♪ >> weak payroll numbers give the fed something else to think about and may suggest employment stable. >> modest gains at the start of a week launching earnings season. >> president trump and president xi jinping held their meeting a success. >> strengthening transpacific ties with china. >> we have the world covered

here. in hong kong,e tokyo, and sydney to preview a trading week. we cross over to melbourne, joined by james bullard. gainsnew york, payroll that slowed in march, but actually there is a silver lining, much more than a silver lining in fact. asia." "daybreak it is just after 7:00 a.m. in hong kong. silver lining, you are talking about the unemployment rate, the lowest level in a must a decade. i'm glad it is the start of a new week. , payrollch a wild ride data disappointing, not to mention syrian air strikes and we have to factor in the meeting

that just wrapped up. that's right. it was so interesting to be so close to these leaders deciding the fate of 2 billion people. pretty much no deal actually came out of it, no deal on trade, currency manipulation, .orth korea it was a short trip. president xi jinping was in and out, and now we are unpacking this. an invitemp accepting to go to beijing in the future. i was expecting something of a gift from the xi jinping, like prime minister shinzo abe bay did. let's get a check of the markets in play. , stocks falling for a third session. on the political side, the main opposition party saying it will

mandate ifz the dual it wins this year's election. asx 200 futures pointing upward. the aussie dollar is currently bit.ng ground slightly, a nikkei futures pointing upwards as well. it rose 5.4% in the last session. weakness, but only after exceptional strength in the last few weeks. that is an early look at what we can expect in the region. ramy: let's get over to kathleen hays. we will be talking about the u.s. labor market in march and the number of jobs created, falling short of forecasts, a sign of weakness, but it wasn't. >> this is the question. make.nth does not a trend let's look at some of the numbers.

march payrolls up 98,000, the forecast was for at least 180,000. let's jump into the bloomberg. you can see the white line dropping dramatically, only 98,000. nevertheless, the rate of acceleration decelerated, so did the six and three-month moving averages, but there was harsh when to weather across much of the united states. people could not get to work. that is not a surprise. meanwhile, the unemployment rate fell to 4.5%. this is very important to the fed and traders because wages decelerated. tight labor market. let's see what's going on there. the blue lineand

is that drop in unemployment, but the white line shows the average hourly earnings are barely rising. stagnant wages, more competition from overseas, more automation. that could be it. there are two surveys, household surveys, that's for you get the unemployment rate. for payrolls, companies answer online surveys, and they can do verge, this one was striking. shery: how will the fed sort this one out? will they be knocked off course? >> most economists say the fed will dismiss this weakness and most traders do not agree. let's look at a chart we put together to show you what this looks like. the white line is the rate hike

next.ility coming up it was higher the day of the last meeting on march 15. look at the orange line, the implied probability of having more than one hike in 2017 has decreased after the jobs report. buts not a huge change, traders are not fully on board with the fed. that's why we will listen closely to what the fed officials have to say. it looks like a very weak first-quarter gdp. pierce 1%.lucky to that is something else the fed has to weigh. shery: we will get more insight into the fed thinking next. we will be joined live from melbourne by st. louis fed president james bullard in about five minutes. let's now get first word news with rosalind chin. rosalind: the chairman of the

chinese insurance regulator is under investigation for severe violations of discipline. there are few details. chairman ofer agricultural bank to head up the insurance regulator in 2011. the phrase violations of discipline is generally accepted to be corruption. the u.s. has denied plans for regime change in north korea as it sends an aircraft carrier to the divided peninsula. to ships had been scheduled sail from singapore to australia, but had been diverted north. will safeguardp u.s. interests in the area. russia is strengthening its presence in the eastern mediterranean following america's missile strike in syria. heading pass through for the syrian coast. it is part of russia's black sea

fleet and is equipped with cruise missiles. the u.s. ships are heading west out of the area. the leaders of the world's two biggest economies say their talks were a great success and have built an outstanding relationship. said the xi jinping two had established a level of trust. the two agreed on a 100 day plan to address their trade imbalance has president trump accepted an invitation to visit china. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. thank you. our next yes leads the u.s.-china chamber of congress. he joins us from chicago. he has an advice or to a number of corporations and governments. thank you for talking to us this morning. nothing tangible out of the

meeting. much would you say both parties advanced there out interests -- own interest. >> yes, president trump talked about trade against china and said he's going to put 45% import tariffs on all the products imported from china. since he became the president, he has not talked about it at all. one reason is that is really complicated. a deficitlking about americans find goods have become part of their daily life, and consumers will not put their wallets on the has been donald trump silent about the 45%. there are not many options. trade deficit is

because americans don't want to make coffeemakers. china needs to continue to export to the united states. we are hearing the likelihood of china being named a currency manipulator, but if you look at the bloomberg, you can see the correlation between the thinking behind the trade deficit and addressing that deficit would be that there is a correlation between a weaker yuan with a bigger trade deficit. this chart shows the year on year change in the u.s. bilateral trade deficit with china. the regress ofs the chinese yuan for a two-year change against the dollar. since 2012, the correlation has broken down. given that the yuan doesn't seem to lead to a bigger trade

deficit in the u.s., which are still expect the u.s. to go ahead and keep that pledge that trump made before he was elected president? >> i don't think so, because to our currency is not fully convertible. the renminbi is fully convertible and you let the market make the determination. you are going to see the renminbi continue to depreciated because a lot of chinese people will try to buy u.s. dollars. one of the main reasons why we have such a big deficit with china is because of the overcapacity in china. it is not just the currency. exportedhe products are commodities related to margin overcapacity, and it is not just because of the currency. that will continue. ramy: i want to ask you about

the potential for u.s. china trade relations in the future. not get any deals that of mar-a-lago, but people were talking potentially automobiles, beef here what are the areas where you see cooperation? believehappened, and i the united states will continue to push china to open up the markets. to chinese will continue want more technology from america. i think those so the big opportunities for agricultural, technology, entertainment, education. those are opportunities for future cooperation. ramy: the conversation will continue in this young presidency as xi jinping does consolidate power in beijing. thank you very much. suisse ahead, credit will join us to break down the latest current account numbers from japan.

that is later this hour. we ask the st. louis fed president james bullard what he thinks about the pace of rate hikes this year. don't miss that exclusive interview next. this is bloomberg. ♪

shery: this is "daybreak: asia." in hong kong. ramy: the fed set to begin reducing its balance sheet. how might that decision shape the path for future u.s. interest rate hikes? joining us now is james bullard. this isow simulcasting inclusive interviewed live on bloomberg radio. good to speak to you. we just got the latest jobs figures. what was your reaction when you first saw that, and the slack

out of the jobs market? my interpretation of the child's report was that it was a bit weaker than expected based on the headline nonfarm payrolls number. i think it is consistent with 2% growth for 2017, which is what we are predicting at the st. louis fed. you also have weak gdp tracking for the first quarter, so i think those two things seem to suggest that 2% growth is about what to expect out of the u.s. economy in 2017. shery: so much talk about reducing the fed balance sheet. can normalizing the balance sheet the as substitute for boosting the benchmark? >> well, one of the issues i felt that is important about the balance sheet is that it is putting downward pressure on the medium and longer in the of the

yield curve -- longer end of the yield curve while there is pressure on the shorter end of the yield curve, so it is a twist operation and i am not sure there is any theory that says that is the right thing to be doing in this situation. do is allow the yield curve to adjust to rate increases in a natural way. one way to do that is to begin allowing some of the balance sheet to run out. an important question. i jumped in here and could not help. i am kathleen hays in new york. are going on,ings a weak jobs report, markets not looking for three hikes. they are looking for a total of two. you yourself have said you don't think we need another rate hike come a so if jobs all short and defect is does not hike as much as it is going to, how can you move ahead and start letting the balance sheet run off.

reducing the balance sheet come you said you have to be well on your way to normalizing interest by raising them. this is going to be a fantastic policy. doesink the policy rate not have to be raised all that much from where it is today in order to keep inflation and unemployment about where they are today. therefore, there is not that much normalization the needs to go on with respect to the policy rate. that is the feds position on this, so that leaves balance sheet normalization to occur. and the reason you want balance sheet normalization in our view end of the longer yield curve, you want to let that adjust to the policy rate increases, otherwise you have of situation where youasia

are twisting the curve and still keeping longer rates low, so that would not be normalization if you did that. >> taking a look at the jobs report, you said you thought the report was week, 98,000, half of what they expected. wages aren't rising. is the phillips curve broken? is the old relation between unemployment and higher inflation broken, and is the fomc failing to recognize? >> well coming you can ask my colleagues about it, but i think the empirical evidence on ypellips curve t relationships has been weakening in the past 15 years or so, and because of that, i would not a put -- not put a lot of reliance on that idea because the unemployment rate looks low that we will get a lot of inflation

out of that. instead, i think inflation will stay where it is now. of course you have energy prices in their, and those are volatile so they have some affect, but on the whole, inflation is close to 2% and i expected to remain there over the forecast horizon. shery: taking all this into account, will the fed be forced off track because of this payroll data or the next? well, you know, i said it was a week report, weaker than expected, but jobs growth of around 100,000 would be consistent with labor force trends in the u.s., and so if you get numbers in that neighborhood, to me that would be neither good nor bad because paceuld be just the trend of growth in jobs that you would expect in a 2% growth economy, so that is where i think we are headed. report will beis

repeated in the coming months, but we will see. the fed has been predicting that job growth would slow down to the pace of perhaps 100,000, so here we have one number that is in that vicinity, so maybe that is consistent with what we have been looking for over the last 18 months or so. ramy: back to the unwind. #7515, theall up yellow line is the fed balance sheet come up 4.5 trillion dollars on the right-hand side of your screen. how much of an unwind would be appropriate to avoid market volatility? a lot of people are nervous if and when this happens that there will be a lot of volatility out there. what is something that you think is appropriate? >> a simple thing to do with the balance sheet -- first of all, four $.5 trillion is higher than anyone thinks it should the pure debt is number one.

, if you want to create policy space in the future and have the option of quantitative easing in the future, then you should get the balance sheet down to a reasonable size today. another aspect of this is all you have to do is allow the reinvestment policy to end, then you can gradually run off some of the balance sheet size over time. also, if you think it is lumpy and look at the pictures of what is maturing win and what month, it looks kind of lumpy, but we could smooth that out in such a way that it declines of a given rate, so i don't think this is a matter of doing something that would cause volatility and markets. i think it would be taken in stride by markets, and i think we could get to a lower number than 4.5 trillion with a reasonable policy.

ramy: whatthan 4.5 is a reasonae then? what is a reasonable number? >> that is a good question. before the crisis, it was about 800 billion almost all cash with some reserves, so post-crisis, i think if i have my numbers right, cash is all the way up to , so if you addw some reserves to that, maybe a couple hundred billion of reserves, you could get to a balance sheet size of 2 trillion, so the 4.5 trillion we have now is way the 2 trillionin range, so we should allow to run off so we are making some progress towards that eventual goal. the committee has not decided what it wants to do, but even if significanty with amounts of reserves, we would only need a balance sheet in the 2 trillion range. it is to allow

the runoff gradually over a couple of years. shery: and affecting the fed in the future is what the administration does, so when will meaningful fiscal stimulus kick in? >> it is a great question. inre is a lot going on washington, d.c., but my position on this is we can wait to see what the congress delivers and what the white house delivers as far as changes to fiscal policy. also, i do not think these are conventional stimulus measures at they are often talked about because we are not in recession a matter of isn't doing a keynesian type of stimulus. i think the administration wants to get the longer-term growth rate up for the u.s. by improving productivity, possibly changing the tax code, infrastructure spending, d regulatory programs, all of those things if done correctly

could have an impact on u.s. productivity and therefore on the longer pace of growth in the u.s., but as far as the fed is concerned, i think we can wait to see what happens and wait to see windows in packs would occur. i don't think they could occur sooner than 2018, and the longer congress waits come in maybe longer than that. >> i want to clarify something you just said talking about letting the balance sheet gets smaller just by not taking the bonds that are maturing and putting them act in the portfolio to get a gradual shrinkage. is it your view then that this will be the path for the fed? sale of theght bonds in the portfolio, which could create a a lot of volatility, but a slow, gradual, don't reinvest the proceeds, then again, can you even do the simple, small step forever if

the economy is not getting stronger, if it really is weaker? it.h, i think we can do i think it would be a very good policy. the economy is not as strong as we would like, 2% growth may be is not as fast as we would like it to be, but it is consistent with what has happened over the last 5-7 years in the u.s. ofre is really no indication any further weakness than that, so therefore i think we could allow the runoff to occur. you are right. we are not talking about asset sales, or at least i am not and i don't inc. other committee members have talked in those returns, so it is ending the reinvestment policy and would allow a slow runoff of the balance sheet and create policy space for the future if we did get into another recession. i think it is a prudent policy at this point. markets,ght, emerging

whether the recent fed rate hike , they have weathered it pretty well, what would be the impact of the fed moves too fast in the rest of the world? is a great question as well. we did have this taper tantrum episode in 23rd teen, which sent a longer-term bond yields up around the world by perhaps 100 basis points. i think that was a communications issue. if you recall what happened in 2013, we actually did nothing at the june meeting, then we got a lot of volatility, and then we did nothing again at the september meeting, and we got a lot of volatility. we did not taper until december of that year, and once we did take the action, there wasn't any further repercussions around the world, so i think the same thing could be said here for reduction in the size of the balance sheet through ending the

reinvestment program. -- could into the program the reinvestment, sorry, and from there -- ramy: we will have to leave it there.

♪ 7:30 a.m.py monday, in hong kong. overcast sky, but we had a beautiful weekend. we are a few minutes away from the first major market open. ramy: it is 7:30 p.m. in new york. you can see what is left of the .un, a gorgeous evening here i'm ramy inocencio in new york. shery: i am shery ahn in hong kong. you are watching daybreak asia. let's get the first word news. rosalind: egypt has declared a state of emergency after suicide bombings that killed more than 40 people. the attacks have been claimed by the so-called islamic state. they call it the deadliest assault on civilians for the

residence three years in power. this comes a week after president trump praise their fight against terrorism. a new poll suggests the parlous candidate-- far left in france is gaining ground. gives the communist act contender 18% supporter, one point ahead of the conservative francois fillon. emmanuel macron and the first national leader marine le pen are tied at 24% each. in marcholl gains while unemployment fell, 19,000 jobs added last month, a little more than half the forecast of 180,000. those were the weakest figures since may last year, but may reflect the labor market returning to normal. people view the economy operating your maximum employment. the ford motor company ceo is optimistic about trade relations

between u.s. and china following the meeting with xi jinping. the car market in the u.s. has hit a plateau but at a high level. >> we want the industry in the u.s. to be 70 million units, down slightly from last year, but at a relatively high level. we are seeing more competitive pricing from a standpoint, but we are prepared for that with a great product lineup and keeping cost structure in line and staying focused on satisfying customers. rosalind: you can see that later on daybreak asia in about an hour's time. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. ramy: we are counting down to some of the major arc it opens in the asia-pacific. -- market opens. adam, what are you looking out for?

the aussie is looking relatively flat. we are seeing that coming back from the few sessions of last week, but it is the home loans data we will have later this morning in australia, the housing market of course being one of the key things, the rba flagging in recent weeks. it was low with aggressive comments last week around what potential regulators are doing and might expect more of in the future. that will be the real key piece ,f data to get our heads around to get does look mortgages and lending, how that is progressing. the shakeup continues in runaway house prices, that is a problem for the rba. elsewhere in australia, from an equities perspective, we are looking at public momentum following through.

we had a tumultuous session friday with the u.s. missile launch on syria. we are seeing the risk off being rewound. we saw that friday, and it looks like it will continue monday morning. shery: yeah, we will have to watch the repercussions, if they follow through this week. but we have japan's current account balance coming out in 20 minutes, so we have data out of china. give us the details of what to act. well on top of it, there is plenty of other things as well, and earnings season gets underway in essence this week. across the world, it will be back to looking at company fundamentals here we have the likes of luxury close makers, product, coming out -- prada coming out. we have retailers like tesco. so there is a lot of fundamental

for landscape as well as more politics and central-bank speakers talking. it is interesting hearing bullard, investors will get to their desks worst thing on the asian morning. we are waiting through the bullard comments, especially around the balance sheet. they made the statement last week that would start shrinking before the end of this year, but bullard has given numbers around that 2 trillion mark. it is currently 4.5 u.s. dollars $4.5 trillion u.s., and it gives the magnitude of the shrinking we are seeing from the u.s. and the implications from the u.s. bond market, the rate, and for investments broadly speaking across fx, bond and equity. that piece of inflation

bullard will be going in further, and people will be scrutinizing. shery: he was telling us the fed could trace the balance sheet in the second half of 2017, and they don't need to be proactive on the raise. thank you so much joining us out of sydney. the leaders of the world's two largest economies have had their first face-to-face meetings, calling it a success, even with their talks being overshadowed by the missile strike on syria and tensions in north korea. tom mackenzie has been following this. nothing really tangible out of the meetings. what is being achieved? tom: no grand bargains or big deals, but what both sides are saying is there is no foundation for a working relationship between the two leaders. we heard positive work in both of them. leading up to this summit, there

was stuff around the courts of the south china sea, north korea, the currency and trade, no details in any of them. we did get 100 days of negotiations over trade. not clear what that means, but we are watching for that, and they set up a negotiation framework headed by the two presidents, and we heard words from president xi said there are 1000 reasons to move the relationship forward and none to degrade it, and is an important year for president xi as he looks forward to the party reshuffle. it is important he went to america and came back looking like a strong domestic leader. we heard reasons why from anka lee, a senior director at how bright stonebridge talking earlier -- all great stonebridge. >> 2017 will be a difficult and sensitive year for president xi. in the fall, he will be

reselected to a second five-year term. before that, he will make turkey can consolidate power, minimize the chance of any kind of opposition to challenge his influence, so he will be quite conservative what he wants to do, not just domestically but also overseas. is a part of this process. tom: the meeting was seen as a success for president xi in this crucial year, but the hard work for both of the president start now. that is all in advance of the meeting. president trump wanted to focus on trade at but as well, north korea. nothing came, but what is the latest? to: that tensions continue ratchet up. we have seen moves from the u.s. navy to realign some of their assets around the korean peninsula, the uss carl vinson has been diapered into the

region. the u.s. navy saying north korea is the number one threat to the u.s., but we did not really get much movement on this between, on the meetings between the two presidents. from the u.s. side, they want north korea to walk back from their nuclear program. they also want china to enact more pressure on north korea. china is reluctant to do that to any degree that might undermine the regime in north korea because they do not want it to collapse and have flood of refugees over the border. so the gap between the u.s. and china and of course north korea remains, and many analysts are saying, the clock is ticking down, and this is an issue that will likely have to be addressed in president trump's first term. ramy: a difficult conversation. thank you. u.s. thanks are set to report first-quarter earnings later

this week. we focus on the week ahead. this is bloomberg. ♪

♪ haidi: beautiful -- shery: beautiful, clear morning in tokyo. we could see another pop-up for the nikkei with futures up 0.4%. that would be the second gains, and ity of could happen. the japanese yen is weakening for a third conservative it session. i am shery ahn. ramy: i am ramy inocencio. looking at the business flash headlines, guotai junan has confirmed it is pricing its new shares at $15.80 hong kong each. the shanghai-based company is offering just over one billion shares would start trading on

tuesday. this could help guotai junan recover from last year's 37% proper -- profit fall. shery: we are watching shares of hyundai motors and tia as they announced a recall of 1.2 million u.s. vehicles. the bearings between 2 and 2.4 four cylinder engines could wear, leading to stalling. they will replace the engine if necessary. neither company would estimate the potential cost. ramy: jpmorgan said home prices in hong kong are close to a peak and unsustainable. the bank's asia-pacific equity unit said prices have out sustained the growth since 2009 and any shock could trigger a tightening of the system and increasing borrowing cost. they are using all of their assets as well as leveraging their parents' homes as collateral.

think earnings and market direction will be a big focus in the week ahead on wall street in new york. su keenan is here with the outlook. su: everybody will be looking at the banks. interest rates are raising, positive. auto loans are starting to default. we know how the market closed, a lot of red on the screen. and going into the holiday short week, we are dealing with that a little bit. with the banks reporting, they are led by citigroup, wells fargo, j.p. morgan chase. they all report around thursday. point, thepivot dollar has been in consolidation. this chart shows the dollar-yen has been trading around the 40 day midpoint, and if that continues they stay at a handle 112, a strong signal for the yen. ramy: in addition to earnings

what else are we looking at? su: we have a few reports in light of the mixed signals on the jobs data. we are looking at the jobless rate, that is of interest. also sales. we have had consumer prices like change. retail sales will be the biggest spotlight. more news from economists, there was a lot of increase in march. it will wrap up the first quarter, and there will be consumer sentiment pieces that will be noteworthy. there is a major auto show. the new york auto show is always a lot of excitement, big cars, diversity, but it comes on the heels of a disappointing sales report for the industry. if we going to the bloomberg #7105, it is also the issue of banks writing off more auto loans, and the real focus, is this the next subprime? it isis debate, but

likely questions on the conference call to the bank earnings. shery: and you pointed out we have a shorter trading week, the holiday coming up, but also the of the syrian air strike. how will that be felt in the markets? su: we talk about in terms of market reaction with the syrian strike. we going to the bloomberg, there was a bit of a knee-jerk reaction, but the markets evened out across all levels, and that was here in the u.s. as well as internationally. oil had a big reaction, spiking up to the highest level in a month. gold was up. we are back at $82 for oil. there will be a drumbeat on whether they will extend the opec. what go to the video on was the big battle at the box office here in the u.s.. "boss baby" dominated for a

second week, a comcast-owned dreamworks animated film, taking in $26.3 million. it beat the smurfs, beauty and the beast, not that out of the top -- knocked that out of the top spot. alec baldwin is a real moneymaker for the movie business. boss baby, and animated baby that took on a nefarious ceo, creating a ripple at an otherwise dull weekend. shery: i am looking forward, that has to be funny. [laughter] shery: su keenan, thank you. su keenan joining us from new york. looking ahead to "boss baby." you can get a round of other stories to get your day going. ondaybreak, you can write it db go. it is also available on mobile in the bloomberg anywhere.

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

♪ this is daybreak asia. i am ramy inocencio in new york. shery: i am shery ahn in hong kong. we are getting breaking news out of japan, the current account balance coming in at ¥2.8 trillion. that is defeating estimates. it is a huge jump from january where we did have the lunar new year holiday. soiness is back in february, we are seeing a huge balance, but it is much larger than we had expected, ¥2.8 trillion instead of ¥2.5 trillion as

analysts had expected. let's break down the numbers with someone who joins us from tokyo. he is a credit suisse chief economist for japan. thank you for joining us. give us the reaction to these numbers. it beat estimates of ¥2.8 trillion, the account surplus, but is below your own forecast. >> yes. was strong,number and exports have recovered, weaker yen has helped income balance i think. imports remain very sluggish. japan is running a huge surplus, so that is a discussion between the u.s. and japan in the coming weeks. shery: how will this affect, how will this be affected if we see oil prices continuing to gain? that will boost the import bill. right.hi: yeah, that is

the oil prices continue to go up. , pushing upifficult imports. but we tend to think that is accompanied by the weaker yen, that should help exports. that should help income balance of the country. so it is not necessarily the the surplus is shrinking meaningfully. want to hop into the bloomberg terminal and show us 185, this is japan's trade and current account balances, up until the news just now. we are seeing this huge bump in the past month. what factors are boosting this? hiromichi: actually, we have to first look at the january, february number, which is of course related to the chinese new year, and we have to look at

the fact that there would be .mpact of the yen depreciation on the side of exports, goods and services and plus the income in my understanding, so income balance should be benefiting hugely from the yen depreciation in terms of the dividend income and income from abroad. it is not happening. ramy: and japan actually gets a lot of it surplus from its primary income versus china, which gets it from goods and services. when it comes to the japan and u.s. relationship here, which industries get a boost? know, the surplus increases should not get a boost work should get the boost to the banking sector. i think behind the increase in

surplus, the one point we have to look at is what is happening to the auto sector. auto exports is now recovering or continue to recover, but we have to be very careful looking at old industry, because we will it some more tensions when other states on japan's exports also to the united states and dialogue. ofs would happen on the 18th april in tokyo. keyy: yeah, the yen being we me talk about exports, and the yen has been weakening in the past six months, but the fact remains it is all about the u.s. treasury yields. among the g10 currencies, the by thethe most impacted yields. take a look at this. viewers can see the 10 year yield has breached the key technical level of 2.3%. it had recovered since then, but

it has breached it twice last thisfor the first time year. given the direction of the 10 year treasury yield, how does it breaking below 2.3% boat for the yen? yen?de for the hiromichi: the japanese yen against the dollar is sensitive. if u.s. interest rates 10-year goes down and below 2.3%, in the trumponomicshe continue, the yen would have significant pressure, and our house view is that yen is at 107 in three months time, and even in a stronger yen should be the case, u.s. interest rates will go down. ramy: there have been allegations from the trump white

house to pan has engaged in currency manipulation here. some people say it only hits one requirement, similar to china. what is your take? notmichi: well, japan has been directly in the fx market. we know japan benefited policy from the bank of japan, it is the kind of longer interest rates of japan. that should indirectly impact the currency. the forecast is on one approach versus the intervention policy by the finance, and we are focusing on what is happening to this japanese relationship in imports their focus on of japan and the gap between policy, because it is still there. but the boj may be forced to digest the interest rate target if the u.s. continues to say japan manipulates the currency. shery: thank you so much for

joining us. i am surprised that 107 called for the next three months. credit suisse chief economist or japan. let's get more on asia's first major market open just in its away. -- minutes away. ramy: sophie kamaruddin tells us what we should be watching. sophie: thanks. we will keep an eye on toshiba because the government has flight concerns over a foreign -- of it -- over a foreign entity taking control of its chips. they may be looking at a joint investment in the nikkei, and also reporting toshiba may be planning a sale of its tv business. take a look at caps on shares. this is booming. and this is the merger. surged,e of coca-cola and we are seeing iron ore in a bear market. look at asian futures, stocks at

a higher open in tokyo, seoul, and sydney. we will get the latest reaction to the japanese trade data. these get done and korea. ♪

♪ shery: weak payroll numbers give the fed something else to think about and mesa just the labor market is more sustainable. ramy: james bullard says jobs may have plateaued, but the bank has hit its goals. he also thinks the economy is not as strong as it should be. shery: president trump and president xi jinping held their summit a success. shopping againnh

with a $1 billion logistics deal in singapore. shery: this is the second hour of "daybreak: asia" live from bloomberg's u.s. and asian headquarters. i am shery ahn in hong kong. ramy: i am ramy inocencio. shery: a lot to get through this week for markets. we are seeing some reaction to the syrian air strikes, but also the disappointing payroll data. u.s. treasury yields have , here, take a look, 10 broke through that key level twice last week, first after the syrian airstrike, then the disappointing u.s. jobs data. we saw yields spiking up, underscoring that it is not easy

to get to the 2% level. it is harder in a way to go down than up after president trump's victory. will guide the japanese yen. credit suisse thinking eventually we will get to the 2% level and that could send the japanese yen to 107 in three months. as it testssing that level, then pops back up. we are still looking at reflation trades across the board. 4.5, that jobs report with percent unemployment was a good one, even though the number missed estimates. let's get to the markets in asia right now with sophie kamaruddin. sophie: with the u.s. jobs report the weakest in about a year, we will see first reaction in asia, but regarding the way treasury yields have been moving.

, treasury yields rising, the greenback weighing on the yen. you can see the greenback has bounced from its march low. looking at how asian stocks are faring, the nikkei 225 up .9%, adding to friday's gains. we are looking for reaction to the latest japanese data, stronger than forecast, but adding to declines is the kospi, .2%, rising200 up for a second straight day, and we do have the korean won extending its drop, dump .5% against the greenback. taking a look at the ringgit, weaker as well as the greenback rising. how commodities are faring today, we do have new

york accrued extending its gains. new york accrued extending gains above $52 as russia signaled it is mulling extending the opec-let cut, even as u.s. drillers add to rig counts. most base metals on the back foot. iron ore for a sixth weeklyirone klein. aussie bonds trailing the movement and treasuries after that president dudley downplayed the meaning of a positive rate normalization. let's look at the nikkei, this andr trade this morning consumer discretionary stocks of ofr 1%,iron ore and ranking sts 14 sent along with telcos and utilities.

- export growth likely to have stalled in march. this week, central banks in focus, the bank of korea set to announce their rates. ramy: it is a big week in asia for sure. let's get to first word news with rosalind chin. sellind: toshiba set to be its tv business, citing underdone fight sources. the nikkei also says japanese businesses are working with toshiba and the government to identify domestic companies which might jointly invest in its chip unit. to prevent a technology and talent drain a broad. st. louis fed president james bullard said we should expect 2% growth in the u.s. this year.

he said a lower than expected jobs report and weak first-quarter gdp suggest the economy remains in slow growth mode and said the situation is not as positive as the fed would like it to be. economy is maybe not as strong as we would like, 2% growth does not as fast as we would like it to be, but it is consistent with what has happened over the last 5-7 years in the u.s., and there really is no indication of any further weakness than that, so therefore, i think we could allow the runoff to occur. the chairman of china's insurance regulator is under investigation on suspicion of severe violations of discipline. the news was posted on the commission's website over the weekend. he is a former agricultural bank chairman who resigned to head up the insurance regulator. of phrase by relations discipline is generally accepted

to mean corruption. new zealand's main opposition said it will give the central mandate if it wins targeting forion, employment as well as inflation. adopted an inflation target in 1990, a pioneering model now widely used around the world. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am rosalind chin. shery: thank you. world's twoof the largest economies have hailed their first face to face meeting a success, even with lks overshadowed by the u.s. missile strike on syria and mounting tensions over north korea. tom mackenzie has been following this. president xing jinping to go bearing gifts such did in february,

but nothing tangible came out of this. tom: that's right. it's worth three capping the lead, the tensions around north korea, the south china sea, taiwan, currency manipulator, a potential label trump said he would put on china, tariffs of course. so the fact the two presidents came out and said they do have a constructive basis to move forward with the relationship is something of a success, i think. pointing to what you said, it is believed that china went there with some give-and-take options for the u.s., but it seems we did not get to that point. what we did get was an agreement that they will have 100 days of talks on trade, little details about what that means, also setting up a negotiation framework overseen by both presidents to a dress of these issues. it is seen as a significant step as well, but in terms of what trump can do on pressuring china

on trade, we heard earlier from the president of the u.s. china chambers of commerce, and he said there are a few options. take a listen. >> it is really complicated. you are talking about the united states wanting over $350 billion all thewith china, and americans are buying goods made in china and they have become part of their daily life, and the consumer will not put their wallets on the table just to create a few jobs, so donald trump has been silent about the 45%, and there are not many options for him to do. a lot of those trade deficits are from goods that americans do not want to make. from president xi jinping's perspective, this was seen as a success according to the chinese involved in this meeting, particularly in the lead up to this party congress at the end of the year, one china analyst saying this was about trying to

get america off his back while he focuses on chinese domestic policie politics. ramy: in addition to trade, north korea was the other topic donald trump said he would take up with china, pushing china to do more on north korea. get us up to date on what is happening right now on north korea. tom: that's right. few details on what exactly trump achieved in trying to push the chinese on this issue, but we do see tensions continue to rise around the korean peninsula we have the movement of some of around thessets korean peninsula, one of the aircraft carriers moving in that direction him of being diverted. we heard secretary of state tillerson saying they are not looking for regime change in north korea, but that north korea should heed the message

from those u.s. strikes on syria, and the u.s. navy saying as well that north korea is the number one threat. we did not get much movement from the u.s. or the chinese on this issue. china is still calling for talks between the two sides, and the u.s. once china to take a tougher stance. most do not expect a major move on north korea from china because they want stability and no big moves on the domestic or geopolitical front, but the clock is running down on this issue. sayingrth korea watchers it is not long now before the north koreans will have an intercontinental ballistic missile that could reach u.s. shores, so tensions are likely to continue to ratchet up around this issue. ramy: tom mackenzie in beijing with the review. ford wants to make most of its vehicles in china

fully or partly electric by 2025. we will hear from ceo mark fields on the company's big plans. shery: global markets shake off the u.s. strike on syria. k a chief strategist where the focus is this week. this is bloomberg. ♪

ramy: this is "daybreak: asia." i am ramy inocencio in new york. in hong am shery ahn kong. a south korean court set to resume a lawsuit to nullify the with cheilamsung industries. lee has since been arrested on charges of corruption surrounding the deal.

ramy: lost and miss its profit forecast. operating profit probably rose to $660 million, but that is below the figure of 5% projected earlier. it would be

it is in talks to acquire olympia exhibition center from west london for a $400 million.

it is very very busy. >> indeed. thank you. u.s. unemployment hits a mere 10 year low, despite weak jobs growth. this is bloomberg. ♪

>> it is 8:30am in singapore, half an hour away from the opening of trading. >> you are watching daybreak asia. let's get to the first word news. >> united states has denied any plans for a regime change in north korea. the confidence and in several guided missile warheads have been scheduled to sail from singapore to australia but have been diverted north. the strike groups will safeguard u.s. interest in the area. its --is strengthening

in the eastern mediterranean following america's missile strike in syria. this past of dutch house in the weekend heading for the syrian coast. the best part of russia's black sea fleet -- as christmas. the american should that want last week's strikes are heading west out of the area. biggest of indonesia's insurance agency ours -- says the countries are likely to face more loans as lenders pull back. we have notoomberg seen the bottom yet for loans because of commodity volatility and other uncertainties. she said the problem will keep economic growth down over the next two years. homes in hong kong are close to a peak and are unsustainable. says prices have outpaced the city's gdp growth since 2000 and nine, -- 2009. buyers have been

using off the assets as well as leveraging things as collateral. global news 24 hours a day powered mama the 2600 journalists and analysts in more than 120 countries. i'm resolution, this is bloomberg. take a look at the pond and fx markets in asia, looks like it could be more of a risk on than risk off trade with you the details on how markets are opening right now -- are trading here. sophie. like risk on an tokyo city. i want to focus on what is going on. the pre-one fall -- for its fifth straight day. let's look at what is going on in the gainers. if we take a look at the decliners here, we have the likes behind us on the back, dropping .6 points. we have a financials falling. this stock of course has been a focus around the chinese television economically speaking

-- i want to focus on what is -- southwith cnc, korean court resumed its controversial trial. we have samsung electronics that wed a half times more -- have lg display on the rise for a second day. they are reportedly offering to invest about $880 million in the oid line to using that smartphone. take a look at hand a motor up there -- hyundai motor.

kia has announced recalls for as many as 1.2 million u.s. vehicles. both carmakers saying that be replacedneed to as manufacturing air workers are found to cause premature wear and tear to engine bearings. when he gains among korean defense stocks like first tech. 5% --: sharks sliding sharp sliding 5%. last week, jeffries highlighting byt surge has been driven the turnaround since the takeover of management. they are saying optimism is overdone.

ramy: in the u.s., a weaker than expected forecast on job creation has cast doubt on the fed policy. the president of the st. louis fed said it will not stop the fed from reducing its balance sheet this year. let's bring in kathleen hays. talk about the jobs first. jim bullard has doubted the fed rate hike path. nevertheless, let's look at that payroll number. jobs, 98,000, the forecast was 180,000. that is the white line. you can see how it decelerated in march. the yellow line is a three-month moving average. jim bullard said it is still consistent with slow, modern

trend growth. we are not talking about asset sales, or at least i am not and i don't think other committee members have talked in those terms. it is about ending the reinvestment policy, and it would allow a slow runoff of the balance sheet and create policy space for the future if we ever did get into another recession. i think it is a prudent policy at this point. >> other fed officials have made it clear they think it is time for the fed, the economy is strong enough, to reduce their balance sheet. let's look at #7515. it is jumping ahead to the balance sheet, nearly $4.5 trillion. you can see it has done this, rising up, plateauing out. will there bes

volatility when the fed start selling bonds from that portfolio. it is hebullard said thinks the fed should proceed with the policy of just letting the balance sheet reduce naturally. when bonds mature, don't buy more bonds, just let the balance sheet run down gradually, and that way you will overtime get a balance sheet that is about $2 trillion. he thinks that is the appropriate level. it does not in his mind involve an outright sale of bonds. traders assume it will start approach, then lead to outright sales. jim bullard is not see that coming and does not think other s from the fed do either. weaker than expected,

but jobs growth around 100,000 would be consistent with labor force trends, so if you get numbers in that neighborhood, to me, that would be neither good nor bad because it would be just the trend pace of growth in jobs that you would expect in a 2% growth economy. >> again, jim bullard is saying it is a weak jobs report, but not so weak that we cannot take small, gradual steps to reducing a very large balance sheet. shery: does this mean the fed hike rates to-three times a year? ithe said he did not think would have that much impact, and theyf the reasons is that are looking for a gradual move to reduce the balance sheet. he is the guy who said one rate hike would be fine, and if you have to do more, just one. this puts him at odds with the

rest of the fomc. there is a consensus now, that far left a diagram on your tv screen, you can see that 11 out of 14 official c three rate hikes this year. jim bullard will speak in about three hours in melbourne, look maybe elaborate on this, and then janet yellen in monday, talking about public policy and will take questions from the audience and responding on twitter. we will get more of a sense where the fed is heading. it was a great interview. always great to talk to you. thank you so much. kathleen hays joining us from new york. coming up, can sales be sustained. we look at the nuts and bolts of the u.s. auto industry. this is bloomberg.

♪

shery: this is "daybreak: asia." in hong kong. ramy: let's look at the latest business flash headlines. south korea, google has offered a one trillion won investment in screens for its smartphones, the equivalent of $880 million. lg display officials declined to confirm the offer, but google is expected to release a second version of its pixel phone later this year. shares at $15 new than $2 billion from its first time offering. the shanghai-based company is offering one billion shares that

will start trading tuesday. raising funds could help the company recover from last year's 37% profit fall. boeing to deliver to triple seven jets to iran air in the next month. the planes had been destined for .urkish airlines i ran a ordered 15 triple sevens. boeing declined to comment on the iran air reports. ambitions in china as it searches for new growth. it is planning to introduce pickup trucks and make 70% of its vehicles in china fully or partly electric bike 2025. >> when you have two leaders who

meet face-to-face, they become people to each other, and that basis i think and reading from the report from the meetings, that is a firm foundation to go off and make concrete advances to strengthen the ties between the two countries. mutual tiesormous between the two countries from a trade standpoint. we have to tread carefully on that because the economic relationship is the basis of the overall relationship. i am glad to see both leaders meeting early on in their 10 years. es.tenur their perspective, the auto industry is where both countries could make steps. is that something you think is possible now? marketa is an important for u.s. businesses, and tangible reforms and openings

are needed because they think there is how do you make sure you decrease policy uncertainty, whose business confidence, but at the same time create equal opportunities for each nation. on the manufacturing council, and we all share the same objective and what a healthy and vibrant u.s. economy. the opportunities in china in terms of sales, and how much will be reliant on the relaxation of the rules? 2% of the total chinese market is pickup trucks. even with that, it is the fourth largest in the world. what we have seen is the government is thinking about potentially changing some of the restrictions, which we think would grow the customer appeal for pickup trucks, a couple of provinces have done that already, and the research we have done and the initial orders is ave on our new f-150 huge opportunity for us to

continue to build the ward rand and grow business in china. what level of investment is there and what is it mean for reengineering of the supply chain? >> we see an opportunity to grow electrified products and are laying out an electrified plan for our vehicles. that is something we can customers are going to warm towards, but at the same time, you have government regulations that are encouraging the industry to move that way. our is all part of announcement we made last year of investing $4.5 billion 2020en now and the end of two and 13 new electrified products to our vehicles around the globe. >> we have seen softness typically in the sedan segment. what are your forecasts for 2017? are we looking at slowdown overall in the market in the

u.s.? >> we have seen the market plateau at a high level, so our call is for the industry in the u.s. to be 17.7 million units, down slightly from last year, but at a relatively high level. we are seeing more competition from a pricing standpoint, but we are prepared for that with a great product lineup and staying focused on satisfying our customers. >> what is the main drag, interest rates, the secondhand market, the fact that incentives have reached their limit? >> trees can't grow forever, but in a 17-18,000,000 unit industry, that is healthy. you also have interest rates coming up a bit, which may squeeze some customers out of the market on the margins, but i don't view it as a crisis and we will manage carefully. >> given the environment in the u.s., do you envisage adding

production lines in the next 12-24 months in addition to the ones announced? >> our approach is the company is to make sure we are disciplined and match production to demand, and we will continue to do that, and the investments are investing in next-generation products to satisfy demand, but we will be very disciplined at a time when the industry is leveling off. tom mackenzie with ford ceo mark fields. let's talk more about the auto ihstor in china with automotive from shanghai. thank you for talking to us this morning. let's discuss china. authority still requiring foreign companies to set up joint ventures in order to make vehicles in china as well as these tariffs on imported cars. when can we expect some sort of reform on this front. there are pros and cons to

the joint picture -- venture structure. the pros are it gives access to global automakers, u.s. ones for example, to the world's largest auto market, which by the way is nearly 50% larger and the u.s. market. on the other hand, a couple of things, it is a restrictive structure. it limits ownership to less than 50% in most cases. it also limits control, and perhaps the priorities of the joint venture partner and the global automaker made to verge at certain points. fxry: when can we see the

from massive subsidies given to them by authorities? >> the subsidies are a good point. i'm glad you mentioned that. the subsidies on electric vehicles are really driving that electric vehicle market in china. 500ese consumers bought thousand electric vehicles last year. if there weren't any subsidies, that number would be far lower, so the next tesla in china will be largely driven by regulation, which is different from most of the markets, so keep an i on this regulations. if the regulators were to back off on them, we could see declines in the electric vehicle market, and perhaps declines in the fortunes of these chinese electric vehicle makers. ramy: what are the brands that are at the forefront of trying to be the chinese tesla there? is ae of the biggest ones

company with great funding. it has really demonstrated some early signs of good engineering, so that i would keep an eye on. these subsidies are two to run very- are due to run out soon, so these ev automakers would need to ramp up production quickly and take it vantage of those subsidies and demonstrate to the consumer they have a competitive electric vehicle, then let the market forces grow from there on. more hurtling towards production like elon musk is trying to do. therems of the consumer, is a difference between the u.s. and china. theave been talking about fact that it is suvs and pickup trucks keeping these companies in profit mode, so what is the

opportunity in china? >> the opportunity has also been with suv's in china, but of a different type. the lower-cost suv segment, which is dominated by chinese , andakers, is on fire here a big driver of profitability. last year, the top three selling suvs in china were with chinese automakers, which might be a surprise to many people come up because they would think that perhaps american brands are known as truck brands, but in china, those are chinese. ramy: when you think of that, you think of the big carmakers, the big three, but giving them a proverbial run for their money. thanks very much. really interesting stuff. you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. to bloomberg subscribers, go

dayb . you can also customize your setting so you only get news on assets you care about. this is bloomberg. ♪

shery: this is "daybreak: asia." i am shery ahn in hong kong. bank earnings and market

direction will be a focus in the week ahead on wall street. su keenan is here with the outlook. ratesto loans, interest -- we look at how the market close, a lot of that had to do with the syrian situation, and that will be weighing on this week. if we look at the big movers in the week ahead, citigroup, j.p. morgan, wells fargo. citigroup will kickoff first-quarter earnings for banks reporting later in the week. the dollar also in focus. #5996, pivot point anyone? isot of traders say there consolidation in the dollar-yen and has a 110-112 handle. similar to the yen with all the world if ends going on and that will continue to be in focus. shery: the mix to jobs report on

friday, what economic data will be key this week? su: we will be getting consumer confidence numbers and the latest on retail sales. retail sales in the u.s. are expected to have risen mildly in march. consumer prices on the other hand expected to be little changed. those are two key reports. consumer confidence will also be out. in new york, the international auto show, a razzle-dazzle event with some of the snazzy, flashes into cars and innovations and electric cars, but it comes on the heels of a disappointing sales report, and that raises the profile of thanks writing off bad auto loans. banks as we go into the earnings, this issue, how bad are these auto loans? is the rising levels of the full

a for the banks and auto industry? these are questions we will may be answers to this week. shery: thank you so much for joining us. that is it for us. bloomberg markets with david ingles is next. a mixed picture, but risk off sentiment when it columns to markets in early asian trading. ramy: we are in the final countdown to open in hong kong and china. have a great morning. this is bloomberg. ♪

♪ 9:00 a.m. in hong kong, 9:00 p.m. in new york. i am peter elstrom . am david ingles this is "bloomberg markets: asia." ♪ japan leaving markets higher, the asia-pacific is the first region to react to the weak u.s. payroll number. but the have plateaued, bank has hit is goals, so says james bullard. pre