♪ seeingasian markets are declines in new york, dropping the most in nine months. >> ibm is a big loser in trading. it missed estimates for a 20th straight order. betty: the pound is surging, theresa may calling a snap election to the surprise of many. she wants a new mandate going into brexit. >> the auto world is in shanghai. a rule on foreigners. we hear from a volkswagen, bmw,

and daimler. we have world coverage on daybreak asia. we are live across asia and the u.s. to look at the u.k.'s snap election in the latest growth report. betty: and here in new york to break down the latest on the banking. tech earnings in year. this is daybreak asia live from a bloomberg's asian and u.s. headquarters. i am betty liu in new york, it is after 7:00 p.m. yvonne: it is after 7:00 a.m. here in hong kong, i am yvonne man. -- imf raising their forecast, it is a different tone. betty: markets are actually down. was micro-news, so to speak that dragged stocks lower. that focused on the banking sector. in particular, goldman sachs leading financials lower. we will dig into that in a few moments.

yvonne: a surprising miss. again, that snap election we are preparing for in the u.k. on june 8. we will see if the pound can continue to rally, holding at 128 against the dollar. new zealand trading so far, seeing pressure in stocks. wall street down 4/10 of 1%. .44.kiwi holding to 70 the key thing to watch is this industrial route. another leg down. futures are also heading lower after a tough day on the asx 200. 1% for the aussie dollar. we are holding on to the strength we saw overnight. are below, back below that 200 day moving average. they could be a rough day for

stocks today in tokyo. that is an early look at what to expect in this region. let's recap what happened on wall street. betty: we mentioned declines. we did not erase all the gains we saw yesterday, but we need headway today. we had financial firms, goldman sachs, health care, energy with oil down, gold was up. going into the close, not a major decline. but it shows no momentum from yesterday's rise, which was the best day for bold since march 1. united airlines reported its conference call had earnings yesterday. it will not fire anyone over the debacle dragging someone off the plane. they drill the ceo about plans to boost capacity. yahoo! showed progress after hours at a -- as a standalone

company. did not move stocks, but topped estimates over -- after hours. ibm revenue falling short. the 20th straight quarterly decline, the stock was down as much as 4% after hours. ramy inocencio will have more on that. let's go into the bloomberg. it geopolitical concerns continue to hang over the market. many strategist talked about the volatility not as bad as 2015, but nearing the high of the year. we will have to see significant gains in the market to offset the recent declines and concerns. betty: let's dig deeper into the earnings side of things. of two tael -- tale banks. >> goldman was a rare stumble in banking, you can see they are

down 11%. more than half of that happened today. they ended the day down 5%, but they were down more than that at the low point. why? they reported first-quarter results, weaker interest from clients and commodities and currencies and client activity was challenged. $2.26on the big numbers, billion, on revenue, those numbers bigger than last year. they missed estimates. the 2.4% decline from a year ago and the all-important trading was a big surprise. it not only missed estimates, but trailed their peers. terms of bank of america, they exceeded estimates from early in the day, income was up 40%. bank of america stock was higher. goldman and bank of america are

cashing in on leverage loan demand like nobody's business. all the rivals have reported strength in underwriting revenues. a lot of this has to do with the pace of rate hikes. companies are trying to reprice and issue loans to get higher yields. -- wallyst said if street is doing everything it can to supply it. that is an area of strength for goldman and every other bank. betty: thank you so much. let's get the first word news. >> the u.s. vice president is pressing allies in asia for better terms while affirming washington's military support. mike pence is in tokyo stressing the need for quick results in a new economic dialogue prompted by president trump and prime minister shinzo abe. he told business leaders and seoul that america's trade relationship with south korea's falling short.

arrested in london, he will face extradition back to india. he surrendered his indian passport at an initial hearing and was released on bail of $800,000. he will return to court on may 17. he willfully defaulted on $1.4 billion of debt at his defunct airline. the pound surges u.k. prime minister theresa may called an early election to win backing for brexit. opinion polls gave her conservative party a 21 point lead ahead of the june 8 vote. may says she acted because the schedule next election in 2020 posted threat from the country's withdrawal from the european union. >> since the referendum we have seen consumer confidence remain high. record numbers of jobs, and economic growth has exceeded all expectations.

we have also delivered on the mandates which we were handed by the referendum result. britain is leaving the european union under the canopy, no turning back. >> global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mean a melendez, this is bloomberg. let's get more on the potential economics of that snap u.k. election. do see the pound holding onto those gains at 1.28? it is a pretty big gamble for theresa may. >> the analysts that have commented on it say she is doing the logical thing. citigroup today should put out a report that today what she did made total sense. traders who are betting on thinking seem to be

she will consolidate her position. thathinking seems to be public opinion polls show the 21 pointives have a advantage, considerably better than her position in parliament right now. if fast days, you should see stronger support for theresa may in the parliament. be helpful as she enters these very difficult negotiations with the you -- the e.u. and potentially other parties, as well. there is quite a bit of positivity behind it, the markets like it. we will see. you had that clip from great britain, that is absolutely correct. saying, the may was economy has done better than

expected. when brexit was voted on initially, there were concerns -- could we end up in a recession? could we have a serious downturn? betty: it is true, right? the pound has made up some of its losses considerably. but it was not a doomsday scenario yet that we thought we would see with brexit. i want to move to the fed, kansas city pushed a plan to shrink the balance sheet. tell us more about what you made of her comments. >> esther george is probably the hawkish fed -- official right now. she is the most in favor of higher interest rates. to fact that she wants shrink the balance sheet is not a surprise. but it was an interesting

proposal she put forth. there has been a lot of talk. what she specifically said is, put it on autopilot. let's do a smooth, gradual reduction in the balance sheet, which is $4.5 trillion, enlarged through three rounds of quantitative easing. she said reduce it in a mechanical way so it happens automatically. fmocat that fmo see -- does not decide on it, it happens naturally. we'll see if that gains enthusiasm from her policymaker colleagues. betty: it will be interesting to see that. before we go, i know we will be talking more about the imf report. but what did you make of it, how accurate do you think their forecast is? interesting, they raised their growth forecast for the first time since 2014.

they had not been particularly accurate. in their defense, most economists have not got it right about u.s. or the global forecast over the last 10 years, they have been way too optimistic. noteworthy,this is the fact that they are raising as opposed to lowering them suggest we are at a changing point. it is a note of optimism that they have not had recently on global growth. steve matthews, we will have more with you in the next hour. plenty more to come. you are watching daybreak asia. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. betty: i am betty liu in new york area a 4.2% rise in

quarterly profits, they expanded to internet-based services. it rose to $8 billion through march, fractionally below estimates. they're the biggest player in india's $110 billion tech outsourcing industry. they face lower demand from consumers with uncertain economic conditions. losing two directors this week, leaving them without a for them. a record 85% in just one day, like thing about $4 million from market value. it is still uncontacted bowl. hired someone to analyze their position. the stock remains suspended. noble group is pushing back with new guidelines on executive pay, saying closing salaries were fit at a disadvantage.

noble has faced bad years, with asset sales. founder is preparing to quit coming he says many of his competitors are private and do not publish compensation details. let's get back to one of our top stories, the imf has raised its global growth forecast. could the rise of protectionism undermine the optimism? 3.5%, up from 3.4% in their january outlook. boy andeled by financial markets and financial markets in a cyclical recovery in manufacturing. growth remains subdued and the risk of trade warfare is high. >> it is hard not to be excited by being able to upgrade. 3.1 to 3.5,icant, as you said. whether that momentum will be maintained depends on a number

of things, policies going areard, other risks that out there. some are political in summer economic. yvonne: the imf raised its growth out look for china to 6.6%. and 6.2% in 2018. but our guest says that report does not go deep enough. he joins us now live from washington. great to have you. what do you think the imf report is missing? >> one thing the imf does, it takes statistics at face value. if you look at the statistic china put out, they say gdp growth is faster. but the measurement of prices is inconsistent. the producer prices and gdp deflator are high, the 7% range. consumer prices and income deflator are in the 1% to 2% range. you have a choice in the chinese case, gdp growth is this fast, which is what the imf did.

but you could decide inflation is too high and personal incomes are not growing. it that gives you a different set of problems than the imf looked at. yvonne: those are the indicators that are interesting to look at. i have a chart which shows the index versus gdp. official numbers were at 6.9%. the indexchong -- shows electricity consumption. that has been even more robust. we see nominal growth has surged. does this actually help, this lingering issue of excess leverage, does it look a little more manageable now? >> this is a time of rapid industrial growth, surprisingly down leveragepay that we are getting restraining monetary policy unless borrowing, then it would be progress. china would be easing is leverage of -- problems.

it is going into industries that , butrofitable like steel no one expects him to be profitable in the future because there were so much overcapacity. it looks like china has bought a period of high growth, but is not addressing medium-term problems. yvonne: is that first-quarter performance the peak for the year? you see car sales have declined for the first corner, -- quarter, ppi losing momentum. is this the best we can get for gdp for china? >> i do not think it will go higher than this. it may stay for the second quarter. it is a perfectly good year for gdp. 2015 andbetter than 2017 will be better than 2016.

the other problems we see in china but investors worry about will be sharper as the year goes on. they are not using this time to fix underlying questions of leveraging and overcapacity. betty: i want to jump in here to back up, we were talking about the leverage in the economy. i want to pull up this chart. this is in one of our bloomberg stories come a came up friday after the gdp numbers show the off-balance-sheet financing is now picking up. it is not as high as it was at the beginning of the year, but it is aching back up. in the month of march it was up to 109 billion u.s. dollars. but 154 billion yuan. where do you see the leverage happening? the chinese government is trying to rein this in. who is taking part in this

shadow banking industry? >> probably the banks pushing stuff off their balance sheet. we say off-balance activity like but they the banks' , are moving stuff away into other sorts of vehicles. there is a big question or difference between tightening and deleveraging. we have talked about how the people's bank is slowly raising interest rates and growth in money supply is slower. really fast, and interest rates are still low, in terms of what companies have to pay. we have gotten a little tightening, but not deleveraging. with all that money, china has the largest supply in the world, it will go somewhere. whether it is bank books or other financials. it pushing these problems, kicking the can down the road? we have talked about situations in europe, in greece.

this year is politically sensitive, are we kicking these problems into 2018? >> yes, that is exactly what we are doing. i am not saying in 2018 there will be an acute crisis. but it is contracting the steel industry. it grew in the first quarter, but we will push that off. what investors are worried about will start to occur after the party congress a year from now. it will not happen all of a setting, but that is when the pain will ramp up again. betty: will there ever be an acute crisis? we're talking about china here. >> it is not a commercial financial system. when i talk about too much money supply, it is true. you talk about excess off lending, these are not banks that will go out of business. they are not commercial banks.

i am not talking about a crisis in 2018, i'm talking about more stagnation, companies defaulting on bonds. the kind of thing that worries investors, but does not panic them. yvonne: what will be the proper's description -- proper prescription? after 2018 what could we see from the central bank? getting market reform with the incoming government, it will still be led by xi jinping, but have some new faces. i think the people's bank best move is to because this in its tightening. that reform itself will cause improvements in productivity but cause job losses and some companies to fail. if you do not get pro-market reform, the people's bank is the theyresponsible party and have to do leverage. otherwise china is looking at a long period of stagnation, like

japan, when they did not get bad assets off their books. you do not have to change monetary policy that more -- that much because it will do that naturally. great to have you, chief economist. we will have more with him after the short break. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. betty: i am betty liu here in new york. you're looking at a chart you want to show our viewers about the bond market. it is interesting, we have been talking about where this reflation trade is going. you can see it through the 10

year breaking out of this range. it seems like it is still a market for the bond bulls. you are seeing the 10 year yield 2.1682. that is that moving average. it may suggest we see more of a drop, whether we see the dollar continue to drop, it has not run its course, that is the big thing to watch. betty: it is interesting and raises the question about whether the fed is behind the curve, does not seem that way, judging from the bond market. themselves, giving all that said the speak, they seem to be looking for that reflation or inflationary had to rear themselves. the bond markets and the feds are saying two different things. we might hear janet yellen talk down the prospect of rate hikes. yvonne: that is true.

we did see that first-quarter gdp inflation also as a big miss. we will have to watch that. yvonne: 7:30 a.m. here in hong

kong. a hint of spring or summer humidity coming in during asia's first major market open. betty: it is 7:30 p.m. tuesday here in new york. also a beautiful spring, a little chilly, though here in new york. a little nikkei for the bulls and the stock market. it was down 3/10 of 1%. i am betty liu in new york. yvonne: i am yvonne man in hong kong, you're watching daybreak asia. the imf has raised its global growth forecast.

the rise of protectionism could undermine that optimism. they see the expansion of 3.5%. that is fueled by a bouyant financial market. growth remains subdued and the risk of trade warfare is high. $1 ceo of prudential's trillion asset manager says investors should be looking for opportunities outside the united states. --id hunt told markets bloomberg markets have been overly optimistic about trumps promises on regulation and taxes. he said india and that you provide more optimism -- and e.u. provide more optimism. >> the markets have gotten ahead of themselves. these changes will be very difficult to carry out. it will be extremely hard to jumpstart the u.s. economy to the kinds of growth rates the administration was talking about. fourshiba is online

potential spinoffs in social infrastructure, non-memory chips, and information technology. toshiba'sinvest in flash memory chip business. the government did not want to get the technology abroad. sharp is owned by taiwan precision. united airlines said no one will be fired over the dragging of a passenger from a plane in chicago. oscar munoz said it was a failure across many issues, so no individual is being targeted. united also said it is to targeted to know if there are problems with booking. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: we are counting down to some of the major markets open

in asian pacific. adam hage is joining us live from sydney. what you looking for in asia? >> good morning. eyes on theall pound. holding relatively well on the sharp news that an election will be coming in june. we need to get through that parliamentary vote in wednesday on london to determine whether that will go ahead, that is a procession and we will roll through and get that. holding up relatively well. the yen dollar remaining relatively strong after the strength we saw, still down below the dollar levels. if we look at that from an equities perspective in japan when the market gets underway, that will weigh further on japanese stocks. across the region we are

suffering from a weaker sentiment than we have seen in the u.s. it was not just those weaker thosen numbers, bellwethers have been tricky. there is political uncertainty, that continues with of the u.k. election coming up alongside the french presidential election. that starts this weekend. attention on the korean peninsula remains at the forefront of investors' minds. a week sessions for equities across the region today. when china opens in a couple hours' time, we will watch that shanghai composite, which was breached yesterday. we seem negative momentum stepping up. the market there is largely individual investors, they are more sentiment-driven.

it does tend to move on sentiment a lot more. on that one an eye when trading gets underway in a couple hours. betty: lots of things to watch as they are opening up. u.s. stocks dropping tuesday, driven down in part by these banking stocks, led by the gold standard, goldman sachs. goldman's stunning loss in bond trading revenue. laura keller has some more details on what happened here for goldman in the first quarter. >> as you said, stunning investors. it was like you had fixed income, you chopped up currencies and commodities, maybe kept fixed incomes. mortgages and consumer rates were ok. analysts are trying to figure out how this went so badly. goldman normally does well in

bond trading and did not do well. activity was down, we did not see a lot of change this quarter, volatility was unhelpful. bank of america reporting hours earlier they had a great week, 20% up. jpmorgan had a great quarter, citi, as well. betty: is it a fluke? >> it could be. a lot of people are trying to figure out, triangulating if it was certain clients. betty: but no answers yet. laura: no answers. comment, you cannot dress this with lipstick. betty: it is what it is, right? a director of research is joining us, where he manages more than $2 billion with a heavy focus on banks.

know you are invested in some of these banking shares like jpmorgan and wells fargo, as well as bank of america. what about goldman sachs? give me your take on this. the three that you just mentioned, we do not own goldman sachs to read we want to own the banks that are in front of the way that we think will be durational in terms of mortgage lending activities and loans made over the next 3, 5, 7 years. betty: looking at what happened with goldman, do you think it has any implications at all for jpmorgan? we are in an environment where there has been a flattening of the yield curve. everyone is looking to see what the 10 year will do. we think that is a one data point thing and it does not make a trend. case, there has

been volatility around the fixed income trading. but we have not done a mile deep look. we think the environment for financials will be strong going forward. betty: why is that? i want to pull up this chart that shows while you are buying, and looks like investors over the past few days, with the haveng season underway, been bailing out of some of the financials. financials.eps on over the past several sessions, months, they have been taking profits on their gains and financials. you are buying why some of these are selling -- while some of they are selling, why is that? tony: we have owned them for some time, they have benefited from the trump bump. they are still very cheap names when you look at the prices in the book and where they are on a

price to earnings basis. they are nowhere near their full earning potential where we think they will be. they peaked in terms of net income margins and efficiency ratios. they started what it can look environmentughish for them. they are nowhere near their full stride, and our opinion. interesting, even after the more impressive earnings we saw from jpmorgan, the stocks still sell. taking a look at the reflation trade fading, there is pressure coming onto the stocks as well. that slater yield curve, breakevens are breaking down. it will be hard for banks of this low rate environment continues. the trump administration has yet to deliver on its fiscal spending plans. if we do not get tax cuts are deregulation, how much more

downside could we see for these financials? tony: if this is the flat part of the yield curve, if this is what hard looks like for banks, we would say, bring it on. we want to see a lot more of that. it was a great number that bank of america put up. they are just getting going in terms of where they will be when the economy takes off. laura: just one thing on that, if we could stick for that a moment. we did see the guidance for $150 million, that could increase. did you think that was lower than what you would be looking for in the second quarter? tony: it beat expectations. no, we thought they would deliver a solid quarter, and they did. they did it broadly across the board. they have settled $77 billion in regulatory fines, their balance sheet has been clean, purged through the last eight years.

they have shed a lot of non-core assets. the ship is ready to sail meca doing well. we are doing that in a fairly low growth environment. we think the wind will be at our backs as the demographics would suggest, a lot more risk-taking activity domestically in the u.s., in our opinion. yvonne: what about expenses? we have seen banks try to rein in costs. are they still able to generate that kind of revenue we were able to see in the first quarter? is the beginning of a trend? tony: let's start with bank of america, they have the most room to increase and improve their efficiency ratios. a is easier when you have better a economy under your feet to manage those expenses. but we still think they can manage it.

jpmorgan is doing well in that regard. at least that is what we saw in the last quarter. i am loving charts here, let me bring up another to show our audience. you may not be able to see it where you are in the studio. andhows a leveraged loans the sales of banks and aggregates and how they are hitting a new quarterly record. these banks are hunting for yields. on the one hand it could be great for business, on the other, is that a red flag? a yellow flag at this point? tony: is this a high-yield chart? i cannot see the chart you are referring to. betty: it is, a corporate high-yield chart. get, we will continue to having gone too much into the energy complex? student loans have come up and been less important lately, and

auto loans, as well. these are big, multifaceted organizations that have their fingers in a lot of different pots. on average, the credit quality was strong and their net interest market -- margins looks good. laura: we have not had a chance to ask you about wells fargo yet, but you have been involved for a number of years. we have the shareholder meeting april 25, next tuesday. what are you expecting? advisersa proxy vote, and recommended most of the board members should be voted out. how will you be voting and what do you think will come out of the meeting? wells fargo has a brand we still think has a lot of value, is still very durational in its attractiveness to consumers, still has a massive depository base. we think it will survive and thrive. there is a reason it continues

to be a few turns higher in its valuation multiples than other banks. it has a higher return on equity still and assets, as well. it continues to be well-managed threat a difficult time in the company's history. they have been through difficult times before, we think they will continue to do well over time. laura: in terms of directors, will the 12 board numbers still remain? the 12 that were recommended to leave? tony: i would expect to see a few turned over, that is a guess. they have done a pretty good job managing through this period of time with new people already. surprised if a few directors that changed out, as well. yvonne: tony, thank you. i also want to meant -- thank laura. we turn our attention to the

shanghai auto show and hear from big global players. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. betty: i am betty lou in new york. a quick check of business flash headlines. malaysia airlines is the first carrier to sign up for space-based tracking of aircrafts. satellites will be able to monitor planes anywhere in the world, including over the poles. it is not clear if the new system would have made a difference with the previous transponder that went dead, the airline would not have been visible to the satellite network. yvonne: the volkswagen group b estimate models on costs. billion --$4.7 higher than a year ago.

it was driven by robust earnings that vw, which surged 12 the full to over $1 billion. at the shanghai auto show, china remember -- remains a key market. betty: u.k. workers take their than strike action in more two decades when worries mount about the fallout from brexit on the auto sector. staff at three plants will stage of the first of 81-day walkout. hinted they may shift production of the many -- mini to mainland europe. and we will talk to the bmw 10 minutes past 11:00, hong kong time. the ceoalso hear from of maserati and alfa romeo, the

stay tuned for that. german car giant daimler has unveiled three revamped mercedes models of the shanghai auto show, evidence it solidified its place at the top of china's premium market. tom mackenzie asked the ceo about his outlook for 2017. we keep moving, we do not give specific forecast on numbers. obviously we are very glad to have published as number one in china. it seems to be totally possible two years ago. we will see where we end up this year. it is nice to be there, we will see how it will develop. >> you are investing heavily in the electric vehicle business as well. what will you be focused on? modelcedes, we have a

already fully electrical. but mercedes is the main brand we are going for. we will continue to sell another brand of hours. -- ours. we will have more fully electric vehicles which will roll out in the next four or five years. in terms of the regulatory environment in china, there is talk about possible changes to the structure, possible reductions in tariffs on cars imported into china. do you see a likelihood of the structure being reassessed by the chinese in the near to medium term? >> they are happy with our partnership. perhaps there will be a different percentage. we see the markets liberating continuously, and therefore

business has a realistic perspective. >> there are concerns about the political risks. you have the french, german, and it u.k. elections. what concerns are those for you on a dragon potential growth? >> we have seen a number of political events in the years, which were not expected by us. it has created some concern that so far. in the world economy, it is continuing to thrive. even the forecasts have improved somewhat. of course we hope it will continue that way. we work to increase the flexibility in our country to react to unforeseen developments. sanguine?remain sn -- news, thisaking yield falling to zero.

this is the first time since november 16. it has been a couple months where we have seen above the target the boj wanted it. so stubborn following the reflation trade. atty: the u.s. 10 year yield 2.16%. it is beyond their control. made the job much harder for the boj, given the relentless fall we are seeing in yields, how quickly that reflation trade has evaporated. as you mentioned, you have this great chart earlier showing how the 10 year yield is dropping. whoever said the treasury bond over,, the bull market is spoke too soon. here are the charts where we have seen yields, we saw a spike earlier last summer now coming down.

as we mentioned, back down to zero here. yvonne: this is still a bit dated, it is hitting the zero mark. we are still waiting for updates. but it is something to watch when it comes to that 10 year yield. more to come, a busy day for earnings in the u.s.. we will talk about that. this is bloomberg. ♪

companies, with good earnings. it has been tough for ibm. superlative out there now after the latest miss for its revenue, 20 quarters down in a row in terms of its loss in terms of revenue. let's look at what has been happening in terms of revenue as well as earnings per share.

billion, $200 million less than the estimate of $18.4 billion. they did beat on eps, but only by a few cents. hop into the bloomberg, you can see the share price in after-hours trading. we are now at session lows for after-hours. 5.4%. coming to the bloomberg terminal foryou can see 5.4% down ibm in after-hours trading. i also want to show you what has been happening. this is another function called the financial analysis function. the reason for this is the reliance on legacy hardware and software has been falling, $6.5 billion in 2016. in 2011 that was $18 billion. the cloud is coming in at $3.5 billion, up by $1.5 billion.

it is just not enough here. let's go through the analyst recommended function. sells are at their highest in the buys are at their lowest. ibm needs to shift to the new stuff, the cloud, and ai, faster. betty: what about yahoo!? ramy: yahoo! is rising in after-hours trading. they are flat right now. what we are seeing, the main ,hing we are talking about revenue and profit came in, million.stimates, $832 18 cents er share, versus an estimate of 14 cents.

marissa mayer is trying to go out with a bang. much: thank you so

♪ yvonne: asia-pacific markets the declines in york. goldman sachs fell the most in nine-month. however, imf seeing an uptick in the economy, warning protectionism could undermine the optimism. yvonne: a hawkers message -- hawkish message from the fed.

london, and april call for a june election. the pound surging in response. yvonne: this is the second hour of "daybreak: asia" coming to asianve from bloomberg's and american headquarters. it is just after 8:00 a.m. in hong kong. just after 8:00 in new york. we were just tightened but the surprise snap elections called by theresa may. before we get to the asian markets, i want to make a nod to ar european brethren and show pound chart here, which we do not often show. it has now given above the 200 take moving average and has gained back on some of the losses after frexit. of the 3% on the pound. all of the doomsday scenario has

played out. that has affected the markets. theresa may consolidating her power ahead of brexitry rough negotiations ahead. a long way to go until june 8. we will see where the pound goes. of course, we have also been watching the yield falling to zero. sophie: let's kick off with that. we have seen the jgb 10 year yield drifting towards the target of 10%. it looks like the macro picture first is the boj's attempts really pushing the yields down. this comes ahead of, of course -- the course but they may reevaluate the inflation target down. assessed it down.

top of mind for markets, of course, a jump in the pound as well. disappointing earnings on wall street. we are seeing asian markets track that sentiment here with havens in place so that stronger down in tokyo, the nikkei one third of a percent. exporters will be down today as well, given what vice president mike pence said about agreeing with trump. i fallingave the kosb here. we have factory gate prices falling 2.4% in march. aussie shares down one third of a percent. it is still above the 5800 level. a key psychological level that we have been watching whether there will be downward pressure

to take it below that mark. that is very much linked to the commodities space. iron ore has lost 8% since the start of the week. futures in china extending losses. as betty points outcome of the pound very much in focus today. it is holding on to its gains ahead of the announcement of a snap election in june. check out how it spring against the yen. the pound yen trading into a .igher range since the june vote lester, we have seen an unwinding of positions. we see immediate reaction to the snap election news. the strong sterling demand has abandoned, jewish, among them. betty: thank you so much.

let's get to first word news with paul allen. the u.s. vice president pressing allies in asia for better trade terms while also affirming washington's military support. mike pence is in tokyo stressing new results. earlier he told business leaders in seoul that the trade relationship with south korea is falling short. mallya of rested. he surrendered his indian passport at an initial hearing and was released on bail of $800,000. he will return to court on may 17. india accuses him of will faintly defaulting on 1.4 billion dollars of debt at his defunct airline. the pound surged as theresa may called an early election for

backing of brexit. it gives her party at 21 point lead ahead of the vote on june 8. may says she acted because the scheduled next election in 2020 posed a threat to the country's withdrawal from the european union. >> since the referendum, we have seen consumer confidence remained high, record numbers of jobs, and economic growth that has exceeded all expectations. we have also delivered on the .andate that we were handed turning back.o paul: global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. this is bloomberg. as you mentioned earlier, the international monetary fund to threets outlook

point 5% this year following a postelection surge in confidence, prospects, and emerging markets. tony is now to break it all down in steve matthews. steve, where you puzzled at all by the upgrade from the imf? wasn't.o, i really if you look at the economic data over the last several months, you have had some positive data internationally. weak.s. has been notably in the first quarter. if you look at what is happening europe, and in the u.s., when you look at the so-called soft data, the confidence figures, consumer confidence, business confidence, there are lots of reasons you of great to update -- the data. that is exactly what we saw. wascan see the imf

predicting -- we had a recession 2007-2009 globally. there was an expectation that we would have a sharp snap back. that did not happen. you recall, we have had 2% growth ever since then. we have had fairly sluggish growth code locally. there have been a series of reasons why the imf has been optimistic, and therefore, private. forecasters have been optimistic. you have had one disappointment after another. you remember greece and the european debt prices. commodity prices collapsed. that affected a lot of emerging markets and the oil dependent markets. you had brexit. that caused a softening their as well as throughout europe. one kind of bad thing after another. the imf last updated the

forecast in 2014 for a quarter. now, there is a sense that maybe things have turned. christine lagarde said today that maybe the economy has a spring in its step, which is kind of lofty language, upbeat language. you really have not been hearing much of the language from policymakers the last few years. maybe it is a turning point. maybe it is not. we will certainly find out. there is some good signs there. you mentioned there is lots of concern about protectionism. blame protectionism or trade barriers. we have had brexit. concern about that. concern about what is happening with donald trump, although maybe they will bring fiscal

stimulus. there is also concerned that trade barriers could slow the economy. there are deathly risks -- out there.risks now the imf is maybe conceding we are better than we thought. i want to move onto the fed though. saying it is time to start shrinking the balance sheet. we heard that from kansas city's esther george overnight. steve: that is right. esther george is an interesting figure because she is a far backing regulator, somewhat influential because of that role. fedas well as the boston president, who has also been one of the more hawkish leaders. you see the hawks coming forward saying we need to be shrinking

the balance sheet. the balance sheet, as you recall, was released to 4.5 trillion dollars through three rounds of quantitative easing. asset purchases now are going through the process of how do we unwind that. saying we haver to do that automatically. we set up a plan and we do not review it. we do not go to each meeting in review what will happen. it will be interesting to see if that strategy gains support. she was interesting and very of front with mike mckee, who did an interview today, saying, you know, the outlook in the first quarter is not all that great in the u.s., but we have to look through that. yvonne: right. they have called noise for the

first quarter. thank you. still ahead, china facing car trouble. how automakers are dealing with the slowdown in sales momentum. we'll go live to the auto show later on. betty: up next, we just mentioned the imf and the upbeat global forecast. the next guest things that reflation is key for asia. that will be straight ahead. this is bloomberg. ♪

yvonne: this is "daybreak: asia." i am yvonne man in hong kong. tata consultancy reporting of rise in profit. that income rose to $1 billion in the three months mark. fractionally below estimates. tcs is the biggest player in

india's 110 tech outsourcing industry and is facing lower demand from customers facing uncertain economic conditions. yvonne: embattled china wishing ishan debris leaving the board with no quorum. the treasurer disappeared and is still not contactable. deloitte advisory of hong kong financial the decision. betty: noble group pushing back on new guidelines for executive pay saying that salaries would put it at a disadvantage. founder richard element prepared to quit. publish details. u.k.e: shocking news of

elections. riska look at the global aversion index there. creeping up higher in white. take a look at the blue line there. see the emerging markets index quiet resilient. if we see the index fall we are seeing an increased appetite for risk. quiet resilient. if we see the index fall we are -- what do you think of the charge ipo -- of the chart? is the reflation trade their? >> bond yields is something we have to watch closely. momentum is probably slowing. you contrast that with what was going on in asia and emerging

markets in general. we have strong economic recovery coming through, particularly around china. you see higher inflation and higher growth. we have good fundamentals in asia. if the u.s. bond yields is an indicator for future growth and maybe things will be a little softer. yvonne: it is interesting. it makes sense if you are buying into all of this growth story. i know you are overweight in india, china right now. of theseabout three markets. at elevated levels. is it time to at least take a breather there as we watch where guilds go on the bond market? what will be the ultimate driver of these rallies chuckle >> into has done very well short

term. some of the liquidity is coming to the equity market. there is also an exit tatian that growth is bottoming out there. i would not be surprised to see a positive relatively strong performance that we have seen in india whereas in north asia, we still have a robust economic recovery coming through. our survey some opportunities in north asia as well at the moment. betty: i'm curious. we did mention what is happening jgb at the moment in the market and a yields falling back down below zero. when you see this headline, it was almost inevitable, watching where yields have been headed. what do you make of that? >> you have to see where we have come from. obviously, six months ago or nine-month ago, at the bottom of the inflation story, yields are much lower than where they were today. we are giving of the gains we have seen across yields and

credit markets. i think the market is now waiting to see if the growth globally is sustainable in the coming months. one of the premises, which we have to remember in the coming years is actually an extension of fiscal policy and markets. it is still the early phase of the process. to ank we are moving expenditure fiscal policy to create jobs and growth. that is longtailed in nature. betty: if you get that right, you can certainly profit from that. andrew, one area or industry, i guess, you say is overlooked might be the chinese banks. you say they are undervalued. what is going on there? what makes you bullish on chinese banks? >> i think i have been foolish -- bullish for a very long time, particularly for the economic

recovery coming through. a lot of focus is on real gdp in china. what drives revenues is actual nominal gdp. you see a germanic change in the nominal trajectory over the last 18 months in china. it is very bad for corporate profitability and therefore think credit. now we are seeing a strong acceleration. what we're seeing is corporate profitability improving quickly. asset quality is actually improving when most people that it would be deteriorating. we do have cheap securities and fundamentals. thene: how do you see geopolitical risk at the moment? it seems like the risk has faded somewhat now but it certainly has not gone away. >> geopolitical risk is something we do with every day. i think we have been living through risks in this

environment. that is why markets are cheap first is history to reflect these risks. if something were to become more automatic, it would be negative. volatility has been low. hopefully at some point we see higher volatility. generally the fundamentals are very strong. investors are underway in the region. the outlook remains positive. see comee continue to in terms of currency markets, the dollar, hard to be able -- a bull these days. where do see the dollar going at this point? >> there are obviously mixed views around the dollar. i am of the view that the dollar will be fairly flat going forward and that will be good for emerging markets in asia. there is strong and consistent

riskterm history and for assets. if you do see extension in the coming years and higher rates on the back of that, i expect a weaker u.s. dollar, not a stronger one. yvonne: great to have you. coming up, goldman sachs shares take a stumble. worse than expected on trading revenue, the details next. this is bloomberg. ♪

yvonne: this is "daybreak: asia." i am yvonne man in hong kong. betty: i'm betty liu in new york. let's look at the tale of two banks. sachs, financials lower. >> really stunning the street.

a stumble right out-of-the-box. really a surprise for one of the big boys. we take a look at the stock to date. you see the 11% decline here to date. about 5% of it in the tuesday session alone. a lot of the numbers better than last year, but they certainly did not come close to estimates. the trading revenue for the bond division certainly a decline. it trailed that of the rivals. that was the stunner. what did the bank cap to say about it? they said weaker interest from they calledies, and the commodity challenge. the big surprise is this is such a challenge from other banks. morgan reported last week. estimates certainly on

bond revenue. the ceo said, you were pretty much kind of meeting our goals. take a listen. allou will see it is across quarters, near 62%. 12%.mon equity of simply put, we are getting there. >> getting there and the stock doing well. of course, intimate story for goldman sachs, taking a hit over the day. betty: certainly one area that goldman and all rivals were doing well on. leverage loans. the fedhas to do with increasing rates. a lot of companies want to refinance loans. this is creating what some are calling a narcotic need for field. this is the one area that goldman sachs eight -- equaled

its rivals. the underwriting of these new loans. clearly, hitting record highs. companiesfinding looking for high-yield and they are more than willing to supply right now. yvonne: thank you with the breakdown their of u.s. bank earnings. marketake a check of trading in the asia-pacific right now. of course, we continue to watch falling to zero for the first time since november. benchmarks falling. it gets you down about 30 points. kosbi down about 4/10 of

1%. perhaps they are taking a pause .r it has run the course also, a lot of politics dominating here with a surprise batch election coming out of the u.k.. raising the forecast for global growth but risks remain. we will hear more next. this is bloomberg. ♪

yvonne: we are now just toughen our away from the opening of trading in singapore. i am yvonne man in hong kong. upty: a gorgeous day shaping there. you are watching daybreak asia. let's get to the first word news with paul allen. the kansas city fed president says the sm oc should start to shrink the balance sheet this year. esther george says it should be automatic and not subject to a

quick reversal. she also called for interest rates to rise further. all of that happens in the context of how we see the economy unfolding. we have not seen a discussion about when, by think you will minutes playing out. paul: a surprising decline in bond trading revenue. the banks aren't $1.7 billion in the first quarter, trailing estimates and the rivals. bank of america reported revenue of 2.9 billion, driving a 40% profit increase. ceo says it reflects confidence in the economy. be looking ford opportunity outside the united states. david hunt told bloomberg that

markets have been overly optimistic about president promises.mpaign he says china, india, and even the eu provide more reason for optimism about the global economy. >> we felt the markets had clearly gotten ahead of themselves and pricing in these changes which will be difficult and complicated in argue to carry out. it will be extreme a hard to jumpstart the u.s. economy to the kinds of growth rates that they were talking about. paul: toshiba eyeing for potential spinoffs. says sharp may invest in the flash memory chip business. there has been little interest among japanese companies. the government does not want the technology to go abroad. says no one will be fired over forcible removal of a passenger from a plane in

chicago. oscar munoz says it was a failure across areas. he admitted the book stops with him. united said it is too early to know if bad publicity has heard bookings. global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. i am paul allen. this is bloomberg. thank you. tied to see how the asian markets are state -- shaping up so far this evening. commodities very much in focus. earlier the imf saying they are looking for commodity prices to recover. withmetals continue along commodities. .e do have energy stocks

take a look at some of the movers today. this is a gold and nickel miner, since 2013. they will takeng on coal mining in australia. a metal snapping almost 3% today. oversold.may be take a look at the drop in base metals here. we do have an index on bloomberg, posting the biggest loss since september. this over demand. also weighing on this index here. iron ore has plummeted.

extending four weeks of losses. take a look at this. of 14% to make it 2017's best economy. while money managers are the most bullish, investors not convinced. money flowing out of the biggest at this point. we have the likes of city and stand chart cautious. betty: thank you so much. kamaruddin in there. now the international monetary fund being discussed. it has raised its outlook for global growth setting up a postelection surge in u.s. confidence. an uptick in global trade. usll the director telling earlier on daybreak australia's

that risks do still remain. >> it is a difficult environment still. the baseline which is this area know -- scenario that we think is most likely to play out is one of recovery. it is but just by strong economic data, we saw at the end of last year and beginning of this year. of course, we have seen many threats to these prospects. you just listed some of them. i would be happy to elaborate on them. no better time than now. why don't you elaborate on them now? >> clearly the are worried about increasing pressures, inward looking policies that had emerged in various parts of advanced economies. clearly brexit is one manifestation of those precious.

we are not having this except brexit which actually happened. we are not having them in the baseline because at the moment we do not see them as the most likely outcome. shouldconcerned that, there be not just political pressures but also actions on that front, that would not only have economic consequent is globaly by curtailing a sense of growth such as trade, but injure a clique through the impact on market confidence. >> had you see the rebound in commodity prices affecting the global economy? in particular do see it rebounding in emerging markets? >> for commodity prices we have recovery prices.

prices remain very low compared to where they were a few years back. they have moved up. our reading of the reasons is primarily that there are signs that global demand is strengthening and demand and manufacturing are picking up. specifics some other for different commodities. for oil prices, obviously, the opec agreement putting some restrictions on supply. factors at play. for emerging markets what i would say is we see a lot of differentiate -- differentiation. , a traders in general are doing well. that is the case for a lot of economies in asia, for instance. commodity exporters are still reeling from the decline in prices over the past two years. imf deputyt was

director speaking on daybreak yesterday a. coming up, can relaxed rules encourage partners. that will be next. this is bloomberg. ♪

yvonne: this is "daybreak: asia. go i am yvonne man in hong kong. betty: the first carrier following the disappearance of 380. it is not clear if the new system would have made a difference. the plane would not have been visible to the satellite network. yvonne: the volkswagen group beat estimates in the first quarter. operating profits totaled about $4.7, 28% higher than a year ago. that was driven by robust earnings at cw itself.

said china remains a key market. >> as far as we know, the premium market, as you mentioned, there are other brands. this market will continue to grow despite the prophecies of doom. bmw 2k workerse: take the first strike action on thursday. staff at three many plants will stage the first of eight plant walkouts. bmw has hinted that after brexit, they may shift production of the many -- mini mainly to europe. yvonne: in shanghai, automakers try to turn around a sales slow down.

from ajoint -- joined chinese auto show. how has the mood been so far? events, ays, at these lot of buzz. of course, this is the largest auto show in asia. cars, suvs, and minivans sold in china last year. they will be showing off about 1400 different brands. hundreds of automakers there. a lot of focus on things like electric vehicles. trevor this cars, of course. the, suvs propping up market. a bright spot, as you say. been slowingve somewhat. you have seen that in the u.s. as well. the u.s. picking up on the conversation.

of course, for the south korean carmakers as well, how much pain they will feel will be a result of tensions pushing back in light of the implementation of the missile defense shield in south korea. how much that will hit the korean automaker. that is part of the conversation as well. a lot of being discussed here. we are just getting started. betty: a lot of factors that india world's largest auto market. what about electric cars? what is the update on that? that is a really interesting area to look at. the chinese government looking for 2018. up a closer automakers based in china have to use a certain number of electric vehicles. sell focusing on trying to

1.5 electric vehicles by 2025. ceo oft up with the daimler, that maker of the mercedes brand, and asked about the prospects for the push of electric vehicles there. take a listen. >> typically we don't give specific forecasts on numbers. obviously, we are very glad to have accomplished this in quarter one. we end up thisre year. it is nice to be there the first quarter. we will see how they develop. >> you are investing heavily in the electric vehicle side as well. as far as the rollout in china, what brand will you be focused on? >> of course, mercedes. we have already three fully

electric vehicles. mercedes is the main brand we are going for. we continue to sell another brand of ours. for mercedes, we announced seven more fully electric vehicles which will roll out in the next four or five years. all segmentsat is of the market. possibleof talk about changes to the structure. what are your expectations? do you see there is a likelihood of the jb structure being reassessed in the near to medium term? >> we are very happy with our partnership. partner in to have a china. altogether, we see the markets liberating continuously. aerefore this is certainly

realistic perspective. >> switching to your briefly, stronger sales across the board. concerns about the political risk. now, the u.k. elections. what concern is that to you on the potential drag on growth? not expected by us. created some returned so far. the world economy for chile is continuing to drive. hope it continues that way. otherwise, you have to continue to increase interest in your company. >> do you remain sanguine about interest in your company? do you have a contingency plan in place should interest dysuria? -- dissipate?

>> we do believe any protective measures of any country is negative for all parties involved. we hope for the best. when we see trends in different directions, we can adjust. specifically for great britain we have no plan b. >> fourth-quarter results are very strong. will you be upping your guidance? >> we had a very strong quarter. we are optimistic for the remainder of the year. >> final question. there is some concern about consolidation. is that something that you see? would you consider restructuring the daimler group? >> we are always open to prospects. we are one of the biggest car manufacturers in revenue and profits.

we are strong on our own. we certainly have a promising future for us. good on you, tried to push him anyway on numbers. in the meantime, i'm curious about for ceos like dieter and other automakers, how do they feel about the chinese market and it being supported and subsidized by the government. does much of that come up at all during this parade of beautiful cars? they are obviously very diplomatic when they are in china. it is such an important market for them. he expects to see greater liberalization in the chinese market. it is interesting as well, we spoke to the ceo of ford and he says there needs to be more reform.

expected or seen as likely that the chinese are reassessing some of the regulations they put in place. at to sign all here up 50-50 with a chinese partner. that has been in place for two decades. some of china's brands have re-strengthen and are starting to compete now with foreign companies. is that justified is the question for many. 20% taxes on cars brought in from china. again, a sop to trump, china, but the europeans also. we will see if there is further discussion on this. clearly many of them would like to have a bigger stake here in

the bigger venture set up they have not many are prepared to go on camera and demand a massive overhaul. there is a bit of momentum on this. they're waiting to see what the chinese authority do on this question. applications are huge for foreign companies, but domestic ones also. companies could see billions of dollars wiped off the revenues radicallyructure was overhauled. there are implications across the board. yvonne: i wanted to talk a little more about that. some of these foreign companies have actually helped to prop up local players, keep them in business, and keep some assembly lines rolling. what are the implications for local carmakers in china been? heard, at least our colleagues in bloomberg news have been speaking to members of

the chinese automobile association. there is great concern for many of the big players, particularly the state owned automakers that if there was a big change, they andd beat very badly hit could lose a lot of money. clearly the sales have been picking up but they still have the automakers, less than 50% of the sales. still the automakers have been dominated a guess, they have strengthened and are starting to compete, but any change could hit them badly. they welcome it, they welcome greater innovation and competition. all right. tom mackenzie their joining us live from shanghai, the auto show there. storiesget a roundup of in today's edition of daybreak. it is available on your smart phone and the bloomberg anywhere

app. you can customize your settings to get only the news you care about. this is bloomberg. ♪

yvonne: this is "daybreak: asia." i am yvonne man in hong kong. betty: i am betty liu in new york. president trump has issued a review of the hb one visa program.

we spoke exclusively with microsoft's bill gates about his views on that. >> america has not had an open door for immigration for a long time. we have a lot of complicated policies that have to do with bringing family members over from skilled based programs like if you can prove that you are filling a job that is otherwise unfilled, help the u.s. economy do that. jobs, want to grow filling new roles, that is a net drop. people worried that you're just bringing in people and lowering wages. having systems that differentiate between the job substitution piece versus building jobs around, that

unique talent, the government will try to do that harder. the fact that it is all evaluating in the framework of jobs and economic growth is fine. high school immigration can .ctually meet that test educating someone and have them leave the country, where other jobs will be created around that person is not a great jobs move. gates: that was bill speaking there. that is almost it for on "daybreak: asia." let's take a look at what is coming up in the next hours on bloomberg markets. runway. a bit more a elections 2020 to come on top of that, a personal mandate that she has been like it so far. look at that, market implications. we see huge moves for sterling. and, looking of course at, i

think, the biggest car show in asia. the shanghai car show. we have several guests from there. betty: tell us about the other guest you have coming up. rishaad: we do of course have people from the car industry. investments. also, looking ahead, of course, at what we can get out of france, the first round of elections there. and about 35 minutes, speaking to the central asia pacific chairman. maserati's headmanned as well. that is coming your way next. ♪

♪ it is 9:00 a.m. in hong kong. i am haidi lun. rishaad: i am rishaad salamat coming to from bloomberg's asian headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: the pound reaches a six month high as the u.k. faces a snap election, theresa may wants a strong mandate. rishaad: the decision coming three weeks after triggering the withdrawal.