arene: asia-pacific markets set to follow wall street lower. growing concerns president trump progrowth policies are not going to pass. oil is at its lowest since november. u.s. supplies are seeing increasing. billions ofd to put grand into the system after smaller banks missed that

debt payments. betty: we have the world covered on "daybreak: asia." how the pboc is intervening while smaller banks struggle with debt. why apple pay has struggled to take a bite out of china. in new york, analysis behind biggest dropd the so far in singapore. we await the latest trade data from japan later. this is "daybreak: asia." i am betty liu in new york. yvonne: it is just after 7:00 a.m. in hong kong. i am yvonne man. drama in the sea. this time, -- drama in d.c. betty: it looks that way. i would be surprised if there was not a carry-on effect at all and as we saw, all the indexes, and that isr by 1%

setting up for a day of red in asia. yvonne: risk off. treasuries, gold. new zealand, down 7/10 of 1% right now. we did see earnings come through . the stock being dragged down -- the index down, i should say -- after they cut their index for the year. the kiwi at 7043. down .3% on the asx. 680.ie dollar at 7 six-week highs for the dollar-yen. a bit of ground. 120 for your yen -- for euro-yen. this continue to see that

knock on effects from what we saw on wall street is trickling through in the asia session. could be hit the most. taking a look at bat, we are trying to figure out exactly what triggered this selloff. gonee s&p has not really with a decline. betty: that is a great question. what changed today from last week? ramy inocencio is joining us as well as cathleen haze to dig deeper into what happened. what do you think ramy: based on what has been happening, everyone has been trying to reflate based on what mr. trump has been saying. was hinging on what was happening with obamacare and whether that actually passes repeal and replace on thursday. president had many publicans in the white house. pass it and if you don't, you

will get voted out of office. >> didn't he say you aren't going to get your tax cuts as well? kathleen: you have to figure out what you are doing with obamacare before you know how much you can cut taxes. there is a lot of tax implications of obamacare in the stories onone of our bloomberg -- it will not cut as much as they thought. a lot of republicans do not want to vote for it because it will take away health potentially from their constituents, but if they do not pass obamacare, again, they cannot move on to had cuts ended you don't, you cannot move on stimulus. this is what was hitting today. ramy: it is what was hitting. in terms of the market, down the most ever since october. pop into my bloomberg and i want to show you the great g #btv 2622 chart. linesare bunch of blue

and take a look at the right side, down 1.24% on the s&p. look at the last time this happened in october, middle october or so. we are seeing on this order of calm potentially being over. what goes up must come down. we are seeing that at least for today. it seems like, kathleen, you have a chart about the 10 year yield. yes, 6598. it is showing the range the 10 year yield has been trapped in for a while. not merely -- matt pointing out that -- betty: are supposed to pull this up? 6598? kathleen: it is back down to 2.41%. technically, a lot of people who you areling for this --

going to be in a bear market. it has resisted that twice now, so i also communicated with worldover at cibc markets. he runs the trading desk there. he felt that with regards to this argument that there was considerable reflation with trump has been there for it while. he thinks the bond market anyway was an oversold market. he thinks that is a dynamic. and of course, we know that the stock market, there has been big trades based on trumponomics. ramy: based on hope and not reality. kathleen: and they did terrible today. ramy: he was saying that whether this is a buying opportunity or not is beyond what we can say here, but we definitely want to up tome analysts which about whether this is the time to get in. we are down 1.8% for the nasdaq

in this is the time to get in as well. we see the 10 year treasury years and this is despite the fact that we continue to hear this course from fed speakers. it is not going to be a rate hike every single fomc meeting from here on, but it is going to be not one and done. kathleen: it would be interesting to see as fed speakers do interviews. we will have big interviews on bloomberg tv. thisll ask how they view move in the bond market. it occurs to me that the yield curve has flattened a bit, but maybe it is partly because when global investors see the yield on a 10 year treasury going up, they see value. furthermore, they will be on a steady path of rate hikes. that is another reason for bond investors to say, hey, maybe it is not so bad to hold onto bonds

for a while. >> possibly we could see that pinch. the markets are seeing that a little bit overnight. kathleen hays, ramy inocencio, thank you for the wrap up on wall street. first word news with nina melendez. joined the.k. has electronics from middle eastern and north african cities during tablets, laptops, and dvd players must travel in checked baggage. the u.k. ban is limited to five nations. canada is reviewing a ban. the european union will make brick and for brexit talks by a summit. that means a whole month will collapse before e.u. leaders will discuss how they will begin the negotiations. donald tusk said the priority is to protect citizens, companies, and states from any

negative effects. theresa may said she will watch the brexit process on march 29. reports from geneva saying north korea is seeking to accelerate its nuclear and missile program with the intention of developing a first strike capability. -- ambassador said "sean described it asrie breakthrough technology. taiwan developed on submarine fleet with the president on the first vessel and service within 10 years. she promoted the plan after a decade of talks to buy eight u.s. both proved fruitless. tensions between beijing and taipei have worsened since the pro-independence progressive party came to power last year. global news, 24 hours a day,

powered by more than 2600 journalists and analysts in more than hundred 20 countries. i am nina melendez. this is bloomberg. theop story this morning, pboc is said to have ingested hundreds of billions of yen into the financial system. under smaller lenders failed to make payments. tom mackenzie joining us from beijing this morning. we continue to see the smaller banks in china struggling amidst this tighter liquidity condition we are seeing. is right, yvonne. we are talking about the missed interbank payments and rural commercial lenders, including one which best an overnight repayment of just $7 million. we have a bloomberg chart, btv #69 85, which shows what is going on because we are talking about the rising cost of money here in china. this is a year-to-date chart. from august of last year, that is when the central bank year

started to push up those benchmark money rates. in fact, we are now a level where we are near two-year highs on that seven day repo rate since about april of 2015, and in fact, up until march, the 16th of this year, 16 can think it of days where the pboc was withdrawing funds from the interbank market. say, it is starting to have an impact on lenders here. yvonne: is this going to have any impact on -- betty: what is the impacts going to be on reducing leverage on china? that is the key question. with that that question to the key economist at bbva. the jury is still out on how this is going to be. he said the pboc's policies have become more sophisticated and more targeted, but we do not know yet if they are going to succeed. what he did say was that this is

exposing fragility of the financial system as the central bank effectively have the tug-of-war with china's lenders. another analyst we spoke to said what the pboc is trying to do is keep the cash supply going but increase rates, but he said they do not expected to down in the seven day rates in the near term. shocks.ore liquidity >> thank you, tom mackenzie in beijing. still ahead, a look at what japan is doing to strengthen its trade ties as the prospect for dpp diminished. >> calmly says investors should pick from least liked stocks. his list,hat is on next. this is bloomberg. ♪

betty: this is "daybreak: asia," i'm betty liu in new york. betty: -- yvonne: a quick check of the latest yvonne: headlines. on monday, deutsche said the justice department had closed a criminal inquiry into its currency trading activities without recommending any action. resources they regulators are in the final stages of their own reviews of georgia's conduct -- deutsche's conduct. apple delivered new products ahead of the much-anticipated iphone upgrade later this year to announce the cheaper version of its my .7 inch ipad which starts at $329. going to buy one? there is a special edition red iphone and seven plus. york shares slipped in new on tuesday but have risen more than 20% so far this year. yvonne: google is giving

marketers more control over their online and youtube ad that are several brands halted overing in the u k concerns about offensive content. it expanded the definition of hate speech under the advertising policy to include vulnerable groups. google has largely stuck to its position as a neutral host of outside content. us look into the crystal ball and see were the markets are headed after today's huge decline. sentiment is too strong and stocks are likely to stall through the first half, says our first guest. , you are the biggest bear on wall street, is that right? how do you wear that? do you wear that with honor? term.is a relative the best way to characterize our view is we are pausing our view. betty: what does that mean, tom? guest: it means that equities have diverged from the yield

high yields and commodities and even small caps, and so we want to see some of these divergences resolve before a more comfortable sort of being bullish. betty: so therefore you think there is a paz but -- a pause. but you should now be looking into shares of companies whose stocks are the least liked? how do you define that? thomas: it is really simple. we use from bloomberg, you know they bloomberg consensus ratings which measure analyst's buys/sells. they have outperformed every year for the last eight years, so the bottom quintile. the relative outperformance has been several hundred basis points per year so it has been meaningful. ramy: betty: energy shares.

you're talking about energy shares and how you see a bottom forming for the energy sector, right? thomas: that's right. betty: let's bring up that chart. i want him to play in this to our viewers. what are you seeing here? thomas: the viewer should focus on the orange line. that is rolling five-year returns relative to the s&p since 1933. generational bottoms occur when that rolling return hits the green line and generational tops when it hits the red line. energy is a very trend oriented and fairly predictable sector that whenever we touched the green line, it has always touched a generational bottom. it seems like we are establishing a generational bottom today. way, someone looks at that and says, is there fundamental support? if you do the same chart using ebit margin, energy margins are

essentially the lowest they have ever been, so you are essentially buying profit drop multiples, 15 year bull market. betty: so that is some value. what did you make of today's decline? thomas: it is hard to draw too much, because it is like one bad day since november -- bad since november, the market has essentially gone one direction. of at leaststart some period weakness because the high-yield market has already started to back up. a high-yield market has been weakening for two weeks now, essentially flat for the year. the yield curve has continued to flatten. equity playstrump have round tripped to november 2 pre-election day prices. when i think about the internal structure, the market is weaker than headlines think. yvonne: it is yvonne in

hong kong. mention about some of these unloved stocks but you take a look at the ones in the lowest quintiles as you have been churning up here, they have actually been underperforming for much of the other quintiles actually, much of the broader markets, so you say these are transitory things that are going on right now, but why do you think we are seeing such underperformance in these stocks right now, and given the fact that valuations are so stretched , is it better to look abroad and outside the u.s.? thomas: those are both really good points. year-to-date, instead of the least liked stocks doing well, it is the consensus names, the stocks that are most like that have been hugely are performing, close to six on the 20 basis points your today to come out of versus the bottom. it has reversed him is completely what happened last year. the reason we think -- must methodology -- a must methodology has changed, this could be purely temporary.

the least liked stocks if you to be bottom quintile, have 300 basis points faster earnings growth this year and they are trading up the same multiple so you are pay more to buy the most like stocks and getting more growth in the least likes and that is why we think it is temporary. you mention about the stuff before, computers, resources, american banks, phones, telecoms that you are looking into. i want to focus on financials in particular which were hit particularly hard on wall street today. the big thing that has been fueling banks is fixed income trading. you're not going to see that really pick up significantly, so how much more room to run you receive the banks? thomas: there is a lot. business models are pretty predictable. they are reliant on as that growth or loan growth and

recently, trading has been a proxy. wayhigher inflation either it is good for banks and people have to keep in mind that banks have been one of the three groups that have borne so much increased regulation. four regulations are crossing billion per year. there is a lot of leverage to take off. anchor: tom, great to have you. calmly. -- tom lee. how the new generation of traders is causing concern on wall street. this is bloomberg. ♪

yvonne: this is "daybreak: asia ," i am yvonne man in hong kong. betty: i am betty liu in new

york. complaining about the young and inexperienced, that may sound typical coming from the old fogies. rookies on wall street could be causing real trouble. maybe the mini crashes. i want to bring in the person who wrote the story. these crashes are tiny ones but are becoming more common. our older people displaying a just blamingpeople it on the younger ones? almost 9%,e moves dropped 9% in a matter of minutes. the bank for international settlements says some of this is due to the inexperience of traders amplifying this move. they see something happening and panic and step away from the markets and it just keeps spiraling out of control so there is a negative truth to that. betty: so tell me, what do these

trading deficits really look like compared to five years ago? are they demographically that much different? are smaller and younger, and what i saw from my research was that the trading deficits have shrunken by 25% in g10 foreign-exchange over the last five years, so it has been a big cull of people and the new blood that have come in, three to five years experience. moreare getting much inexperienced. there are fewer senior managers on the desk as well. lananh: we have one managing t director. that was one:4. 1:4, so weing -- was are seeing fewer experienced people. yvonne: is this a junior eyes happening? lananh: i got feedback from

bonds to municipal bonds and people across the industry so this resonates across wall street, especially in banking were the banks after the financial crisis have really had to cull the desk. it is not just a foreign-exchange stored. yvonne: there is backing from the bif, but what are the employers saying about this? is there anything going to be done about this or does there need to be? lananh: for the day-to-day churn of the business, you have a lot youngsters on the desk who can handle computerized trading. it is all very quantitative. it is basically the computers doing the heavy lifting these days, so it seems like there is less of a need for human traders. when these big event, these black swans occur, you need someone in the driving seat who has seen it before and who had seen the rm crises to be able to steer the ship and have some patience when the markets are really going haywire. yvonne: don't blame it on the

fat senior anymore? just a college grad. we will have much more ahead on

>> a gorgeous evening here. it can almost be spring weather this weekend. 7:30 p.m. in new york. not so refreshingly springlike at all. 1% in the s&p and over 200 points on the dow. i am betty liu in new york. you are watching "daybreak: asia ." first word news now is nina melendez. mina. nina: china's central bank injected hundreds of billion of yuan. the institutions that missed role commission

banks. smaller vendors face tighter liquidity this week as money market rates climb to the highest since 2015. sources china is planning to tighten rules on the use of corporate bonds as collateral for short-term ♪ loans . -- short-term loans. they will only be allowed to use aaa rated securities as collateral for short-term loans. u.s. supreme court nominee neil gorsuch said he would not hesitate to will against president trump if the law required it. he refused to say whether he would uphold trump span from travel from six muslim nations other he said the constitution has many projections for religious minorities. the confirmation hearing, he made no promises about how he would rule on any issue. , fromone in the process the time i was contacted with

an expression of interest for a potential interview to the time i was nominated, no one in the process asked me for any commitments, promises about how i would rule in any kind of case. marriage equality defended in australia after a government official said they should not campaign on social issues. riding on the qantas website, they say they support equality and that open societies attract better talent. most australians support same-sex marriage. previous campaigns have failed in parliament. more asian cities have made a list of the world's most upensive with tokyo shooting seven places to number four, bolstered by a resurgent yen. osaka and number five. singapore and hong kong retain the top two spots and seoul, the sixth.

global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am in a melendez. this is bloomberg. ♪ >> looking at how the asian markets are shaping up. let us get to sophie kamaruddin with the market board. wonderingonne, we are if we are going to see the risk off frenzy. still wondering if we are going to see the risk off frenzy extending to the asian session. we did see the rally in emerging markets stopped in its tracks. new zealand sliding for a second day this week. australia, the essex down hundred -- the asx down. u.s. stocks fell by the most since jumped election. the question of whether we are going to see a truck correction,

like rock saying the reflation trade is down but not out. we have haven assets on the rise. moree seeing the dollar lots of those. cannot seem to find a bottom. no sign of a rebound for oil prices, trading at the lowest since november, and we do have copper falling as the freeport mine continues operations. there is a record pileup of chinese ports. , theyshare commodities slide. the aussie below 77 u.s. cents. the highest in three weeks after u.k. inflation rose more than forecast. theuro is looking steady after advancing in the wake of the french presidential debate, emmanuel omicron on top. omicron on topel -- macron on top. betty: i want to get to kathleen

hays. a trio of officials on the u.s. economy today and we just heard from the right of is there and we will hear from another guest. they going to seeing the same tim? kathleen: i expect so. everybody else seems to be marching to the tune of the same drummer and gradual rate hikes in 2017, the economy is getting healthier. a conference in washington saying she agrees that more hikes are likely in the economy will grow above 2%. quarter, we will be transitory and inflation is headed towards targets. the upshot is, more hikes. here is what she said. i believe further increases will be needed. my current assessment is the pace of removal will not call for an increase at each meeting, but it does mean more than the

one increase per year seen in the past two years. loretta mester seemed to leave the door open, but given how the inflation gauge is running relative, she might be ready to go for the three or four hikes some have talked about. let us jump in to the bloomberg. 3429. core pce, the feds key gauge, is the white line. the turquoise line is the medium cpi. it is up 2.5%. its research shows this is a better predictor of where inflation is heading. it has leveled off. the core pce is writing slowly at 1.7% -- rising slowly at 1.7%, enough for loretta mester to be on board with hikes. the balancem her on sheets. more than $4 trillion of bonds being held by the fed. when are you going to start reducing it? the fed has said, when normalization is on the way.

the president of the kansas city fed spoke earlier and she also talked about the balance sheet. she said you are going to hear more talk about it but the fed is not going to move quickly. from the monetary policy side, hawk, was kind of cautious. she said it is tricky to move now because we do not want to destabilize recovery and we do not want to move to slowly to iranian inflation. rein in inflation. bank regulation, the roles had to be strict enough to prevent them from failing. fedpresident of the boston is speaking about two hours from now in singapore at a conference

, actually, speaking in bali. a very interesting subject we are watching closely. i wish i was there for the conference. and at any rate, that is an important voice. betty: we are all on this inflation path or reflation path and in europe,an but not particularly in the u k, right? kathleen: they're inflation is really moving up and faster than forecast and that is because the pound has fallen so much. 17% drop in pound sterling since the brexit wrote and what this means is that inflation is rising. england's 2% target is topped. 6974, 2 .3% is the year-over-year rate on the headline and the court is up to 2% and in fact, a year ago,

0.3%. a very fast move. i want to show you some of -- what does this mean to real people? what is costing more? fuel costs are up. imported food prices are surging and things like pcs and laptops are costing more. basically, this is the story for the u.k. the bank of england, mark carney has urged people to be calm. a pound dropped will pass through the number and maybe that number will look better behaved, but still, a big number to watch. a growing, complicated situation in the u.k.. kathleen, thanks so much, kathleen hays. yvonne. all right, the payments market in china is worth five point $5 trillion. the biggest such market in the world. the potential to be highly

lucrative for companies, but despite that, and despite having the backend of china's biggest abdel pay is facing an uphill struggle. lulu chen joining us on set. why is apple not doing so well? u: apple is is not comparable to where ollie pay and we chat pay is. you look at apple's own iphone sales, not doing so well either. toy 9.6% of smartphone sales account for and also in terms of shipment, it drops last year, so combining that with also the local competition, all the pay and we cap pay have 60% of market share, so it really is an uphill battle for them. yvonne: it is all-encompassing, some of these chinese payment systems, but let us talk about the different systems. how are they different apple

when you compare alley pay and we cap a? codes and scanning you can use them on any mobile phone, but the devices nfc's are actually more expensive for the local storefronts to install and that is where the hurdles come in for users and the shop owners as well. they preferred something that is user friendly,e which is qr codes in china specifically. betty: is there anything apple can do about this, lulu? is a data breach or some massive user concern, for the existing apps. there might not be that much of an incentive for them to switch devices and services, so unless something like that at black swan happens, probably not much chance. sales.e than expected competition continues to weigh

on its u.s. business. we are bad for numbers, coming up next. this is bloomberg. ♪

betty: this is "daybreak: asia." i am betty liu in new york. georgia bank may be fined by the fed for his actions in the forex market. on monday, the deutsche bank said the justice department had inquiry into its trading activities without recommending action. sources say regulators are in the final stages of their own reviews of deutsche's conduct to determine what fines if any the bank should have to pay. with planning the biggest rollout of new cars in its after surrendering the luxury sales crown to mercedes. andill launch 40 vehicles invest more than $10 billion in new models and technology.

annual pressbmws conference it marks the start of a transformation might anything the company has ever seen. missed estimates for a second straight quarter on increasing spending to handle e-commerce shipments. operating incomes fell due to higher cost is for labor and rent. the company is adding capacity and automation at fedex ground to process more of the growing number of goods purchased via the internet. and now, joining us on set for moore is ramy inocencio with more on the markets and some of the big stocks to watch including more that we saw including nike, right? hop in the my bloomberg because you want to see what it is doing in terms of after-hours trading here through there is another one if you going to my own terminal cure, but basically, what we are seeing in terms of after-hours trading is that it is down 2.5%.

the reason for this is because -- betty: that is big. ramy: exactly, that is super big. you don't want to wake up once this actually starts trading tomorrow, but what we are seeing here is assembling all over the place in terms of revenue. it messed gross margins -- missed gross margins here. it turns out that future orders also missed here. 3.6% down here. havee orders are also -- also missed on the order of one percent down. revenue came in at a $.43 billion. it was supposed to come in at $8.47 billion. versus an estimate of 44.9%. earningsg grace was per share. that did beat by $.15, but you can see investor sentiment is

definitely on the down, but there is concern happening in terms of their competitors. under armour as well as adidas are taking market share because of the athletes -- athleisure. segment. betty: is there anything else? imy: in terms of analytics, want to highlight the power of the bloomberg looking at analyst recommendations as well as short interests. analysts recommendations first ,ff, this is the anr function if you are playing along at home. basically, the greens are the buys for analyst recommendations, the yellows are the old. lls are the read your the greens are at the lowest since middle of 2015 here and also the hold are at the highest since the same time 2015 or so, so we can see people are getting

skittish in terms of what is happening with nike. happening you what is in short interest. this is rising to a record high. the bottom of at your screen. the biggest thing here because it is comparable to the strong u.s. dollar ever since donald trump was elected into office and vulnerable to trump trade policies. a lot of negative here. we will see what happens tomorrow in real trade. see.: interesting to short interests not as high as it was a historically, but creeping up, as you mentioned. thank you so much, ramy inocencio, digging further into nike and the declines. you can get a roundup of that story and many more that you need to know to get your day going in today's edition of daybreak.

go to dayb on your terminals. you can also customize your settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

japanese trade numbers just coming out moments ago for the month of february. you are seeing the surplus creep up just a bit higher here, ¥813 billion is where we are falling. there was a survey of economists who expected a surplus of 807 billion yen. exports increasing by 11.3%. also higher than what you economists had surveyed and imports, which of course is some measure of demand in japan, up 1.2%. a little bit below what economists's estimated and certainly a slowdown from what we have seen.

a big drop from the prior month. in addition to japan, we have not only been watching what is happening with the currency and on trade, but also japan's relationship with other trading countries, particularly when it comes to tpp. that is something we talked about earlier in daybreak australia with the trade minister from australia. i want to bring in deborah elms, executive director of the asian trade center and deborah, just looking at these numbers here, coming up from japan, what kind of, you know, what sort of do you see with japanese trade and in a relationship with other countries? anst: i think japan is in interesting place here. they have the opportunity under 11 to continue to leave tpp if they should accept that opportunity and drive it forward, but they are in an interesting place because they

continue to have a large trade deficit vis-a-vis the united states and that is making them uncomfortable and nervous because as you know, the trump administration places a lot of emphasis on trade deficits viewed from the perspective of washington, and so, for japan, it is a bit challenging because that trade deficit with united states continues to be large and problematic, and so the japanese had to decide, do they want to push on tpp? if they do, will that continue to antagonize washington? and it is a challenge. it is an interesting question for japan. betty: what do you think they will do? how do they get out of a conundrum? >> i think it is impossible for them to flip that deficit vis-a-vis washington overnight, outcome i the best think is to continue to lead on tpp. therah: that was far before trump administration came into office. there are a lot of benefits for

japan on tpp 11. i would proceed on that and do what you can to make this administration, the u.s. administration-japan relationship as smooth as possible because for japan, they need whatever sources of economic growth and development they can have. i think tpp is a win for them. i would continue to proceed. it is the risk. betty: a risk of angering the united states, which certainly no trading country wants to do, however, you know, we were as well,ephen this yesterday lean trade minister, a couple of hours ago, and we heard a lot of talk, but not a lot of actual policies are action yet, and i wonder if that may actually be a benefit, you know, for japan and others who are worried about angering the u.s.. perhaps, it is a lot of talk and it will not be followed by a lot of action? well, it might be.

i think it is just delayed, frankly come out of the u.s.. they do not have their team of people in place yet and have not yet figured out in the u.s. where they are going to go, as they start to build out their top level of individuals. i think the picture will become clearer. they have started by withdrawing the united states from tpp. the next up is renegotiation of nafta. that is going to get time. i think that gives breathing room for everyone else. i think tdd can move forward. i do not think the japanese our at as much risk as they think. yet.: tpp is not dead deborah, i want you to hear except the what he said about that. >> talk of the tpp's demise is premature. all countries, all 11 countries excluding the united states, were all willing to keep discussions going about the future of the tpp and what we might be able to achieve, so, you know, i have seen some

country saying the tpp is dead, forget about it. what this shows is maybe that it is not. what is the point where everyone begins to realize that it actually is dead? we have a very interesting meeting coming up in may where the 11 will get together again and at that time, they can decide how much further they want to push this through to move it ahead is simple. we only need to change one sentence and it is so simple it is tooe think that simple actually, so simple that people are distrustful. how can he possibly change this agreement with just a one sentence fix? that is the problem. it has got to be more complicated than that. the united states was clearly important. if you change it with one sentence, that cannot be the solution. it must be more obligated. it takes time to show that you

only need to change one sentence and you can move ahead. so hopefully by may, people will come around to the realization that that is true. only one sentence can fix this. you can move ahead without the united states. by may, the picture, i'm hoping, becomes clearer. very complicated in their minds. deborah elms, executive director at the asian trade center. let us get more reaction on the japanese trade numbers as we had to the tokyo open with sophie kamaruddin. sophie. japanese trade data, we will be checking in on auto and chip stocks. stronger demand for car parts and chips plus the weaker yen was a boost to exports in february and toyota also of interest today. it has been named along with bmw and honda in a u.s. trade case. takata, you are watching at the open. comic is affected by the airbag related recalls can decide on restructuring. shares are down 42% until give this year.

you so much, sophie. we will have much more on "daybreak: asia." we will be back with the tokyo and the seoul open. ♪

>> asia-pacific markets follow wall street down. concerns that donald trump's progrowth policies will not pass. on its longest 2016.g streak since

takata may be willing to let its restructuring be determined by -- the second hour of daybreak asia. betty: it is just after 8:00 p.m. in new york. what a day on wall street. the biggest declines we have seen since october. it has everyone saying this trump train finally over. seeing lots of drama in the days ahead this week. japan: we just got the trade data. -- the dollar yen >

opening looking ugly. sophie: ugly indeed. third dayn, set for a of losses. japanese exports coming in slightly stronger than expected. exports rising less than forecast appeared shipments to china grew, but exports to the u.s. rose by a flight .4% year on year. we do have stocks in sydney dropping slightly. by back in the cost the red. the resilience we saw so far seemed to lose some of the steam in korea. take a look at the nikkei 225. property, industrial, and consumer discretionary stocks leading the drought.

we also at health care and i.t. stocks down over 1% to date. telcos stocks switching into the red as well. we will be looking closer at what is going on in terms of automakers and chipmakers given that was expected to boost export numbers for february. we have conical and minolta dropping today. tradedter minolta ground -- downgraded their stock. 18 of the dropping by percent. we did have banks leave the slump in u.s. stocks there. checking in on currencies, the japanese yen continuing to climb . we did see it climb six straight days. looking for a seventh day higher. taking a look elsewhere in the region, aussie down about two

tens of a percent. seemingly off to a weaker footing in asia. betty: thank you so much. the open and how the markets are trading. let's get to first word news now. nina: the u.k. has joined the u.s.'s band of large electronic devices from certain middle east countries. this after washington suggested terrorists are planning innovative new attacks. theban is not limited to big carriers. canada also considering a ban. elapse in the two-year window before eu leaders discussed negotiations. the european union president donald tusk says it is to protect cities and states.

genevas from to nina -- saying north korea is expanding its nuclear programs with the intention of a first strike capability. korea tested a new rocket engine over the weekend described as breakthrough technology. build its own submarine fleet with the president morning the first vessel in service within 10 years. she promoted the plan after talks proved fruitless wall european suppliers held off for china. upsetting the progressive party came to power last year. takata is said to be ready to

let automakers decide on its restructuring. manufacturers have been involved in the discussions on the airbag makers future as they have already invested billions of dollars in repair costs. courtant to avoid a bankruptcy as that would disrupt supplying of parts. global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. this is bloomberg. yvonne: to our top story in injectingpboc billions of yen into the system. let's get to our correspondent, joining us from beijing. this tug-of-war between the pboc and institutions. >> that's right. the banks have been squeezed as a result.

this includes some commercial rural banks. thanks that essentially have been held over the age -- edge, as they shake them out of this borrowing they have gotten into. we have a bloomberg terminal chart that shows what has been going on in terms of the rates. the benchmark money rates, the seven day rate, this is a year to date chart that has been last year.since we had that period in early march, you might remember, up until the 16, when the pboc was which wrong funds from the market. impact biging to

lenders. this is a clear warning from the central bank to move away from excessive borrowing. betty: is this going to have an impact on reducing leverage? >> the key question. the pboc does know how these more sophisticated markets -- what is showing is the fragility of the financial system. , andoke to another analyst they said that what is happening is the poc is extending cash apply. they want to keep the cap supply going, but keep the rate higher. that analyst is not believe the rates will come down anytime soon. we had a warning from one of china's biggest fund managers as well saying that liquidity shocks are expected to come,

expect more of them this year. that continues to put pressure on china's lenders. yvonne: hoping for some policy clarity here when it comes to these monetary tools. live from beijing, thank you. can they do it? criticisms that they are losing ground to competitors. next, how asia reacts to the u.s. markets.f on that is just ahead. this is bloomberg.

yvonne: this is daybreak asia. in newi am betty liu york. a quick check of the business flash headlines. deutsche bank may be signed by

the fed for its actions in the market. the justice department had closed a criminal inquiry into its activities without recommending any action. regulators in the final stages reviews to determine what fines, if any, the bank should pay. yvonne: apple delivers some new products ahead of the much in iphoneanticipated upgrade later this month. ipad is the cheapest yet. also, special edition of the iwatch,iphone and colored red. betty: several brands halted spending in the u.k. after concerns of offensive content. it has also expanded the definition of hate speech to include portable groups.

the new policy has largely stuck to its position as a neutral host of content. yvonne: u.s. stocks fell the most in four months. the dollar in the longest flight since november. chief investment officer joining us live from singapore. great to have you. we flip the switch to risk off. i want to get your take on this. what changed? >> i don't think anything has changed. essentially the market rallied ahead of anticipation. ,nticipation of fiscal stimulus and importantly, tax cuts. all we are seeing over the last two months is a lot of heat, a lot of sound and fury, but not a lot of substance on the things that really matter for the economy, the matter to the markets, which is essentially top, andright at the

also some clarity on how donald trump intends to deliver. so much has been built into the earnings forecast that if you does not deliver on what is expected, this rally is clearly running on empty. yvonne: is about the problem then? the long dollar, short tragedy -- treasury, that is the trump trade. is the dollar actually falling this year? trump, we are realizing, he will not get those proposals as quickly as the market is pricing in. i we getting to the realization that we are all kind of crowded on the wrong side of the train right now? >> you are absolutely right. it will take some time before is anytrump delivers an position to deliver on his

economic agenda. i will draw at decision between equities market which i just dealt with and the currency market. is -- the dollar bull has less to do with it. the global economy is generally running better at this time of this year compared to last year. a lot of it has been german out of the united states. we have a stronger u.s. economy, rising inflationary pressures in the u.s., and the fed has signaled point clearly that is on the path of rate hiking. where else do you see in the developed market do we see any talkingveloped market of a rate hike soon? i don't think so. with the currency market, we

expect the currency market to maintain the uptrend. i see an opportunity to pick up the dollar bond is weak. betty: i'm curious because it you areike the market -- hearing about the different interpretations about the dollar and why is rising. one interesting one that has come out is the dollar has become a harbinger of volatility. it has replaced the vix in the u.s. as a fear gauge. what is puzzling is this risk on, risk off if the vix has stayed calm, even today. let's bring up this chart. i'm not sure if in your office you can see this on our screen. it clearly shows the dollar trend and the vix staying relatively calm.

it has continued to rise. notion that to this it is a new fear gauge. do agree with that? >> i just had a look at your chart. i would not really put too much into that really. the u.s. dollar, yes, from time to time, it functions as the safe haven currency. there are other safe haven currencies. strengthensenerally demonically. i do not think we should exaggerate this. 500ave seen 1.2% of the s&p . 1.2% at another time would be another day in office. we have been so used to the last four months, so used to this one way trade on the u.s. equities market that a 1.2% decline seems to be such a shock.

this, they were already signaling grossly overboard and a correction was imminent anyway. i would not be too much into this. the dollar has not been strengthened for the last few months. treasury yield has been trading sideways since december. the trump victory driven spike in the tenure treasury yield has been marked in time. i think that will go higher. inflation, to repeat myself, is on the rise and likely to continue rising. rate, it isat the way below the hey there rate. even if you use the suppressed rate that the fed prefers, it is

the rate.below yvonne: it is interesting because you mentioned about low lows.lity, we see new but, ambiguity, a new high now. would you buy riskier in the region? >> with regard to equities, i digestings a case of the gains of the past five or six months rather than the beginning of something else. i have seen, read, and heard the commentaries about the decline in the u.s. market. this may be a little bit of overreaction to this. the positives here, it is continuing, but you are likely to get a bear market. you do not typically get a bear

market when you have a stronger economy. you get an equities bear market in one of two scenarios. when you get a recession or you have a huge external shock, external to the economy itself. possibly financial. at the moment, we do not see that. i do not see the beginning of a new bear market. time for investors to take it vantage of u.s. stocks. in terms of emerging markets, thinking of the headline again, i would say, trading places. while the u.s. dollar gain

continues to decline, i think that is an opportunity for emerging markets. betty: what is your headline for the fed? >> it is all on again. that will be the headline. clearly, this is only the beginning of the rate hike cycle. betty: on again for the fed. how many hikes do you see? >> 325 basis hikes for this year. betty: what makes you so sure? >> you are never sure. because inflation, back to my point, inflation is going , the u.s. economy has been stronger than it has been for some time. at the end of the day, the federal reserve much -- must

make sure it has something when the cycle comes to an end. this is their opportunity. they would be full is not to do it. here,: closer to home what is your playbook on china? you have seen quiet bit of for 2017.s inflation, southbound flows. can you overlook the bad loan concerns? >> you cannot overlook the bad loan concerns, but they will continue and remain for years to come. if you trade purely on the bad loans situation, you would not buy it at all. really borrowing and lending throughout the family. they are essentially loans to

state owned enterprises. i would not get overly concerned about it. with present -- regard to chinese equities, i think there is a case here to take a more positive view on chinese equities, particularly during this period. apart from the cheap valuations, you have decent yields and some stocks that have held up fairly the despite the weakness on earnings front. apart from that, china's economic growth will probably find a bottom around the levels of 6.5 to 7% of gdp, which really, in the global schema things is nothing to scoff at. thene: great to have the on program. chief investment officer of dps joining us live from singapore. coming up next, lawmakers could

decide on takata's future. that is coming up. this is number. ♪

betty: automakers affected by the jet cutter be in the driver airbag the and battle maker. let's bring in david mccombs from tokyo. what does this mean for the customers? >> the customers have played a big role here. they need the airbags. they need the replacement. keep critical that takata producing, but in order to do the, takata has to keep company alive. not only are they paying

penalties and fines for the reimbursingthey are automakers themselves for the recall. from the automakers point of view, they need more transparency on how all of this shakes out. yvonne: what does this mean for takata's creditors? a transparentant process as well. you have bondholders, although .hose getting in line suppliers -- this is the

biggest safety recall on record. a lot of people will be in line to get money. yvonne: the kia shares down 5% this morning. coming up next, the fed opinion todds her the course. live-stream your favorite sport

at the airport. binge dvr'd shows while painting your toes. on demand laughs during long bubble baths. tv everywhere is awesome. the all-new xfinity stream app.

xfinity. the future of awesome. yvonne: a beautiful morning view this morning. 8:30 in singapore. betty: certainly beautiful. you are watching daybreak asia. let's get the first word news. nina: thank you. china's central bank injected hundreds of thousands of he one into the economy on thursday.

we're told institutions that missed payments, and smaller lenders faced liquidity this week. china plans to tighten rules on collateral short-term loans. we're told financial institutions will only be able to use triple braided companies -- rated companies. nominee neilcourt gorsuch says he would not hesitate to rule against donald trump if it was required. he said the constitution has many protections for religious minorities. such told his confirmation

hearing that he is not made any promises on how he would rule on any issue. >> no went in the process, for the time i was contacted was an expression of interest from the interview to the time i was nominated. no one in that process asked me , or made anyts promises on how i would rule in any case. equality declared in china -- australia. surveys show most australian support same-sex marriage despite previous campaigns failing in government. asian cities on the list of most expensive with tokyo shooting up to number four. osaka also remain on the list at number five.

singapore and hong kong retained the top two spots. seoul was six. global news, 24 hours a day, powered by more than 2600 journalists in more than this istries. bloomberg. of course, we saw japanese stocks tumbling here. sophie? sophie: we are seeing japanese shares set for the third day of losses. down by about 2.7%. take a look at some of the movers. holdings leading the drop. we also have mitsubishi falling almost 4%. shares lighting a fourth day for

that stock. stagnate.ing shares dragolicy looking to be a and performance for those stocks. we only have four starts on the rise here on the nikkei 225 led by nh foods, almost 2%. let's take a look at toyota. shares falling the most since november. you can see this think line on the chart here. there is some upside to go. as the debate with on over the inflation rate, keep your eye on the again. it is on a two-month winning

streak. fails to hold,it the downside could beat fast and furious. betty: thank you. sophie on the markets. all seem to be saying, great hikes in the future. kathleen hays here with some more. the charts do not say more. now. is confusion kathleen: five-year, breakevens, also at the spreads

suggest that the expectation has flattened, maybe even in some cases coming down. if you are a little less there may be some slowing. gdp growing over 2% this year. and, she said inflation is heading towards targets. here is what she said about rate hikes in particular. >> is economic conditions evolve anticipateted, i further moves in the rate. itcurrent assessment is means more than the one increase per year seen in the past two years. betty: more than one rate hike means two. the consensus is three. i want to show you this chart because the cleveland fed has

their own gauge of inflation. you can see from the trick with turquoise line, of. the cleveland fed suggested it is more of a reliable measure. she talked about the balance sheet she said if the process of normalization continues, she would favor starting to reduce the balance sheet this year. that was echoed from the kansas city fed who is also talking about rate hikes. we are waiting for erica , howman speaking in bali he weighs in on this. betty: why is the u.k. an outlier here? the poundbecause sterling fell 17% since the brexit vote. the uk's cpi for year-over-year

for february topping the bank lending, 2% now. let's look at a chart as i give you some of these numbers. .ou see headline inflation up the court region, right on. a year ago, that was only 0.3%. you can see it has been a big move. here are things being hit by the weak currency, that makes things you want to buy more expensive. imported food crisis, surging. if you want to buy something like a pc, a laptop, that cost is rising as well. for a lot of people that has become a necessity. this is such a strong trend that last week it was dissented upon, to bank of england decision hold steady. the trade data, we see

exports at the most in two years. kathleen: exports were up year-over-year. they were only supposed to rise 10%. that snapped a 14 month losing streak. ¥813, leading exports in china. an increase in exports. ofre is the threat protectionism. very quickly, the boj minutes from the january meeting. members agree there is a moderate trend in china now. they believe the ppi will be positive very soon. most think the cpi by fiscal year 2018. control consistent with the

guidelines. not much good news there, but continued optimism. all right. thank you. let's look closer at shinguard abe's trip too europe. they have been doing this, trying to do this for four years now. why the renewed impetus? >> basically because of donald trump. the eu and japan, both abe and the block trying to cut a deal with the u.s. japan with the tpp and the eu with a separate deal. those talks are going nowhere now. the eu is looking elsewhere, japan, looking elsewhere. the eu just cut a deal with canada. for japan, it is essential to

keep moving forward. this deal is getting renewed attention because of that. yvonne: we certainly thought after the g-20 there was unfinished business. i want to throw up a chart here and talk about the japan trade surplus. surplus buttrend of europe in a deficit. what are the major sticking points between the eu and japan? >> it is possible. one thing the japan wants is better access for its vehicles. that could balance things out. possibly. that is one of the major sticking points. the eu is a bit wary because south korea had a similar deal where car imports surged the year after that was cut.

prospect for the deal shows the eu is willing to give some ground. pasta, chocolate, wine, all the things that people love, better access for that. they have agreed to stay away from more sensitive items like beef, pork, rice. that increases the prospect of some kind of deal. betty: what would a deal mean for the global economy? its exportstimates to japan could rise some 30%. exports from japan to the eu could rise 30%. signal at a time of rising protectionism across the globe. they can move forward on big agreements like this. japan looking for an alternative

to the tpp with australia, trying to cobble together something to keep the momentum for free trade as president trump goes in the other direction. yvonne: thank you so much for joining us. trade on the top of mine in asia. of next, we talk china and trade, if any, for the transpacific partnership. this is bloomberg.

asiae: this is "daybreak ." betty: i am betty liu in new york. seeking a deal on the rcb agreement as soon as possible. ustralia's minister told

that nothing should be read between the gap of the two visits and the two countries remain close. >> absolutely not. the fact is australia's relationship with china is very strong. piece inan op-ed today's newspaper that speaks in glowing terms about the relationship. strong ties ind trade. the relationship frankly has never been as strong. >> this is a relationship at the moment defined by idealism or pragmatism? it is said that china will further embrace democracy to fully meet its potential, what is on the table? >> it is a relationship built trade flows, the

signing of the china-australia free trade agreement. this has underpinned the relationship. in terms of discussions over the next several days, there will be an opportunity to continue to build on the relationship in both countries. towill make sure to continue grow, make it easier for consumers to expand. >> there is confusion about the course of voices not speaking and concert about protectionism, trade tariffs. is there concern from australia ofspective about the clash messaging and what the policy is? >> there is no doubt there is some uncertainty globally around trade and where it is going. you have seen, for example, some

of the uncertainty in relations in the north american free trade agreement. thehave seen uncertainty in respect of the transpacific partnership. for what it's worth, from australia's perspective, we continue to be of the view that the transpacific partnership is withd deal, consistent high quality highly ambitious trade agreements. we will also pursue the partnership of the asian countries plus six including india, china, australia, and others. that is the core of what i am talking about when i say we will continue to pursue new markets. messaging ae mixed benefit for you because it means there are no policies yet coming out from the u.s. the ministration?

>> i do not want to overstate the impact it has. it does have an impact as far as global trade. u.s. policy will shape globally where different economies go. at the same token, my focus is on making sure we continue to have new opportunities. i'm in discussions now about a post-brexit free trade agreement where nearing the final stages of the free trade agreement, like a said, i have a high party korea.ussions with north in chile last week, we are looking at a possible us really australia alliance. all of these options are on the table that we may be pursuing.

yvonne: that was the australian trade minister on daybreak australia earlier this morning. both opportunities and challenges in the second half. the biggest income for the world's largest dairy importer jumped in revenue to $6.6 billion. and interest dividend of 2.2 cents per share in april. fedex profit missed estimates for a second straight quarter on increasing spending. of 8%.ng income the company adding automation to process more of the growing number of goods purchased on the internet. yvonne: take a hutchinson will report earnings later today. as bothtion building

companies expected to raise dividends. of course, you can get a roundup of the stories you need to know in today's edition of daybreak. can go to govivors on your terminal. it is also on your phone. much more to come here. this is bloomberg. ♪

yvonne: this is daybreak: asia. betty: i am betty liu, in new york. nike revenue up 5% from last quarter. joining us now to break down the details, ramy inocencio. disappointing a lot of investors now. ramy: a lot of investors. there was one saving grace in all of the negative, i suppose. they beat earnings per share. that was it. looking at the negatives, a lot more revenue, for example coming in above estimates. not so much of a miss, but still, a miss. gross margin also down by .4 percentage points. future orders with the biggest thing.

that came in after the conference call. that was down 1% for the third quarter. the estimate was for a positive of 3.4% there. there was a lot of concern with nike over the past several months with regard to the competition. for example, under our been. earlier, i was talking about as leisure.- ath wear theseople clothes out. one other thing here that is more macro is the tpp, or lack thereof now. for example, the ceo of nike saying that if the tpp was to go ahead, they would be saving a lot of money and that would be reinvested into the u.s. as far as jobs growth and reduction there. vietnam, they sourced 40% of all of the issues there. because of this, they will not get those cost savings. yvonne: you have been looking

into some of the analytics for nike. you have some bloomberg functions. what have you got? ramy: that's right. and looking at analyst recordation's first off. if you hop into the bloomberg, i can show you the green, red, and yellow here. green represents the buys. sincen see a low not seen 2015 or so. at the same time, the yellows at the most ever since 2015. in terms of the buys, holds, and sells, the buys still have it, but we are seeing the buys on the down seeing -- downswing. people holding on to find out what will happen over the next three quarters. one other terminal chart i want to show you is as i, for short, interest. you can see the bottom line there, at a high, in fact, a in terms of the number of

shares out. 32.7 million shares shorted. it is only a 2.5% quote of the entire market. it is not too much, especially when you compare to other companies. these are some of the things investors are looking at and will be looking at a as nike comes out for the fourth to see if they can pull32.7 mil. yvonne: thank you. ramy inocencio there from new york. coming up at what is over the next few hours on bloomberg markets: asia. heidi: we will keep looking at the cbo story. have spoken at length about some of the pressures they are facing, in particular, smaller, rural lenders in china. this played out with the stories had to essentially inject money

into the financial system. hundreds of billions of yen into the system. we will be talking the implications when it comes to financial stability, that is really our top story we are tracking today. betty: you have some big guests coming up. heidi: that's right. chinesereviewing the premier visit to australia. he gets here this evening to canberra. it will be trade, tariffs, and corporation on the agenda. we will be speaking with the chinese chamber of commerce ceo about that. we will also take a look at the outlook for iron ore. ♪

♪ it is 9:00 a.m. in hong kong, midday in sydney, 9:00 p.m. in new york. rishaad: i am rishaad salamat coming to you from bloomberg's asian headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: asia-pacific markets following wall street down, concern that trumps pro-growth policies won't pass. rishaad: ¥9 trillion in market value is gone. that