haidi: asia-pacific started everything after the biggest decline. they will pick up the pace. debt rack on the agenda this week. loud and clear. -- back on the agenda this week. loud and clear. haidi: janet yellen says she is disappointed to leave. tax cutsaims to make

the cornerstone of this year's agenda. i'm haidi lun. this is "daybreak: australia." past 5:00 injust new york. it is just past 5:00 in new york. we had a super selloff of stocks and bonds. this, midst of all of janet yellen given us a very goodbye.nt -- poignant i get a little choked up when i think about her leaving. just to be the numbers quickly. if you rounded off, it was a doubles market. about 60 points.

about 145 saying point come nearly 2% as well. they were spooked by the bond market. this sudden realization that the fed is probably going to be on track for at least three rate hikes this year. on friday.ime, what does this mean for asian market after this big selloff? haidi: the question is whether this is temporary. you keep buying on these opportunities. --is it in and action point an inflection point? all 11 sectors retreating. u.s. dollars during seeing its best week in 2018, after what

has been a bad news story. the kiwi dollar at 7291. u.s. dollar about 9/10 of 1%. continuing to extend those gains. playing catch-up. up ton see, catching those sydney futures down 65 points there. but a bitf a decline, of a break in that momentum. we have the rba on tuesday, expecting to hold. of commodities. this is what has been driving the selloff in australia that we

are anticipating. its biggest decline in two months. down .8%. crude also half -- slipping half a percent. news int the first word new york. remy: good morning. talks broke up as negotiators tried to bridge gaps on labor laws and health care. disputes remain, including the demands for tighter laws on temporary work contracts and review of doctors pay. they had hoped to reach an agreement by sunday. talks will remove -- resume on monday.

the johannesburg sunday times says the talks could determine whether the president opens a new session of parliament on thursday and delivers a state of the union. opposition parties want him impeached. china is ratcheting up trade tensions and launching an investigation into imports. beijing says they have evidence that they subsidize the sector. untill check reports october 2017. saudi arabia cap oil pricing to asia unchanged for a second month. this in response to slower demand. $1.65. of

data onaccording to bloomberg. price inraised the january. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. kathleen: to continue that conversation, the departure of janet yellen is historic. there were no 21 gun salute, but staff got started on twitter. every time you see janet testifying, she is wearing those smart jacket with the caller. -- jackets with the collar. she said she would have liked to stay. this is the core of her existence. i think it is another display of her humility and openness that we enjoyed for so many years.

interesting very when you split up different mandate that she took over from the minke -- took over. low in that is so last month that janet yellen was fed chair. now he has to deal with the financial stability and bringing the economy towards stabilization. this selloff that we have seen ,ueling the equity selloff really saying that they need to stick to the gradual rate hike plan. the economy has performed as expected. i think it will in nerve investor -- unnerved investors going forward.

three might not be enough to keep the fed ahead of the curve. kathleen: the average hourly earnings year-over-year went up to 2.9% from 2.6%. that was unexpected. a bit of an increase. there are a couple more measures i think everybody should be looking at. hit thethe one that market right between the eyes. this is the question we will be asking with so many people, is the bond market over? nearly 2.84. it has broken out of this trend line going down. the last time was before we went into the great recession. -- it is lot of people not just inflation or the economy. it is tax cuts and the things that are coming together.

let's bring our next guest in. economist atal union bank. chris, what is your comment on janet yellen's reign? chris: it is a shame. i would have thought a populist president would have taken someone who would take a more aggressive ants with the federal reserve, like a lot of republicans wanted to see. we got a guy that janet yellen like. -- liked. we are hopeful he will do a good job. is thed of the fed nation's chief economist. you really have to knowing you are doing and have technical asked her teeth. expertise.chnical

he is a lawyer by trade. as far as him knowing what to do in a crisis, on his own, based on his training and experience as an economist, he is a little short on that. kathleen: we shall see. you are. the big question for him is how quickly do you normalize? the bond market and equity towards threeking or four hikes. i know you are pretty bullish on inflation. if you look at the fact that workers are not getting big wage increases, this seems like an alarm bell going off. 10 year yields had broken

higher before the report. they were 2.79%. 2.85%.nt as high as the bond market really does not think. it is irrational a lot of times. average hourly earnings wages were 2.9%. if you look at the working class , people who are not supervisors , the workers, their wages are only going to .4%. if you look at the trend of nonsupervisory workers, for their wages, nothing has happened. there has been no breakout on wages whatsoever. i'm a little fearful what the bond market is doing. it is partly wages, and it is

also what is the bond market doing sending yields up when the market collapses? as an economist, what is your explanation? we have seen this phenomenon play out for the fed. it is what we are seeing wherely, this situation wages and inflation are not catching up. is it a structural issue? is it globalization that is behind it? chris: it could be. is notret to inflation just a labor market all the time. is a point labor market, you have to give it another 18 months. if wages do not pick up a year and a half from now, we will have a story. fast, 4% ins very

the late 1990's. inflation went nowhere. what gets inflation going? the only thing in my mind that gets inflation going is high energy prices, consumers playing higher prices for gasoline -- consumers paying higher prices for gasoline at the pump. is there a chance that we are going to see a little more of a bond markets will off and get some kind of reversal, if people realize that inflation is not just me accelerating -- reaccelerating? chris: it is possible. the idea of three or four rate hikes, people were thinking they

might up their game and shoot for four times. it is going to be a close call. instances -- i know yellen is not there now. the odds of a rate hike are skyhigh for march. look at the dow jones industrial down 4.2%. that is a big drop. i am a little uncertain about what they do in margins. stocks do not stabilize there. haidi: we will have to leave it there. coming up, we will take a look at how the debt ceiling debate in washington is bringing more alarm bells for investors. --er in the show, kathleen: keep it right here. this is bloomberg. ♪

haidi: i'm haidi lun in sydney. kathleen: you are watching "daybreak: australia." republican lawmakers are backing the inquiry into russians interference in the election in 2016. some congressmen disagree. >> i want to stress that bob mueller should be able to turn over every rock and pursue every lead so that we can trust in knowing what the russians did or did not do. >> trump says this vindicates him in the investigation. sideeen: how is each trying to frame the back-and-forth of these memo releases? does it become a campaign issue

or is it something that has heightened political fireworks, but really does not get into the heart of the matter? possible with the midterm elections so far away, that over time, this could blow over and by the rest of the as a political issue. what might not understand is in issue and what the memo is all about. they just two not out. that is always a possibility. democrats are trying to run hard on this. they are saying this shows that house republicans wanted to releases controversial memo last week out of the obstruction of justice efforts that they believe the white house and trump are engaged in.

that will likely be a vote on monday in the house intelligence panel, to release a democratic response to the republican memo. again, that could get people's attention, or could be see as an equivalent of he said she said. president trump has come out and read that this totally vindicates him. party is ony on his board with that. republicans would like to put the memo writing behind them. there was a report earlier this afternoon that devin nunes might have more memos to calm -- come. singling out different parts of the government that he feels has been working in a deep state, in favor of democrats and against republicans. you have not heard the last of this i far. haidi: a few days after the

president tried to strike a tone of unity, is this more divisive and distraction from actual policymaking and hitting is done -- getting things done? >> yes. the bipartisanship that seemed to be evident at the state of the union is a matter of opinion. president trump was on twitter this weekend, talking about russia, russia, russia. how nobody talks about job numbers. as we know, there is a big deadline coming up in congress this week to keep the government-funded again. it certainly does not help to make policy when there is so much partisan sniping. haidi: here we go again with the debt ceiling.

thank you so much for that. that tweak response. we have to get back to that vote. subscribers can go on their terminals. it is available on mobile. you can tweak the settings to just get the news on the industries that you care about. this is bloomberg. ♪

kathleen: i'm kathleen hays in new york. haidi: i'm haidi lun in sydney. you are watching "daybreak: australia." disappointing earnings for exxon and chevron. jpmorgan describing it as very sloppy. sloppy?

remy: that's right. theop -- let's hop into bloomberg terminal. having a little bit of a malfunction. there you are. live tv, let's just smile and go ahead with it. we are taking a look at the imap function. the energy sector was the biggest all from friday, down 4%. this is the lowest since march 2016. i will give you a little bit more of a deep dive. sector, youenergy can see the fall. that is because of chevron and exxon. yellow, chevron is down 5.5%. exxon in blue is down about 5%. ofir worst fall since august 2011. we are looking something on the

order of something not seen in the past seven years. crude also fell from the $70 mark. itrsday, goldman sachs said could go to $82.50. friday, people said not so much. in terms of these two companies, you have to talk about two misses. this is worldwide output. for revenue, the top. eps at the bottom. for thesee that far past four quarters. it was not enough. analysts were actually thinking that they would hit a six alien dollars more in run -- $6 billion more in revenue. up by 19.9%chevron, in terms of revenue growth.

investors are looking at the eps. for eps adjusted, those were both misses. exxon, it missed by $.15. chevron was way more. $.55.sed by this is what worldwide output is looking at. perspective, your you think the lines do not make too much of a difference. we are talking about single-digit rises and falls. that is enough to weigh on investors minds. the .9 9 million barrels was them yet -- 3.9 9 million barrels was the reality. they expected 2.2% more there. is word for all of this

disappointing. looking ahead, chevron is saying they will increase production. exxon, $10 billion. no new output until the 20 20's. those are your terminal charts that we finally got on the screen. back to you. haidi: so much expectation. let's get a quick check on the business headlines. we will be watching sony. the company sees operating income at $6.5 billion at of analyst estimates. have no sales on the stock. guidance remains below the average analyst estimate. it is up from --

the stock has nine buys and no sales. next, earnings out of australia. keep it right here. this is bloomberg. ♪

♪ sydneyit is 9:30 am in where markets open in just 30 minutes time. quite a leap downward from the wall street session, 666 point plunge for the doubt. all sectors retreating, we have the downside of 65 points going into the sydney open to it -- open. kathleen: we are belted in for what could be an interesting ride as asia trading gets underway. you are watching "daybreak: australia." ramy: first up, janet yellen says u.s. stocks and commercial real estate prices are high, but she stopped short of saying they

are in a bubble. she says the financial system is much better capitalized in the banking system more resilient than they were before the financial crisis 10 years ago. she stepped down as fed chair on saturday and said that she is disappointed president trump opted to replace her with jerome powell. a confidential yuan report says north korea made almost $200 million between january and september of last year from banned exports of steel, coal and other commodities. shipments to malaysia, china and vietnam were used with ships using deceptive navigation patterns. is saying it is doing its part to enforce sanctions. .y. lee is back in -- j is back in court. prosecutors want him behind bars for a longer term.

a final appeal to the supreme court may follow cute and -- may follow. playmakers have never had it so good in asia. mainland chinese carriers have met -- have meant good business for boeing and airbus. they are adding more than double the forecast of north america and europe combined. the region will meet at least 16,000 new planes to meet the demand. and we will have some other big guests coming up from the singapore airshow today. alan joyce will join us in the and -- in the next hour, as will additional gas. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am ramy inocencio. this is bloomberg.

haidi: thanks for that. let's get an update on the asian markets, we are setting up ms. england -- new zealand. trading off already in the early session. it is a huge week when it comes to the data calendar and bank meeting calendar in asia, the likes of asia gdp. data out of loans china as well. and singaporea central-bank dominating headlines. s&ps look at australia, the when it comes to sydney trading, we actually saw a little bit of a bucking of the rule. the sydney market putting on 1.2% by the end of last week against a drop for the msci asia-pacific, the biggest occurrence of 2016. under 80llar falling u.s. cents.

we are expecting it to hold. it will be the 18th straight meeting at holds. more broadly, look at the rest of the markets. the bloomberg dollar index extending the gains. the best week in 2018 so far for the u.s. dollar after relentless weakness. atrling trailing -- trading 1.41. seemingly destined to test the strategistsot of saying it is the start of a true bear market when it comes to bonds. just a reminder of the close, the s&p 500 down by just over 2%. a bit more on what we should be washing is trading gets underway in asia, let's go to adam haigh. the route in bonds and equities,

we have seen it play out in asia, will it be extended? adam: it really is a question of the depths of the decline. we have seen for negate futures for the australian session and the australian session is already off week, and been -- and building on the theme we saw on friday, the extension of the idea that inflation worries, which up until now the bond market has not really priced in, is shifting yield significantly higher on the long end of the u.s. curve. that is starting to filter through to equities. we had signs of this out at the beginning of last week and then things eased back as people got to grips more with the idea that the fed might be more aggressive this year then we may have thought going into the year. friday reminded us that there are lots of prices across equity markets that are still a little wobbly given the relative

valuation trade between bonds and agrees, and we can see here on this chart, 2872. this is at the heart of the argument with what we are seeing in markets at the moment. the differential between the earnings yield on equity markets and on this chart, the u.s. market and what you see on the 10 year yield. maybeinues to be a lot of if short-term move, short-term investors adjusting positions rather than necessarily big, long-term investors adjusting positions. one thing i keep hearing a lot is the short volatility funds are having to adjust to the sudden uptick in volatility, there's been a lot of movement of money in the last year or two into these short vol funds. it just pushes a lot of money out and it means people have to take profits in a grace. kathleen: a lot of people have been warning about complacency when you go through a period of low volatility. let's look at value investors. they have had a tough time of

late in many parts of the world, but not so much in china. why are the bargain hunters doing so well over there? adam: it has been a tough time, hasn't it, for value traders in most parts of the world. it is interesting to see china standing out. if we have a look at the chart on the terminal, this shows the extent of the outperformance we are seeing there, 2883. ins chart is the value index china relative to the msci all country world index in the blue line. it shows us quite a lot of the stocks, which value in the chinese since tends to be often -typeas so we type -- soe investments. those of the ones that have been rallying. versus small caps, which is in struggling somewhat. small caps continue to perform weekly and an era of weekly

deleveraging, if we continue see that from the chinese authorities. we had seen a pop in these bigger state-run enterprises. banks of had a fantastic run in january. at this point, it shows no sign of easing off. as we set out for training in china and hong kong today, it is going to be difficult for anyone to escape the selloff and i think we will see that even in some of these value names, especially given the have seen a good run. longer-term, it seems there is further pressure on the upside for these. kathleen: as a matter of fact, it will be interesting to see , theuickly this turns initial hit everything of the many things bounceback quicker. that was adam haigh. let's move on to australia, first-half earnings season about to kick off. paul has a preview of what to watch. i love the lead on one of her stories, amazon and china and bears. where shall we start? paul: broadly speaking, the

earnings picture for us trillion looking positive, we are seeing earnings per share increasing 2018, and ofing the 87 copies expected to pay a dividend, just 60 are expected to increase the payout. let's start with the mining sector, so important to australia. they have been outperforming the bloomberg commodities index that have seen australian resources stocks up. rio tinto will get things underway with big miners reporting on wednesday. reading up to the season, production reports are fairly positive, metals and oil prices rebounding, and a shout out goes to china, who buys most of this stuff. thank you i guess from a lot of the aussie resource companies. haidi: the exporters will be looking at that as well, as we get the china numbers through this week and with a better idea of the turning point of the story or sustained stability. paul: another of the

beneficiaries of the china story will be the health and consumables sector, they have point -- up about two about 2% the past year. blackmore's is one coming weeks spoken a lot about in 2017, the crackdown on people loading up suitcases with vitamins and such an carting them over. but blackmore's says it gets have its revenue silly likely to consumers in china. bellamy's has raised its revenue outlook for 2018 and the share price is up 250% on year. treasury wine another beneficiary. there will be some stocks to watch when the reporting season gets underway. haidi: for all the retail into the -- all the retail in the christmas -- aussie retail and

the christmas season was australia -- was amazon. paul: it was a bit of a letdown. analyst said amazon is not going to be a killer in the near-term like people think. that has turned out to be the case. online retailers, another of more than 300%,. there is money to be made an online retailing area in australia, but for some of the other retailers, they have really struggled. myer has not had a great year. retail sales are up almost 3% on year overall. there are some bright spots. haidi: thank you so much for that. and southwesterly are teaming up to form the largest virtual powerplant.

the details. this is bloomberg. ♪

♪ i'm haidi lun in sydney. kathleen: and i'm kathleen hays in new york. you are watching "daybreak: australia." achilles prime minister is to take a page out of president trump's label to make corporate tax cuts part of his agenda this year. let's get more with jason scott. turning to trump for inspiration? notp's tax cuts, they are popular across the board in australia. jason: there's certainly not popular with the opposition, the opposition labor party, but i think the prime minister is seeing this as a way forward to really create his own agenda for the year.

parliament is just starting up after the summer break. the prime minister has been since julyically 2016 of really lacking a vision for us trillion. i think this is his big focus for the year. he has looked at what has happened in u.s. with the tax cuts and is looking for a way forward. he is thinking that other countries are following this move toward tax cuts. japan, the u.k. and france. this is the way he needs to be giving relief to voters under a bit of pressure with wage growth constraints at the moment. kathleen: what are the chances of him getting these tax cuts through? does he have to offer the opposition anything to sweeten the deal? or is it just the weight of the

logic? that is certainly his i don't think labor will agree with that. his main problem is going to be come up with most of the things -- is going to be, with most of the things in parliament, getting it through the senate. he's going to have to convince the senate that the plan to cut corporate taxes about five percentage points as well as cutting personal taxes for an undisclosed amount, we will get some more information apparently in the main budget. persuade,ly trying to he will have to persuade the senate that this is worthwhile and basically, it will be impetus to the economy. it is not traveling too bad, of

course, the same time, the headline figures such as gdp growth and unemployment is low. unfortunately for a lot of voters, they are still feeling wagesnch because of remain stagnant, which is the case in a lot of places in the world. ,his is the one way it seems especially with the personal tax cuts, you can actually get some sort of relief to voters and put money back into their pockets. i think as you alluded to earlier, last year was a chaotic, noisy year for turnbull's government. he's trying to take more control. how crucial is it for these measures to get through for the future of his government? yeah, i think he is place a lot of emphasis on it. you are right, it was a pretty

messy year for the government, the nationality crisis, it took a lot of heat away from whatever they were doing. year pretty well comparatively, seemed to put most of the nationality crisis behind it, has been performing a little bit better in the polls, including today in today's polls, narrowing the gap against the main labor opposition. that said, these tax cuts are really crucial because it is almost putting the whole legislative emphasis on these tax cuts to get through. and of course, elections are not too far away, july of next year. thank you so much for that, jason scott.

planning toy is roll out solar panels and tesla batteries to at least 50,000 -- southwestern australia is planning to roll out solar panels and tesla batteries to at least 50,000 homes. i thought the story was can it be about australia getting together with elon musk to sell flamethrowers. it was not. >> it builds on the world's biggest battery, which was what in place in south australia last year. it caught a lot of headlines, elon musk beat the headline. this is basically a springboard for an even larger project, a virtual powerplant. it is using solar panels on people's routes -- roofs and installing the tesla battery. basically rolling that out along the thousands of homes in south

australia in the next couple of years to create this power grid where the tower can go back into the system. -- where the power can go back into the system. like most things with elon musk, this is at scale. little hope there a little cool -- a little bit of a political contest as well? south australia suffered a blackout in 2016. who is for it and who is against it? perry: that is a good point. the statewide blackout, september in 2016, it is what sparked all of this. south australia has come under a lot of criticism for embracing clean energy to ambitiously come around for 5% of its power comes from clean energy. elon musk was one of the solutions to that last year.

thats not lost on anyone the announcement came yesterday at the start of an election campaign. the labor government in south australia is pinning its hopes on a little bit of elon musk's star appeal. they're also saying it will lower power bills by around one third. people generally think it is not a bad idea so far. the big question is where the funding is coming from. we know there is a little bit, government grant, obviously tesla is involved in the installation, there is still a question over who is going to pay for the rest of this scheme. we will presumably learn more about that in the coming days. kathleen: we certainly will. perry williams, thank you so much. don't forget, you can always find in-depth analysis on a bloomberg radio. tune into "daybreak: asia."

, orcan download the app access at bloombergradio.com. this is bloomberg. ♪

♪ i'm kathleen hays in new york. haidi: and i'm haidi lun in sydney. you are watching "daybreak: australia." yahoo japan also raised its view for the year amongst other japanese companies, lifting operating profit forecast to about $1.7 billion, although it remains below analyst estimates. the company cited active investments. net income fell 1% to $320 million while operating profits rose 2%. mitsubishi -- kathleen: mitsubishi's third-quarter profit fell.

net income sales of just over $2 million in the last quarter based on the banks earning statement on friday. the group remains on course to beat its four-year earnings target. haidi: the hong kong stock is change has issued new guidelines allowing companies to price ipos below the indicated range as it tries to attract more firms to list. companies can price shares as much as 10% below the range without having to extend the offer. . it -- the offer period. a company in the u announced a charge of more than one million aussie dollars on an acquisition of the home base chain in the u.k. it says it will take a hit on store closures on the chain it bit -- it bought two years ago. haidi: wall street journal says

apples domestic base is expanding at about 5% per month compared with 2% at its rival. if thatr says continues, apple music will take the lead in the coming months. users -- million spotify has 70 million users. that is it for "daybreak: australia." let's take a look at what is coming up over the next two hours. aviation in focus. yvonne: that's right, we are heading to the skies. it is asia's biggest airshow happening in singapore today. we will be kicking off with alan joyce, the qantas ceo. aboutt to talk with him they have been plowing their resources into the region, also long haul flights to europe. how he views international

competition at the moment, are there signs things are updating, getting moreg or intense? given new services, how will that impact domestic business? a lot of questions for mr. joyce. kathleen: and after that big jobs report on friday in the out showed perhaps some celebration in wages. will it take for rate hikes in the u.s. economy? the chief economist at the bank of singapore, we won't talk about what -- we will talk about what he sees on that front but also asia this week. you have the reserve bank of india and a lot going on. richard will touch on all of it for us. haidi: there are some essential questions for the start of the trading week.

we will be talking about the implications of pushing to 3% of the u.s. 10 year. does that marked the beginning when it comes to this route, or will it be the upper limit? lots more to come.

♪ yvonne: 7:00 a.m. in hong kong. i am yvonne man, welcome to "daybreak: asia." asia-pacific stocks brace for a selloff after the dow's biggest fall in 18 months. there is concern the fed will pick up the pace when it comes to hikes. the u.s. debt ceiling back on the agenda this week. the bond market alarm bells ringing loud and clear. hays in: i am kathleen new york, it is just past 6:00 p.m. on sunday. a new era for the fed, jay powell sworn in on sunday, janet yellen said she is disappointed to leave. in it is singapore airshow week. we will hear from