♪ at a crossroads. inflation flatlining in japan. will household spending continue to fall? >> great expectations. the fed is running out of reasons to delay as more officials flag and imminent hike. >> snapchat's parents send a positive message on their debut. snap. billion attorney general jeff sessions removes himself from all russian inquiries.

he denies he lied under oath. this is the second hour of "daybreak asia" coming to you from bloomberg's asia headquarters. i am yvonne man. >> it's just after 7:00 p.m. in new york. i am betty liu. we are looking for fed chair janet yellen's discussion or talk tomorrow, but for the time being, we are watching how the japanese markets -- japanese markets are reacting, which shows that the jobs market is tight. up.ation seems to be taking it looks like a recovery is underway. a very slow grind. the household numbers, as we talked about, quite a miss, down 1.2%. with the dollar rising, i'm sure japan is happy with how that weaker yen is doing. sophie kamaruddin? weaker yen, giving

the bank of japan some scope to be patient. japan has been the poster child for deflation, it's numbers given some impetus to the idea that it's jumping onto the global inflation bandwagon, but we have japanese shares marginally lower, down for the first day after the spectacular rise we saw on thursday with the topics and -- topix and nikkei 225 rising. we saw the highlight, the drop in household spending, which mabel's for the bank of japan's conviction to stick to its strategy. over to seoul, we have the cost be -- kospi lower. we had inflation quicken in january more than forecast and the current account narrowing as import growth overshadowed and weakness in the shipping industry, feeding into

that. if the fed does titan, it could weaken the one, which could support for korean exports. the won has been the best performer in asia so far. we do have its successor sm shipping due to start services this month. take a look in australia. we have miners greg and on the index, falling over 1%. -- dragging on the index, falling over 1%. rio, also dragging in sydney. taking a look at the hong kong open, futures are pointing higher. check out the chart on the terminal. it was a rough fourth quarter, but the hong sang has risen the fastest among major indices, as mainland funds from china piled in, but the value is seen to of the, as the prospects u.s. rate hike rises.

we will have to see how the market opens at 9:30. betty: thank you so much. data, as wenflation continue this discussion from japan, bank of japan governor haruhiko kuroda, a glimmer of hope. what are the key takeaways right now from this data? >> well, good morning. as you saw, cpi was up 0.1% in january, beating the estimate, which was for it to be flat. it's the first time for the core cpi number two rising more than a year. was 3%.ess rate it's been hovering around that job to applicant ratio remained at 1.43, the highest level in 25 years, just as japan's hunting season is getting underway. 1.2%hold spending fell year on year. that was much lower than the

0.4% decline that was estimated. are we back on track with inflation? >> it's hard to tell. it's hardly a surge in inflation. on the flipside, prices fell every month but one last year, and it's positive it is moving. what we are seeing is fueled by oil and the yen rather than consumer spending, which you saw was quite weak. it's what the are we back on trh inflation? abe government refers to as the virtuous circle, prices rising, wages rising to match that. japan is just entering its annual spring wage talks at the moment. early indications are that abe isn't going to get the growth in wages he is seeking. they are indicating they see no reason for wage increases this year.

it's not clear if abe is going to be able to create that virtuous circle he needs to internally stoke inflation. yvonne: i want to talk more about the household spending, because that was the biggest take away for me. of mentioned about how tight the labor market is. 20-year lows, 3%, but we see wages are growing, particularly at the bottom of the panel -- that is household spending. we have seen 12 straight months of falling spending, which, broadly speaking, this is a downward trend, except for a couple of exceptions when we have seen a little bit of growth. it is that deflationary mindset that japan is caught in. what does this mean for the boj now? >> absolutely. as you say, boj governor kuroda often talks about the .eflationary mindset

they've never known any sustained inflation. it's very difficult to change that mindset, especially when the wage growth, even though it is somewhat positive, it is still pretty anemic. with regards to the boj, the next meeting coming up this , talk around the boj has been shifting away from the need for stimulus on the back of improving cpi data. i think it will be quite a long way off for a potential rate hike. is aoard member sato who frequent dissenter on the boj policy meetings, he says he could see cpi reaching 1% this year, and that might even

trigger a rate hike. you have to remember he is a dissenting board member, and what he says doesn't exactly rule the board. for the meantime, it seems the boj is going to be in a wait-and-see mode. they will be watching this data very closely. yvonne: it could be just want a hawk in the boj. great to have you. let's get you caught up from courtney collins. france's farst up, leadsleader marine le pen has the polls ahead of the first round of the presidential election, although she is seen losing the runoff. even the thought of her winning worries her critics. former italian prime minister enrico letta says it would be the end of the european union. >> i think it's game over for europe. it's impossible for europe to

have a leader of one of the most important countries of the european union someone who is against the european union. conservativence's present for candidate france fillon is-- francois losing the backing of his own party . more than 60 party officials say they will no longer support him during an investigation into his misuse of public funds. south korea says relations with the north are at their worse in decades, and talks are off the abandonsil pyongyang nuclear weapons. the north carried out a missile test last month, leaving china increasingly unhappy with its ally. however, beijing strongly opposes soul's plan to deploy an

american-made missile defense system. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.i am courtney collins. this is bloomberg. betty: attorney general jeff sessions has removed himself from investigations into a legend russian interference in u.s. politics p that is after the justice department acknowledged he met moscow's ambassador last year. there's a little bit of deja vu, right? after we learned from national security adviser michael flynn, he was fired for these allegations. >> exactly. it looks similar to what happened with michael flynn. it'll be interesting to see how this plays out with donald trump as he weighs what to do next, if in fact ass are serious as what people are saying. the department of justice is confirming that jeff sessions did meet, did talk with russian

ambassador sergey i. kislyak twice during trump's campaign for the white house. this goes against what senator sessions said under oath in testimony saying, i did not have communications with the russians. that's a quote. thursday, he did make a u-turn, and he said he never met them in person. let's take a listen. >> meetings with russian operatives or russian intermediaries about the trump campaign and the idea that i was part of a "continuing exchange of information during the campaign between trump surrogates and intermediaries for the russian government" is totally false. >> he says that he never met any russian officials, at least in person, but he did admit that he spoke to the russian ambassador. thanmore of semantics

anything. all in all, he did have contact with russian officials, and he has recused himself. some critics might say, that implies there is something there that he needs to recuse himself from. betty: how has the president responded? he stood by sessions, right? just did stand by sessions a few hours before mr. sessions had that press conference we were just looking at. . took a look at his twitter everything is quite right there. a few hours before, he did say in mr.total confidence sessions, and he was grilled by reporters when he was visiting a naval vessel in virginia. let's take a look at that, too. >> was session involved -- >> when did you first learn that he had spoken to the russian ambassador? when were you aware?

>> i wasn't aware at all. >> when did you find out? >> [indiscernible] >> he probably did. >> it's interesting. just looking at body language, mr. trump is trying to get away from these reporters grilling him on whether sessions should recuse himself. and whether he spoke truthfully about contacts with russia's ambassador, he said he probably told the truth. now we know that is not the fact. donald trump, asking michael flynn to resign, and it will be interesting to see how this plays up your democrats are asking for him to step down. this would be the second blow to this very young white house administration. much, thenk you so latest on sessions. still ahead, how the prospect of u.s. protectionism is causing asian nations to pivot to china. yvonne: plus, hopping on the march bandwagon. and other fed governor makes the case for a rate hike. this is bloomberg. ♪

asia." this is "daybreak i am betty liu in new york. yvonne: i am yvonne man in hong kong. opened bidding for its memory chip business and will take proposals through march 29. selling the entire unit could net more than $8.7 billion in profit, and reuters says toshiba has hired ubs for the potential sale or ipo of a majority stake in landis and gear. betty: j.d..com has agreed to sell its finance arm for more than $2 billion in cash but will retain a share of its future profits as part of a deal to spin off the fast-growing division and create a rival to alibaba. jd.com shares rose almost 6% in

new york, their biggest gain since november. yvonne: reports from japan say foxconn may sell a small stake in sharp. the nikkei news says 1% could be offered to clear the way for sharp to return to the first section of the tokyo stock exchange. 35% must be available for public trading under exchange rules. sharp wants a return this year. odds for a u.s. rate hike have jumped higher after a dovish fed governor talked up rates pugin it yellen could move the needle to furl -- to full certainty you'll see a rate hike. kathleen hays, the stakes just got higher. kathleen: they certainly have. she has to be choosing her words so carefully. you have another fed official speaking this evening in new kong,this morning in hong and that his master from the

cleveland fed. she speaking to college students about leadership, so we are waiting to see if this panel is someon -- if there eager finance student listening, we want to know about the march rate hike. you're going to be our plant. we will have reporters from all over the world pestering her with questions. we will bring you whatever she says. j powell spoke earlier in new york. prettyfed governor who's dovish. after saying a couple weeks ago, i think a rate hike is beginning to be more appropriate, and he said, the case is coming together. it is fed speak. it stronger than it was. close to our mandates we had been in a long time. the case for a rate increase is on the table. we don't need to guess about what the market reaction is. if we jump into the bloomberg terminal, we see that showing

you a pretty picture. if you want to see federal rate hikes, the turquoise line is up to 90%. you can see how it has jumped since last thursday. the white line, why are we showing you that? that is all the buildup to the december rate hike, which did occur the last month and a half. the bets were 100%. the fed came through and didn't surprise people on that. speaks in chicago at 1:00 eastern friday, stan fischer in new york at 12:30, and they are the definitive voices. does she dilate back? does she keep those hopes were fears going? yvonne: right, kathleen. she has the final say. it doesn't matter what everyone else says. what is she expected to say? kathleen: that's an important point. all of these officials are allowed to speak. again, she is the chair.

we want to know what she thinks about the labor market. one of her more dovish stances is, there is plenty of slack. #26 92.oing to see it's a simple chart. it shows new claims for an employment benefits. they have fallen. a 44-year low. that could be because labor markets don't have enough skilled workers. it could be because employers are cautious or they don't know what donald trump is going to do. another question is, what will she say about inflation? is it close enough to target? i want to show you one more chart quickly. what it depicts is our bloomberg intelligence team view. they are showing you the rate hike cause rising. that orange line is showing the atlanta fed's gdp tracker. the latest estimate is one point in percent come in quarter with quarter, and

bloomberg intelligence is saying this could delay the fed hike. let's see if we hear anything from janet yellen and stan fischer. yvonne: kathleen hays, thank you. coming up next, we are going to get some investment insight with apexche asset management ceo and talk more about the fed. this is bloomberg. ♪

betty: this is "daybreak asia." i am betty liu in new york. yvonne: i'm yvonne man in hong kong. the chances of a fed hike in march increase, and let's bring you a chart and show you what is going on. it's a stark contrast from three years ago when you did see capital flooding out of developing markets in that so-called taper tantrum. you can see it back in 2013 with the previous federal rate hike hike. rate

what has changed? let's ask sean taylor, had of emerging markets at deutsche asset. what is driving this right now? it's not the fears of the fed. we've gotten this donald trump address out of the way. what is driving all of this? sean: the first thing was, when trump was elected, there was a sharp selloff. i think it was a 15% under performance in november and december, and that has been readjusted. the main key has been china. the growth has been a lot better. that is coming through in earnings. people have been underweight on emerging markets, so it's been a good environment. yvonne: we've seen the economic data has been stabilizing, but how do you factor in the politics ahead of the national people's congress? they could be raining in some of these growth targets. they might have some market friendly reforms, or they could end up doing some supply-side reforms. what are you going to be looking out for this weekend, some clues on where beijing is heading?

sean: one of the interesting things that has happened over the last six months in chinese government is supply-side reform, and if that continues, the market is going to take it very positively. that is the keep you are that is leading to a change in delta. it was the services of economy doing very well, but in the last six months, the old economy has been picking up. it hasn't been growing massively. better.a has been that has allowed stocks to do better. within china, capital controls have been extremely tight. property is quite subdued. better. the government has been trying to get liquidity out of the bond market. they have been keeping policy rates tight -- sorry, the same. that's been a very good environment for equity markets. china's investors continue to market, because they are worried about devaluation of the rmb later in the year. it's been positive. betty: i want to talk about currency, sean.

we saw today with the spike in the dollar, does that remain the biggest threat to a positive view? sean: it does, betty. also, we have to be careful in differentiating which countries will do well in this environment. i think on balance, lots of people are scared when the dollar goes up. a lot of situations before have been driven by crisis. the dollar is going to be strong, in our opinion, because u.s. growth is picking up, and at the same time, chinese growth is picking up. you can't get away from the fact that some countries, whether it's turkey, south africa, indonesia, with a lot of dollar debt, they will be in a worse situation with the stronger dollar. betty: indeed. that is why you favor asia over

latin america, right? you favor asia over countries in the middle east, or africa, is that right yet go asia the top spot for you? sean: it is, and it's really driven by china, betty, but also by last year. we had a huge performance of latin america, particularly ,riven by brazil and argentina and em ea, particularly driven by russia. stablear, i think the growth will come from asia. the market is coming down a little bit. that will provide an entry point in a few weeks when rates go up. russia is down 5% this year with emerging markets up 10%. it basically did too well after trump got in, both the ruble and equity markets, but that is a good opportunity.

yvonne: sean taylor, have a great weekend. coming up, a top banking analyst warns president trump that plans to deregulate the industry must not threaten investors' safety. we will have more from mike mayo next. this is bloomberg. ♪

yvonne: 9:30 a.m. in tokyo. it looks like to be a beautiful friday. we are just 30 minutes away from the beginning of trading. we are seeing the yen hanging 114.some losses, betty: i'm betty liu in new york. you are watching "daybreak asia." courtney: japan's core inflation rose in january for the first time in 14 months, offering some hope that price gains may the inching towards the boj's 2% target.

household spending fell 1.2% from a year earlier, three times the forecast drop. higher inflation is at the heart of japan's economic revival efforts with the hopes of a turnaround pinning on higher oil prices and a weaker yen. shares in snapchat's parent surged on debut, closing 44% higher. snap sold 200 million shares at $17 each. that valuation makes it twice as expensive as facebook and four times more costly than twitter. far,ree analyst reports so to our cell, one is a hold. evan spiegel and bobby murphy are $1.7 billion richer. >> i think it's a reflection of two things. one is how popular the product is and how well the company has executed, and the second is friendly there haven't been a lot of tech ipos, and there is investor demand to invest in companies like snap. slumpedpillar's shares

taxmost in months as officials searched its offices. however, caterpillar revealed in a filing last year it had been subpoenaed by district court seeking financial information. the rates come on as the new ceo tries to revive a company hit by the prolonged slump in commodities. nintendo's next-generation gaming console has gone on sale in tokyo. the switch sells for $300 and is touted as combining home and mobile ability. it's nintendo's biggest bet in years after the decision to make games for smartphones, and it follows the flop of its previous console, the we you. reviews have been mixed, and nintendo's shares are down 13% since it was announced in october. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.

i am courtney collins. this is bloomberg. yvonne: thank you so much. it's time to see how asian markets are shaping up on this friday morning. it looks like it is a down day. sophie: we are seeing shares in tokyo dragging down, following that weakness we saw on wall street. we are seeing the dollar-yen, very much in focus, inflation finally entering positive territory, and the boj counting on the weaker yen to keep that momentum going. we do have a chart on the terminal, if we can pull that up. that the resistance area, that is seen around the mid 115 level, but the upward momentum, that is stalling near the 55-day moving average. this is similar to what happened in mid february. yellen and fisher could give the dollar-yen the boost it needs to go higher, which is needed for

japan's inflation ambitions. we do have the boj six policy meeting on march 16, just after the fed, so that is going to be watched for clues. one boj board member said earlier this week there could be a rate hike later in 2017 because inflation could hit 1%. of course, given japan's tight grip that it's got on its yield curve, that is going to be a focus. betty: thank you so much, sophie kamaruddin on the markets. our next guest was formally the banking analyst at cl assay and one of the most vocal on this sector. earlier this week, the brokerage unit shut its u.s. equity research operations, and now he calls himself a free agent. joining us is mike mayo. good to see you. mike: thanks for having me. betty: you found out monday night. how have you been holding up?

was a surprise. these things happen in the rough-and-tumble. betty: was it a surprise? mike: it was an absolute surprise. i went home and told my wife, and she said, you are fired 17 years ago, which i was, and she said, we are not doing that again. i go, what do you mean? she says, i'm not walking around central park at lunch. i'm not going to a coffee bar in the middle of the afternoon. i'm not seeing a midmorning movie with you. i will get a job because i'm afraid of what my wife might do with me. betty: she might get you before somebody else will. you say it's a surprise, but it was always an uphill battle for clsa to try to compete with the u.s. brokerage firms. investment research is very costly. it's tough to break into this market. it was always an uphill battle, right? mike: i cover global banks. day onn had its investor tuesday, and if you want to see

a model of how to expand globally, jpmorgan's fastest-growing region in investment banking is asia. jpmorgan increased their investment, additional investments of $5 billion over the last eight years. betty: to tell you how strong that region is. mike: and that also includes asia, where they have gained share. equities, ared in you also expand in fixed income, the whole gambit of activities to her is the way jpmorgan has successfully expanded. the u.s. is the biggest capital market in the world still by a long shot, so there is always the chance you have more foreign banks coming to the u.s. what is the need a brokerage firms? what is the service we ultimately provide? first, i would hold my 25-year record on banks up against the 1990's,lish in

bearish the last decade, super year.h the last that is not permanent. there is no permanent impact from that. what is permanent is how we do our job, the process, and the process of holding management accountable to shareholders and narrowing that year. cap -- betty: clsa was known for being much more independent and hiring analysts like you who were able to speak your mind much more freely than others, so you not being a part of any firm, does say now what you may be didn't say before. is there anything? mike: i am proud to have been the first analyst to test the cause of the financial crisis and the only one to testify on sarbanes-oxley. i've worked at swiss banks, german banks, chinese banks, u.s. banks, and i've been independent. if i have had something to say,

i have said it. there's always the 80-20 rule. when he percent of the analysts draw 80% -- 20% of the analysts draw 80% of the research. what i've done that is new in the last couple years is go to annual meetings. remember, there was a financial crisis, but also hold those who oversee management more accountable, and the investors said, well done, keep doing that. yvonne: i just want to say hi. i want to get some comments from you regarding your old boss. we talked to him last week. he had some things to say about who pays for research. he was saying decline should decide how much they want to pay. do you agree with that? mike: i think there is an ongoing need for quality research to advise institutional

investors. i will go further than that. i want institutional investors to render active management fees , and they should be active not just in the buying and selling of stocks but actively engaging with corporate management. if they do that, they earn more of their active management fees, and you can reverse the trend from passive to active. what we do as part of our service is provided insight into corporate management strategy, make decisions whether or not corporations are allocating resources well, and holding management accountable. if you do your job well, investors should reward the good analysts. i hope i'm one of them. there are several out there. betty: you mention about the opportunities in asia. yvonne: i think it's the fastest region, but i'm just curious. it's been a difficult time for the banking sector in asia. talk about the competition between the domestic and regional players, compliance issues, regulations, as well.

it's putting pressure on margins. where do you see the opportunity in the region? mike: i'm sorry. you can't cry about regulation in asia after what we've seen in the united states of this decade. i estimate that the four largest banks in the u.s. come if nothing changes, will have $100 billion in regulatory and control costs. that is a huge number. having said that, i understand what large banks are going through. you have regulation. you have cut expenses. where you going to get the growth? i think it's tougher outside the united states, but the united states, you do have the strongest balance sheets in a generation, and you have accelerating revenue growth, helped by some of the potential fiscal measures by the trump administration. yvonne: we have seen a lot of foreign banks in asia other downsize or retreat from this region.

are the bright spots outside of china then? think it ist necessarily region versus strategy. the question is, to the global banks have the right strategy, and do they have the fortitude to see that strategy through? yetthe expanding and equity go are they expanding in derivatives, fixed income? as opposed to a product approach, having a relationship approach, and the right approach is you lead with a couple products, and you certainly can lead with equity research. that enhances the brand. reputation,e that you leverage that to add on more products. that is one strategy that can work. betty: back on the u.s. banks, in the last year, you have been pretty bullish -- mike: not pretty bullish. super bullish.

as i sat on bloomberg, the most bullish i have been in 20 years. betty: i was thinking more relative for you. you have been such a dog on them for so long. mike: i clearly went overweight last february. they've been up over 50% since then. betty: the right call, but now what? are you waving a yellow flag on them? mike: now i hang out at starbucks in the middle of the day making phone calls for a job. say, be a little bit careful. for my reasons, i think there is upside. i don't think everybody is buying for my reasons. what you have here is a lot of owning the banks for the trump bump. you go, wow, that's great. you are re-fleeting growth. i would say, beware. i would say in the next seven weeks, because then you get the bank earnings.

results will be good, but then you are likely to see sector rotation not a banks into another category. betty: why is that? mike: they are pricing in the interest rate more than what is going to come out. 10-year can't keep going up from where it spent. you are pricing and more of the short-term benefits. what i would say now on your show, and this is the first day i've said this -- i would say, be a little careful here in terms of u.s. banks as we go through the next seven weeks, and by implication, if u.s. banks are little bit weaker, you could have some of the asian banks little bit weaker. betty: and make markets weaker here, too, right? mike: the increasing global growth theme, wait a minute, it's not a straight line, and there are potential bumps.

betty: still a long-term bull? terms of u.s. banks as we go through the next seven weeks, and by implication, if u.s. banks are little bit weaker, you could have some of the asian banks little bitmike: long-termy positive. that is underappreciated. good to see you. thank you for stopping by, mike analysts.former clsa as we talked about president first,utting america we will talk about who we think might be the unlikely winners of u.s. protectionism. this is bloomberg. ♪

asia." this is "daybreak i'm yvonne man in hong kong. betty: i am betty liu new york. mexico central bank, announcing of hedges to protect the pace of from volatility after donald trump's election, but our next guest argues that mexico may benefit from a more protectionist u.s. policy. joining us is the ceo of risk consultancy firm business environment risk intelligence. ofthanks for joining us. was very curious reading your notes. what country is going to benefit from u.s. protectionism yet make

sense of mexico first. >> let's start with mexico. i want to go on record saying that there is going to be a net losing situation of the countries we are looking at, but in mexico, they have a great opportunity on a bilateral trade basis. they're going to negotiate nafta, and i think they will come away a winner. they have a lot of leverage we are not hearing. they're also getting involved in latin america him more and more, and we are going to see more bilateral trade investments that mexico will be negotiating with china, india, and asian countries. some of these countries mexico already has good trading relationships with. betty: let's talk about asia in particular. china you see as a net winner here? >> china is an absolute net winner. china is sitting down and doing nothing, watching the u.s. destroy itself. withdrawing from the tpp was a

bad idea. know, china has been pushing their own concept, but they are slowing it down. they didn't want to do it anyway. they were doing it to counterbalance the u.s. involvement in the region. now they are just watching. we are seeing them in thailand. we are seeing them in southeast asia. yvonne: i just wanted to throw some headwinds your way. you mentioned how overall this is a net negative when it comes to trade or the trump administration, there's been talk of them breaking out of wto rules. how do you factor in a potential border adjustment tax for some of these countries in this part of the world? >> it's pretty much robbing peter to pay paul.

there is going to be quite a lot of distortion here. they are going to be taxing the trade deficit, which is a good idea. they're going to get this and leave exports untaxed. this is pretty much an export subsidy. all these countries are going to argue that, and there will be cases brought before the wto. it is not a good idea. one of the things that is of great concern to us in the political business is that president trump is trying to pay for this based on the appreciation of the u.s. dollar, and his team is telling us because the dollar is going to appreciate 20% or 25%, that is not going to have an impact on importers that much. we don't know how much the dollar is going to appreciate. we don't know how border adjustment taxes are going to be applied. there's a lot of confusion in washington about this, and the

houses of congress, and there is a lot of confusion in emerging markets. yvonne: the president himself has not exactly been specific on whether he stands by a border adjustment tax. if we do see something like this, china, how would they respond? are we going to see retaliatory efforts, and could it spark a trade war of some sort? >> i would like to think that both countries know better not we'rethat, but i think going to come down to a currency manipulation issue. if the united states declared china a currency manipulator, we are going to see retaliatory measures. i hope it doesn't come to that. when you look at china, what they are trying to do is appreciated their currency. they are applying capital controls. they diluted their foreign currency baskets so the currency would appreciate against the u.s. dollar. they are doing everything, because they want to be in the .sci

it's becoming an international economy. if they are declared a currency manipulator, that is going to bring back some retaliatory measures. betty: let's talk about some of the under -- other countries you have singled out. india and russia, tell us the case. tech companies will be happy about h-1b restrictions. they will be able to keep their talent. tech companies at the same time, india has undertaken great structural reform. certain parts of india will be winners. they have a very good relationship with the united states. modi and president trump get along very well. betty: the same with russia. >> russia has turned into a manufacturing sector.

i think politics has become even more difficult now, with these two countries coming together, but russia -- i was in st. petersburg two years ago for the international conference, and i have seen the manufacturing base grow. i have seen companies talk about that. they have a weak currency and good labor force, and after two years, we have seen more and more manufacturing plants coming into russia, so i think they are going to be a winner from this. betty: thank you so much for joining us. i appreciate that. compelling arguments on the winners and some losers, obviously, in this protectionist rhetoric we are hearing from washington. much more ahead. to raise or not to raise? we are going to hear the view from julius baer. that is next. this is bloomberg. ♪

betty: this is "daybreak asia." i'm betty liu in new york. yvonne: i am yvonne man in hong kong. momentum seems to be building for a rate rise, and a julius baer says a hike would be a signal of strength. in the exclusive interview with bloomberg television, boris galardi says he expects the fed to move this month or next. boris: i think the markets are running a little bit ahead of the rate hikes. i think we are seeing markets anticipating this for quite a

signal that it's help markets get to the next level. it seems to be imminent. >> if you had to hazard a guess, when do you see a rate hike happening? help markets get to the next level. boris: between march and april. >> would a series of rate hikes be beneficial to wealth managers? boris: i think it would certainly help continue building confidence on the outlook. i think increasing rates is a signal of strength, and i think that is what we all need right now, especially wealthy clients. there is still a lot of cash sitting on the sidelines, and i think that could be one more stone in getting people back into action in the markets. >> can you elaborate on that, what proportion of cash are they holding? are they still very conservative? boris: i think we are seeing clients holding between 20% and 25% in cash, which is a lot of cash.

it is taxing to be holding cash. you have negative interest rates and negative inflation, so it's double your advantage. >> you see that changing the echo you see the cash holding diminishing in the months to come? boris: we are seeing the first movement. it's difficult to say whether that is a trend or not, people starting to go back and invest into some solid firms and good sectors, good industries. we see some cash starting to move into securities. let's see if the trend continues. >> there seems to be optimism in u.s., its growth story. are your clients eager to invest in the u.s., also partly because of what trump has in mind in terms of spending, like on infrastructure? would private equity be attractive to them? boris: we are seeing clients returning to markets favoring the u.s. market. rising.seen valuations

that seems to be the trend, and i think that should continue in the months to come. betty: again, that was julius lardi. ceo boris cal we are getting breaking news from donald trump's office, coming out with a statement saying president trump reiterating that sessions is an honest man, did not say anything wrong in his dialogue with the russian ambassador. he could have stated his response more accurately, and also calling what is happening now a total witchhunt. yvonne: we will follow those headlines coming up from the president. we have more to come on "bloomberg markets."' ♪

>> its 9:00 a.m. in hong kong, midday in sydney, 8 p.m. in new york. i'm haidi lun, this is bloomberg markets asia. haidi: great expectations, the fed is running out of reasons to delay as more officials talk about imminent hikes. china's political elite gathered to map out their targets for the year. we are live from beijing. and attorney general jeff sessio