♪ betty: steady as she goes, the fed sticks to its gradual path, leaving rates unchanged. weako remarks over changes. taxne: questioning trumps plans. saying it is unlikely to spur growth. model 3esla says a remains on track for a summer launch. investors say some have an irrational faith in elon musk. yvonne: facebook flies despite adding users.

questions about ads in the pace of sales growth. we have world coverage here on daybreak asia. we will go live to sydney and io,, japan to see what the fed decision means for this region. betty: here in new york, qualcomm looking to ban iphones in the u.s.. could that really happen? and we will break down those facebook results from san francisco. good morning, this is daybreak asia live from bloomberg's u.s. and asian headquarters. i am betty liu in new york, it is after 7:00 a.m.. yvonne: it is after 7:00 a.m. in hong kong. breaking news from south korea, the account balance for march coming in at $5.9 billion. that is a narrowing of that balance or surplus we saw in the month of february. we're off about $2.4 billion. we saw imports rise more than exports in the month of march.

we have seen korea maintain a surplus for five years now. the reason why we have seen foreign investors piling into the bond market. and we saw foreign reserves $376 billion.er to there could be a fed rate hike possibly in june, that is the fmoc statement we got overnight. we will see how asia is digesting the news so far. we saw the dollar up, the gold down. the treasury bounced back to 2.3%. hardly anything exciting. new zealand shares down 1/10 of 1%. 6888 on the kiwi dollar. the aussie was one of the big ones. we are holding onto those losses.

it came down to 1.5% for the aussie dollar. let's see how things are looking in sydney with futures pointing lower, 1/10 of 1%. .7425 is where the aussie stands right now. japan is closed for the holiday. the yen above the 112 handle right now. the bullish momentum is getting stronger for the dollar-yen. we will see how things go for the rest of the asian session. not much of a lead-in from wall street overnight. we still had a waterfall of earnings to talk about. betty: a lot of earnings. the key ones we will be talking about, facebook and tesla. we have insurance earnings coming out, as well. those lead to a next session in the markets. let's pull up the boards. you see the nasdaq composite down a 4/10 of 1%.

pretty much flat for the s&p and dow. we are looking at how many futures are trading -- mini futures are trading. that has been opened for the last hour. it is unchanged at this point. let's get the kathleen hays from yokohama right now. she is been covering the fed meeting, as well. as expected, no change on interest rates. they did note this weaker economy. kathleen, what did you think of this policy statement from the fed? we were talking about this 24 hours ago. by the way, it is a gorgeous morning here in yokohama. there are big interviews, including a former bank of japan economist to talk about the fed and the boj here at the meeting. bottom line, everyone says the fed will look past the leaked data in the first order of the

year. they said the committee used slowing growth during the first quarter as likely to be transitory. it appears roughly balanced. seen as leading the door open to the june hike. look at what the market is looking for, projections on the terminal. the june hike, up to nearly 79%. closer to a sense of certainty. the fed is sticking to its timeline, there will be a rate hike in june and september. balance sheet reduction starts in december. on that point, the federal reserve did not change anything in the policy statement about the balance sheet. untill reinvest proceeds it is well underway. no changes. but that is the news. they are putting the week -- weak first-quarter behind them and assume baseline levels.

at least three rate hikes this year and the next in june. that is the takeaway we got from the fed. yvonne: seems like a new thinking from the fmoc. they were given plenty of excuses to hold off on anything, but that does not seem the case anymore. we will get back to you from yokohama, japan. we will have more fallout from the fed's decision. we will be joined by russell price from ameriprise. and we will have a columbia professor. let's get you caught up with first word news with courtney collins. >> a former fed chairman says president trump's plan to cut personal taxes appears ill-timed and do little to spur growth. he says it might have made sense for five years ago, but they would do better to concentrate on supply rather than demand. of thet in an overhaul

tax system at the top of its agenda, calling it the biggest reform in u.s. history. >> at least from the perspective of putting people back to work, it would've made more sense to have more tax cuts and spending in 2014 or 2012. from that perspective, unemployment was at 4.5%. today it is weaker. there is always the case for improving the quality of the tax code, making it more fair and simple. in terms of the economy, that would've been better a few years ago. japanese prime minister shinzo abe once a new constitution in place by the time tokyo posts deal of the games in 2020. he said the country was it reborn ahead of the 1964 games and then rediscovered confidence, the driver behind its rapid growth. voters are split on amending the constitution. article nine mentions japan's self-defense forces.

the bitter fight between apple and qualcomm has seen the chipmaker's demand a ban on iphones from the united states. qualcomm wants the asia-made device block ahead of the iphone 8. qualcomm has patents that allow it to charge a percentage of the price of every smartphone, regardless of whether it uses its chips. apple is refusing to pay. national australia bank's reported first quarter earnings that increased estimates. treating incomes offset higher costs. -- uned -- on audited the banking, environment remains challenging. but there is a favorable backdrop. -- but there is a favorable

backdrop. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney collins, this is bloomberg. other earnings today, facebook extending regular session declines after hours. a spike b's -- beating estimates, approaching $2 billion. joining us from san francisco to break down the numbers is sarah frier. this was a great quarter for facebook. what did you learn on the call? you are right, it is the quarter we expect from facebook. at the reason the stock is down is because on the call facebook's cfo reiterated a warning he has used in quarters past that the ad load, their frequencies of ads in facebook's news feed will not continue to grow later this year. that was a major driver of growth in the past. analysts and investors are looking to the future and wondering how much that will

affect the sales in the future quarters. they say it will affect it meaningfully. as theooking at facebook other revenue growth driver they had down the line. not many are at the point where they can offset this decline. betty: that is right. what does this mean for revenue? i get it, they are doing virtual-reality and artificial intelligence and new technology, but that will not replace this huge advertising revenue base that they have. main socialook's app, it has almost 2 billion users, it is a mobile advertising machine and it benefits greatly from having a position in the market where advertisers decide they want to spend more money on digital, it is either facebook or google.

this company is investing in these other areas beyond the long-term ones you mentioned. , such as near-term their messenger app. whatsapp has more than one billion users. but neither have meaningful advertising platforms. they just started testing ads. instagram is a hopeful spot. facebook owns instagram, and they have healthy advertising platform. facebook is not broken down how much the revenue continues -- contributes to the overall high. we will have to see in future quarters, it is down to the big blue app, that drives the growth. yvonne: thank you for bringing the facebook earnings live from san francisco. we will have more on facebook coming up. one of the top ranked forecast, michael pachter will join us

from los angeles. betty: let's weigh in on the fed. they are keeping the june option open. we will discuss that with ameriprise financial. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. betty: i am betty lou here in new york and the fed signaling its gradual rate hike approach intact despite recent economic weakness. our guest is optimistic. russell price, the senior economist with ameriprise financial. he is among one of the most accurate forecasters of the u.s. economy. also from bloomberg intelligence, chief equities strategist. russell, let's talk to you about the fed's statement. are we on track for at least two

hikes? i think we are on track for at least two more hikes this year. were was one in march, and expect one in june. and we expect the third to come in december. we think the economy is strong enough to support that outlook and sound enough for the economy to absorb this additional rate hikes. betty: solid enough. for some investors there is trepidation. i want to bring up a chart which i think is what is making investors nervous. this is a chart that shows the valuation of the s&p. it shows we are on -- let's bring that up. it shows on a price-to-earnings basis, we're at the highest level, as represented by the dotted redline, since 2000, for

both of those measures. that has to bring up some bad memories. if it is solid enough, which is not great, are we too richly valuing? >> we have worried about valuation for a while. as rates remain extremely low, investors have very few choices elsewhere. that is keeping money in stocks. one thing that can erase that valuation is fast growth. if we get decent earnings growth, the fed has the hike a few times. if we get a nice earnings recovery, that erases a lot of the valuation problem. some are looking backward. what happened over the last 12 months. we were digging our way out of an earnings recession. many sectors were struggling. if we can get that recovery growth, and the price movement, things will look a lot better.

yvonne: russell, it seems the market is data-dependent. sayontinue to see the fed that. in the nexto happen couple months for these two to line up once again? russell: i agree we need to see the economic data. consumer data stalled in the first quarter. consumer fundamentals are very -- in very good shape. earlier this week we had the personal spending and income report. wages and salaries the most important component of personal income, was up 5%, year over year. the private sector wages and salaries were up almost 6%. consumers are in very good shape. there is no reason we cannot see consumers come back and spend a little bit faster. their debt levels are relatively

low. the fundamentals are there for the economy to rebound fairly soundly. yvonne: is inflation the wildcard? we saw pce inflation go the opposite way from the fed target of 2%, 1.8% in march? now that we see oil over again, this soft data or downward pressures persist, could it still be live in june? russell: it could be. if we remain soft and inflation data remains soft as well, the march figures are certainly a surprise, i do think the federal reserve could push until the data does improve. that is one of the things the kudosl reserve deserves for doing throughout this cycle. rather than just follow through on projections, when the data

does not support their case, they back off until it does. betty: we did not get a lot of clues about the job market from them adp report. it came in in line with estimates. will the jobs report be important this time around? it seems to be less and less important overtime. the earnings season showed corporate earnings are on the right track. i think we have a tail wind it d less important overtime. from the corporate earnings environment, excluding the apple store yesterday. is keyedk the market in to the wage number. we talked about the diversions between the fed expectations for a few more hikes, the market expectations for 1.5 at best this year. that could close that gap. you see earnings accelerating a little faster. the market wants to see wage and that would probably

close the gap between market expectations in the fed. betty: looking at those valuations, how much of a pricing in a policy risk as well? is there any in here? we are do not think pricing in a lot of policy risk. if anything, we are pricing in better policy, corporate tax reduction, we have eliminated a lot of that optimism. but there might still be optimism left. i say that because we have bottomed precisely with the new speech is coming from washington on tax policy. there might be a little optimism with respect to policy right now. the market islike waiting for clues to balance sheet reduction. it russell, i have the last question for you. sh aboute hush-hu details. you may have to wait to the minute to get clues. how will it play out for the fed? is there a risk they can make a mistake?

they will beink careful in laying the groundwork in advance of when they start to taper their balance sheet. that may begin sometime in the second quarter. been some feelers put out in federal reserve speeches about starting that tapering process in the second half of the year. we think it is more likely to come in the first half of 2018. the fed is laying the groundwork, making sure the market is well-prepared for that eventuality. betty: russell price, senior economist at ameriprise financial. also joining us, gina martin adams, bloomberg chief economic strategist. we talked about pricing and policy risk. it looks like there could be reasons for optimism. breaking news, the house says they will vote on thursday on republican health care bills. this is according to aides.

confirmingr mccarthy the news, saying there will be a vote thursday. the republicans have the votes to pass this bill. perhaps once a that has passed, we will see more of these policies promised by the white house go through. perhaps optimism for investors. optimism on elon musk and his stock, tesla. we hear from a hedge fund manager that says no, he has a warning for investors. they put too much faith in musk. rbnz yvonne: this is daybreak asia, i

am yvonne man in hong kong. betty: i am betty liu here in new york. management demands for change are clouding prospects for an

upgrade of the miner's credit rating. they are lobbying shareholders after they rejected calls for corporate overhaul and a spin off of oil assets. they went from positive to but want the uncertainty to end. yvonne: new zealand has blocked a proposed merger of the newspapertwo main publishers. they fail new zealand by blocking two local companies from gaining the scale and resources to compete. fairfax has a week long strike by journalists in australia, after being asked to axe a quarter of its editorial staff. confirmed thesk new model 3 will begin production in july. tesla announced a first-quarter

loss that was wider than expected. model 3 production is critical to the company. they saw their share price rise nearly 50% this year. one hedge fund manager says investors have irrational faith in elon musk. >> they are skeptical the thatny will have margins value the current valuation. the marchniscent of 2000 dotcom bubble. betty: i want to bring up this chart. there has been a battle that elon musk, not by has choosing, has had with short-sellers. short-sellers have been betting against tesla, that they can fulfill their promises. this chart, the blue line is the short. and the white line is stocks. inry time the stock goes up,

the early part of 2016, the short to go up. then they realize, stocks hitting records, we are selling down. it has come back down again. when they see the stock is going against their position. now it has turned again in shorts. it has not caught up yet to how high the stock price has risen. we will see if at some point, they have tried in the past 12 months, we will see if they tried to be successful. you can almost understand the trepidation. we are talking about the market gap on tesla. it is very close, if not higher than what we are seeing out of gm and ford. that cash burn seems to be the big concern.

$622 billion in the first quarter. it is the second highest in the company's history. in the keep it at the current levels? that is the big question. this is bloomberg.

yvonne: 7:30 a.m. in hong kong. they are coming back from celebrating the buddha's birthday on wednesday. wednesday.p.m. a beautiful, sunny day in new york. my allergies are killing me. ready mixed here, we are awaiting other numbers coming up , such as the jobs report. iu in new york. yvonne: i am yvonne man in hong kong. you're watching daybreak asia. we have the first word news with courtney collins. >> chancellor angela merkel has

attacked rising protectionism ahead of germany's posting of the g20 in july. she said there may be short-term benefits, but long-term harm. she did not mean any single person our country but pointed to the difficulty of making progress at the g20. the whitetrump won house campaigning on the slogan of america first. >> those were trying to withdraw from international competition can maybe hope for short-term advantages. but in the middle and long-term, their ability to innovate is weakened because new ideas and developments go best in an environment of freedom and openness. yvonne: u.s. commerce secretary wilbur ross told bloomberg some parts of the tpp could be used to revamp nafta. president trump pulled america out of them tpp just days after taking office, and is been

critical of nafta, threatening to withdraw if the u.s. cannot have new terms. >> their parts of nafta that are ok, parts that do not work. the same concessions nafta partners made in connection t proposedproposedpp, -- -- made in connection with the proposed tpp, transpacific partnership. the nationalist leader for trader opponent as part of the global elite, surrounded by islamic terrorists. said she is unfit for power and playing politics with voters in securities. le pen arrived with notes, while ron spoke unassisted. they are calling pyongyang's nuclear fostering irresponsible

and a threat to peace. russia -- china floated the possibility of new talks. beijing,ea attacked warning its main ally not to nce. its patients -- patie a tropical island a destination for medical tourism. billions are spent to attract wealthy chinese patients who might otherwise go overseas. they estimate half a million people went abroad for medical health last year. cancer and heart disease are soaring in china. is promising cutting-edge treatments not approved elsewhere. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney collins, this is bloomberg. counting down to major market opens in the asia-pacific.

let's get more from adam haigh, joining us live from sydney. traders of pride to the silver lining we usually get when it comes to blooming economic data. they set their guns on a possible june hike. how will that play into asia today? adam: good morning. we are seeing it play out in a selloff in australia on government bonds. the tenure is picking up slightly. investors have to digest this fed date. they're looking to the line with the fed has said, prepared to look through the weakness in data the early parts of this year. there has been plenty of data this year in auto sales and cpi. it made investors nervous about the u.s. economy. maybe a bit of reassurance from the fed. as we look into the start of the asian market session, we should see australian equities start off in a bit of a tough

situation. we are seeing weakness and aussie in the past 12 hours. i think that is all behind this rally in industrial metals, and the copper price. that will weigh on the big producers. the hong kong open -- market reopens after the holiday. apple earnings from yesterday. traders and equity markets, we start the session down here. we have seen plenty of that in the chinese markets at this year. regulators are trying to calm the investors down. what are they saying? adam: i think their reaction the market can be captured quite nicely if we bring up this chart of the china bond market this year. you can see the selloff.

yields have been climbing on the of the reaction to what regulators are doing to clamp down on speculative activity. i think what regulators are doing is get ahead on the front to reassure investors. we had statements from the financial news outlet, saying, do not panic. it is part of a controlled situation, it will not be disorderly. you can keep your faith and how regulators are trying to keep credit under control in china. been some tough moves in the local mainland market. investors have been worried. a bit of reassurance from the authorities that they have control over the situation. whether or not you believe them is another matter. betty: indeed, thank you so much. adam haigh there on the markets. staying in australia, their bank announcing first half profits

that beat estimates. not all good news here. joining us from sydney is paul allen. how did these results actually stack of? paul: the good news was the cash 9 australian dollars. and $.90, that was in line with expectations. the bad news with the -- was the net profit margin, narrowing. million to $394 million. they spoke to the media after and called the environment challenging. he was cup half full. here is what he had to say. performance ofl the bank is sound, we improved profit, managed margins, grew revenue, managed costs, and

maintained dividend that $.99 a share. our return on equity, $.14, is pleasing. that comes from having a strong bank. our balance sheet is stronger. paul: we have a couple other due earnings did -- do -- in the next few days. yvonne: thank you so much, paul allen. we have another big bank getting set to report their results in a few hours. for proofysts looking their stabilizing their top line. it dropped to 9% from a year earlier to $12.6 billion. after five years of declining revenue, they have had $3.5 billion of share i back -- buybacks. we will have more with our asia

finance editor in our next hour. plus, we're joined by ian mckay. don't want to miss that interview. meanwhile, the asian development bank is marking the past century meeting, meeting japan in the first time in a decade. they may be feeling the heat from a chinese rival. they boosted operations above $20 billion for the first time last year. meet infrastructure needs alone. announced,tly published a new estimate of innovation between the two trillion.of $1.7 we need a huge amount of money.

the asian countries are very keen to invest. so far, the majority of investment is in the public sector. they also have power generations and communications and so on. we should promote the infrastructure investment in many ways. donald trump -- to what extent has he upset the apple cart here in asia? there is the setback from the tpp and these assumptions about trade relations, trade deals. they have been thrown up in the air. how does that affect what you're trying to do in the region? how do you deal with that, what do you see happening next? >> the trump administration is discussing how they want to adjust to the trade system and valuations in asia. it is too early to mention not.er it is a problem or

i think the u.s. will continue to be engaged with asia and continue to have a free-trade system with asian countries. there can be some adjustments and discussions. they will join the tpp at this moment. it is fascinating, the u.s. walked away from free trade. >> when you look at financing a deal, how much difference does it make? how much do you have to look at the debt profile, not just for a specific project, but for a country? in the regionrn about china debt, for example. and recently, indications nonperforming loans will stabilize. one area china is people are concerned about that. but it is not just china. ultimately, you are providing

financing. it is not just a gift, it is something you have to make sure works. how do you factor china debt into the equation? >> china has been very prudent. they have repaid all their debt to us and other international creditors. it is slowing down for two reasons. structure issues like aging and decreasing labor , and the need to change to environmentally friendly growth. they spent a lot of money after the global financial crisis. they must take care of these issues. issues,e talk about every country has issues. two economy number

in the world. people are paying a lot of attention. but there are issues they must take care of. betty: he was speaking to kathleen hays there. much more ahead. let's turn to tech. topre joined by our facebook forecaster for challenges facing mark zuckerberg and his team as they approach to billion users. this is bloomberg. ♪

betty: this is daybreak asia, i am in new york. yvonne: i am yvonne man in hong kong. facebook share is extended declines after hours, despite first quarter revenue beating estimates and monthly users approaching two billion. mark zuckerberg said growth was

slow in 2017. joining us is a securities analyst live from los angeles. michael, great to have you. we talked about how this was a solid quarter for facebook, despite the warnings we got from 2016.uckerberg in late why has the stock fallen? is it all about ad load? michael: i think it is down more because they decided to report on a gap basis. i think the market is genuinely confused by that. they printed a dollar, and that of stock$.20 plus valuation. clear.pany is not very basis,pples to apples there are doing fine. but our estimates, it looks like they missed. they talk about ad load's flowing and opex going up every

quarter. that is just par for the course. that is why is down. yvonne: we had a little confusion. there seems to be a sense of what comes next. they said they cannot put more room out there for ads and newsfeeds. they want instagram and messenger to pay off for the top line for facebook. is it all up to instagram and their ability to monetize those 700 million users? michael: i would say for the next three years, yes. insta graham is about 1/3 the size of facebook. the frequency and duration of the visit is about 1/2 as great. you will see about 15% growth for instagram. opportunity on facebook is monetizing places outside of u.s. and canada. the u.s. and canada are $67 a year in revenue

for users -- per user. the rest of the world is under $20. there is an opportunity there to grow that dramatically. what about asia? i saw that one third of their daily active users are coming out of asia. what about the opportunity there? are not obviously, they in china. they are in developed asia, a huge opportunity. they just have to great relationships with advertisers who want to reach wealthy asian customers. hundreds anderally millions of asians better at or above the median incomes that advertisers want to reach. people in singapore, korea, japan. you will see the asian market numbers double and the next couple years. betty: that is a big area.

one area facebook has been stumbling is is live video. and the amount of content on monitorat is hard to but can be quite disturbing or very disturbing. mark zuckerberg did address this and i want you and our viewers to listen to what he said about this. >> over the next year, we will add a 3000 people to our community operations team around the world. we alreadyhat 4500 have today. they will review reports and the process for doing that quickly. betty: is that a true solution are putting a band-aid on a growing wound? michael: it is a band-aid. a band-aid. if 3000 people is not enough to monitor two billion people. they have to do something like you do, a seven second delay. facebook could put a 30 minute delay on its live streams.

again, you're never going to protect against crazy people. there are crazy people that want to kill themselves or somebody else and brag about it. and that is not going to stop. facebook is just evidence those people are out there and they are crazy. betty: it absolutely is, but is there any more they can do about it? or will it be a situation investors and users are going to have to deal with and be at peace with? michael: they have been good at keeping pornography off the site. twitter is not good at that and tumblr is terrible at it. ultimately, they will do a better job than anybody else. it is a problem with live streaming, that people can put objectionable content up there. suicide and murder is pretty upsetting. there are plenty of other things we could do that are upsetting, as well. they will never be able to monitor it with 2 billion users. yvonne: michael, talking about the stock in general.

up a chart here. a handful of companies are bringing up the s&p index. like facebook, apple, microsoft, amazon, alphabet. we heard from david einhorn, given the enthusiasm we have seen in these stocks, it is reminiscent of the march 2000 dotcom bubbles. is there truth in the analogies? michael: i think we were the only ones around in 2000, the rest of you were probably in grade school. the difference is, the company's leading the charge are quality companies. that facebook decision to report on the gap basis, that means they have real earnings. om, it is a pets.c real company with real earnings.

i say netflix maybe not so much. google, alphabet, real companies with real earnings. it is not the same. we are not buying into the hype and hoping someday these guys will turn cash flow positive. they are there right now. betty: michael, thank you so much. we appreciate you joining us. you can turn to your bloomberg for more on this. you can see commentary and analysis from bloomberg expert editors. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. betty: i am betty liu in new york. chinese internet lenders smart ,inance have consulted banks

this could happen as early as this year. on company judges borrowers factors, including how often they charge their phones. ceo's says they expect to reach $1 billion evaluation by the end of 2017. saying, it is a profitable company and not a bubble. they expect to approve 4 billion loans a month. tumbling again in singapore, falling to its lowest since september as they consolidate the stock next week. shares have more than halved since february, over concerns management team will not be able to mitigate losses. the founder is preparing to step down. betty: analysts expect a 13% increase in first quarter sales when it gives an update on thursday. revenues it should get a boost for strong momentum from athletic shoes.

modeling a white developed after a tennis star. analysts think they can do it. yvonne: love those. the pentagon is heading to china to boost drones. they want 19 models made. -- itrpose of the order is specific to make models and accessories. dji is a leading drone producer. it may appear at odds with president trump's buy america drive. betty: more to come with asia's first major market open moments away. bring in sophie kamaruddin to tell us what we should be watching at the open in australia and south korea coming back from the holiday. >> south korea coming back online.

the first reaction from korean automakers. when it comes to north american numbers, hyundai saw a rise of 1% for that month. reportsa, nab first-half cash profits topped estimates. tesla, production of the model three is on track. keep an eye on lithium miners. the prices jumped last year on tesla's demand. so checking in on the futures board. under pressure, exacerbated by a slump in metals. this is up 2/10 of 1%. a higher start when it comes to korean shares. kospi is the cheapest among asian emerging markets. that is a brief look at trading

underway. of seoul. this is bloomberg. ♪

♪ betty: steady as she goes, the fed leaving rates unchanged and showing no alarm over recent signals bed yvonne: tesla says the model three remains in track for a midyear launch but some say investors see elon musk as irrational. betty: the australian treasurer is not impressed. and china seeks to calm nerves as mainland markets injure a volatile few months.

this is the second hour of daybreak asia. in hong kong, it is just after 8:00. yvonne, we have the fed meeting today. as expected, no change in interest rates. interesting to see that they recognize that economic data was showing a little bit of weakening. we are going to get more of the friday jobs report. that has ignited the debate of how many interest rate increases are we going to get? 6-1.e market is still it was a very interesting test. mohammed was speaking about how the changes in the fed are evolving. before, they would have plenty of reason to pause after a shock in the first quarter. it seems like we are shifting away from that.

it was effectively a start of the new regime for the fed. of course, we have south korea back online after coming back from the holiday. let's get to the market opening. >> this set up this morning in asia is that the predictable fed is taking a backseat to the mayhem in metals. copper falling, by the most since 2015 along with iron ore good mining stocks being dragged on the s&p 500. that hit the australian dollar, holding losses. not doing well for risk sentiment. a hitrean won taking today, as well. i would like to show you a chart on the next terminal panel. the australian dollar could be in the sweet spot if technicals are anything to go by. the lower panel is hinting at a move similar to what we saw in

december which could push the australian dollar back toward the $.72 level. on thee are waiting australian trade balance. japan is still on holiday today. we are seeing australian stocks continuing to drop after falling . korean shares are gaining for another session despite the lingering geopolitical clout as well as the upcoming election. korean shares are looking like a bargain. the kosbie is the -- looks like it could have further to run. >> certainly interesting to see. now, let's talk about china. calm investorso in the face of tighter regulations.

joining us now is our chinese managing editor. tell us more about what beijing is saying to calm nerves. >> good morning. seeing a ratcheting up of state media commentary that is attempting -- one point is that the leveraging campaign is not going away. the second point is that .nvestors should not be worried authorities have everything under control and they are comfortable with the losses we have seen so far. >> why is this day trying to manage investor perceptions so actively? stability is meant to be the name of the game this year. we have the national congress coming up. looking at the markets, stability is what regulators are attempting to get to.

with china being dominated by retail, sentiment can turn on a done so communication is important. soturn on a dime communication is important. yesterday.nteresting we saw the pboc injecting more cash into the financial system, the most we have seen since january. is that going to work? >> it was an interesting day yesterday. we also saw some maturing. .orry for all of the acronyms that shows us that the pboc is willing to give and take away. at the same time, the pboc doesn't want to squeeze liquidity too hard. sarah mcdonald, thank you.

let's get the first world news. the bank of america says the donald trump administration would harm business and undermine the financial system if it were to revive a 1930's law separating consumer and investment banking. told us that it would be against american interests. president trump has called for a new version of the glass-steagall act. it is not in america's best interest. it is against america's interest to break up the large banks. >> national australia bank's beating estimates, increased trading income offsetting higher cost. of 2.3%. a rise says the banking environment remains challenging

but australia's economic fundamentals provide a favorable backdrop. shinzo abe wants a new constitution in place by the time tokyo hosts the olympic games in 2020, saying the country was reborn ahead of their previous games and their rediscovered confidence was a driver behind rapid growth. a poll says voters are evenly split on article nine, to explicitly mention japan's self-defense forces. the u.k. may have to accept the free movement of people from the european union because introducing controls will be too complex. a think tank says the implementation of new immigration laws by the 2019 brexit deadline is quote unfeasible. thousands of civil surgeons would be needed to do with it -- servantsgeons -- civil would be needed to deal with applications. this is bloomberg. tesla says the

model three is on track for july. our investors convinced? we will discuss that, as well. >> the former fed chairman weighing in as the central bank signals no change to the balance sheet policy. that interview, coming up next. this is bloomberg. ♪

♪ >> this is daybreak: asia. >> i am betty lou here in new york. the countdown to the june decision for the fed has begun in earnest after the meeting wrapped up today signaling no change to the policy path. hays joins us from japan, keeping her eye on the fed. kathleen, give us your take on the policy statement and how that is reverberating over there. reserve the federal

went out of its way to make a clear, something most of us expected they would say or signal, which is, we saw some first quarterhe but it is transitory. that is what is most important the headhen i spoke to of the adb, i asked him about this question of how tightening in the commitment to rate hikes is going to affect emerging markets? he says the economy is stronger in the united states which is great for emerging countries and asia. as for the markets, seeing the fed talk about the weakness as -- others saying that they are sticking to a timeline. june, september, and reducing

the balance sheet by the end of the year. the former fed chair says, sit back and relax. it is going to take a while to get it down to where it was before. let's listen. >> there are legitimate questions a how about -- about how big it should be. ,here seems to be no concern certainly not much in the markets that the unwinding part is going to be difficult. the whole strategy is basically, reinvestingt, stop maturing securities and that a runoff in a passive way and i suspect that will be received well. to our you always lead distinctions and you have an important one. educate our audience about the and to shrink passively that there are different ways to shrink and you make a key distinction.

is mostlyance sheet consists of treasury securities in mortgage backed securities, once backed by the u.s. government. those are obviously private .ector -- owned by the fed they have a maturity and at some point, each individual security will mature and run off and what happened was that earlier on in the process of expanding the balance sheet, we begin to say, we do not want the balance sheet to decline in a passive way because things are running off and maturing so we began to process -- this is back in 2010 -- we took the proceeds, we reinvested it in new securities to keep the balance sheet unchanged so since 2014 when they stopped dying securities, the balance sheet has been a fixed size. now, what they are eventually going to do according to their some point,, at

probably this year, they are going to say, from now on we are going to not replace all of the maturing securities. whatever they decide. without actually selling anything or taking any active decisions, the balance sheet will vary gradually begin to shrink toward something more sustainable. the photos are extraordinary, particularly the family photos from lithuania heard there is a wonderful photo of you taking lunch from tim geithner where i am sure you had a lot to talk about. maybe you just talk to which our -- talked to each other. do you have a date where you would think we would get the balance sheet to normalcy? is it five years?

20 years? >> the fed has released a lot of projections but it depends where they decide to end up. the best guess is something like four or five years after beginning the process to get back to some kind of sustainable level. chair ben former fed to bloombergking surveillance. it is very important that he said the fed has been talking about this for a while. they have released simulations for those of us who follow this question. it is not a surprise to hear him say that. here.are no rules written we have never had a time when we saw balance sheets across the world balloon, explode. now, a process has to start with a are gradually reduced because to suddenly reduce them and take liquidity out of the global

system of liquidity and capital could have an impact on the bond market and that is what many wall street practitioners are saying. maybe not the academics, but the actual doing is going to be tricky and this is where the fed has to tread carefully. as others would say, a couple of rate hikes, then you start normalizing. then they can start looking at the balance sheet. that will be the next phase of normalization. >> it seems that they are going to make this a very drawnout process to not scare the market too much. great stuff. joining us live from yokohama. investors are concerned that tesla is bernie threw two much cash. we assess the health of the company, next. this is bloomberg. ♪

♪ >> this is daybreak: asia.

i am yvonne man in hong kong. >> it has been a big earnings day, the likes of tesla and facebook third both are likely to be in focus and moving the u.s. markets tomorrow. we have more. let's start with facebook. >> a bit lower, but many analysts warned that this was priced to perfection. it has been hitting records going into the earnings. the earnings were strong. 49% jump in sales. they announced they are going to stop or halt increasing the frequency of some of the advertisements on the newsfeed. they also said that they are going to be putting 3000 people, hiring them to monitor videos. this is a critical issue that facebook finally addressed. there was recently a murder

broadcast on facebook, the fact that some people have been put what has been criticized as fake news on there. sheryl sandberg says this is something they are addressing head-on. >> we take all of these issues seriously. we know that people want accurate news on facebook. we have announced a number of steps including disrupting economic incentives to stop the spread of false news. >> it will be very interesting to see how this plays out in tomorrow's trade or when wall street opens on thursday. if you look at how facebook has gone, a straight shot higher, record after record. what was also interesting is that even though they view themselves as an advertisement company, it is still the social media driving growth, the increase in users. they admit they are anticipating advertisement slowdowns and they

are trying to address it in different ways. >> with facebook -- with tesla, also, it looks a bit different story. the stock proving pretty resilient in the face of disappointing numbers. disappointedally and yet the stock only fill not as much as you would expect it let's talk about the tesla numbers. this is another company with the stop priced beyond perfection. there has been concern about overvalue. it surpassed g.m. and forward in terms of valuation -- gm and ford in terms of valuation. they lost on the earnings front, more than forecast. is the issue here, the second highest in the company's history. the plus was at the founder was investorsl, ensuring

that the model three, their most andcipated car, is on time they are ramping up production and output will begin in july. it was the anticipation that pushed tesla's valuation past g.m. and ford. investors are getting the message that it is on track so we are not seeing the stocks taking that much of a beating. look at the chart. it will be interesting to see how this plays out on thursday when you have a lot of the professional investors in the trade. again, that is the tesla story. these are probably two of the most hotly anticipated earnings stories out there. they are very much going to impact the open on wall street. reaffirmed the model three which seems to be reassuring for investors. did elon musk learn from his

mistakes? thank you. let's look at the latest business headlines. won posted a small of an estimated profit. to $315me climbed million, almost three times the result from a year earlier. loans grew 7% for the year. r.b.i. data shows annual credit growth in india's financial system was the slowest since 1992. showing signs of stability after a rocky decade. profit coming in out $1.2 billion -- coming in at $1.2 billion. their ceo has said he will step aside was the board identifies a replacement. shares rose 1.5%. fitbit surging after giving

investors could news. they are reporting -- could news. -- good news. they are reporting positive revenues. they have been facing competition from lower cost devices and smart watches from apple and samsung. more earnings to talk about. national australia bank reporting a better-than-expected profit. we are seeing shares are pretty flat at the moment, close to 0.1% in paul allen is joining us live from sydney. it is a mixed bag for nab? >> that is right, could news and bad news. first, the prophet. -- the profit. the dividend coming in line with expectations. interest margins narrowing even further down to 1.84%, down from

1.93%. bad debt charges also up. the ceo andrew thorburn acknowledged that this is a challenging environment but he was very colorful about it. >> i think the financial performance is sound. we have lifted our profits and managed our margins. we have managed costs. we have been able to maintain dividends for shareholders. 14%.eturn on equity, i think that is very pleasing betting that comes from having a really strong bank. our balance sheet is stronger than it has ever been before. the open. a pop at reality seems to be sinking in now, looking flat at the moment. treasurer also

getting his thoughts on this proposal. paul singer at it again to move bhp's main listing from australia to london. he is not impressed by the suggestion. unthinkable was the word that scott morrison used. php.hold a 4.1% stake in -- bhp. ino, ending the dual listing both australia and london. saying, why don't we close the australian listing? morrison says that will be contrary to the conditions of their merger agreement. he says that may lead to a criminal offense and the government would move to block that. there are not too many fans of this idea.

moody's saying that it could be credit negative, highlighting their business as a significant asset. has majorroposal flaws. not very many fans. [speaking simultaneously] .> thank you very much let's take a look at how the broader markets are doing in the region. one market to watch is the cosby after coming back from the buddha birthday holiday. we are seeing a reaching a new kospi.for the mostly just doing a catch up rally. other larger markets like australia and new zealand are falling with the asx 200 down about 22 points, after no change , perhapsfed for march signaling that we could be seeing a fed hike in june

despite that soft patch in the first quarter. more to come here on bloomberg television. you are watching bloomberg asia. ♪

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i'm gonna just go back to doing what i was doing. find your awesome with the xfinity x1 voice remote. andt is a: 30 this morning -- it is 8:30. daybreak. watching >> house republicans plan to vote on the obamacare repeal. says they have the numbers to pass the bill. undecided, remain adding suspense to the bill.

using cash and combing words to soothe investors. urged people not to overreact and put more cash in the system. policy makers are trying to send a clear signal. diplomats used in a discussion korea.icize north increased military activity for higher tensions and ofna floated a possibility talks. >> the conflict with north korea could become a cyber conflict.

are reacting with a major attack against the financial infrastructure. >> the french presidential elections turned nasty. portrayonalist leader -- there was -- pen arrived with notes and macron spoke on assisted. i am paul allen. this is bloomberg. areet's see how markets this morning and there is a record and they focused on the

industrial metals. >> i want to focus on what is you can take a look decline and they also -- players on the and the chairman says that he intends to step and in the coming months says there is not a gas crisis. they said the exports would be curbed.

nickel mining areas rejection ofthe the secretary. short-termll be negative for players and we have andnk snapping a drop shares are at the highest since 2008. reducing and the domestic market is improving. andhe earning front is out

andre joined here on set can they return growth? there is an unexpected loss in the markets and the a consensus year some outnd there are there who expect a stronger and it mightenue be a help. the bank has been very actively trying to wind back the exposure

to risky markets and investors .re starting >> there is a lot on tucker's list. we are also looking at the buybacks. >> this is something the outgoing ceo has flagged before. it is not so helpful, but the last round of results flagged that they would be considering more further in the year and analysts are not expecting anywhere in this order and we will be looking for more clarity and how we will fund this buyback.

hsbc has beeng actively doing is winding back expenses and i have had a is aive trend and there measure of how fast costs are growing with revenue growth. i think we will be looking for -- and >> what about the global banking of market's decision. >> we have the fixed income and

and itme over the banks indicates that may have -- inued and thank you for giving us a preview of hsbc. iphones could be blocked from the u.s., if qualcomm has their way. paye is refusing to licensing fees. fights more about this and if it will cause a ban on iphones? >> it is unthinkable, but if they have their way, we may not see them. on andght has been going the shares have been falling.

qualcomm and qualcomm is hitting back. apple was taken to the international trade commission werehis is a foundation qualcomm has these patents. whether itdless of has qualcomm components. even though it doesn't, it relies on the cellular technology. kim cook said that --

he leaves it open and says that we will see and says that qualcomm has not offered safe returns and, to look at how much apple could be hit, take a look at the pie chart. this is $86.6 billion and, if this does happen, it will be a huge hit. s are happyvestor that qualcomm is fighting back a little bit. >> yes. some of the analysts are saying a qualcomm just had to do this and apple could not get away with it.

how likely are they to succeed in this? months inuld take 21 the international trade commission. everybody who has been talking is saying that there likely to be able to buy the iphone and, for qualcomm and apple, they are trying to get to a settlement and qualcomm wants the money from apple and apple wants to pay less. with that, if apple or qualcomm settle, it could open the door to other makers. >> thank you. coming up, we will talk about the gradual rate hike approach. we will talk to somebody who has

worked in the powers of japan.

>> this is daybreak. >> the fed wrapped up a policy meeting and said that week data is not a worry. global policyr editor who attended the meeting. what are the lessons they can take out of the statement from the fed? towe have a special guest help us with these questions and how it is linked to the rest of the world and japan and throughout the region. professor of economics

at a school of public affairs and a minister of finance and one of the best-known experts -- start on the federal hikes and a path to we had a meeting dad said we would not worry about the first quarter. interpret this path? the best scenario they

can come up with and i think no optimism over pessimism and that is reasonable. quarks do you think there is a danger of moving prematurely? they continue to say gdp path. is down and on a there is trillions and the united states and an expectation .nd they will communicate that is important.

-- important? >> they want to communicate carefully so that there is no surprise happening. yes. >> what does it mean for other central banks? the monetary policy report and --ed a change inside ands means it will weaken it will be good for the bank of

japan. japan usehe bank of some help? andhere is a labor shortage there are different industries in the labor market experiencing spreads tond this inflation. >> the headline and a lot of people have been following is negotiations. >> outside of that part of the labor market, you say these other entities are controlled by

labor negotiations. negotiation only cover theof labor force and withs are concerned more the job security and it is a segment of the labor market. >> i want to continue the conversation and there are signs there is a long way to the boj target and will it get there? this is our panelists here today. i'm kathleen hays and we will be coming back here.

will come back to bloomberg and weion here in japan are taking a look at risks in the asian region. ministry of finance and this

question of japan and inflation. rising, but the core number is points 2%. -- is 0.2%. it is going to be so long to get to 2%. it is going to be meaningless. rate at theegative short end and it is time to move on to something else. boj'ss is not the responsibility and what they can hope that qe is

environment will make inflation the interest rates in europe. one do you think you will hit 2% inflation? there will be oil picking up. >> we are making sure the assumptions are stimulated. andou are on a panel moderating about an hour from now. a financial crisis in the making? getting in china, the

asiawill be reviewed and is prepared. say the foreign reserves were piled up and the financial markets were strengthened and they did not have a problem during the global crisis. now, i think the biggest risk is corporate debt and sovereign debt. they had state owned banks and they have to watch

carefully. >> do you think it is an and -- e strategy >> they handled the flow problem and they want to control that depreciation and they do not takingre and they are the controls and they want to raise the interest rate and the increase in the interest rates is pushing the real estate markets and the growth rates are affected and there a couple --

there are a couple or two or three things they keep up. they will avoid the crisis. >> thank you for joining us today. it backre going to send to you. a terrific day here at the conference. >> thank you. have fun. we will see what is coming up here on bloomberg markets. >> we will have another surplus or a shrinking that we are looking at and we're looking numbers that are out in over three hours from now and we will see how they are doing and if they can keep the

dividend. that is what we have. >> you have some things. >> we have just been in eurocom okohama and there is a discussion about how the financial crisis has changed and they are talking about the u.s. and china trade. this is bloomberg markets. next.

>> to get of the hospital, you did push-ups. people than had working for you. it is a chilling experience. >> president obama calls you in the office. people would recognize me.