♪ yvonne: no rush on rates, the new york fed president says the economy is not overheating comes to further hikes can be gradual. the pboc tightens rates, the worst ever quarter for corporate bond defaults. mind your language, white and corrected messaging apps are becoming a headache for wall street. -- why encrypted messaging apps are becoming a headache for wall street. we have the world covered here .n "daybreak asia"

we will also be live in tokyo. talking about the latest remarks from the fed, and looking ahead to the much-anticipated march jobs report that will be ending the week on friday. this is "daybreak asia" live from bloomberg's u.s. and asian headquarters. is just after 7:00 a.m. in hong kong. a new trading month, new quarter, could be an exciting one. data, but first a check of business confidence in japan at this hour. >> indeed, that will be key, the be tokyo toy in-swerv released at the end of this hour. we will be watching for a lot of

data this week, the jobs report on friday, but before that, auto sales numbers will be out. consumer demand is so important in japan, but also extremely important in the u.s. meet in., rb a the biggest meeting of all with president trump and xi jinping and mar-a-lago. keep in mind that china and taiwan markets are closed for the next two days. new zealand, stocks under point 2%.down away,g in sydney an hour futures positive, could be a soft open with the start there. theing pretty flat against dollar for the aussie, the yen heading sideways as well. soft for thee

start for equities this morning. let's get to our top story in asia, pboc tightening, raising rates for standing lending facility loans, small and medium-sized financial institutions. what is the rationale here? we have a stating of the economy, factory reflation, allowing the pboc to stay in lockstep with the fed as it starts its tightening bias. pboc useeing the different tools to tighten in specific areas as they try to create this interest rate corridor, and the standing lending facilities puts the ceiling on that corridor. much like the fed discount window, so it guides interest rate policy in this time as they theto normalize the policy,

interest rate policies. let's tell you what they did. the pboc focusing on the instruments, including the sl f rate for overnight loans to 3.3%, seven day to 3.5%, one 3.8 percent, aimed at small and medium-size lenders, fluctuationse some out of the economy. are learning that china has had its worst ever start for bond defaults, so what is it telling us? david: that is the flip page, the pboc tightening liquidity, making it difficult for some companies to repay. seven companies have defaulted out of nine bonds on shore. like a lot,ot sound

but there were just 29 all last year, so this was the most on record for the first quarter according to bloomberg data. most of them are depending on ,eavy industry and construction and primarily a lot of them are in the northeast region, which already slipped into recession last year, and this was also when we had that big dis-investment in the state sector in the 1990's, it was the northeast region, these areas were hit the hardest. they were also dominating the list. this was what china merchants said, senior analysts

week companies can't sell bonds, which adds to the pressure on their cash flow. the pace of default will continue. >> all right. thank you. certainly something big to watch in china. more oncan fall the that story and all the days trading on our markets live log .t mliv you can get a market run down in one click commentary and analysis from bloomberg's expert editors. is can find out what affecting your investments right now. let's get to first word news with rosalind chin. beatene: tesla has estimates as it starts model three production. carsips just over 25,000 since march, keeping it on track for 47,000 to 50,000 in the first half of the year. shares are up 30% thanks to anticipation of the model three

and the news that tencent has taken a 5% stake. facing a new tax evasion and money laundering investigation spanning five countries. authorities arrested two people and are looking into dozens of other suspected of concealing swissns of euros and accounts. france, germany coming u.k., and austria investigations also underway. it has surprise not just the bank, but also swiss authorities. the boj's first tonkin survey is out later this hour, with the weaker yen. that is true a with the index rising from 10 to 14. the survey is expected to show sectors are optimistic about the coming quarter, reflecting stronger exports and fiscal stimulus. scotland's first minister says her timetable for a second referendum on independence from the u.k. is the right one and

she will keep pushing for a vote. not discussit would a date while brexit negotiations are underway with the eu, however, nicola sturgeon says the government's position is untenable. >> i don't think the position of the prime minister which at the moment appears to stand in the way of the scottish parliament is a sustainable one, but i will discuss this with the u.k. government in a constructive manner. my view is clear, the will of this college -- the scottish parliament must be respected. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> the days ahead on wall street, focusing on the friday's jobs data, auto sales numbers as well. carmax,k to watch is questions about credit problems in the auto industry. is that the next subprime loan housing crisis. su keenan has more.

street investors are saying this is the next big short, and carmax in the crosshairs. their stock could be down 20% because of their exposure to car loans. let's look at the chart, 8% down year to date. it dips as it goes into the year. they report fourth-quarter , auto financing is contributing 40% of the companies operating income, so it is less friendly to use car buyers as personal bankruptcies have picked up, meaning rising faulty loans for carmax, significant and something investors will be looking at. some other stocks in the spotlight, credit suisse down friday, the surprise probe into tax evasion and money laundering. they said they have zero tolerance for that. we will see what investor

tolerance is. allergan losing a bid to get rid of a lawsuit, troublesome comic accusing them of having quid pro quo with doctors in exchange for prescribing medication. lowe's could gain big because of the strong rebound in real estate. >> what about auto sales? su: that will be a big indicator for the consumer. is the consumer strong again? is one of the reports. we are seeing has mentioned an 175,000,possibly of wage growth expected up, some analysts saying this could be weather impacted. let's go into the bloomberg, trumping ande some tweeting about unemployment way down under the new administration. this shows the drop in unemployment under different

presidents over the decades. the message is that it depends on what they inherit, unemployment already dropping under obama. let's look at manufacturing, expected to cool off from a robust february, strongest manufacturing growth in february since 2014. sales, light of vehicle sales expected to be strong, forward with some week 's, gm expected to have strong growth. analysts are saying incentives are out there and will keep inventories in line with expectations at least for now. we also have a direction question when it comes to oil, friday the biggest weekly gains of the year. should we remain cautiously optimistic? su: there is a lot of speculation, reconfirmed by the kuwait minister last week that there would be an extension of -- steel among opec to cut of the deal to keep cuts among

opec. with the supply data, national inventories boosted crude use in three years as supplies fell. if we look at the analysts survey we do at the end of every week, most are bullish, but less than half. there is a wait-and-see attitude. is a, what you will see blue line that shows the one shows risingte supply, and long-term is forecasting a drop in price, although near-term debt hope is that opec and non-opec producers will extend cuts, and that does apply some support. keenan, thank you. tesla on track to meet its delivery goal for the first half. we run to the latest figures. but up next, jamie dimon sending his anticipated annual letter to shareholders on

wednesday. we will ask what he may say, what to watch out for. this is bloomberg. ♪

counting down to asia's first major market open this morning. japan is about to open in 45 minutes. well, given the time change, nikkei futures up .3% despite a decline on friday in the u.s. right before the close of trade. this is "daybreak asia" in new york. >> let's check the latest business flash headlines. the head of rio tinto's aluminum operation says prices are heading for a volatile period. beijing ordered cuts to steel and aluminum output in 28 northern cities and its fight against pollution. despite that, inventories rise,

threatening the 28% price gain of the past year. foroshiba has received bids its chip unit worth $18 billion. the highest offer is for 100% of the business and include individual companies and groups. say thereecutives were no japanese bidders in the first round, but may join later. toshiba may miss its to late april 11 earnings deadline. says itmachine maker will participate in japan's new gaming industry, but only if the regulations are as strict as those in las vegas. the good reputation will attract visitors and turn resorts in two destinations events other than gambling. companies can easily lose their amienses in las vegas and kon would walk away if regulations are too loose. >> traders, bankers, money

managers using encrypted messaging to get around the rules. we will have details of that story next. this is bloomberg. ♪

>> this is "daybreak asia." i am betty liu in new york. >> i am in hong kong. messaging apps a headache for wall street, dirty jokes, dubious information, screenshots of confidential client positions being shared through whatsapp and signal. interesting story, tell us about this cultural shift among traders on the floor. >> this is an interesting trend. it has been going on for a number of years where you have big banks that have compliance sec, trying to regulate them and saying any business

communication needs to come through the bank and the bank monitors that. separately you have employees who don't want to be monitored or do business on their cell phones, so it is a nuanced issue for those reasons, and also because traders and asset managers are friends, so they are chatting as they normally would be. >> i'm curious about this blending of business and personal. banks comeroved by or is that a gray area? >> most of these banks don't even want you to have yourself phone on the trading floor on the banking floor, because there is so much you could be doing, saying. >> they don't want you texting. tim tatian. if you have your phone out, it is easier to take a screenshot of certain things or text things you should be doing over the mail, so these banks would like you to not have those, but there are situations where we found

the managers of banks would know this goes on and would not do anything to stop it. >> tell us about the cases you wrote about last week, this jefferies analyst who got caught, but that was also a great area. >> exactly, two different cases, different levels of what was happening in terms of fines or bad things. the first was this jefferies banker in london who the regulator there was saying you took your whatsapp and texted in that application two different scenarios. one of them was talking about client positions, a new deal whoening with the person happen to be a friend and client of that firm. they said you were not trying to profit off the information. you are trying to brag. you're being stupid. we are going to find you. we will not bar you from the industry. that is one example. on the worst end of things, we

have seen a case in the u.s. where whatsapp was being used by a money manager for the new york tosion fund using that app go back-and-forth and talk about prostitutes, cocaine. we did speak to the lawyer for the bond manager, and he said those messages were benign. >> a very great area. thank you so much. laura keller on the use of these messaging apps. morgan ceo jamie dimon has more on his mind that messaging apps. he will release his annual letter to shareholders this week. it has been a good 12 months for jpm, outperforming its peers and the s&p as a whole. note legally that you

are a former jp morgan chase investment banker and lost an arbitration case over your dismissal and are now involved in litigation with j.p. morgan him of it nevertheless we have you on to talk about this. >> that's me. >> that is a mouthful. there is never a dull moment with you, bill. happyoff, is jamie dimon these days with trump in the white house and all this talk about deregulation? >> i don't think you could imagine -- you know i have been talking about a new golden age on wall street for several years now. i don't think you can get much better than this. first of all, let's look at the bank, the largest bank by assets in the country. it has number one market share in loans and close to number one in investment banking. it is unbelievably profitable, making $25 billion net income a year. its stock which for years had

been stuck doing nothing is now in the 90's. you can't ask for a better situation than you have now. i don't know what in the world jamie dimon could expect to be better than right now. >> he clearly has a big platform now. it is getting even bigger and bigger. you say you help and maybe it will come out in this annual letter that he speaks out more on behalf of wall street to what you mean by that? >> look, obviously i have a new book called, why wall street people like jamie dimon and lloyd blankfein are explainng the time to to people what wall street does right and wrong. i would wish it jamie dimon would take the time to remind people what wall street does right, and show some leadership and try to begin to fix the things that wall street is wrong. because interesting,

his last letter, he mentioned the risk of grexit. we learned also last week that they are in talks of looking for a dublin office, 1000 employees. should brexit's to be a concern for j.p. morgan now? >> it is something to think about. i don't see it as a big concern. finances of global business. do businessant to with j.p. morgan chase will be able to do business whether they are based in london and dublin, or somewhere else on the continent, asia, new york. the world of finance is global. companies come to wall street it is such an incredibly successful business. they will find wall street and jamie dimon wherever he is coming so brexit or no brexit, yes, something to think about. i'm sure they have a lot of people worried about what they are doing or not doing there, whether they should be in london or not, but it will not slow

their business down. >> i'm going to play devil's advocate. you wish people like jamie dimon would come out and be more outspoken about fixing what is wrong on wall street. guys goingn are you to get off their backs? they have already been trying to fix it, right? they have paid billions of dollars in fines, admitted wrongdoing, trying to root it out, so what more do you want guys like jamie dimon to say? >> you and i have talked about this before, having wall street paid billionsders of dollars in fines is not the same thing as justice agreed that is not justice. that does not get to what holding people responsible for the financial crisis. that was the responsibility of the doj, and that did not happen. now we have the statute of limitations, so that will not happen. i'm talking about fundamentally

changing the incentive system on wall street so people don't get recorded -- rewarded to take big risks with other people's money. no one is talking about the reward systems on wall street. when you reward people to take big risks with other people's package up mortgages into mortgage-backed securities and sell them as investments around the world, that is what they will do. i'm not saying that will be the next source of the crisis. it will be something else, but when you reward people without accountability to take risks to generate revenue without responsibilities for their actions, you are begging for another financial crisis, and that is where we are. >> i know, i know. i just like pushing your button sometimes. absolutely, the compensation system has been a hot topic on wall street. good to see you again. the selling author of many books. bloomberg contributor editor.

he lost his arbitration case over his dismissal, now involved in litigation with j.p. morgan. i need to make sure our lawyers are happy with that. we will be back with much more.

betty: 7:30 a.m. monday morning in hong kong p are hope the good weather can continue. what was probably the perfect weekend with spring weather, we are now minutes away from the asian market open. betty: it is 7:30 a.m. -- p.m. sunday evening in new york. markets on friday closed lower, down 0.2% after a pretty chock-full week of fed speak that we heard. i am betty live in new york. yvonne: i am yvonne man in hong kong. you are watching daybreak asia. us go to first word news. rosalind: central bankers raised rates, aiming at small and

medium-sized institutions. the overnight standing lending went up 20 basis points to 3.2%. stable economy and rising prices have given it the scope for policy to keep up with the fed. china has seen the most corporate growth ever for a first quarter. soen companies were failing far this year. that compares with 29 all of last year, according to data compiled by bloomberg. heavyf them were in industry, and the situation shows how policymakers' attempts to reduce liquidity are causing casualties. themmed barkindo said output cuts are working, and it is starting to balance. ,t has been a drag on prices with people calling for the restrictions to be extended when they end in. he was cautiously optimistic reserves are starting to fall,

and the oil prices will start to rise. south africa's new finance minister has said he will push for inclusive economic growth while speaking to the spending framework already in place. he took over last week after the president jacob zuma chose -- fired his predecessor. investorsing to calm after banks tumbled and the rand headed for its biggest slide since 2015. helm in particular at the of that collective is to retort , to assure our stakeholders that we are to collectively possess the requisite political and expert capability to perform on the

tasks that we have been assigned. rosalind: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. we are counting down to some of the major market opens in the asia-pacific. let's bring in the reporter adam haigh from sydney this morning. adam, as we have to get up earlier, what are we looking out for in australia? adam: yeah, good morning. the main thing on the radar is looking ahead to the agency. we are not expecting a change, but we have seen a very strong aussie dollar this year, the recovery in oil prices has been better than expected, and china is holding up pretty well. it is fleshing out pessimist worries we had the backend of last year. , thererba decision is may not be a change tomorrow.

we will keep that 1.5% record low the same through the year, but it is about inflation. that is picking up in the way are being is the core inflation measure. that reading will, the end of the endwill come at of april. elsewhere, equities look like they will pick up slightly in australia this morning. not a lot of optimism, but outflow this morning, and across asia, we might get more of the equity movement. other bigl me the highlights we are watching elsewhere in asia? adam: yeah, that's the, there is quite -- betsy, there is quite a lot with the u.s. jobs report at the end of the week, and that is key not just to u.s. investors but asian investors as well. we have the 10 cans survey out of japan, and the swathes of pmi

readings from a lot of countries, and we got a few more clues about how people are recovering, how that is developing. i think also there is plenty of more fed speak on the cards this week. the market will be interested in how that gap is developing between the fed and how the markets is the pricing for the three hikes later this year. so it should be a busy week, but not too much optimism. a bit of a cautious tale. we will see some green on the screens when most markets open in 20 minutes. yvonne: thank you so much, adam haigh, there in sydney. fed and theout the traders, we are looking ahead to wednesday and the minutes of the fomc rate hike decision following the avalanche of fed speakers last week. joining us now is dan maas.

-- moss. how will this frame the minutes we get out this week? dan: we have had so many speakers from senior to quite junior coming out more or less saying the same thing. the minutes are not going to surprise in that regard, but back to what adam mentions about the gap with the market is, this time last year, the fed and the markets were running from the.. and if dots are in, anything, it is the fed that have had to leave the market. go back to that week just before the last rate increase, march increase. we began saying it was a bluff, they will not do anything. -- 72discussed, in 27 hours, it did. what was that change? what happened, why are the

stocks now back in vogue? trajectoryonomy's seems pretty steady, and unlike this time last year, there is no external shock. if you go back to january with concern china would fall apart, it did not. the global deflation/this inflationary scare, that has -- disinflationary scare, that has abated. they are feeling more comfortable about that situation in europe, so there are a number of things going on that the markets look good. , that wasdiscussed interesting, and bill dudley cap the week nicely. -- capped the week nicely. betty: what about the issue -- gradually start to let securities mature rather than reinvest --

betty: it is interesting what you thought about rosengren, but i want to get your take on the reduction of the balance. willis be a conversation happening towards the second half of this year or 2018? dan: all credit to eric rose. he is the double market speaker of the week. he is not just head of the new york fed, he is also vice chair of the fomc. he said, at some point if the economy goes around 2018, we will start to let the balance sheet go off, and then we will take interest rate increases, ofause it will be a removal accommodation. the chairman said that was a discussion about balance sheets, so we are looking very closely in the minutes to get a sense of the tone of that conversation, whether there was conviction, but deadly really outlined an

interesting roadmap. it was great. betty: it certainly was. dan moss thank you. looking at the bank of japan, releasing their survey on business confidence. we will have immediate reaction. this is bloomberg. ♪

♪ yvonne: this is daybreak asia. betty: a quick check of the biggest flash -- business flash todlines, san miguel plans invest $34 million in heavy industry as they want to ride the wave of economic growth. money will go into an oil refinery and integrated still complex and an ocean side power plant. the sales will rise 20% to about $1.2 billion.

yvonne: china's agent day group group is -- h and a among lenders for deutsche bank. they will be reviewed over the next few weeks. they hope it can be wound down. the government asked for hna to sell the bank by february next year. betty: and the newly animated release from dreamworks was a surprise winner at the american box office with boss baby starring alec baldwin. it took in $49 million, knocking beauty and the beast off of the top spot. another live-action animation remake, ghost in the shell, was third, but the $19 million effort was a third below forecast. i love the cartoons. yvonne: live-action. let's talk more about japan as the fiscal year starts today.

we have a reporter from tokyo. we are still waiting for the taunton survey numbers to come be, but this will undiscovered jewels as you have said. i have a chart that shows a chart we have seen when it comes to the small caps versus the large caps. the nikkei 225, the topix ended rter flat. what do you see with the domestic recovery? will he continue to see spending at the lowest in -- will we continue to see spending at the lowest in six months? reporter: the reality is there have been a big improvement in the domestic environment for doing business. whether that is in the regional economy, amongst the new

emerging sectors, so as a result of that, while the global big companies, toyota, are dependent on the u.s., the exchange rate, china, what is going on in japan is this hidden recovery in the regional economies, and that is where the small and medium-sized companies are developing. you see that in the stock performance. yvonne: we know these can be volatile, not as hidden because we have seen the nasdaq for most of february was climbing for 20 days in a row. and it could be dragged down by a stock particularly when there is one specific tumble with no apparent reason. so as an active investor, how do you pick? reporter: how do you pick? etf willat this and basically weighing the small-cap universe on the defendant pay out you get. -- diffident payout you get.

defendant, at the which is what wisdom tree does, that shows you from that market cap positivity, it gives you the long-term gains you are looking for. betty: it seems like the domestic environment is getting better for businesses, and we will see that with the tankan survey out in a few minutes. let me show you the domestic consumer. we still have not seen that yet. we saw a reflected in the numbers last week, you in the household spending numbers, much worse than what economists had estimated. we cannot get that domestic spending up, so what will it take? that is the key to the boj. jesper: i think that you have got this bifurcation going on. you have got on the one hand, a -- thee side, the mixed

make jager generation, the baby-boom generation, they are much more frugal in their spending habits. the younger generation, people in their 20's and 30's, they are actually seeing much improved -- you know, the quality of jobs are improving, wages are increasing. wages for university graduates are raising at the right of 6%. that is the sort of excitement you really want to look at. the average is our kind of isressed, but the dynamics really exciting with the 20's and 30's in japan, a new middle class here is rising. betty: even with that bit of good news, is that the older generation drowning out the older, so in the end, you have got to pay attention to the mick jagger generation. that will be key to get them to

move just as much as their younger counterparts. jesper: look, japan is not a high growth economy, and that is dictated by the demographics. there is no question about it. the point is for investors, the fact that japan has underlying economic growth rate of 1%, how do you play that? does that mean there will be earnings growth, stuck at 1%? no, because there is bifurcation. look at the retail. the exciting factors are the new industries starting to come through catering to the younger generation, and that is where super earning is possible. 1%, super earnings growth, what kind of earnings are you talking about with small and large companies? we see either the low teens or the topics. jesper: you are looking at

earnings growth with between 20% and 25% driven by the fact that the small to medium-sized companies are taking market share in the domestic economy because they are more innovative, faster than the big, classic giants like the standard department stores, and as a result of that, you get this continued outperformance in the domestic sector less than the smaller medium-sized companies. betty: and real quickly, what about the yen? we have seen it stabilize, we are at 111 right now. we are back from a year ago, but still up 5%. where do we go from here? i think the market is long. jesper: i think that is debatable. the markets are not sure, given the action we have seen over the last few weeks, but that is beside the point. the question this year, 2017, is

all about federal reserve. we get a stronger dollar. in japan, the bank of japan is likely to do absolutely nothing. it has become passive aggressive. it is all up to if and when janet yellen increases interest rates further, increasing the trade. us to give us a stronger dollar. -- that should give us a stronger dollar. >> you said the boj is with a passive aggressive mode right now, but half the economists surveyed say the boj needs to start tapering over the next year. how will that play out? jesper: i think there is a big misconception. you talk about tapering, which implies looking at the balance sheets, people misunderstand what happened in september. the bank of japan switched back to a price targeting regime, so they want to cap the 10 year bond at around zero, and whether

that takes ¥80 trillion of trillion yen or 63 of balance sheet does not make a difference. i think it will be at least until this time next year before the bank of japan is going to change its interest rate policy. betty: and a lot of that has to do with what we see with economic numbers. not just household spending. we are starting to get a trickling out of the numbers for of thekan survey, one more important ones is the large manufacturing index of the first quarter. it is at 12. the index at 12, economists had -- a betterr than number at 14. the large nonmanufacturing index, services, a little above the estimates, which was a reading of 20. economists had expected a reading in the first quarter of

19. and on the small any fracturing , and, there are five again, they had estimated a slightly lower of about three. if i were to categorize what we are seeing from these numbers, it is kind of mixed. i know you are quite bullish on japan, but the economic numbers we have gotten show it is mixed in japan right now. there is no one way or the other at this point. is very interesting because you read out the numbers, and the key issue, the small cap indices were better, and the nonmanufacturing sector was better. -- that isic domestic economy. so you see the domestic story really coming through very nicely. japan is not in a v-shaped recovery by no needs -- means. months in, months out, quarter

in, quarter out, things are getting better. i know markets want to see something more spiky. it is not spiky, but it is getting better every day. betty: and the large manufacturers seeing the yearr-yen 143 in fiscal 2017. thank you so much, jesper koll from wisdom tree. in order to get you going in the addition of daybreak, bloomberg subscribers go to tv . it is available on the mobile anywhere at. you can customize settings so you only get news on industries and assets you care about. this is bloomberg. ♪

♪ this is daybreak asia. i am betty lou in new york. yvonne: tesla talk to delivery

estimates for the first quarter of 2017, putting it on track for 50,000 cars by the end of the second quarter. let's bring in ramy inocencio who has the details. looks like a good quarter. ramy: look, they did what they needed to do. 25,000, encores for the 50,000 they wanted to do last year. they came in above analyst estimates, and that was 24,200 for the first quarter, beating it 8000 vehicles delivered. looking at the past quarter, this is icing on the cake of what has been a good first quarter. if you look at the share price, investors are pushing this higher. months, weack for are seeing -- water a month, we are seeing the share price

higher. it starts right after the new year. tesla rolled out the first half battery cells -- first battery late out in reno, then in february, they put a small quarterly loss expected. set to bedel three is on track. and a few days ago, tencent had billion stake of $1.8 or so. that boosted the share price. hop into the bloomberg terminal. despite all of the good things that are happening with tesla, we are still not seeing analysts and investors saying they are going to boost this in terms of their call radius. ratings,e is the buy yellow is hold, red is sell. you would think the by would be higher, but it is eight versus

10, and the stock price is higher than what has been happening in terms of the analyst calls, but not seeing any stock right now. >> and tesla has this ambitious goal of half a million cars by 2018. ramy: they will have to quintuple what they are doing now. 2000 cars a week, but then it will be 5000 a week. elon musk has been talking about pushing this aggressive stance, and investors are saying they believe in him. it seems we are seeing this 30% rally. betty: thank you so much. plenty more still to come with asia's first major market open now moments away. yvonne: let's bring in david ingles to tell us what we should be looking at. it seems like we are seeing dollar-yen heading lower. david: yeah, apart from that, earnings as well. earnings like you shania -- this

company was $1.9 billion. toshiba still needs

♪ set to-pacific markets rise up the start of a new quarter, the week ahead brings the new u.s. jobs report and a presidential meeting. confident, improvement in japan, but not as much as one might expect. progress in the oil market, officials say the global glut is draining away. beat to itsivers a estimates as it looks ahead to the new model three. >> this is the second hour of "daybreak asia"

coming to you live from bloomberg's u.s. and asian headquarters. >> i and betty liu. we have one big data point behind us, and that was the tankan survey. the domestic economy and businesses are doing well, but there are questions about the domestic consumer, and over all that survey was still pretty mixed. >> mixed in particular for the large manufacturers. we were expecting it to be much higher. still better than the previous quarter, but the all industry cap explants, usually japanese industries are conservative, but we saw a uptick here. >> that could perhaps -- show this recovery in the

private sector is more sustainable than we think. let's get to the market open and see if there is any reaction to those numbers with david ingles. david: it is like the last gauge of confidence, the big spending bringor plans of which more confidence. first day of the training quarter, there we go. the g-20, here is an early look at the risk appetite, a bid for the nikkei 225 and the kospi. of event risks ahead, the meeting later this week between president xi jinping and president trump. on the space next, 30 year japan down one basis point, 2.68% on

your 10 year. precious metals pulling back, .25% on silver. brent and west texas coming off a stellar week. about now, we talked capex tankan survey and the. going back, large manufacturers at the top, small manufactures at the bottom, very much mixed. if you compare the last year, an improvement, so if you are a class half full force and, then it is an improvement from last year, although may be the market got ahead of itself when it came to market expectations. here is your capex in white. that is where we are, .6 was the capex. for the

we were expecting a drop of .3, so better than expectations. on your bloomberg, your charts. a decent start, not a screaming start, but we will take it. >> we will take whatever we can. tankanthank you so much survey to the reaction to the and markets today. let's get to first word news with rosalind chin. rosalind: the opec head says output cuts are working and the market starting to rebalance. downlobal glut will drive prices and producers calling for restrictions to be extended. speaking in baghdad, he said he was cautiously optimistic that reserves were starting to fall and the or price would begin to rise. tesla has beaten estimates for first quarter deliveries as it starts model preproduction in july. it shipped to just over 25,000

cars through march, on track to 47,000 to 50,000 in the first half of the year. tesla shares are up 30% on anticipation of the model three and a tencent has taken a 5% stake. singapore's unwinding of property curbs may be creating new problems. regulators close attacks developersat allows to offload apartments to institutional investors, but many are facing the choice of discounting unsold luxury homes or paying penalties government mandated sales deadlines. tinto's aluminum operations says prices are heading for an extremely volatile time thanks to uncertainty about production curbs in china. beijing ordered cuts to steal and other minimum output in as many as 28 northern cities. that, inventories continue to rise, threatening

the 28% price getting over the past year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> china's president will meet his u.s. counterpart in florida this week, a critical first encounter as the two sides see common ground on trade, territory, to north korea. let's look ahead with our chief asian economics correspondent enda curran. we have seen a resurgence in exports led by china. can this resurgent demand continue? >> we are seeing a big pickup in chinese buying just at the time america is ratcheting up trade tensions with china. buying more commodities, and not just reflecting higher prices. analysts say there is -- demand

.s also growing they will continue to pull and more growth, and for sure america is still the world's biggest consumer, but demonstrates how important china is becoming to the rest of asia. >> should we be concerned about what we see domestically in china now that we see these rate hikes and open market operations? as they to leverage, could that derail some of this? the export rebound reflects higher commodity prices. economy slows, then commodity prices, iron ore, start to cool, then that would flow through to malaysia, indonesia, so keeping china's economy on track is vital for keeping the asian export story going.

there is plenty of up to miss him -- plenty of optimism. >> moving away from trade, we know that will be on the agenda. i wanted to bring up north korea. how much will that be used as leverage with the chinese? i want to bring up this interview that donald trump did with the financial times published over the weekend where he said if china is not going to solve north korea, we will. that is all i am telling you. i don't have to say anymore. how the chinese going to react to that? >> this is the big unknown topic as regards to the asian economy over the coming months, whether north korea escalates or if they can be contained. hear how they will approach or tackle that subject after this weekend. of tensionseting u.s. to wider tensions in

and chinese relations and will have a spillover effect to the rest of the asian economy as well, so it is an unknown event that could lower the asian growth story this year, and it is at the top of everyone's worry list now. >> is there any talk at all or areter that wendy two meeting later this weekend that we might see something happen coming out from north korea the same way we saw went shinzo abe was visiting trump? banhina did take steps on a of north korean coal, seen as a dent towards north korea's ability to source foreign currency. they have had a significant concession from china in terms of the north korea story. as to how they move forward from here, i will remind you of what .remier li keqiang said

no one wants chaos on the border , so china is approaching this delicately. the will be advocating diplomatic route first. whether or not come up we will have to wait and see until president xi jinping and president trump speak at the weekend. >> the concerns of this protectionist wave has died down i guess you could say since the start of the year, so do think it was a bit overstated? >> it is still a risk. there are fears of a full-blown trade for dissipating. are more conciliatory than where we were last year, but there is prospect for heightening of trade tensions between the u.s. and china. we know reviews are going into u.s. key trading partners,

sniffing around the edges of the currency manipulator bank. >> we will learn this month. >> certainly there are sources of tension between china and the u.s.. there is still room for some significant difference of opinion that could have impact in certain sectors for sure. trump wants toif be friends with president xi, but some president said there was a certain degree of golf trump andbetween shinzo abe. without work on president xi jinping, who does not like golf? >> golf is not his favorite pastime. >> he is a football fan? >> he is not staying overnight in florida, which speaks to a difference in the relations between japan and the u.s., old trade and security allies.

china is on a different side of that debate. they are meeting now, and net-net, it will be fascinating to see what they do make agreement on and if they meet halfway, at least in the trade debate, and whether or not they do indicate they can work to gather on some of the security is north korea. it will be an absolutely fascinating meeting i think. >> absolutely. thank you so much. looking ahead to that meeting between president xi jinping and president trump. whilea outlook in china, veteran dealmakers are heading for the exit to other firms. >> up next, a senior economist from nomura at a look at those just-released tankan survey figures. this is bloomberg. ♪

>> i am in yvonne man in hong

kong. this is "daybreak asia." >> a quick check of the business flash headlines. hong kong's richest man expanding in canada. cpk canadashing holdings will use cash on hand and assume the company's debt. reliance will stay based in ontario, with the current management team remaining in control. i look at toshiba shares , 9% now, more than 7% after sources said it may miss its to late april 11 earnings deadline. has received bids for its chip unit worth $18 billion, and the highest offer is for 100% of the business. two executive said there were no japanese bidders, but may join later. >> the first quarter tankan survey shows large japanese

companies planning to expand capital expenditure by .6%. it puts in indexes sentiment at 12 among manufacturers based on an expected yen dollar exchange rate of 1.09. joining us now to talk more about the tankan survey and the outlook for businesses is the senior economist at nomura in tokyo. we had a guest on in the last hour who said, look, the tankan thaty makes a base case things are improving for japanese businesses and it will only get better from here. what you make out of this? >> tankan survey the tankan the japanesems economy is in a phase of recovery. actually, the recovering in the -- recovery in the tankan survey was modest, but as you

mentioned, they assumed a dollar-yen rate lower than current levels, so there is a potential for a revision upward in the future. furthermore, the most important was better,ex plan stronger than markets expected and our expectation. i am not worried about future so much, so the results are modest and this year will be a modest recovery for the japanese economy. >> modest, indeed. let's pull up that bloomberg function here which shows how the yen has performed against .ts peers so far to date you can see that on the left is where it has strengthened against other currencies, every currency from the euro, u.s.

dollar, kiwi. essentially strengthened against most major currencies, so i wonder if that outlook of 1.09, is that realistic among the businesses in japan? realistics potential is more conservatee and dollar again will go up. the japanese yen will depreciate given the u.s. economy is performing well, and the fed is expected to raise interest rates more, so the trend should be dollar-yen going upward, so i think the forecast for dollar-yen is still conservative. mentioned the global

outlook, the japanese exports are looking quite strong. i want to throw up a chart here. we did see robust up 4.8%, but how sustainable is this current export boom in asia, which has been led by china? does that make you change your forecast for the region and for japan? mentioned,, as you an important point is how long the acceleration of exports will continue. we think exports will continue to expand this year, but the growth rate should be lower toward the end of this year, so from a cyclical point of view, exports will be the best in the first of middle of this year because much of this recovery is

coming from inventory cycle which adopted a long-lasting. >> yeah, and what about for china too? we saw the rise in exports were due to contribute in factors, but as china d bigrages, could this be a headwind when it comes to shipments across the region? sure, the structural adjustment in china is headwind, has been a headwind and will be heading for a long time. the current recovery in the chinese economy i understand is coming mainly from the inventory building up, which should not last for so long. growth rate wise, the acceleration should not be that long-lasting, which means japan's exports acceleration

should not be that long-lasting. quick question before we go, how much is dependent on the boj and when they remove their stimulus? or is there a bet they will not remove it at all this year? >> we don't expect any move from the boj this year. the target is 2% inflation. we don't expect inflation to reach 2% this year. however, they are worried about the side effects of even lower negative interest rates, so we don't think they will move theher, even though inflation rate has not reached the target of 2%. >> all right, thank you so much. the senior economist at nomura securities. up next, we look at the big stories coming up this week. what you need to watch this week. plus, what could be the world's most viable diamond -- most

viable diamond ring when he goes to auction? find out next. that is a beauty. this is bloomberg. ♪

york.nd betty liu in new this is "daybreak asia." >> i am yvonne man in hong kong. we will cover all the big stories this week here on "daybreak asia." cut diamond ring goes to auction on tuesday here in hong kong. betty, you must be jealous. mined in south africa and weighs 59 carats. imagine that on your featur fin. $60 million, not chump change. it is actually considered one of the rare and greatest treasures

of the world, this pink diamond. we are expecting the latest report card on samsung. it may not be as flashy as that pink star, but investors will be watching how business has weathered korea's widening scandal that has embroiled jay y. lee. it has been quite resilient. the 12 month price target has continued to rise even despite all that political turmoil in south korea as well. s8,'sust launched this of bullishness continues for samsung. that,will see how any of if at all, has affected sales of the s8.

in the u.s., we look at president trump's meeting with president xi jinping on thursday and into friday. the two heads of state will have their first face-to-face talks at trumps oceanfront mar-a-lago resort in palm beach, florida. that will be a show to watch, if and job numbers are out, adding possibly 175,000 workers in march, the jobless rate steady at 4.7%. economists predict a pickup and wage growth. that is key for the fed. the fed has said they look at jobs data and that is important when they consider the rate decisions. i want to point out this chart, which shows you very well the recovery in the jobs market. we have heard president trump already take some credit for the jobs growth that we have seen, but you can see on this chart particular that he on the

right-hand side, that is when president obama took office. jobs were already coming down, one steep ski slope down how far jobless claims have fallen. now we are at multi-decade lows. the question is it kind of looks like we are leveling off. is that going to continue with trump's policies. >> yeah, and he will start off with a high base when it comes to job gains or president trump in his administration, so how he can build his momentum will be key as well. >> indeed, and he sees part of of thatina as part picture. one feature on the bloomberg we would like to bring to your attention is our interactive tv function. .ou can find us at tv you can watch us and see previous interviews or dive into any functions we just talked about.

you can become part of the conversation by sending us instant is a just during our shows. in this is for bloomberg subscribers only. check it out at tv . ♪

in singapore, thunderstorms and rain for the line state this morning. half of an hour away from the open. i am if on man in hong kong. >> quite ominous there. i am betty liu in new york. you are watching "daybreak asi " ." fromumbers coming out various countries around the region. here is david ingles with more. david: six economies, indonesia tankanines, thailand -- survey and south korea as well.

with a lack of catalyst from the u.s., we're looking at asia now, right? trades into a lot of economies across asia. improvement across these numbers. indonesia way above 50, 50 .5. philippines 53.8. 52.2 four thailand, so as a group southeast asia doing well. that me see if i can get into any of these numbers. here we go. philippines. there we go. it has been above 54 several years. the next release on may to is one to watch. a group to watch if you want an indication if the data is supportive. andfundamental story earnings growth across the asia-pacific, that was it good

markets, a cautious start, not had come up mostly gains. australia off the lows of the day. a weak u.s. dollar, gains across fixed income, most, not all. that may look at the other side of the occasion, japan yields on the way up. we will get more updates with malaysia. gold is flat. as far as that is concerned. there is a one-year look at 10 year yields. we are stuck. have a look at this. let's see if i can bring it back. there we go. eight-nine trading sessions we have been around 2.4 percent handle on the u.s. 10 year, which says the market has all the information it has to come up with a fair value of where we are here, right?

what is next? do we need something more to break us out of this? let me wrap things up with a look at key movers. go, sonyhiba, there we booking again in the sale of one of its units in china, 6.4% miss for toshiba, might its april 11 deadline on earnings according to one executive at the company. fortescue, prices for iron ore back to january levels. new crest mining also a gain or in sydney. gold mining consistently on the way up in sydney. all yours. >> a little risk off feel, it seems. let's get to first word news with rosalind chin. rosalind: china central bank has raised entrance rates for small and medium-sized financial institutions. the pboc increase the rate by 20

basis points to 3.3%. a stable economy and rising factory gate prices have given its scope to tighten policy to keep up with the fed. china has seen the most corporate bond defaults ever with seven companies failing this year, compared with 29 for the whole of last year. int of the defaulted worked heavy industry, construction, and the situation shows how the attempt to reduce liquidity is causing casualties. rose the's home prices most in seven years last month, sparking renewed fears of a bubble. average house values climbed 12.9%, the fastest pace since may 2010. the boom is led by sydney, where average house prices surged from must 19% in the past year, the most to since november 2012.

san miguel's president says the company plans to invest $34 billion in heavy industries as it seeks to write the philippines wave of economic growth. the money will go into an oil refinery, integrated steel complex, and said profits will rise at least 20% this year to about $1.2 billion. south africa's new finance minister says he will push for conclusive economic growth, while sticking to the spending framework in place. presidenter after jacob zuma dumped his predecessor following sparring for control of the treasury. sought to calm investors after bank stocks tumbled and it headed for its biggest low since 2015. , meorking as a collective in particular at the home of the collective is to restore

confidence, to restore calm, to weure our stakeholders that collectively possessed the requisite political an expert capability to perform all the tasks that we have been assigned. >> global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> tesla top delivery estimates for the first quarter 2017, putting it on track for 50,000 cars by the end of the second quarter. ramy inocencio has more details. like bigk it's bull's-eye big bears. this was one for the bulls, right? ramy: one for the bulls. 24,002 hundred was the expectation according to three

analysts surveyed by bloomberg, but they blew past that by 800 can see, 25,000 as you is the reality for the first quarter of 2017. we will see how tesla shares react in monday trading, but over the year to date him and they have risen by 30%. look at that. december, december 2, up by 50%, so if you are long, you will be smiling happy right now. looking at some of the milestones here for tesla, the a factory open gig in january. elon musk also said the model three is on track for production in july, then of course a couple of days ago, tencent revealed that 5% stake, $1.8 billion. i want to show you the analyst recommendations in the bloomberg. we are not seeing that bullishness in terms of analysts, green are the buys,

yellow holds. that is according to your anr function on your bloomberg terminal. you can see the 12 month target is $260. the price is near the $280 mark. looking ahead, tesla does have a very lofty goal that a lot of people are sure they will be able to get, 500,000 vehicles delivered in 2018. right now in the first quarter, 2000 cars per week, but they're looking to do 10,000 cars in 2018. elon musk said we will do it and push ahead. he has more often than not fallen, but there is that phrase that says, shoot among the moon, land among the stars. ok, for the bears, tesla

sales had the boost in hong kong, but there is a new tax policy that just expired to could hurt the company. the exemption just expired. bloomberg intelligence says this could increase the cost of electric vehicles by 50%. for 570,000 goes hong kong dollars, $73,000, but guess what? that can go to about $118,000, a fair chunk of change that will depress sales in hong kong. let's look at what has happened in terms of 2016 sales. while we think of sales in the how muchates, look at in hong kong, 7% from tesla, 1% united states, and that's so in mainland china. because of what has been happening with the tax there,

they are thinking possibly tesla will look to mainland china to get those sales to get that revenue. last year, they hit the $1 billion mark. president xi jinping potentially being the champion of green energy, who knew? they have somee tailwinds in china, but that tax exemption is a big deal for a company like tesla. ramy inocencio on the electric vehicle company. why are veteran china dealmakers jumping ship, and what does this mean for m&a? find out in just moments. this is bloomberg. ♪

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

kkr is taking a $250 million vietnamese company, $18 billion meat industry for masan group. the producer holds less than 1% of the market share. >> the merger that created the uae's largest lender was -- as firstnday is abu dhabi bank began trading. it has total assets of $180 billion. that makes it the second-biggest lender in the gulf cooperation council the stock rose 1.5% with 3.5 million shares changing hands. group one of five potential suitors who placed a h nordea bank. offers will be re-feud --

reviewed. in 2015, the eu ordered the h to sell the blank -- bank by february of next year. i have to get my german on. >> that was a tough one. let's talk more about china. traders have been jumping ship for smaller funds in search of lucrative deals and pay packets. banks are facing a test to retain talent in the face of tighter regulation. joining us now to look at china's m&a landscape is chief partner of financial services aipac. reported about how we have seen this accidents out of banks like goldman sachs, merrill lynch, but what you think is driving this exodus? speak to a bigger

picture of how these bigger firms are operating in china and the challenges they are? >> the blunt answer is money. that is getting deals done per big houses has become difficult, so there is less to pass on to the employees. it is really about money. onreasingly, you need to be the buy side and need to make investments to participate in the upside on these deals. the guys in china are not hiring bankers to do what they used to do. >> i want to throw this function .n the bloomberg, slma of january and february, we saw a significant leg lower when it comes to m&a activity. how difficult will it be for these new managers and these new funds to source these chinese deals? also competition among chinese security firms as well. >> in the smaller firms, you are

doing a different job. you are a boutique doing some negotiation, not the large matchmaking that used to go on. the chinese themselves are doing that. if you go into the domestic market, that is different. one of the big challenges has been closing outbound deals and getting the cash to buy the assets you want to buy, so if you are in the domestic market doing domestic things, you don't have those problems. grass may be slightly greener on the other side to do expect the exodus to continue and ramp up? >> there is not much further it can go. a lot of people leave the m&a space and move on to smaller boutiques and/or move into the buy side. so i don't think there is a huge distance still to go. the big banks will need to have some people. the chinese need some people,

articularly when it requires negotiated deal, and overseas deal, so the will be in need. i'm curious, leaving the prospects are generally that these bankers and these m&a advisors will make more money if they go locally or independently? >> i think so. the foreign banks, the global banks have generally had more control over salaries and bonus pools, but there is a lot more eat what you kill in the boutiques and in the venture funds they get carried interest, so it is potentially a lot more money. >> what did these banks with , goldman talent pools sachs, carlisle, what to they do then and philip that talent cap?

they continue to bring on board where they can, but let's , it is slightly different, more of a revolving chair there. is from thet banking sector where the banks are downsizing. it is not leaving a massive vacuum behind. wherehere will be spots people are short, but fundamentally it is shrinking. >> it absolutely is. i want to bring up this chart which shows this credit expansion we have seen in china, but what is interesting is the white line there shows you the aggregate financing in china, and over the last year or actually within the last few months, it has gone down sharply, even though it is still at higher levels, for instance

local currency bank loans are still at high levels. what does that tell you about him in a or financing activity in the months to come? it is just for a difficult to get the cash out of china if you're doing an outbound deal. that has to impact. one, no closing, but more importantly is that when people are bidding for deals, they don't have the certainty they can close when they are talking to the seller, and that is a handicap for chinese buyers trying to go outside the country , so it is not the greatest of signals. >> do think chinese officials are acknowledging that it has to be a level playing field? if they have no reforms in place that allows foreign companies to could wess to china, see additional backlash when it comes to these chinese m&a deals? >> i think you have a lot of things going on. you have a massive change in the political landscape globally and

people are nervous about that. you have the chinese focusing on new trade links, one dealt, one road and so on, so we have seen deals in that direction get is ang, so that interesting dichotomy. yes, is there a fear about a level playing field? it has clearly caught some interest attached to it, but if we look at the other side of the planet, maybe not so different. we are president trump not quite sure what his policies will be when it comes to foreign investment as well. for it comes to the future 2017, we have already seen dealmaking slow down a bit. does this limit the size of these deals going through as well? >> i don't think we will see as many large big deals. we have seen tencent and tesla already, and we have seen the government supportive of the aramco deal.

if it's government supportive, we still see the money flow. we should not overlook the domestic market. big happenings in the domestic market, capital markets freeing up, ipo's going out, which means there is more money to reinvest. the biggest challenge in the domestic market is finding those deals. >> great to have you. senior partner of financial services for apac here in hong kong. it's your addition of daybreak, subscribers can find it on dayb . it is also available on your smart phone in the bloomberg anywhere app. you can customize settings where you only get the news on the industries and assets you care about. check out dayb today. this is bloomberg. ♪

>> this is "daybreak asia." ime fun man in hong kong. >> i am betty liu in new york. >> -- i am yvonne man in hong kong. >> i am betty liu in new york. a study has fundamentally change one should think about the chinese economy. tom mackenzie spoke to the economist, uncovering some

uncomfortable truths. inequality is actually really bad for chinese economy. not for social instability, but for china's economy. china's government has done not enough, not sufficiently to help the poor by transfer income to the poor. i give you statistics, 40%, only 40% of chinese government spending are using as the transfers. the number is 36%. other european countries are higher. >> what had you learned about asset allocation and where chinese money is in savings? averageost is housing, inet, the housing asset china is 70%. in the u.s., 36% as a reference, so a huge number. like shanghai or

beijing, 85% of total assets are in housing, so this is very unbalanced, to save the least. the government becoming more trustworthy, you think? >> i think they do become more reliable. i think they have been changing. not that they are not as reliable, the problems they don't release the details. i don't mean intentionally change it or do this intentionally, i don't think that's the government policy. >> what do your statistics tell you about the overlooked opportunities in china's economy? >> the big overlook his understanding china's consumption cycle. on dvdtion is focused even hitting extreme poor by 2020 or 2030, they should not only focus on the extreme poor,

but the relative for, helping them develop their skill to develop their self, and also working ethics while encouraging the country to the consumption driven economy. >> that was tom mackenzie's with a professor at the southwestern university of finance and economics and shannon do. you can watch us live on our interactive tv function in c previous interviews and dive into securities or bloomberg functions we have been talking about. this is for bloomberg subscribers only. make sure to check it out on tv . that is almost it for us here on "daybreak asia". you are taking a deeper dive into those tankan survey numbers. >> it looks pretty good from the

outset. steady, broader recovery when it comes to business sentiment and large manufacturers. much thislk about how is outweighed by the fact that we are not getting wage growth, that the animal spirits are lacking when it comes to the japanese recovery. story today our top and what else is driving markets at the start of this new quarter. >> the guests that you have coming up? >> in japan, bank of america merrill lynch is -- merrill essentially where the japanese economy goes from here. the key will be where the dollar goes come of that correlation between sentiment and the year. more to come. ♪

9:00 a.m. in hong kong, midday in sydney, 9:00 p.m. in york. i am haidi lun. bloomberg markets: asia." ♪ marketssia-pacific higher at the start of a new quarter, the yen climbing on the improving outlook for corporate japan. loser amid fears it will miss its earnings that line. , tokyo down to the wire has 2020 vision when