♪ >> we are very focused on trying to achieve our 2% inflation target. it is not a subject of discussion. betty: that is the fed chair commenting, pushing back wall street toward records. while treasuries rose and the dollar fell back. yvonne: asia pacific building on the rally. the expansion of credit in china expected to write -- raise the risk on mood. betty: the brexit clock is

ticking. the u.k. must make its position clear. yvonne: guilty of corruption, the brazil inquiry. we have world coverage on daybreak asia, we are live in brazil to discuss the fallout from the conviction of former president lula on corruption charges. betty: stateside it is all about janet yellen's testimony. we will have full reaction within the next few hours. this is "daybreak asia," live in new york. it is just after 7:00 p.m. yvonne: it is just after 7:00 a.m. here in hong kong. one and done for janet yellen's testimony to congress. the focus has been on the fed inflation outlook. it was uncertain according to her. someone, thete janet yellen market knows that

she is back. according to how investors are interpreting this. betty: they sold some divisions. they will still continue on this rate hike path, maybe it will be pulled back just a little bit. there are others that doubt we will have a rate hike at all for the rest of 2017. were leaningers more toward the latter part. take a look at my bloomberg and the 10 year yield. you can see this precipitous drop later in the session. janetn reaction to what yellen said in her testimony. that fall in the yield continue through the rest of the treasury session. we will see if she roles that back tomorrow when she testifies in front of the senate. certainly bond traders were feeling dovish today. after the symphony of

central-bank talks we had, it did take a dovish turn for the markets. the green light when it came to equities and bond markets. , these arethe dollar playing out in the asia-pacific. heavy futures on the up in the region. new zealand kicking things off positively on them nzx 50. up about 0.3% for the benchmark. .7250 for the kiwi. up about 1/5 of 1%. ahead of the china trade numbers out, 0.5% for those futures. .7677 for the aussie. drop afteraw the 1% u.s. crude supply dropped last week area there were some gains on opec's first again for 2017.

about seeing crude down 0.3%. japan, we saw a strike on the yen, below 113, amid the drop. now, 113.32. also falling after the boj bought more bonds along the three to five your part of the curve. it is the second time in less than a week. we have the bank of korea and bank of malaysia central-bank decisions this morning. betty: let's get the first word news with courtney collins. >> first up, the chief e.u. brexit negotiator has warned the u.k. a second time in a week, demanding london make its position there. knowsaid that you needs to -- the e.u. needs to focus. the e.u. still does not know

britain's redline, and where they make compromise. least e.u. nine positions so far. the impositions are clear. we now need to know the u.k. positions on each of these issues to make progress. the idea the government is blundering along is horrifying. clearly there are major divisions at the top of the government. that takes me back to the top of the proposition. it has been pursued in such a chaotic way. say the boj will raise its growth forecast for fiscal 2017-2018 by as much as 0.2%. is based on recovery and

consumer spending and the rise of public investment in corporate spending. the boj has seen 1.6% growth in 2017 and 1.3% the following year. the nikkei says the banks may cut their inflation forecast for this year and the next. policymakers followthrough to reduce off-balance-sheet borrowing. growth and on balance sheet borrowing beat analyst expectations. worth $227n were billion. the former brazilian president d guilty of been corruption and money laundering for his part in that sweeping scandal.

lula remains one of the most popular politicians in brazil and was seen as a front runner. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. janet yellen telling congress she sees an economy that is strong enough to push inflation higher, balance sheet that will start shrinking sometime this year. kathleen hays here with more. the fed hike in june, yellen stress to the transitory nature of weaker inflation. but she changed her tone a little bit. kathleen: a little bit. what she did was acknowledge the uncertainty around the inflation outlook. she mentioned the transitory factors like the new mobile phone prices and drug prices. put them in a broader array that the fed is watching, bottom line

is tighter later market -- labor market will push prices. she said it is to early. let's take a look at the bloomberg. you can see a redline that the picks the fed's 2% inflation target. that is where the fed wants inflation to go. you can see turquoise line that includes everything. it is above 2%, now down to 1.7%. the white line at 1.4%. they are clearly headed in the wrong direction. have a bitrket did of a rally. we were speaking earlier with the chief economist and he said, yes. the fed talk of tightening in an inflation downturn may be one reason bond guys like this. >> it blows me away. they have been tightening since

early 2015 when they started hinting they would do it and push the market to do their job for them. we have now had interest rates come from zero to above 1%. that is a substantial increased. could takef we another look at a chart from our bloomberg bond team, you can see the odds of rate hikes in september or december continue to ease lower. septemberility of a hike is the white line. that is 13%. not above 50% anymore. one thing people took is a more dovish signal from janet yellen was her saying the initial rate of the funds rate may be lower than the fed thought, which would signal less rate hikes overall down the road than people have been looking for. the question on

the balance sheet, we did not get a clear timeline when that -- when running off that would start running off. john bullard, president of st. louis said in the last month, it makes more sense to do that when there is a meeting. that would signal september. what did janet yellen say? she sees the balance sheet shrinking soon. it is going to be this year. it is contingent upon the economy performing as the fed anticipate. i assume that means stronger jobs and inflation picking up. if subpar inflation does not go away, could this throw the fed off track on their plans to start the balance sheet reduction this year? i think the fed would say, no it won't. steps. make small if we are waiting for

inflation to turn around, we could at least get normalization on the balance sheet underway. yvonne: stick around, we will get more from you after this short break. we have janet yellen's testimony. how asian markets are seeing the fed the strategy. this is bloomberg. ♪ up next, julia coronado joining us as well on the shift in yellen's tone.

♪ ,"onne: this is "daybreak asia i am yvonne man in hong kong. betty: i am betty liu in new york. let's break down janet yellen's testimony with julia coronado. hays stayed with us. first and obvious

question, what did you think about the testimony? i'm agree that she was more dovish, leaving the door open for a softer interpretation of the inflation trends. betty: soft enough we will not see a rate hike this year? julia: i do not think we will see a rate hike in september. we can wait and see whether the inflation turns higher. kathleen: let's get to the balance sheet. i raised the possibility, people worry -- wondering if the fed will normalize this year. i have a chart for you. you can follow along at home. this overlays the portfolio. two big part of the mortgage-backed securities, $1.8 trillion. and the treasuries, another $2.3 million. security gets you up

to $4.5 million. am i right in saying the fed will take this, no matter what happens in the next six months? we will at least get this process underway? julia: it does seem to be on autopilot, not independent, as the rate hike seem to be. a complex policy is such a heavy lift that once you have all your ducks in a row, let's keep in mind those ducks are about the change, let's go along with it. kathleen: jamie dimon expressed concern this is such a big risk. there is so much uncertainty, anything could happen. or do you take the fed's view? everything will be slowing gradual, relax. julia: i put myself somewhere in between. i do not put so much faith in markets that everything is already reacted to. it is uncertain, we have never been here before.

we do not know how markets will take it or how it will interact with other things i'm a what the ecb, the boj and data are doing. we could see more tightening as more markets absorb the information. they have been as careful as they possibly can about laying out every detail and putting it on a very gradual trajectory. it gives them plenty of time, if the situation changes, to change course. yvonne: there were that stability and asset issues over the past few weeks. looking at active price evaluations, we try not to opine on whether or not they are correct. do you read that as a pullback? how much do you think financial conditions are a factor in the fed forecast? julia: the booming stock market

was a factor in their deciding to accelerate the pace of rate hikes. along with good data. assetey have opined on prices, of late. the fact she pulled back ever so slightly suggest these inflation misses are weighing heavily on their minds, then they were admitting at the june press conference. kathleen: why do you think inflation is not rising? could it be corrected by the federal reserve? julia: i am not sure about that, we are all confused about the driver of inflation. it is a global phenomenon. you were just speaking of the boj raising their growth target and lowering their inflation projection. i do not think it is just transitory factors, it is not all about cell phone price wars. betty: you are right. it is japan, australia, europe. why? julia: some of it is good

inflation in the sense, why do we have a price war? progress,chnological that they can offer unlimited data and that is more feasible. some of it is technological progress. some of it is global forces, like the label -- labor market. it is not just about what is happening in your country, what is happening in other countries. betty: is a demographic? julia: some of it is. and that is also a global phenomenon. demographically, we are losing the growth drivers, and that is a driver of inflation. and competition across countries, and throw on to technological progress, which is quite rapid. up to low inflation trends in central banks that will find themselves stuck close to the zero bound. yvonne: how critical is the cpi going to be tomorrow?

some are calling it a make or break moment. if that disappoints, could that push the fed to delay the balance sheet unwind, or at least the announcement later this year? that the does not feel balance sheet unwind is so dependent on the inflation trend. unless the economy rolls over, that is probably on a preset course. our thinking is it september for an announcement. i do think it matters for the next rate hike. we are below consensus thinking. that,d-based driver of that could take december off the table, at least for now. unless something changes. kathleen: she was cory when it came to the future. she was grilled so many times about what would happen after february 2018. so many headlines are about gary cohn being a possible successor to janet yellen. what do you make of that

nomination? julia: it is unconventional. he has no central banking experience, no academic framework that we can look to that will say whether he is a hawk or doubt. pragmatic is, he is and will want to keep economy on course. probably not a big regime change in the current policy structure. kathleen: which makes me think of a quick final question. saidsion, is the tightening into a falling inflation environment, and is somebody like gary cohn equipped to handle it? they are showing a little more flexibility on rate hikes. they do not want to be the cause of the next recession. if inflation stays low, the neutral rate is low and they will stop earlier. but that is the worry of having an unconventional person who may find it harder to form consensus

when you are confronted with a crisis. when we thought -- at the helm, he had so much credibility, it helped him form consensus. it is not to say there is one model for central bankers, we have had many types with many different backgrounds, but is -- it is a little concerned. yvonne: great to have you, julia coronado. thank you. more and a roundup of stories to get your day going in today's edition of daybreak. for subscribers, go to dayb . it is also available on your mobile. you can customize settings to get news, industries, assets 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. endingn airlines is chair agreements with qatar airways over a dispute of government subsidies. they notified carriers of the decision june 29 and see no financial impact. the pilot union had called to an end for thek -- the qatar theair after they called aircrew grandmothers, a comment for which they have now apologized. yvonne: the second of three major u.s. securities investigations. it is the biggest the finance organization has struck. the bank must deal with the three investigations before can

return to the private sector. betty: show me the money. that is what a lawyer told management about attempts to outbid warren buffett. berkshire offered $9 billion cash for oncor. however, elliott is pushing for more time to put a deal in place. they will be back in court later this month. braziliane former president lula da silva has been sentenced to nine and a half years in jail for grafton money laundering. carwashs a sweeping corruption investigation. let's get to our economy and government editor who joins us live from brazil. it great to have you. a mentioned how big of setback of this is for that 2018 run. tell us the latest.

what does it mean for him? >> this is bad news for his chances of reelection in 2018. if this sentence is upheld on appeal, he will be ineligible to run. at the moment he has a chance. but it is looking increasingly slim. he had a solid core of support. many protesters out on the street. they were demonstrating against the decision. for many brazilians, who might be more on the fence, this conviction is the last nail in -- nail infor lula's the coffin for lula's credibility. betty: what does this mean for brazil? >> it offers a short-term respite for michelle kummer -- temer, going through his

own corruption charges. but that is only short-term. the long-term will only increase brazilian disillusionment with their ruling class. congress is under investigation as part of this carwash organization, but also for other crimes. was the icon, he left office with an 83% approval rating and was beloved by many brazilians until many of these corruption allegation started to surface. his crashing down to earth is failedbol of brazil's political establishment, which is coming under serious pressure from all sides now. thank you, live from brasilia with the latest on this corruption scandal involving former president lula da silva. we want to break down the june figures coming up next. and the new loans in aggregate financing.

we continue to look into those numbers. this is bloomberg. ♪ whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want. go on, try something fresh. tripadvisor. the latest reviews. the lowest prices.

yvonne: beautiful morning thursday here in hong kong. 30 minutes away from asia's first major market. betty: it is 7:30 p.m. wednesday. turned out to be a nice day here in new york. a nice day for the bond bulls and equity old, the market closing higher after janet yellen's they won testimony. i am betty liu in new york. yvonne: i am yvonne man in hong kong. let's get the first word news with courtney collins. records, rose toward treasuries rallied and the dollar fell back. janet yellen signaled the said would not rush to tighten

inflation below target. she told the committee the u.s. economy is expected to grow consistently, allowing repeated gradual rate hikes. she repeated the fed's intention to begin unwinding the balance sheet soon. >> my colleagues made the judgment in june when we laid out the final details, that if the economy continues to evolve in line with our expectations, it something we should begin to do this year. to my mind, i would say relatively soon. >> the trump administration is telling lawmakers it intends to redesign america's trade deal with south korea. president renegotiated the accord in 2012 to gain better terms for u.s. automakers. however, president trump has called it a horrible deal and plans to revamp or terminate. he told president moon that seoul should give u.s.

automakers "a fair shake. 1.5% adding pressure on the r.b.i. when it meets next month. shares led by energy stocks and --auge of from aipments surged year earlier. an iceberg weighing one trillion tons has split a way in antarctica. it is the size of greater london. floating, iteady is not thought to raise sea levels. satellitesored by and scientists expected to break up and the smaller icebergs that may drift into warmer waters. environmentalists say it shows how fragile the polar region has become. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins.

this is bloomberg. yellen'snet reassurances that will not be a rush to raise rates should help stocks in the u.s. the dow closing at this fresh high. joining us now is su keenan with more. fall, bothhe dollar oil and gold higher. a bit of green on the screen, the go-slow fed stealing thunder from the trump emails. those were the headlines yesterday. let's talk about big movers, this softwares, had gains over the average software. they may outperform their peers. morgan stanley had strong comments as they entered the earnings season. you have vornado doing very well. --'s go into that bloomberg

the bloomberg and take a look. even though we have stocks near the s&p, we are not back to the 90's. -- the 1990's. the median average, we are not 2009.ove but we are slightly above the median average. yvonne: oil remaining in the spotlight, but huge drop we saw in u.s. supplies, which would normally be bullish, but did not start much of a reaction. su: they did not. api show their it be a decline, the biggest drop in almost a year. we did not move that much higher. at one point we were up 3%, but the gain was cut back to a 1% gain.

we are looking at the fact that the u.s. output was up. a bearish undertone to the report. you cannot overcome the bearishness is what one trader said. focused on the fact that we have two african producers in nigeria. the opecfrom secretary-general that perhaps it will all work out well. take a listen. >> what we would like to see is an orderly recovery. that would not disrupt significantly the rebalancing of the market, which is a delicate process which has taken longer than expected, because of the changing fundamentals. su: the rebalancing of the market, delicate indeed. we have the major players and opec involved in these output cuts. nigeria signaling it is willing to join in the accord and cut

its output. u.s. leaders leading a pickup in terms of output that adds to concerns about nigeria and libya. that has been bearish for the oil price since may. su keenan there with the latest on the markets. we look ahead to the china trade data numbers. we have money supply numbers that came out yesterday. it was the slowest on record in june. the second straight month where we have seen a new record low being hit. let's get to our chief north asia correspondent who is in shanghai this week. so good to see you. it was interesting to hear from a spokesperson from the pboc she was calling slowdown in the m2 growth the new normal. >> it is interesting, they are on a deleveraging campaign. we saw it dipped down in m2 in

money supply. in june in the latest data you saw a new pickup in loans and aggregate possible. how is it possible money supply is dipping lower -- 9.4% growth nine point 6% in may. before may, the number had never been in single digits in data dating back to 1997. the money is being tightens, but new loans and aggregate financing. the big dilemma is, how do you take the speculative side of debt accumulation out of the equation while not choking off debt to the real economy and growth? that is what the dilemma is. in there briefing yesterday said they are taking that speculative side out of it. there is more efficient use of credit. but there is still a risk here.

if you are clamping down on funds to nonbank institutions, which they are doing, and taking the speculative side out of it, you run the risk of a faster slowdown than they predicted. that is a balancing act to they are doing. betty: we have china trade numbers later. we heard these threats at the g20 about steel tariffs and thing is -- things of that sort. tell us that plays into trade numbers? stephen: the specter of possible trade tariffs from the u.s. is out there, of course. but that is one sliver of the chinese exports story. they export so many things. the people bloomberg have been talking to say, it is a cloud hanging over trade relations right now, but it is not going to be a big dampener on trade. if you look at korean, taiwan exports, pretty robust.

we're looking at exports expected to be 8.9% rise. if you strip out the march, february anomalies we get every year, that will be the fastest pace of export rises in dollar terms, dating back to december of 2014. it is a pretty robust picture for exports. betty: thank you so much. we will be watching more and getting more analysis on those trade numbers. plenty more to come on daybreak asia. this is bloomberg. ♪

yvonne: we are counting you down to asia's major market open this morning. japan futures up 70 point. looks to be the case for the rest of the region this morning after a dovish janet yellen --tified in bc overnight rushing to, bc overnight.

betty: let's turn to private equity and the implication of high stock valuations. a guest says there are always opportunities in a changing world and that the internet is changing the game on an almost daily basis. >> private equity has to work harder. we have a lot of capabilities at bain capital. we are trying to do deals where we can transform will companies. people across1000 the world that can do that in an expert manner. companies can really transform and make companies better. we're proud of doing that. >> where do see opportunity -- that can be geography, or sector-wise? >> there is always opportunity where there is disruption.

certainly in technology and health care, all sorts of things going on. it is astounding. billion we spent on the cloud alone this year. 15 years ago, zero. at that has been a major transformation. we are only in the third inning of how the internet has revolutionized everything we do on a daily basis. --ruption, a great place for to take a long view. you are not affected by markets going up and down and eps on a quarterly basis. >> many of these private equity funds -- do you have concerns they are getting too big? try cannot comment, but we to stay a similar size. we have been a little smaller than the rest. we want to deploy capital to get high returns for investors. funds andsize our look at the size of the

opportunities. you do not want to have excess capital. we watch for that every day. that being said, it is interesting. there is more use for private equities than there used to be. there has been a huge growth in tmt. there is a dynamic happening with the internet, the cloud. the chairman with of the exchange commission. she said the bigger threat was not getting companies to go public, that may be companies were in the pipeline, waiting to go public. how is that factoring? >> good companies can always go public. we never had it problem taking our companies public. there are cycles to the market, good times and bad time. what may be happening, there is

a large ecosystem built in private equity. from $100 million funds and more. can take aund company to a certain level and then they need globalization, more capital, more expertise. even then, a large private equity fund needs capital to go public further out than it used to be. that is created more demand for that capital coming in, putting people to work. capitalhat was bain pagliuca. you have some exciting news? yvonne: i have been wanting to break it all morning, some of the biggest news. hong kong, as shake shack is planning to open. a push into mainland china market, as well.

ambitious, 14ite stores in hong kong and macau for the next 10 years or so. we see the u.s. market oversaturated when it comes to burgers and fast food chains. i have to question if they are not too late in the game? the burger craze has waned. folks for shake shack they do not think so. it has not been slowing down in the u.s.. they have struggled a little with same-store sales. i have had their burgers, they are great. as you mentioned, there is a lot of competition. what is interesting, is the competition coming from mcdonald's. i want to show you a chart comparing mcdonald's stocks to shake shack. for so long, people were writing off mcdonald's, saying their , everyone is going

gourmet, going to shake shack. but look at this chart for mcdonald's. it has been incredible, the comeback for mcdonald's so far. they came back and said we will take market share away from these gourmet burger joints like shake shack. they are able to do that, drive prices down, increase their margins. had one of those craft to burgers from mcdonald's and i got to say, my kids and i ate them and, not bad. i was excited to eat a mcdonald's burger. yvonne: did they have a machine like in hong kong where you can customize and put it together? i love all the upscale. the were mentioning about menu they will be bringing to hong kong, as well. 90% to 95% will be the same as the u.s., but there may be more chicken items. that will be different. betty: we are getting more

upscale in our tastes, even at mcdonald's. one feature on the bloomberg we would like to bring to your is ouron -- attention interactive tv function. you can find it at tv . you'll be able to watch us live in see previous interviews, dive into any securities or bloomberg functions we talk about. the conversation by sending instant messages during our shows. this is for bloomberg subscribers only. this is bloomberg. ♪

♪ ,"onne: this is "daybreak asia i am yvonne man in hong kong. betty: i am betty liu in new york. digital payments are growing industry with big players around the world. alibaba, ande softbank say the war has only just begun. -- the ceo says he

wants the world and wants it now. he told our correspondent that at the moment, profitability comes second to profit share. >> finally it is going toward maturity where we have [indiscernible] is shaping up, one ecosystem belongs to alibaba and others. another ecosystem belongs to amazon, including content and so on. another, to tencent. >> how are you going to win? are investors going to keep throwing money? amazon, $5 billion and counting. when does it end, or how does it end? win, you are planning to that winning race has already ended. it is going to the tech world we have been talking about.

it has gone beyond the throwing money. throwing money was a trick. >> what is your priority right now? >> [indiscernible] >> is profitability a near-term grow? >> [indiscernible] out of the question. >> is there overheating? outcome ofing is an overpaying. when youtube was bought for $3.1 billion, it was overheating. when instagram was bought for $1 billion, it was overheating. those are going today. but there will be a shakeup,

right? it is already happening. >> in any business. >> in five years, who will be standing? >> i do not think this is a question -- we are a paranoid bunch at paytm. we already know what they can do, so we are paranoid. [indiscernible] if they do not swing faster, they will be out. >> what else do you need in your portfolio? >> i want the world, and i want it now. [laughter] the world, and you want it now. good to meet you. ceo.e: that was the paytm

a quick check of our business flash headlines. its fight against a $1.3 billion tax bill in france as the court claimed it used legal loopholes and amazon -- they did not avoid taxes. they said they were not liable for french taxes between 2005 and 2010. emmanuel macron about to make the country a startup nation. yvonne: u.s. computer and gaming company razor setting for an ipo in hong kong that could value at $5 billion. they may use the cash to help fund smartphones. and atll products online best buy across the u.s. they want to use hong kong as a beachhead for the gaming market. they plan to list in october. betty: toshiba looking for $2.5

billion for its unit. they own with incj. several options they may use to raise the cash they need formal trade million dollar losses. they begin trading in zurich on july 21. plenty more to come. the major market open his moments away. yvonne: we have janet yellen's testimony, which came out more dovish. sophia kamaruddin watching openings in japan, korea, australia. >> it is a risk on session. futures in asia, look at the track, the rally we saw and wall street. a softer dollar and falling treasury yields into that session. it is not going to be all about

the fed. we have rate decisions of a malaysia, south korea. we also have chinese trade numbers on deck. i want to flip the board to show you stocks to watch at the open, starting off with whitehaven in sydney after a reported lower wholesale, and a miss of its full-year forecast. tokyo, theay in numbers will provide a glimpse into the health. its operating margin has been improving with of that price slashing strategy. said to reveal a hydrogen-fueled vehicle in august. that comes over six months earlier than it originally said. things we are watching out for the open here in asia. be all systemso go when it comes to the equities rally.

we have plenty more ahead in the next hour of "daybreak asia." we mentioned the reaction we did see out of janet yellen's testimony, it was quite dovish. it was interesting because we did not hear too much about the whole issue of financial conditions or asset prices. that may be a conversation. it is a question of whether markets are getting ahead of themselves of the uncertainty coming from the fed chair. betty: if you are looking at where the dollar has been trading, for instance, it would seem investors were ahead of the curve, in terms of those expectations. a keys interesting, question is, are we getting a fed that is becoming less data dependent? , it is aok at the data most clear to some we do not need to raise rates. certainly not anytime soon. yvonne: the big question is maybe for the boj, are they still winning in this battle of

yield curve control? they stepped into bond markets twice in the last week. it was the three to five year portion of the curve. you have to mention the frequency and continued talks of expanding its balance sheet. this is bloomberg. ♪

♪ >> asia-pacific markets set to build on wall street's rally. credit in china also expected to risk -- lift the move. >> gradual rate hikes, unwinding should begin soon. what's growing frustration in brussels. the brexit clock is clicking -- taking. >> counting down to the latest trade data from china.

exports providing a cushion for growth. this is the second hour of daybreak asia. it is just after 8:00 a.m. certainly the testimony by the fed is what is reverberating throughout the financial markets. you saw that immediate impact in stocks and bonds, and the dollar as well. we saw the dollar as well. , all thislying because there is this sense that perhaps inflation is not going to pick up any time soon. the fed may delay that rate hike. gradual has gotten even more gradual. it has taken a dovish term. >> yellen orchestrating the symphony here. asian markets are cheering her dovish term.

level.y yields back 2.2% we have just these stocks rising 14 of a percent. -- 4/10 of a percent. -- thelar-yen trading levels we trading at haven't seen since june 27. this ahead of a rate decision out of the bank of korea do this morning. along the central bank of afternoon, if anyone is looking at all is the shares, the aussie dollar looking study here. thisse trade data on deck morning. if the export number comes in stronger that could help propel the aussie dollar higher and provide commodity space, which

we have seen a rebound in. taking a look at the commodity space, base metals on the rise. gold losing some ground this morning. and oil above the 45 barrel mark . -- $45 barrel mark. seeing moresses are ahead. signaling slightly higher open after that rally we saw on wednesday. 2017 has been a tough year for the dollar. yellen not helping much. sterling study after u.k. payroll beat estimates and

unemployment fell to 82 year low. can a delivered its first rate hike in seven years. thene hawkish tone expected. last check on the dollar-yen, the 113 handle there. around 112a.d. a break of that level could towards steeper decline 112. strong support for the dollar-yen could emerge with a 100 day moving average. have said we seem to driving some today. a lot going on in asia as well. betty: thank you so much. -- thank you, so much.

>> first up for gpu brexit negotiators warned the u.k. for a second time in a week, demanding london make its position clear. adding the eu needs to know onch points can be agreed of -- agreed upon. it has been three months since the u.k. triggered brexit. the eu does not know the red lines and where it might compromise. [indiscernible] >> and your positions are clear. we now need to know the u.k.'s position on each of these issues in order to make progress. >> the idea of the government is blundering into this is just absolutely horrifying. they are clearly major divisions at the top of the government. that takes a back to the

conversation i started with it i can't see brexit happening when it is pursued in such a chaotic way. >> the bank of japan will raise its growth forecast for 2014 by as much as 2/10 of 1%. the nikkei news says that is based on a recovery in production and consumer spending, and a rise in public investment, and corporate spending. growth -- theen nikkei says the bank may cut its inflation forecast for this year as well as next. of money china's supply is the slowest on record in june as often makers follow through on pledges to reduce off-balance-sheet borrowing. growth and on balance sheet bank loans beat expectations. new u.n. loans were worth $227 billion.

that is the second record low in a row. brazil's former dissident lula da silva has been convicted of to nearly, sentence 10 years in prison. he was found guilty of moneylender in -- money land during -- money laundering. lula remains one of the most popular politicians in brazil, and was seen as a front runner. for hours a day, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. >> janet yellen stuck to her inflationng congress may be softening now, but it is going to be heading higher as the job market gets stronger. what do they read into this? .athleen hays is here with more was there really a change here? >> it was a pretty small change.

it is moreink perceptible because the market reacted. sometimes how markets react depend on what they are expecting. because they are so teed up, the fact that janet yellen seem to acknowledge the obvious and say, yes, there is uncertainty along the outlook, don't worry, it is transitory, it is temp. read inflation has fallen back from its target because of -- inflation has fallen back from its target because of lower drug prices. it is when to take a wild. the labeled us today market is getting stronger, will rise more. let's look at btv 2985 so you can see why this is being so wi. let's closely watched. more than jobs. you see a yellow line, the fed's 2% target. the blue line, the headline deflator.

boy, it how it has -- how it has come down. 1.43. here a lessers hawkish janet yellen? .hey are expressing uncertainty gradual rate hikes, like she always does. let's look at a chart together, showing the [indiscernible] doing one more rate hike this year is not so strong. we will see from this chart the odds looking at the september rate hike, the december rate hike, they have gradually come down. you can see again, there it is, for the december hike, it is up around 45%. for september it is down to 13%. today, aeige book out survey of the 12 district banks,

saying labor markets are targeted. put it all together. the that is talking about raising rates, could that be perhaps white people are -- why people are getting bearish? >> it's sort of blows me away. they are tightening. they have been tightening since early 2015, when they started hinting they would do it, pushing the market to do it for them. we have had interest rates come from zero, a substantial increase. >> the natural neutral rate could be lower than the fed, that would signal fewer rate hikes down the road. it does not change her conviction to have one more rate hike this year. >> what about for the balance sheet? we did not get a clear

indication of the runoff space. >> the fed is not ready to give it to us he is -- give it to us yet. what she said was the following. she sees it shrinking soon. did not give a start date. people think maybe september, october is the logical time. now, question you have to ask, if inflation remains subpar, if it keeps weakening, could the fed start down another tightening path, leading the balance sheet runoff? the president and founder of >> it does seem to be a bit on autopilot, not data dependent as the rate hike seems to be. crafting a consensus around such a complex policy is such a heavy lift, once you have your ducks in a row, those ducks are about

to change, you just go ahead with it. >> i love that line, all the ducks in a row. does she is bring referring to changes at the top of the fed. janet yellen was asked about not to have another term. if president trump wants to call her up and talk about it, she indicated she was perceptive to listening and talking. >> being coy as usual. thank you. we'll have more analysis on yellen's testimony. find out while our next guest [inaudible] the rally we are seeing today. >> and we will hear from india's largest digital payment's company on how it is increasing its digital footprint. this is bloomberg. ♪

>> this is daybreak asia. i'm betty liu in new york. yvonne: stocks in the asia region are gaining after jenin yellen signaled the fed will not rush to tie in monetary policy. i want to bring in alicia garcia start off with you, are we seeing the old janet yellen? what did you make of the comments? soundfirst glance it did more dovish from the overall feel of it, but overall she did confirm what we know already. there was not much news. inflation is below target. she seems to be confident it will recover going forward. we are not so sure.

i'm not so sure, personally. we do have a timetable, we do know it is unlikely they will raise any way, another time since september. we do have a strong earnings season. as far as that goes the market is quite happy for them. markets just misinterpreting that statement? >> that is the issue. -- it is missing that mandate. defense, only fed the fed that is missing it. that is what matters. the other things are issues that are not really monetary policy. what i am talking about is the macro picture. below 2% inflation is not the

end of the world. it is less than perfect. says we don't have imminent rate hikes, i would like to see her being proven correct in the next few weeks. banks,the central inflation coming back into the system. , you can't goeing against that. >> we are holding our breath for that. it is interesting, because we have not seen inflation pickup, and we are all waiting for that, you get the sense that the fed is getting less data dependent. >> i hope it is that. this concept of too long, -- data dependency. guiding.to nobody is i feel central banks have lost

their mandate. keep having a sense of what they are doing lately. you expect basically the same thing. have you think the markets misinterpreted yellen? do they get too excited? years i face it, four would argue, i expect them to do its job in the least painful way . that is not going to be possible. every time they feel the need, they explode. in particular -- it is going to hurt.

>> we saw that evidence in the bond market. >> i am just wondering if asia should take comfort in this testimony. it really shows the yield curves thiss the u.s. treasury, red line here is when yield curve control was announced in september. we did see curves flattening here for the japanese yield. we are running flat here. , everything else seems to be steepening. you see it steepening in the boj. we have seen to fixed income operations in less than a week, alicia. >> we have seen arguing for a --g time, that these targets [inaudible]

which does make a difference. it shows they are not very confidence. never really achieving that precise target of 0%. it makes no sense now. beforetroduce it right interest rates globally started to move up. theit is basically forcing boj to come back. the yen being weaker than ever. they should just forget about it, or free write it in a way that does become a target. the whole idea was not to have negative rates. [indiscernible] of the day, they need

to look at what is going on around you. markets -- give up. now the curve is steepening by itself. >> they can let go. >> i want to drop a chart here. the net long dollar position. i find a fascinating chart. ,round the march timeframe these net dollar position start to go down. there has been this sort of tamping down of expectations for fed rate hikes which have been essentially confirmed today in some ways by janet yellen. i am curious where you see the

dollar, how you see that werency trading in what might see in the next six months. >> we are among those who have been shifting their views on the u.s. dollar. we have decided to further u.s.e our exposure to the dollar. we have moved it in favor of the swedish dollar, which we liked before. it is in large part related to the fact there central bank is one of the few exceptions that delivers on credible inflation targeting. they are above target. they have a promise to keep it above that place in a sustainable fashion. they have very negative rates. open, veryeen very aggressive, sufficiently aggressive am a two ensure they can meet the target, working well, they will be will to raise

rates going forward without having all of this nonsensical discussion we are seeing now in the fed. when you need to ease, you have to ease aggressively, then you can go back. the u.s. dollar is a slightly different case. the hiking patterns there will not be as aggressive as the fed would like to have. that will keep the current level , currency levels week. -- weak. >> is the boj pretty isolated when it comes to these central banks? the canada central bank hiked rates for the first time in many years. you expect other central banks to start tightening? >> a few. [inaudible] two early. -- too early. the economy is recovering.

it philippines, i think won't be right after the fed. ce roads inve ni asian now. to lead the way to hike in some countries. >> who is the most likely to? >> the philippines. alicia, good to have you. here on set, you have more on daybreak asia. ♪

>> a quick check of the latest business headlines. google has won its fight against

a tax bill in france is a court rejected claims that it abuse legal loopholes. judges said google did not dodge taxes by routing out of ireland and said it's irish arm was not liable for french taxes. france's new president vows to make the country a startup nation. >> toshiba looking for $2.5 billion through an ipo. it owns 60% of the company with inkjet holding the rest. one of several options toshiba may use to raise the cash it needs to cover multibillion-dollar lawsuit edits u.s. nuclear arms. >> up next, one of six months into the opec curve, sales remain weak. and too much crude. this is bloomberg. ♪ these days families want to be connected 24/7.

that's why at comcast we're continuing to make our services more reliable than ever. like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most.

>> 8:30 in singapore. a half hour away from the open of trading there. betty: you're watching daybreak asia. let's get to the first word news. >> u.s. stock rose toward records and the dollar fell back as janet yellen signaled the fed will not rush to hike rates, but inflation below target. she said the u.s. economy is expected to gross -- to grow construed -- to grow consistently. intention ofthe unwinding the balance sheet soon.

>> we laid out the final details in june. if the economy continues to evolve in line with our expectations, it is something we should begin to do this year, and to my mind, i would say relatively soon. the fed, investors are now watching the bank of korea's rate decision. they're expected to hold rates at record lows but the real focus will be on whether it will raise it wrote forecast and give me true -- any clues on policies. it's the first since a governor pledged to adjust monetary policy if the economy showed clear signs of a recovery. south korea will send a delegation to washington to discuss a date for trade talks. soul has received word from the trump administration that it intends to redesign the trade deal with south korea. thatdent obama negotiated

back in 2012 to gain better terms for u.s. automakers. called it a has horrible idea any plans to either revamp or resend. inflation fell to its lowest ever, 1.5%, adding pressure on the r.b.i. to cut rates when it meets next month. shares cap to third day of new highs led by energy stocks and mid-caps rose to an all-time record. the prospect of new tax rate sparked a doubling of gold imports. tonsents rose to 72 metric from 32 one year earlier. an iceberg weighing about one trillion tons has open away in antarctica. it's about the size of greater london, but it is not expected to raise sea levels. it's being monitored by planes and satellites and scientists expected to break up into smaller icebergs that may drift into warmer waters. environmentalists say it shows

how fragile the polar regions have become. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. time to see how the asian markets are shaping up on this thursday morning. here is sophie, and it's looking pretty great out there. >> momentum building up in asia, stocks and bonds on the up here. the dollar saw this is helping support regional currencies. asian stocks are set to rise for a fourth straight session. trading the highest in about a month. .2%, so we are seeing the nikkei 225 rise about .4%. .9% to resume gains for a third day this week.

property and health care leading the advance and the aussie edging closer to the 70 sent mark ahead of the chinese trading data due out this morning. we are forecasting a hold there. chipmakers are rising in seoul. thattry reports saying south korea could surpass taiwan is the top chip equipment maker in the world this year with china taking second place in do have taiwanese future signaling a gain of about .5% at the open for the taiex. ksm see is due to report earnings later today. up thewant to pull boarding show you some stocks where keeping an eye on. whitehaven in sydney sliding after its fourth quarter sales

came in less than expected. coking coal may fall to $105 for sliding2019 and toshiba 4.7% in tokyo as it's reported its unlikely to give a dependent on toshiba's annual report. so it is like more potential troubles for toshiba. yvonne: opec is still pumping have our energy editor with us from san francisco. nigeria has signaled its willing to cap production to ease the global oil glut. we had to draw down it inventories here. what has the response been for the market? signal they are willing to cap their oil production in the market basically didn't do anything on

that news. the reason for that is probably because bacteria has said it is willing to cap its production at a level that is higher than its current output. so if anything, that gives it more room to grow, not shrink, and that's not exactly a bullish signal for the market. bullishs there any real news at all out there for oil? >> i wish i had better news for the oil bulls out there. unfortunately, even the good news sounds like not good news. earlier, youioned had the u.s. government put out a report to show that inventories of oil dropped by the most since september. while prices rose, they still failed to break above that 50 day moving average. for technical traders, that threshold is key to break above in order to signal the prices are really ready to start rebounding.

opec statements they been putting out over the past 24 hours don't seem to have helped, in fact the report you mentioned earlier is showing that opec is still producing more than the market needs. i believe that in june, they estimated that their groups output was at 32.6 million barrels a day and they are expecting the market needs about 32.2 million barrels next year. you mentioned all the headwinds and we are far below $50 for wti right now. what is everyone looking for to turn things around? >> i think the market still has its eyes trained on opec. the group is meeting later this month in russia. unfortunately that's not necessary a bullish signal for the market because deeper cuts

are not on the agenda, and the opec secretary-general has made it clear that while nigeria may boost its production, it is welcoming those recoveries and is acknowledging the fact that these countries have faced challenges. even if they agree to deeper cuts, there will still be questions that loom in the market about whether countries will continue to abide by those targets. let's talk a little more about digital payments. there is alibaba and softbank backed atm's, but the war has only just begun. our north asia correspondent stephen engle says at the moment, profitability come second to market share. >> were going to that maturity

where you have ecosystems, and i think how is shaping up is, one alibaba andlongs to another ecosystem belongs to amazon, including payment and content and so on. >> how are you going to win? brady investments going to keep throwing money at it? amazon, $5 billion and counting. when or how does it end? >> the picture here is if you're planning to win by throwing more they, there is no into money in the tech wars we're talking about. is going to be who has more customers and connections. it's gone beyond throwing money. toowing money was a trick

make a large sum of money. >> what is your priority right now? >> a large number of users. it's a large number of users and inactions. >> how far down the road is it? >> 2020, nothing before that. overheating is an outcome of overpaying. for $3.1ube was ought billion, it was overheating. when instagram grandma spot for $1 billion, it was overheating. -- when insta grandma was bought for $1 billion. >> but there will be a shakeout, it's already happening. >> in any business. >> so in five years, who is going to be standing?

we are a paranoid bunch, we believe the unknown will kill us, not the known, so we are paranoid. if they don't swing faster than the market does, they will be out of the curve. >> what else do you need in your portfolio? >> i want the world, and i want it now. [laughter] he was talking to stephen engle. much more ahead. misguided and distorted. --d out fire guests say most our guest will join us next.

this is bloomberg. ♪

yvonne: this is daybreak asia. expecting june trade data out of china this morning. the consensus is for the rising exports providing a cushion for china's growth as investment slows. the spring and a senior fellow with the asia program at the carnegie endowment. he is cracking the china conundrum. usnks so much for joining from singapore. if we continue to see china's surge ahead,orts which is the expectation with the june numbers, is it going to get a lot harder between the u.s. and china, between

president trump and president xi? >> you are absolutely correct. president trump looking for reduction in u.s. trade deficit and he wants to see china's trade surplus thinking. as your recovers, exports to the west will increase. so it goes directly against what president trump is hoping for. betty: will it amount to things like steel tariffs? >> environmental protectionism died down for a while. the mar-a-lago meetings led to the agreement that was a good one. it focused more on opening the market rather than closing it. now as north korea accept, i think you will see an increased linkage between economic and political factors which increases tensions between the united states and china. betty: i want to point to an

interesting tweet that was just posted a few hours ago by president trump, which i thought was quite telling. he retweeted and article talking finally hitting the chinese market. he says after 14 years, an exciting opportunity for agriculture. so finally u.s. beef is hitting the chinese market. it sounds like we need more deals like that to tensions. how significant is something like that? >> i think it's a good thing. the less restrictions and the more open market, both sides benefit. we have to realize that trade is a multilateral issue. china will be buying more beef from the u.s., but as a consequence, it will buy less the from australia and japan. so this has global repercussions and they don't get the attention they deserve. yvonne: we've seen the growth

rate when it comes to china's exports. we are losing a little momentum here as we get closer to the end of the year. some could say that china is losing its competitiveness. how do you call it? beenobal trade has declining for several years now. china has felt that. its export trade figures have been slow and even negative in some months. that is a general sense global trade is climbing, but that is not actually true. china's trade funds have been falling less quickly than the rest of the world. it's been increasing steadily over the years. if you look at trade in terms of value added, after you take away the growth outputs and inputs, china's share below value added in trade has been soaring the

last four or five years. that is because china is producing many more of the parts and components which used to be produced in other countries, they are producing it entirely in china. so china is getting more out of trade today than it was three or four years ago. this is coming at a time when the u.s. is hacking off the global stage. there is a lot of talk whether china can fill that leadership vacuum we're seeing and be the leader here over europe and japan as well. do you see that as a grand vision that could turn into reality for china? >> i think america dropping out of tpp was certainly bad for the u.s.. it offers tremendous benefits for the u.s. and gave the u.s. the leading role, establishing good policy in terms of trade investment for the region. that was a fundamental mistake. but ironically, the best

arrangement would have been u.s. leadership in the tpp, at some point china joining the tpp, because trade is multilateral. the more they participate, the better off you are. people see china playing a leading role along with india, japan, north korea. the question is, it's a good program that addresses certain issues. what i would like to see is the u.s. actually tries to enter and participate, because trade is really multilateral. there's a piece of news out amid all the turmoil in and theon, donald trump administration still trying to fill all these different roles. ,ne of them was dennis shea vice chairman of a congressional commission that was highly critical of china.

he has just been nominated by the president as deputy u.s. trade representative. it's interesting because he is highly critical of china. he joins wilbur ross and others within the cabinet, be extremely bearish and critical of china. given all the number of individuals around him who say we should ban chinese companies from acquiring u.s. companies, we should be putting tariffs on, are you surprised we've not seen more hard measures? >> think this will probably be the most important issue in the economic agenda for the coming years. it's basically the investment flows between china and the u.s. many in the u.s. believe american companies are investing excessive amounts in china and it leads to job loss in the

united states. what is interesting is that of the total u.s.-foreign investment going overseas, only 1.5% of it goes to china. it's almost negligible. if you look at europe, which economically is the same size as the u.s., it's a multiple higher. the reverse is also true terms of chinese money coming to the united states. china's money going to europe is multiples higher than going to the united states. the question is, is it good or bad for the united states? both sides would benefit more from foreign investment going both ways. there are restrictive barriers in china. the white house is correct in saying china needs to liberalize and open up its market to foreign investment, particularly in services. this is a very important issue. yvonne: i want to get your take on the domestic side of things

as well. seeing china has expanding credit again. suggesting the government can continue to leverage and not impact the economy. still hitvernment that growth target of 6.5% differ seeing single-digit growth now? >> the government is concerned creditxcessive expansion. the money supply has been increasing more than it needs to be. curbing debt or credit expansion will not have a significant impact on gdp. is particularly property markets. this has been driving the credit flows of the last 10 years. 70% of china's credit and debt flows over the last decade have gone into property and land values.

this makes china quite different from other countries. as the credit goes up a lot, .light -- credit flows moderate that's what has been happening over the last couple of months. yvonne: great to have you on the program. you can get a roundup of the stories in today's edition of daybreak. it's also available on your smart phone. be sure to check it out. this is bloomberg. ♪

betty: here's a quick check of the latest news and headlines. american airlines is ending kosher agreements with qatar airways over an ongoing dispute about government subsidies. itsican notified associates. the ceo called american cabin crew grandmothers, a comment for which he has now apologized. yvonne: royal bank of scotland will pay $5.5 billion, the deal the second busiest -- second biggest ever struck.

soldttle claims that rbs multi-mortgage bonds from 2005-2007. me the money come at what a lawyer for texas our utility has said about his bid to outbid worn buffet. -- warren buffett. elliott is trying to craft a debt for equity plan. elliott is pushing for more time to put a deal in place. the two sides will be back in court later this month. time for a quick look at what's coming up on the next few hours here on bloomberg markets. kong.lorious day in hong data anytimethis after 9:30.

jpmorgan, giving us an idea of what it means, how is it really global economy and the domestic economy. the big one is looking back at janet yellen. she didn't talk very much about when the balance sheet unwinding was going to take place. the thing is that, do they really need to do it? amazingly about those in nine inflation numbers. from daybreakit asia. this is bloomberg. ♪

♪ ♪avid are there many who said i want to be the leading cellist in the world? >> in music there is no such thing as this is the greatest anything because it is about learning forever. >> what about where you play? >> you don't have to be there. i don't have to be there. if were going to spend time together, let's make it count. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪ david: i don't consider myself a journalist. and nobody else would consider myself a journalist.