the hang seng index is up 1.4%. that is saying it is undervalued. the s&p 500 is in the red, signaling it is overvalued. you said it is not, but i want your reaction to this. what are your thoughts on this? we still see the equity -- broadly,y bodley globally undervalued compared to the bond market. there has been a huge rally in bonds over the past few years, and it looks like it has gone too fast. the recent gains we have seen in equity markets globally does mean you are likely to get fall back over the next few weeks because markets are trading on the expectation you are going to get stronger signs of growth, higher inflation rate. while it is slowly 20 --

turning, we need to see signs of fundamental economic data supporting that view. it looks like the market has gone too far the past you weeks. we think overall on the technical indicators, others, equities is still undervalued compared to bond on a global basis. there are valuations -- variations by region. yvonne: i want to talk about the big year budget. scott morrison later on -- the bond market in australia has not really quite reacted to events like this in the past, but this time around, we do see the economic data front for australia. he said a weak point. we see slower growth, and also deterioration in the budget deficit. given the risk of losing a aaa rating, could this be different this time around? diana: we think that in today's

new year economic update, we will probably see the budget deficit for 2016-2017 maintained forwardillion, but the project in my look weaker because wages growth has been slower than what the government was forecasting and because commodity prices have been higher, which is good. the government does not use forecasts for current levels. the is the expectation or the forecast range for commodity prices. you might not see as much of a gain from that part as what people are expecting. that even inhink today's update, uic deterioration in forward -- you might see deterioration. we are not likely to be downgraded this week but is likely next year, closer to the budget in may or may be a few

weeks after the budget. the rating agencies still want to see if the government is able to pass through any further savings measures. if we look at the past few months, the departure was $21 billion worth of savings, which is a good outcome, but they have more to go. that is what the rating agencies are looking for. the aussie dollar has reacted over the weekend. it is now down below $.73. had been quite resilient over the past few weeks. yvonne: more fiscal reports i had. thank you for joining us. robot revolution breathe life into two panes aging rust belt? -- japan's aging rust belt? ♪

♪ with an aging population

and low unemployment, it is hard for japanese workers. shinzo abe believes the robotics industry has the answer. we bring in a reporter from tokyo. good morning to you. tell us about the prime minister's call for a robot revolution. it sounds daunting. reporter: well the idea is that japan wants to create more robots to not only make things better, but to deal with the the aginglenges that population gives. just service role but now a major target to spur growth. angie: when you hear about robots doing more, you think about humans doing less. what are concerns about things youne of the need to understand here in japan

is that people tend to have different attitudes to robots. one of the experts i spoke to for this story mentioned animation characters like astro boy, who was introduced during world war ii, had a significant role in shaping people's mindset about robots. they are considered cool and friends, so it is not like they are considered job killers, like they are viewed in the states. ramy: i am very fond of astro boy myself. why do people in japan have a different attitude compared to americans? resisted --re, we visited one of the struggling manufacturing towns, and this ma. is called pado they are not afraid of using robots because of astro boy. that speaks a lot for their attitude.

ramy: all right, thank you. up next, donald trump takes on china once again with the concerns of a military secret and a naval drone.

♪ a.m. inthat is 7:30 hong kong. we are very close to the open. is 6:30 p.m. sunday in new york. down 0.6%, the nasdaq down 0.4% on friday. there was drama between china and the u.s., making investors skittish. yvonne: you are watching daybreak asia. now to first word news. arelind: china's leaders searching to rain and risk next

year, exercising prudent and neutral monetary policies. with the fed asking for more hikes, it is the most for china since 2006. the planningup conference, vowing to save the financial system and deflate asset trouble. bp has amended a 77 year relationship with taking one of the emirate's largest onshore oil concessions. it will have more than $2 billion of their own shares to pay for this, getting a 2% stake in return. the deal provides bp with long-term access with significant resources it already understands well. >> he will meet another 160,000 barrels a day in addition to what we produce in abu dhabi. so it is a very long-term relationship. that is good for us. the economics are good for us.

prudent for shareholders. for bp, it is a strategic move. rosalind: ukraine wants to men national eyes is biggest lender -- nationalize its biggest lender. mosof tm have appealed for help. it has loomed large following a recession brought on by resolutions and the separatist conflict in the east. on a hongad service kong bridge will be completed by the end of the year. it is covering it with asphalt and saving 75% of the deck it already finished. it is expected to have cost more than $10 billion when it finally opens 12 months late in december next year. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg.

markets are trading in the asia-pacific on monday morning. we look at new zealand now, we see a better print on yield 1.5%,s -- stock is down but the kiwi dollar holding onto losses still below 70 handle, 69.62 u.s. cents. the treasurer will give his midyear budget in australia and a couple of hours time. will it be the trigger for aaaralia to remove the credit rating? it may not be this time, but obviously they need to look out for in the long-termwith291 right now. it is stronger dollar story still dominating on this monday morning. let's look at futures for japan a few minutes away from the open. futures in seoul and japan and china falling. dollar-yen was seeing strength

against the u.s. dollar. the hang seng is that -- flat. it could be rough given the political storm we did see with the south china seizure of a drone. donald trump also making waves on that on twitter. ramy: definitely seeing a knock on effect from the markets on friday. money trading in wall street, we will see more continued reaction. it caused u.s. stocks to slide on friday and allegations of russian interference with the u.s. election hovering around it. su keenan is on the story. what are the big concerns with the drone seizure? su: u.s. navy secrets may be seized, they are calling it a seized underwater drone, may be examined to see if there were any clues to the u.s. navy

technology. the pentagon demanded the return. trump is-elect donald giving contradictory tweets, suggesting beijing should just keep it. earlier he denounced the snatch and grab, and assurance from china that it would be given back to client u.s. credits. china says the u.s. is heightening it for diplomatic purposes. senator john mccain of the armed services committee was on a sunday talk show and called it a gross violation of international law. that is a quote. the chinese administrators have criticized the u.s.. we will see how it plays out. yvonne: and how will it play out with the alleged russian hacking of the election? su: another international tension on the forefront. over the weekend, some of the prominent lawmakers, u.s.

senator schumer, charles schumer is now calling for a u.s. investigation into what the u.s. intelligence agencies say is a russia-led hack that present did, toid -- putin favor or influence the election in favor of president-elect donald trump as was done allegedly. the release of all of those emails from democratic candidates. trump has cast doubt, saying there is no consensus that vision was involved -- that putin was involved. some of the top senators say this should get more scrutiny from lawmakers. yvonne: a lot of geopolitical tension for 2017. thank you.

the turnbull administration to be the first australian in 20 years to lose a aaa credit rating. we are looking into this budget from australia. the policy one way is a threat, but economists are also [indiscernible] inhie: they are taking it stride. perhaps the government should take stricter measures when it comes to reining in budget deficit and deliver on election processes -- promises. scott moison estimates a major economic update. the change was for 37.1 billion aussie dollar's. for 3.5%eal forecast projected early this year -- since may, week wage growth has been forecast.

gdp has been expanded. after july, pushing through the election fiscal reforms made tougher by the government, just cobbling together a simple majority in the lower house of parliament. this resulted in the downgrading to negative in july. to progress is being made balancing the budget. australia's budget deficit sense of 2009, they may reject a balanced budget by 2021. but some say that is merely a projection and not a government policy to achieve that surplus by them. there could be potential upside from the rise of iron ore and coal prices, higher commodity prices may not be enough to -- weakeek wage growth wage growth. ramy: let's say the s&p does go ahead and downgrade australia. what happens?

sophie: so it has a aaa rating from s&p. it may not be this time, but shoulds&p by the bullet it come in the form of a -- littlein banks reaction is expected in bonds and currencies, given the move has been priced in. let's take a look at a chart on the terminal. this tracks the movement of the 10 year bond yields. is the white line on the chart. rating position since 1986. you pull up the chart and the the performance of the aussie 10 here.gainst s&p decisions 1986, many years ago, that is when australia lost a aaa rating. we count down the hours until that happens or if again.

thank you for looking at that. we will keep you updated for what happens. and matt damon's latest film great wall enjoyed a blockbuster debut in china breaking in $66 million. group.hrough want a -- wanda group. why is this film getting attention? it the crossroad of three big trends for what is happening in china is moving market, which has been closely -- china's movie market. the first thing is this was produced by legendary, as you mentioned. owned by second richest man in china. can they produce movies? the answer was great wall, though it appears, yes. the second big question, what about coproductions between big

hollywood stars and chinese directors? how will those work go to work was a high-profile example. plowed $150vie they million into. this is a big deal movie and seems to be working and selling. the third trend is simply the market has been down. i mentioned the chinese box office had been booming for years. the last months, it has been down. there is a question, why aren't chinese moviegoers going to the films anymore?. part of the answer is no hits, nothing to draw them in. there is a question that a lot of the growth was basically adding new tenants. the growth, number of cinemas and screens available, that have leveled off. so will the increase keep popping? there was a sign that with the success of this movie, you make a hit film, you get moviegoers to come.

yvonne: and with how much hollywood loves franchise films that spawned sequels we see all the time, everyone can expect great wall part two? that is a very good question. a successful film, they think about how to follow up with it. we interviewed the director, they did not want to imitate the hollywood tentpole style. there is no superhero. there are several heroes. damonus is one, -- matt is one of them. we will not see him reprising the same role. big, youvie hits this expect a similar theme with a follow-up. yvonne: all right, thank you. let's stick with film. the force remains strong with disney after wrote one, a star wars story posted the biggest december opening ever, only

beaten by the record of last year's star wars release. -- they got $155 million in north america. it took $290 million worldwide, debuts in china on january 6. on next, we look at the outlook for a transport company with 3000 employees across 19 countries. ♪

♪ yvonne: we are counting your down to asia's first major market open this morning. we are a few moments away from japan, trade figures as well. dollar-yen took a bit of strength here at around 117 territory for the yen. you are watching "daybreak

asia." ramy: a quick check of latest business developments, shareholder dissent with a decision to abandon shares to purchase part of a transit firm. the bank wanted to buy in the , $86hen metro group million, but major shareholders did not agree on a deal. they did not plan for any major asset moves. yvonne: as he had no is making job -- this company is making job cuts. they told bloomberg they will off, 3000 people per unit, i.t., human resources and [indiscernible] they now employ more than 23,000 people. -- uber'ser hasramy:

rival -- that will present a 10% stake in the dubai-based company. they raised $60 million last year throughout the u.s., middle east and asia. to half $1o get up billion. yvonne: let's turn attention to one of the largest public transport and mobility operators , they operate 13 different railways, coaches and fairies. it is also the parent of hot import -- hong kong transport. we have the ceo. we have a relatively small presence in asia, given the fact the region relies on public transport. what opportunities do you see? we are a large company, $60 billion in revenue, 88,000 people around the world. we have high systems like the

munich, macedonia or new orleans tram systems. in asia we have confidence with the tram. we have ways of metro line in mumbai. yvonne: the public transport systems like this struggle to turn a profit in the midst of so many different types of public transport now. it is difficult to cover it with fares alone? advertising is one of the biggest sources to really generate profit. is that the right ideal? thierry: it is a mix always between passengers fees, passengers paying and of course advertising. advertising is important, especially when we look at what we do here. the revenues coming from advertising, which is a nice way to complement not the main

source. yvonne: what about government subsidies? thierry: if you look at most of the world, 30% is paid by the passengers, 70% by the local government on average. yvonne: given the transport here, everyone calls them the here,- ding dings eventually do you think this type of transportation could be absolute -- obsolete in hong kong? thierry: no, we have been improving on the safety of the trams, putting air conditioning, electricity running. we look at tram, there were 40, 50 in europe, and years ago, now they are back

everywhere. maybe we will see eventually in the new continent, the new part the modern tram versus the small tramp, which is very well fit for the streets and a very good way to go around. yvonne: most people are not familiar with it, but the battle you have with uber, you are probably the biggest competitor. you have lobbied to contain disruption, took them to court in europe. where are you now? have you lost, or have you like, join them? largey: we concentrate on cities, and we have opportunities around large cities. there is a big part of transport. i don't think private cars will be the solution in most major cities. you cannot replace large transit systems with cars. certainly there is a large part of the transit.

with metro, rail, high drain systems. yvonne: i have some breaking news out of japan, trade figures for november. the trade balance coming in at a 30's -- ¥5360 billion. that was much bigger. they were expecting ¥277.4 billion. that was the balance adjusted figures. 0.4% comparedll drop.tes of 2.3% that is better than expected. ofter than the prior print 3.3%. meanwhile, imports now 8.8% fall here in imports. that is slightly better than what the imports export --

.mports expectation was we are seeing dollar-yen around 117.75. remy. let me go in take this back up --ramy: let me take this up with thierry. let's talk about uber here you have your own app called dietrich here. it is the answer to uber, but which cities are you in? you are not in major cities at least here in the united states. andrry: we are in baltimore we are resisting uber. there is a position to be too big, so we are concentrating where we can feel we make a difference. what about a new york? that is the company's biggest revenue city.

i tried to get a car earlier today using dietrich, and it was $88 to go from my house to hear, but uber was only $10. thierry: i was not aware of that, so we need to look into it and improve on the quality. ramy: great, we will leave there. really interesting insight with trans death. -- trasdev. the bling generation. the global diamond industry relying on chinese millennials. ♪

yvonne: the global diamond industry is betting on millennials to boost growth, especially in china where they say young women are very important.

let's talk to rachel chang. a lot of bling we are talking about what are the numbers? what we are seeing is millennials are going off and buying diamond jewelry especially in china or 70% is actually bought by women below 35 years old, way more than markets in the u.s., where it is 40% bought by millennials. when you think about the fact they are only at the beginning of their consumption power, and the millennials are about a decade away from their peak earning year, this is a huge source of demand for the diamond industry. ramy: marriage rates are falling, but how is that impacting the diamond jewelry industry? marriagese number of is projected to fall in china because demographically the

number of women in marriageable years are falling in china. what we are seeing in china is surprisingly that the whole jewelry industry, not just diamond industry, because chinese women associate diamonds with eternal love like the u.s., it is more like women seeing bling, something to show they have good faith in life. they don't feel the need to wait for a man. what we are seeing is diamond companies in china are rushing out to get them more accessible and practical for such women, diamond a plastic engagement ring, but smaller diamonds, necklaces, earrings. this is just to cater to a completely different market in china. ramy: we believe that there, but thank you. plenty more still to come with asia's first major market open

just in its away. yvonne: the sentiment is good so far. we see equities in new zealand as well as australia on the move right now.

♪ >> makes a hollywood star with a local director and enjoy the

results. "great wall" is a hit in china. >> this is the second hour of "daybreak asia" live from bloomberg's headquarters. i am yvonne man. ramy: i am ramy inocencio. you.to see let's do a recap of the markets. losses across our three major indices, a little bit coming from the drone of drama in china. a couple of interesting eco-indicators. janet yellen on monday about the state of the u.s. jobs situation. yvon: it seems we are seeing sentiment turning with markets in new zealand and australia moving upwards, u.s. futures butting higher as well, take a look at how things are

kicking off so far. ontralia holding on gains the asx 200. update from scott morrison and australia. we will watch to see if we see the deficit worsening and if this could jeopardize the aaa rating and australia. japan and korea, weakness in tokyo, down .3%. dollar-yen,s and the yen of 117 territory. i want to recap those trade balance numbers. the trade surplus shrunk for november 2 $152.5 billion. see the shrinking of the trade surplus do to the x for figure, falling -- export figure falling. exports easing, 8.8% down for

imports year on year. seeing pressure at the start of the session. emphasis for china's economy next year will be prudent and neutral monetary policy, the word as the nation's leaders wrapped up their conference. e have more on that. quite a bit of tightening in china, is that likely to continue? rosalind: that is what economists are looking at for the future. china has been following a prudent policy so far, and now it is prudent and neutral. the royal bank of scotland saying the emphasis on neutral signifies monetary policy will be marginally tighter next year. the fed is indicating a steeper interest rate path, tightening by china next year, but

economists say it will be as slow, incremental process. the two world's biggest economies are tightening next year, the first time that would have happened since 2006. we also have to look at the fact that just because the fed says it will tighten, that does not mean we will see it happen. also, china's monetary policy is undergoing an overhaul, so it economists don't see any change in interest rates going into next year. bes implies tightening will done to the money markets. generally though, they do think thee is optimism for chinese economy. saying china will hit its economic targets this year. jinping saying china will hit its economic

targets this year. meantime, chinese leaders emphasizing controlling financial risks. rosalind: this used to be really important. officials said preventing and controlling risks to prevent asset bubbles will be a priority next year. they laid out steps on deflating the real asset bubble and property. these steps include limiting loans for speculative home purchases and eliminating excess housing supply in third and fourth tier cities. houses are to be inhabited not for speculation. it looks like chinese authorities will crack down harder on what they see as speculative homebuying. officials underlined as well the need to give a high priority to preventing and controlling financial risks, calling it a slurry of risks and

talking about asset bubbles, and saying the property bubble must be deflated by controlling speculation. tensionsgoing ahead, with president-elect donald trump, and fed further rate hikes, but generally optimistic about china. ramy: a lot of headwinds as we head into 2017 with the latest on the chinese economy. let's get first word news with sophie kamaruddin. sophie: relations between washington and beijing remain strained after china seized and underwater drone. the pentagon says it was operating in international waters, while china says it was near a disputed stretch of see claimed by a couple of countries. washington says the drone will be handed back. john mccain and senators have

alled for an congressional inquiry into russian interference with the presidential election. noald trump says there is consensus among u.s. intelligence agencies. thanng has ordered more 1200 factories to suspend or reduce production in this year's first red alert for pollution. authority strengthened emergency measures after the alert was issued on thursday to restrict usage an effort to help clear the air. cities is one of 23 under smog alerts. the air is not expected to improve before wednesday. troad will be completed by end of the year. engineers are covering the pavement with asphalt and say more than 75% is already finished. the bridge and tunnel project is 60 kilometers long and work

began seven years ago. it will cost $10 billion when it finally opens next year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ramy: thank you. markets mixed now. this week, wall street has to contend with more economic data and news on president-elect donald trump's transition plan. >> volumes will be lighter because of the holiday, and that will lead to ships in the market. , a policy board lower in the rally perhaps because of the china tensions. bloomberg,to the 5367, you are seeing a gauge of

investor sentiment. towardsshows is a move the value stocks, look at that big move higher on the white line. of the nerds, the value oriented nerds, is what one strategist called it because a lot of fund managers view it as the top tier, but they certainly are the big winners now. look at the s&p 500 and how it has performed since the election. the question is are we pausing or set to go higher. j.p. morgan's technical analyst said there is no sign of trend exhaustion. same with the dow, no sign from trend exhaustion. the view from technical analysts is that the rally remains intact. ramy: what can we expect in terms of economic data? >> they are likely to get

scrutiny because the fed has put us on a faster track for rate hikes. rosefiscal spending likely , americans appear to have kicked off holiday spending in good form, and it is expecting to show improved incomes as well. another report, home sales, new and existing homes, and big-ticket items. fedex, earnings, nike and on the 20th reporting second-quarter earnings. we will hear from janet yellen and president-elect donald trump, what will we here? putin will get his annual press address and moscow, but it is in the context of accusations swirling and the u.s. of perhaps involvement in the hacking incident that u.s. intelligence agencies have said putin was involved in. we will get into that later in the show.

trump also preparing for his inauguration.t be natio also, how trump's comments about the drone situation play out. yvonne: thank you. looking ahead to janet yellen speaking in baltimore on monday about the labor market. more andalk about this what we can expect to learn about that. just heard from yellen falling the fed's decision to lift rates. what can she tell us this week? >> it should be an interesting speech. most of the news out of her press conference was actually about labor markets. she told us last week that she basically viewed where we are now as the to seven level. what economists call full employment, the idea being everybody who wanted a job was qualified for one.

that is what the fed is shooting for all the time, part of their dual mandate, they want to reach full employment. when they get there, they expect inflation to move up higher. i think she will expand on that. aboutshe will talk more the economy running hot idea. she put out the idea that you could run a labor market hot for a while in the hopes of drawing people back. she walked of that back and said she was playing it out as a theory and not as an actual suggestion. we will get more detail on that. yvonne: i thought it was the markets taking it as a hawkish tone from janet yellen. will this give us any clarity as to where rates are headed next year? >> it probably won't. fiscal uncertainty ahead of us. donald trump is promising an

infrastructure spending package and tax cuts. if those things happen, it could push the fed into a faster hiking cycle. unfortunately we don't have things about those two or the timeline they will be rolled out on. we will probably not learned much about what that will mean for the real world until we have more fiscal certainty. ramy: looking at what is happening with the fed as we look ahead to janet yellen talking at the university in baltimore tomorrow on the state of the job situation. looking ahead, gain from pain, oxycontinny behind sees huge demand in china. we will find out what is behind its popularity. yvonne: the risks that are keeping investors up at night as we head towards the end of the year. we will speak about that. this is bloomberg. ♪

ramy: you are watching "daybreak asia". i am ramy inocencio. yvonne: i am yvonne man. aramco and riyadh considering ipo could still be in the u.s.. they dismiss saudi arabian speculation that it would reduce investments because of the loss. ramy: china's leading developer blaming shareholder dissent to abandon plans to issue new shares. company wanted to buy a stake and was ready to pay a $.6 billion. the major shareholders could not agree on the deal. hasne: korea's hotel lotte

retained its duty-free license. its parent is being investigated over allegations of paid money president park geun-hye in return for business favors. let's get back in and check on the markets. good to see you. you were are ready skeptical of this trump rally. there's a lot of volatility expected in 2017. how are you setting up for 2017? >> good morning. skeptical is good. that is what fund management is all about.

is that welook at it are looking for upgrades to economic activity in the u.s. on the back of this trump extension. we are looking for those on thes to come through proposed corporate tax cuts. upward on eps in north america, andrd on economic condition economic factors going in. having said all that, we don't know at what level is that economic activity going to pick up. therefore, what steepening of the yield curve can be tolerated. asepening is acceptable economic activity and earnings are growing, and the complication is three rate rises by the fed being there target, and that's the difference we have going into 2017. we have risk at the margin, consolidated, but always skeptical. yvonne: skeptical, what about

your take on yields and whether they continue to rise. at what point will the start hurting stocks? >> exactly. day, cutting the to the chase, this is not a 1994 event. the market may begin to price in such an event, but to have that negative annual return and bond markets, to have that event, you need some form of runaway pressure blowing out. we can't see evidence of that. there is some reflation, but broadly that is not evidence of sustainability, steep yield curves. you can tolerate those when you allocate your risks. andarnings are expanding economic activity is expanding, it's trying to get the level of that, so we are pro risk going and 2017, acknowledged and

being cognizant of the risks out there, but it's that upgrades to --nomic and 2-d and earnings economic activity and earnings. your key ratesof you mentioned china. the currency as well. now the focus seems to be shifting for the pboc to a prudent and neutral policy, continue tightening over all. do you think this is reminiscent of what we did see earlier this year, august 2015? should we be worried? should be concerned. we should be more concerned on the tightening at the margin in china, the weakening of exchange rates is quite significant. at the margin, anyone trying to buy u.s. dollar assets, it is a natural hedge and will work on

any narrative to get into a u.s. dollar position, so the weakening of the yuan, people are trying to adjust that, but slowing of economic activity is a worry. looking at that recalibration, the slowing of the chinese economy will have an impact, and we believe that will be more risk in 2017-2018. we still upgrade earnings and activity, but we don't know what they will be. and can bfe concern at the margin destabilizing for markets in the region. ramy: i want to swing it to the united states. one of the risks you said you have is u.s. fiscal stimulus would let the markets down. wouldd president -- what be enough not to let markets down? not letare minimum to

markets down is an upgrade in gdp .5% on the back of stimulus and earnings act 70. can is very proactive and justify some of these by uh and send not have the market pullback too much, and if you're getting a flat gdp number with an eps upgrade, that is not good enough, and you will get a correction there. that is the biggest risk to what degree fiscal stimulus is delivering economic activity, and therefore we go back to look at the narrative of the fed and fed officials, the data profile, to see the sustainability of the theomic conditions, but point is that it is a bit exuberant, what they are expecting, but it is still an upgrade. to be fair, most of central bankers have been calling for something like this. is byjust that it surprise with the u.s. election.

ramy: thank you very much for your analysis. up next, the great wall, the movie enjoys a blockbuster opening weekend. we will look at its recipe for success. this is bloomberg. ♪

welcome back. matt damon's latest film, "great wall. " coproduced by a unit of wanda group. talk us through why this film is getting so much attention. this is really a three-way tests. you have a billionaire, a new blockbuster formula, and you have a movie market that is poised to overtake the uss the largest in the world. hast the billionaire, he

purchased a legendary studios this year, and this is the first big film they have come out with and the blockbuster formula. you have bankable hollywood star and matt damon, and one of the directorsinese combining to take this film on and present it as the first major coproduction. spent 150mething they million dollars on, so something definitely aimed to be a blockbuster. the third thing, a market that has been growing year by than to overtake the u.s., and in the last three months, it has been dropping off, raising questions as to whether it is a lack of hits or also the case that they are not building as many new screens, not adding new cinemas, at the pace they were before, and that is the drop

off. so people are watching results, and a big blockbuster coming out is a good sign for the health of the movie market and for the formula for box office success. wenne: some are saying that might see a sequel of this. thank you very much. movies, thethe force remain strong with disney after rogue one posted the second biggest december opening beat by last years star wars release. rogue one collected 155 million dollars in the u.s. and canada, and disney said it took $290 million worldwide. nextbuts in south korea week, and china on january 6. coming up, the political a lot over china seizure of the u.s. navy drone. ,he president-elect's reaction plenty of tweets from donald trump over the weekend. this is bloomberg. ♪

♪ singapore.is 8:30 in now just an hour away from the trade of open. ramy: you are watching daybreak asia. let's go to first word news with rosalind chin. a greater drive to rein in next year, talking about mutual monetary policy. with the fed slashing -- putting on more hikes, it is the highest difference between china and the u.s. since 2006. they wound up their annual conference on friday, valley inc. -- vowing to safeguard the

system. bp has cemented its 70 year relationship with abu dhabi, taking 10% of one of the emirates onshore oil concessions. it will front $2 billion of its own shares to take the stake in the company, giving them a 2% stake in return. the deal provides bp with long-term access to significant resources it already understands well. airbus has suffered another blow to the troubled program with iran dropping from the upgrades. they were going to get 100 aircrafts in a revised contract that will no longer include the jumbo. they cut production by a half to one play in a month by 2018. demand has dwindled. ukraine wants to nationalize its biggest lender following the failure of the rescue bids.

the government will acquire 100% of the bank after shareholders appealed for help. this has looms large over several bank efforts to nationalize, brought about by resolution and conflict in the east. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am rosalind chin, this is bloomberg. yvonne: thank you. let's take a look at how markets are trading in the asia-pacific on monday morning. japan saw pressure, but we are in the lows so far, down 0.2%. around 117, but looking at the topics, signs that it is the most overbought since 2013. they are showing there is little , too this could be too far fast when it comes to the rally

in tokyo given the dynamic with dollar-yen. theing at japan, we see extremes of where the currency will go next. we are staying at 117.55 right now. the top fx strategist are neatly divided between bull and bear on japan strategies. take a look at the aussie dollar, down 0.2% right now, ahead of the midyear budget outlook. we have gotten more since then. we are seeing a list of weakness , 1185.77. in australia, this could be the first australian government and 30 years to lose the coveted aaa credit rating. but neither seems to be concerned about that. sophie kamaruddin -- has been looking into this. economists are not pessimistic about it. policymakers are

concerned they may downgraded, but economists are saying it would allow for potential increase spending in the long run as well as relieve the government of pressure to receive a aaa rating. this all comes down to whether the turnbull administration can raise the budget deficit and deliver on election purposes -- promises. there is a news conference today in canberra. climates are not expecting much -- economists are not expecting much. this is the official forecast. in the reale a cut gdp growth forecast of 2% from the 2.5% projected earlier, iner the economy shrunk 0.5% the third quarter. since may we have seen a slowdown in wage growth, and pushing needed fiscal policy reforms, made challenging by the political deadlock we are

seeing. the labour party has been pushing back the coalition proposal to cut corporate taxes. , soaw s&p cuts to negative it depends on how agencies react to the budget meeting today. ramy: let's say snp goes and downgrades australia. what happens? sophie: there is consensus it will wait until may 2017, but should they pull the trigger this week, we could see borrowing cost increase, others in the form of downgraded banks. this according to the national head research, but little reaction in bonds and currency given they have been generally placed in. -- priced in. the general aussie bond yield, that is the white line, you see they have largely ignored the moves. ramy: all right, thank you.

we will see what happened in the hours ahead as potentially australia my loses aaa credit rating. meantime in the u.s., wall street will see continued reaction to two political incidents him of the drone incident in the south china sea was caused u.s. stocks to slide on friday, and allegations russia interfered with the u.s. elections. we have more. let's go to the drone seizure first, walk us through this. conflict that shows delicate relations as president-elect trump begins his inauguration. we have a top lawmaker, john oil was seizedng from the underwater drone, this could on earth secrets. the pentagon demanded the return of the vessel. donald trump suggested beijing should keep it. earlier, he denounced it as they

snatch and grab. we have a serious is -- assurances it will be returned. assurances it will be returned. they said politicians were pounding the table on the talkshow. china's ministry has pointed out the u.s. and china are talking and working to resolve it. yvonne: what can we expect with the alleged russian hacking of the election also? su: senator charles schumer has called for investigation. you have several intelligence agency state their findings or beliefs president bruton was involved in a hacking incident that may have tried to influence the election for president elect donald trump, who was going to , by releasing all of those you or hillary clinton days before the election. donald's people have been quick to downplay the incident. they don't believe who is

involved. -- believe putin is involved. senator schumer is one of several that says this is to be looked at much more closely. yvonne: thank you. underpins its placement in the middle east with a $200 billion deal. ♪

♪ ramy: you are watching "daybreak asia". i am ramy inocencio. yvonne: a check on the highlights, the world's oldest bank is launching a share sale. avoid a government rescue. they will sell stocks to institutional investors through thursday while the offer for retail investors ends on wednesday. the pri and number of shares sold will be determined by

demand and the outcome of a separate debt equity swap. ramy: making job cuts in the face of slow growth after years of expressive -- aggressive expansion. started in a last few weeks, it will affect 1000 to 3000 people. ad stock has etih dropped. billionkareem has been -- valued at $1 billion after the investment from saudi telecom. this would represent a 10% stake in the dubai company. in 2012 and raise $50 million to expand in the middle east, africa, and asia. they are working with credit suisse to raise the money. news of the opioid oxycontin has been rising in china.

the maker has been giving sales and added boost by working with local doctors and the government. let's bring on the health editor joining us on set. is behind this? we know china has an aging population, but at the same time it also has rising incidence of cancer. china has gotten richer, we see chinese families changing their attitudes to life and how things should be managed. as a result, we see more openness and great demand for painkillers and opioid kate painkillers. -- opioid painkillers. yvonne: there was concern. anjali: we did see the wide use of painkillers. as that expanded, we have seen misuse of things in the u.s.

china is different. we have not seen that addiction issue yet. you know, there is no signs of it. addiction as an issue at the moment. but for a way forward, china has a massive system, and the drugsnge is in managing and potent drugs in the health care system, it is high. ramy: you touched on the differences between u.s. and china, but how about china and the u.s., what is the difference? anjali: one thing china has done, they have much stricter rules on prescription of opioids for non-cancer cases, cases like [indiscernible] allow use in certain cases, but there are restrictions, which is why you see much greater control in china than the u.s.

as i said, yes. there are risks in china as well, something to keep an eye on. ramy: what are the risks that china really does need to look out for? anjali: as i said, the sprawling health care system. in china, there is a lot of local doctors who are starting to learn about plate -- pain management and opioids. it is important to make sure : the education and understand where opioids are best used, the risk, addiction, and that the drugs are prescribed to people who really need them, and they don't reach people who would not benefit or get addiction. ramy: all right, thank you. bp has cemented its long relationship with abu dhabi with a $2.2 billion deal for sikh in

one of the largest oil concessions. give 10% share of adco, abu dhabi gets 2% share in return. >> why now? we have been working here for 75 years of adco. it is important work bp has had for a long time in abu dhabi. given the discipline and financial framework we have had an meeting obligations in the u.s., which took us a while to work to the point where we can make this great investment with abu dhabi, the key element is bp shares. abu dhabi will be an owner of bp by 2%. for bp, it is another 160,000 barrels a day. continuing a very, very long-term relationship. that is important for us. the economics are good for us,

agreeable for shareholders, and for bp it brings in a strategic owner of the company which i am pleased about. bp has worked here along time. i would like to believe we have shown what we can do technically in management capability. we will move and work with and not, the transformation company, and we will be the best resources into it. experience a lot of in working and managing really big oil fields, late life, overflowing, technical things we will bring. as well as a deep sense of responsibility about the privilege of working with the national resources of abu dhabi, in in many ways the crown jewels. >> should we take it as a sign that now is the right time for oil majors to begin ramping up investment? someudley: one has to have

confidence in the price. we have been working getting down to an efficient level, that we will balance sources and uses in 2017. a year ago we were saying 16, now it is 55. it is clearly in size. we will remain very, very disciplined about the capital we spend, projects we collect. it is time for bp to start growing. we have worked for many different groups -- many difficulties in the u.s. reporter: we saw a very historic deal by opec for the production company, pretension -- for essentially even non-opec producers to join in with those cuts. how do you feel about opec and the future of oil? bob dudley: it is very significant. you have got non-opec countries seriously talking about reducing

. some people have said opec is not a real organization anymore, it does not actually bring things together. i think opec is an important organization. this agreement is significant. you can see it. i know because we work in russia, there is a schedule of reducing output from russia, so i think it is serious. oil prices between $50 and $60 is very realistic for 2017, and growth continues in china and america. reporter: donald trump has been nominated rex tillerson. is he right? excellent for is knowing how to get things done, around the world. .e is a very serious person i think he will do a great job, not just because i am in the oil and gas industry. this is a man that knows the

world and how to global management. reporter: we know donald trump is potentially more friendly to the oil and gas industry than his predecessors. what does that mean for you? bob dudley: surprises are all over the world. people were surprised with the campaign in the u.k., even in lombia.a -- co i think we are in for moore surprises in 2017. we are a very long-term industry, 7, 10, 50 years out. we will navigate and work thing. the bp has got financial framework back, we will navigate wherever the circumstances will be. yvonne: that was bob dudley speaking with tracy alloway. and now how shinzo abe's abenomics revive the rust belt. ♪

♪ ramy: you are watching "a daybreak asia," yvonne: we are walking to manila where shery ahn has a preview to the exclusive interview with development. good morning. shery: today marks the 50th

anniversary of the asian development bank which launched half a century ago. it was mired in poverty back then. now it is one of the fastest growing economies in the world. develop and of asia faces challenges, depreciating currencies, rising nationalism. adb recently trimmed the forecast for this year to 5.6% from 5.7% mainly because of india and the chaotic monetization process. beneficiary largest after india. remember now the headlines of ,ir quality problems in china well, adb has projects it is trying to improve the air quality in the greater beijing area as well as nanjing. adb expects china to grow 6.6% and accelerated growth of 6.4%

next year. in my interview with the president, i will be asking him about the challenges that developing asia faces but also the opportunity you can find in the region, and of course with rising protectionism and the anti-globalization, we will ask him about how all of this affects multilateral organizations such as adb, so a lot to look forward to. ramy: definitely looking forward to that upcoming. with the aging population and low unemployment, it can be hard for japanese companies to find workers. shinzo abe leaves the robotics industry could have the answer. let's bring in our economics reporter. tell us about this robot revolution. that japanhe idea is is simply trying to build on the

success of manufacturing products. now they are trying to make more robots not only to make things but just to have people to deal with the challenges brought by the aging society here in japan. ramy: are there concerns over job losses? yoshiaki: not really. for example, when you look at the struggling factory town padoma, the major business owners all say they are not concerned about using robots. they would rather use more machines rather than people from abroad. why do people in japan have different attitudes when it comes to robots compared to americans? one of the things is that japan has a big culture affection for robots. , ipoke to one of the experts spoke to for this story,

mentioned that the animation characters like astro boy had a significant impact of shaping peoples attitudes towards robots. they tend to be seen as cool companions rather than killers. that is different from the states. yvonne: a lot more cuter when it comes to robots. thank you. over thea quick look next couple of hours on bloomberg. what are you watching? rishaad: we are going back to the asian development inc., talking to the president. , howhe price of pollution much of a hindrance it really is to this part of the world, particularly china. china has recognized it as an economic imperative right now. we were putting that question to him, and why that asia-pacific as well. we have scott morrison, the australian treasurer, he is addressing the nation and

parliament. under the background of the rating we have the aaa australia has locked in place. how long can it stay? we will be days or weeks or maybe never that we see it slashed at some point, but that is what we are looking at as well. we are looking at that with michael price. he is from tourist family office. he will be here in 15 minutes. and this bubble, do we know it is a bubble? and will it actually burst? we have someone from she now property. -- zi mao property. that is all to come in the next couple of hours. yvonne: let's take a look at how markets are treating before we go. -- trading.

you see the nikkei 225 and korea downs seeing pressure 0.2%. we got the japan trade figure which actually shrank in the month of october. exports and imports were falling , but that eased a bit when it came to shipments as well as imports. taking a look at the region, it looks like we saw u.s. equities rebounding and geopolitical risk as well. ramy: that is it for now, but more to come. markets asia is next. ♪

♪ rishaad: 9:00 a.m. in singapore, midday in sydney, 8:00 p.m. in new york. i am rishaad salamat. ♪ rishaad: japan had a third straight monthly trade surplus as exports the decline. prudent and neutral, china's leaders say they will work harder to rein in risk next year. australia's