♪ 7:00 a.m. here in hong kong. this is bloomberg asia headquarters, i am yvonne man, welcome to daybreak asia. the exit polls show the center-right meeting in italy. the election was marred by delayed confusion. china's elite gather to chart economic and political courses for the year. evidential trade world looms over the two week events. betty: i am betty liu here in new york. it is after 6:00 p.m. on your sunday evening. calling forump tariffs at home and abroad. america's allies won't be exempt. signaling another exit

and a step toward the end of the easy money era. >> no shortage of disruptive moves to the ball and the equity markets here. this is the seat majority here. there are these threats. i went above this chart here. this is the bull market, g #btv. the percentage of consumers. this is the white line that still leaves we will see an increase in the stock market in the next year. why is this important?

i wouldn't said that consumers are great stock market predictors but as long as they have the confidence of u.s. consumers to make up a majority of economic growth, you might still be ok here in the markets. just to say whether markets ended on friday, these were the mixed clothes at the end of the session. you have the s&p and the nasdaq climbing. you can see it falling about 71 points. saye the consumers might this. >> this a better with a close, that could be a good tailwind here in asia. that is picking up here, that is the big event risk for most of the asia region. we are treading water right now when it comes to equities. we are seeing our shares gain about a 10th of 1% here. australia, we are wrapped up when it comes to earnings season. we are looking for some fresh direction here and we are seeing

the open much flat. 77-62 for this right now. we are seeing a spike up of about four basis points. we are talking about this heaven trades, it is the haven of choice for the speaker. this is what we see when it comes to that yen strength. we could see more call back here . let's get to our top story right now, the euro rose and as a polls show a center-right bloc taking the largest number of seats in the italian election. the antiestablishment five-star movement seemed to have performed better than accepted pushing the center west into third place. no group has seen an overall majority so far. let's bring in emily horne joining us now from from this morning. can't justify the

conclusion. >> not just how wrong is posted below what it means in terms of the backroom dealings and how they form a coalition. what we know right now is that italy is expected to go into serious gridlock. we do have the center-right. this is leading in terms of majority but not enough to cling to power. had one-star movement of the senior members of the party and if these projections are true, distort moment for the five-star party, they are the single -- likely to be the single party to get the most votes but not enough to form a government. it is like to be a hung parliament in italy and back to status quo. >> if that is the case, what does that mean for the rest of europe? what is interesting is that

if you add up all of these parties that have eurosceptic or anti-migrants, they make up 50%. 80% of italians from what we are seeing are -- have voted for parties that are very antiestablishment, germany, angela merkel, this is the antiestablishment. emmanuel macron france was able to contain le pen. we saw the netherlands be able to contain this antiestablishment momentum. italy, it was like the establishment will not contain this populism moment. i think for angela merkel waking and emmanuelorning macron you're thinking italy might be top of our agenda. this is the eurosceptic. >> tells more about the sentiment behind five-star right now, it will be talked out of we have seen this serious gridlock year. does it have a chance of survival?

quite a lively doesn't have a chance to form a government, especially since they have been hardliners on the fact that they will not cooperate and form a coalition with other parties. they say other parties could possibly join them but not to form a proper coalition. but this party is fairly new, 2013, it is now led by a young man, 31 years old. he will be here this evening, likely to see that they voted this morning in naples. they are having some momentum and they have a lot of votes in southern italy. they are the ones that call for a referendum on europe. they backtrack that now. they dial down that rhetoric. asy do want to be seen likely fit to serve and to work with european union but they are eurosceptics and that is certainly what has the likes of

merkel and mccrone worried. >> tell us about the northern league and the number of seats they may take and that is -- why that is so critical as well. >> you would love this tactic. steve bannon is actually in italy to support him. that is very interesting, we might hear from him tomorrow. what is interesting is that he is teaming up with them and together, it would be able to form the center-right coalition. but they are right there right now and their numbers are kind of on par. if they would form a coalition, we could see some drama shaping up between the two. it depends on who was to be smearing. but theye some drama

also showed a strong showing. greg steve bannon, can't escape his name. let's talk about the u.s. or italy. thank you so much in rome, our bloomberg news reported. you can turn to your bloomberg for more on this, get commentary and analysis from expert editors right now. they are busy updating that terminal page. let's get to the first word news with ramy inocencio. remy: the countries are in for the annual session our parliament. he will launch a two-week national people's congress with his work report and economic targets. this event comes as trade tensions string relations with the u.s. the four ministries, china does not want a trade were but it will defend its interests. south korea is expected to spend -- send to high-level envoys to

pyeongchang trying to persuade the north to open talks with the u.s.. the spokesman for the president is aimed at the denuclearization of the peninsula as well as improving ties between north and the south. will briefit washington after the trip and will work closely with china and japan. over to europe, theresa may has spoken to the first ministers of scotland and wales after her latest speech on brazen. she repeated her desire for a deal that would allow a frictionless trade with the eu as well as showing no hardware between the public. the prime minister did not say how that would happen. agela merkel moves closer to fourth term as chancellor later in monday with her official nomination by the german president. they are bringing the and two months of political negotiation and paralysis.

this will those appointed an internet version of the so-called grand coalition. the lawyers, 24 hours a day. i am remy inocencio, this is bloomberg. trump continues to threaten global trade wars even as his trade negotiations continue to work on an international economic policy correspondent mike joining us. tell us how the steel and aluminum tariffs might affect all those talking about nafta? tariffs steadily casting a shadow over these talks but we are in this weird parallel world. in washington they are talking tough on the sunday talk shows, administration officials are defending the tariffs and also dropping bailed his about the future. >> the president has made quite

clear that if it comes to a don't deal or no deal, he is very likely to opt for no deal. he doesn't need to take a terrible deal. that is how we got here. >> the work goes on, negotiators have been working about a week. there are five chapters close out of a total of 30. it is slow progress but it is progress. robert right here in the second with his mexican and canadian counterparts and says the state of the talks tomorrow are running up against an auto :00. this has the midterm elections in november. while there is another round headed by scheduled, that maybe

it for a while. they may suspend the talks if they go there is enough progress to pick them up again after the americans about. >> we just heard from wilbur ross, what if there is no deal? what are the chances that the president pulls out of nafta? with donald trump, you can never rule anything out. many republican congressman deking it to mexico city say they don't want that to happen. they are telling the president that. the work goes on here. >> the whole world is doing to see if the u.s. really does start a trade war. socko ahead prevailing comes to china but how big are these threats? >> to other countries that supply much of the imported

steel into. president has threatened both of them. he could have a major impact on the talks if they are included in the president signs the measure here or next week or next. they say they will be tallied on the list and today, did menstruation officials say they will be. >> there will be an exemption particular cases where we need to have reductions so businesses can move forward. arehis point in time, there exclusions. >> no doubt they will make that claim to the ambassador that they don't like what the district had to say, we will find out tomorrow afternoon how it all plays out. >> thank you. he is joining us from mexico city. we have been talking about how it has been a chaotic week in washington.

even by the current administration's standards. this is some of the policy decisions that could shut the global economy. trade tensions, the italian election, they all play out in the foreign exchange market, this is bloomberg. ♪

this is daybreak asia, i am yvonne man in hong kong. the tariff trade war is heating up, prompting protests at home. our next guest says the blood of chaos is so that we haven't seen in a long time. joining us now is the head of public affairs. he was also a senior advisor during the budget administration. >> let's first tackle this issue of tariffs which is really turning the markets upside down here. , do you think the white house

is going to follow through with these really punitive tariffs? >> the incredible thing is still , several days after the original announcement, it is hard to say. you never know with donald trump. he can i know something one day and several days later, after he experiences the reaction, he could change his mind. oftill think there is a lot internal debate on this issue of tariffs. i think what we saw last week, how the chaos in the u.s. situation can play havoc with the global markets, i think we will see a lot more of it in the coming weeks. griese it seems like whatever happened in washington, the markets were still going up and everything was fine area >> the mainline republicans in the u.s. love the tax cuts and they love the deregulation and i think what we saw in the white house is there were forces in the

white house keeping everything on track and keeping everything mainstream and control. the start to fall apart. >> might be referred to some of ,he people coming to the for you are very from wilbur ross,. navarro but there is a lot of talk that gary cohn has lost his influence as well as steve mnuchin, do think that is happening here? clinton white the house and i know personnel is always political and put it was owes personal. especially for someone like donald trump with him his personal relationships are very important. he has his family, his age but rob porter, the staff secretary who was asked in a domestic abuse scandal -- porter was running a policy process on the issue of trade and tariffs which fell apart

when he left. hicks resigned and those personal matters seem to have -- reverberations in the global economy because it was in a bit of anger that president trump whennced haphazardly that he was not supposed to announce that he was going to proceed with his tariffs. we'll see if he goes through with it. suggesting that he is not going to go through it but i would not be surprised if he changed his mind. we saw him change his mind on he had the democrats saying he was for gun control and the nra said he changed his --d the next day area >> day. >> he basically said trade was are good. be in terms ofey

victory? what would be a victory according to the president? guys that is a great question. i don't know why he said there easy to win. i think that if anything, we will see a lot of volatility, we'll see a lot of back-and-forth. he saw it around cars over the weekend. kind of trade war situation, especially one that did not exempt our allies is really uncharted territory. the opposite of being easy to win is that it will be very unpredictable and it can be very dangerous and there can be a lot of collateral -- collateral damage. >> you talk about how chaotic it has been over the last week with opec's, you see the president sideline jeff sessions. is this a president is getting more and more isolated within the administration? >> that is right. i think he is losing people inside the white house that he

felt comfortable with and like in any environment, in any date organization. if the boss is unhappy, the boss is going to make decisions that may not be deliberate, it may not be well considered. it can impact on a lot of people and have a lot of collateral damage. i think we are in for a very rocky areas how long will it continue? well stabilize? and is that last? what will happen with the mueller investigation, all of this will play itself out as we now and the midterm elections. >> is coming ever closer, richard weekend with how we are already in march. he mentioned that it is interesting seeing how other countries are taking advantage of this political chaos. namely, you say china relating it back to president xi jinping

this we having no term limit here. the phenomenon we saw that we saw in the u.s. with president trump is really a global phenomenon. we are seeing authoritarian they willking power, abolish term limits. we see the chinese internet censors becoming very aggressive. happenedth all that and a party that he runs, this is the prime minister himself. it seems like politics all over the globe is being ended. blitz, this trump trend if you can call it a trend

in the u.s., we see many versions of it everywhere else. politically, we are in a very interesting time. hopefully, the economy stay strong. but a lot of the global fundamentals a very strong. fingers crossed. >> the consolidation of do trump xi jinping, tariffs actually drive u.s. allies closer to beijing? >> i don't know. i think that china is looking for every advantage to take, they're looking to take every advantage they can from the chaos in the u.s. and the u.s. political situation. the u.s. relations with russia, i think china is really being

very clever and will play the u.s. and global democracies. shame on us if we let them. christ we appreciate the effort. this is the group had a public affairs. interactive tvr function is, catch us from the bloomberg bunch of that we talk about. this is going to make sure to check it out at sea to go. this is bloomberg. ♪

♪ ♪ >> a quick check of the business flash headlines. hyundai may think it's -- rethink its u.s. operations if president trump goes through with the tariffs. this could raise costs and ultimately prices.

the comments go beyond toyota and ford, they have one tariffs would make because costlier but stop short of saying that could affect production plans. volkswagen is said to be examining options that could pave the way for an ipo or bond sales by his truck in it. they're discussing ways of getting the units access to the capital markets while potentially changing its legal structure to that of a private limited company. giving all options open as a transition from a startup to immature corporation. thatberg has been told they are try to buy property with a casualty insurer. they announced in coming days that would be the biggest insurance since 2015. this is the business that has been} hangover. this is after the heavy losses. still had, china's biggest

political event of the year caps off invasion by trade tensions with the u.s. threatened to overshadow her -- overshadow this. that is next, this is bloomberg. ♪

♪ 7:30 monday morning in hong kong. we see clear skies. we are now 30 minutes away from asia's first major market open. quite a list cloudy there. sunday evening in new york. there are skies here in the big apple, markets close as we saw on friday, a mixed session, lots of stuff from this tariff news. betty liu in new york area you are watching daybreak asia. let's look at the first word news with rainy this just ramy inocencio. thatrse exit polls suggest the center-right coalition is leaving the italian election but no group is inspected to win in

overall majority. the euro skeptic five-star movement is seen doing better than expected. it must be said that as opposed have been way off in the past. the australian trade minister's say tariffs like those proposed by president trump on steel and aluminum imports will only end up reducing global prosperity. steve told sky news that australia is seeking exemption from the proposed levies but it is unclear if those will be granted. this abs were dependent country could be among the biggest losers in a global trade war. now to negotiators are said to have reached a deal on transparency seventh round of talks due to finish on that specific. they also wrapped up discussion on chemicals but president trump's latest trade threats could derail that progress. canada is a top exporter of both steel and aluminum to the u.s.

while mexico is the fourth biggest still provided. black panther remains on top of the north american box office for a third straight week holding off movies from jennifer lawrence and bruce was. it estimated almost $66 million in the u.s. and canada. the third best weekend on record. this is more than half $1 billion in passing that mark today's faster than star wars: the last jedi. i think i have to do that again. global news, 24 hours a day. this is more than 120 countries, i am remy innocencio. this is bloomberg. quite smoke let's get more on what we should be watching. adam joining us from sydney. you have been watching the yen quite a bit, we continue to see some pressure here. let it is global trade tensions and now you have governor kuroda adding deal to this rally.

adam: a couple of things are going on and as you say, we have seen quite a bit of yen strength over the last few weeks, it has been a surprise to some people if you cast your mind back to where people view the world at the start of this year and where we got to now two months and. there were a lot of people suggesting that the yen would have been under this much pressure and rallying so hard. if we dive into the terminal, look at the chart, it shows you the sense of how well this happens. kester my back to the mid-90's when bill clinton changed the agime with japan and you saw noticeable shift there. you can see that yellow circle with the dollar-yen moving up over the next two years. are looking for some

people in some people's minds for the japanese currency. as we heard from governor kuroda on friday, we are still some years off the bank of japan being able to really changed for medically. the policy remains incredibly loose at a time when the fed continues to jack up rates and the ucb gradually winds down its asset purchase program. in that context, it is fairly to finally balanced. the key things to look out for and of course, that might with the dial on the other side as well. >> at least in the u.s., why are we seeing these reversals here? some of these are quite large and magnitude. quite some of these are very sizable and not the kind of moves traders will be used to over the last 10 or 12 months or so.

the a look at it at bloomberg, this is a great chart. it shows us have the s&p 500 performed last week. we were down about 1.1% during the friday session and had a very significant rally into the closed to end the week. it is very rare that we see these kinds of moves. this has been more than a 1% live in the s&p 500. did you cast your mind back to the start of february when you have the percent of the turmoil in equity markets, there were plenty of people who said this was just a flash in the pan, we had those short trades that fleshed out. he saw a spike that will come

back to reasonably low letter -- levels. around 20 which is double the average over the last year. it is clearly or some volatility in the regime. you should be prepared for some into the equity market. >> adam from bloomberg markets on the markets. the bank of japan becoming the latest major central bank but before that way out. we saw that path normalization. with whatays is here governor kuroda of the boj had to say. testimony.urs of some of it a little off the record. we have the details that governor kuroda made where he gives clear guidance on the

policy normalization. let's look at what he said, the members of the policy board and april 2019.2.3% in this is what we be thinking about and debating. maybe that doesn't sound much but yet been on what to say this up until now. saying the regular -- negative rate -- it is possible. live ato issues are every policy meeting. i think that is going to put a lot more -- it is not that they're just on board, there are real decisions that they continue to make your.

is a normalized their monetary policies at the moment. >> they decided to do something and then they did not expect to have anything in terms of causing a. but neel kashkari, the president give an interview with the financial times over the weekend. he is getting nervous about the cost of trump tariffs if trump will be aggressive and make these threats credible. he says if you read still -- ffs if you look narrowly at that, the answer is going to be a resounding no. free rate hikes look good but it was see inflation rising even more, maybe four, maybe four. even in a trade war, with a take that position? on that chart that adam just showed us, the job they are

seeing is a clear winner of global trade tensions rising because it is a haven currency. what are you going to do? perhaps you will buy a japanese yen. this was a record of 79 per dollar in 1995 and george bush in 1990 two pro tariffs on steel products. theident clinton changed yen regime a bit. it really hit the yen hard. >> thank you. you are not just in the yen. still holding on the -- they're seeing a bit of decline is that. we will talk about that later. a trade were with the u.s., one of the big issues facing china, the national people's congress on monday. tom mackenzie is at the great hall intendment square. tom, good morning to you.

we saw the response of china want to comes to the steel and aluminum tariffs, things seem quite rational at this point. sayhat is exactly fair to and to characterize the chinese response. these.e try to diffuse they are less concerned about the immediate impact of the potential steel and aluminium tariffs. they're concerned about a broader sector by sector approach from the trump. this is a decent economic backdrop, it is an economic foundation. that in 2017, they're hoping there they will get it again in 2018. even if growth slows a little bit.

this can impact exports that could further impact the economy and make that job that much more difficult. the says that he wants to see talks here in beijing with his counterpart. certainly this will be an issue that will be discussed in the great order of the people must be 3000 delegates. this for the start of the national people's congress. >> what about tom? whatever heard from these delegates better gathered together? what is going to be the big issue they will be talking about? we are going to get the premier which will be speaking at around 9:00 a.m.. they will be laying out this work report which stretches at the policy agenda for 2018. we have heard from some of the business delegates as well.

this is over the last couple of days, they have been here in beijing over the weekend. we heard from the likes of $.10. they said that he wants to see artificial intelligence, technology used to de-risk what he says are some of the concerns around online finance. we have heard from other officials as well, we heard from one of china's largest importers of soybeans, just bring it back to the u.s. china relationship saying yes, a determination would hit his business, he may have to diversify: soybeans from other areas. there have also been reports over the weekend that china is indeed moving toward a super regulatory body, a body according to the news agency that would look not just at monetary policy but macro potential oversight and financial oversight as well. this seems to confirm reports that bloomberg had that there may be emerges, also the banking regulators. this will create a body that has a wider remo the financial

sector in china. this has led to a lot of risk in the system here. fairly de-risking is the number one policy priority for the policymakers. you're hoping to get more details on how they plan to pursue that over the next few weeks. >> thank you, we will come back to as we talked to them. outage talk about the news in the euro so far, we do see a substantial drop here by about one and 40 basis points right now in the last half hour or so. we have seen that negativity filter through here as we continue to seek his results coming through from the telling election. it was like we are heading into a hung parliament there. these are the exit polls and those projection so far. we have seen antiestablishment parties that have been doing well, the traditional ones not so much, the northerly really having a realistic shot at overtaking this. we have seen the five-star movement to outperform here but

we haven't seen any of these parties really try to have a majority in all of this self the big question is whether that form some type of coalition. >> it has been interesting were all of us about the polling going into the elections and the actual results. this is from italy just showing here about the hung parliament that we are on track for a hung parliament, is affecting sentiment here. you can see even in futures, down about 3/10 of 1%. that along with the trade tariffs and the possible global trade were hanging over the equity market. just ahead, we will be keeping our focus on currencies, the yen is also once again shaping up as a winner in the currency markets, more with the global markets next, this is bloomberg. ♪

♪

this is daybreak asia. i am yvonne man in hong kong. i am betty liu in the art. u.s. investors for president trump's expected official sign off this week on global tariffs on both still and aluminum. many u.s. corporations have said that this will probably be passed on to consumers. ramy inocencio at the wall taking a look at the likely losers here in a global trade war. >> looking at what we have identified here on bloomberg news, these are the top five sectors that will be negatively impacted by these tariffs on steel and aluminum if that happens as expected later this week. at least for autos, based on the terrace this good at about $200 to the final price of a car, canned goods, the beer industry really coming out in force here. hurt the 2y it could million employees in this

industry, also, another company is saying that there isn't enough aluminum other in the united states so they wanted to bring that in from overseas. technology here, he muster saying that if this impacts apples finished close out of china we could see on the order of a couple bucks for these have of the iphone x because of that percentage. manufacturing solar industries that, oil pipelines, very interesting here, one group says that good at about $76 million in terms of the typical pipelines to construct that. board, the top of the bloomberg terminal here. i was show you some of these in chart form. on detroitterror three. looking at the biggest loser in the past two days. five 5 --ler now down five point 4%, this is the lowest since january but that is not all. general motors down about 5%.

a little bit of a rebound here. this is down to bite -- by 2%. we are taking a look at the bumpy desk, the turbulent in aerospace. this is 3379. we are seeing this like him right here. lisa was saying that this is a very good barometer. whiskey is getting a hangover, down by 1.7%. this is like a few dozen whiskey has beer alcohol makers. diageo being chief among them, 16% in this etf. that has fallen by 3%. on the order of a couple other ones, they are down 3.4%. there were daniel before percent hennessy down 3.1%. we are seeing this across the board. it has to do with steel and

aluminum, then you will be getting hit. was it is interesting to see in chart form. this is the implications of these global trade tensions, that has weighed on a lot of currencies, the euro has been bolted as well. here's how it goes when it comes to that trade as we look at closing out a hung parliament in italy. that is the is opposing projections that their literature right now. we see more of this high-performance coming up on his antiestablishment parties and the populist coalition perhaps a five-star northern. this could have a relatively wide majority in parliament, the question is if they will be able to form such coalition. of now we are joined by tony compass global market, the senior vice president joins us live from sydney this morning. they can for joining us, this is all about the euro you. if angela merkel heading to a fourth term but it seems to be

focused on this hung parliament in italy right now. this is just opening the door for more weakness. >> yes it is. a tiny of uncertainty in financial markets, you're going to see a little bit of instability and currency markets as well. has been a 125 and a broad-based range over the past month. that range remains intact, we're looking at support around at 122, 50 level for the short-term to hold this five-star antiestablishment movement in italy, usually the anti-europe, the antihero and anti-you as i was sentiment would see the euro, this. we should do the euro-dollar maintain its current status in terms of --

in all intents and purposes, the polls indicate a hung parliament. -- i am still seeing looking at the euro yen, that has been an interesting cross here. we have a chart that shows that for our viewers. our marketsing to editor about why the yen is still the haven trade of choice at the moment. how big of a red flag is this now for the carry trade? strengtheneds about 5% over the past month as you say, it is safe haven status. it has come into question. countries like japan, switzerland and even the rose 10 to do well in cap -- in times of

uncertainty and heightened geopolitical or trade war scenarios because those countries in particular all enjoyed current account services and that is what we are seeing at the moment, yen strength is primarily a function of that. also, let's not forget some employment numbers coming out on friday, the unemployment rate in japan for the month of january actually improved a tad from 2.8% to 2.4%. the real issue is the core inflation which remains secured still below that 1% level and the target is 2%. for theworking well bank of japan, as a long way to go. i think her at his comments their fiscal policy stance might just be a little bit of talk at this stage. we will watch this space on that front. >> maybe a little premature. we are talking about the yen here. we have another chart here to follow. visit g #btv 3499 which shows

you during the protectionist policies that were under the clinton administration against japan, we also saw yen strengthened considerably. below the lows there just ¥80 here. we are so far away from that, we are looking at this key level of 105. is it possible we may see the yen strength into that degree? yes, there is still a lot of potential there, we broke through that axis of 105 50 support and that opens up the downtown toward one of 3, 50. it is a level we haven't seen in over 12 months. it is unprecedented territory for now. without the long term forecast theou like, it is for inflationary pressures in the u.s..

>> briefly turning over to china. the big event over the next few months will be the opening of the national people's congress, there will be a lot of focus on the economic policies, the gdp growth target, also, the shifting of the economic team, how might that play into the chinese currency and stability of the chinese currency amid all of this talk of a global trade war? >> there is a lot of talk at the the protectionism argument, the trade wars, the impending concerns that. talk, moment it is only it could be diluted, it could be postponed. we don't know for sure. the u.s. is obviously the number was doable border in the world, something like 30 million tons aboutel, we are talking

billy massive implications on the trade perspective. in terms of the yuan, post the national congress, what we have at some ofopping out the manufacturing data in china and my concern going toward especially this year is it we see a deceleration of chinese economic growth, even from last year's print of 6.8%, to be with jesus .5%, that could see the yuan we can further. we have seen the 620 56 that the range broadly on dollar yuan over the past 12 months. 6.5 levels certainly are a major resistance platform on the top that 615 level is a really good level of support as well. let's not forget this heavy regulation of the chinese financial systems and perhaps the credit restrictions as well in china, they could see some of those underperforming industries

been sidelined and that is the reason why i believe the yuan could weaken further on this year. reformse expecting some and in terms of the language coming out, if we hear something like not just a soft target but increasing possibility in a two-way floating angle to all this, could that actually increase volatility when it >>es to this should mark editing it can increase volatility and that is what uncertainty will do. now that president xi jinping has been in power for quite some time, some of these regulations and restrictions will be amped up, that will put the market on standby. >> thank you so much, tony. as expected, we are getting news out already ahead of the opening, china expecting 2018 m2 growth to be steady with 2017

also setting the 2018 gdp growth resultingaround 6.5% with the official news headlines, this is bloomberg. ♪ mom, dad, can we talk?

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. yvonne: 8:00 a.m. here in hong kong. welcome to "daybreak asia." exit polls show or lisko knees -betty: -- to line up ber a potential trade for looms over the two week about. those targets coming out from china. from bloomberg's global headquarters i am in new york. president trump's advisers supporting his call for tariffs. americans allies will not be

exempt. ♪ yvonne: we are seeing the big headlines coming through on the terminal. the biggest will be the growth target for 2018. point 5%.nd six they are keeping that soft target which is probably no big surprise. n2 growth as well. things have declined. this is financial deleveraging. china islike downplaying that. see theou can really

sense of stability or trying to quiet the markets. with some of these numbers. also noting that china is targeting a lower 2018 fiscal deficit at 2.6% of gdp. the issues in china -- those continue to be a big issue. that does get some reaction on the market with david and glace -- with david. david: it does not seem like a monday. whatve you a sense of those lines look like. the headline numbers. no big surprise, 6.5%. 2.6% as a percentage of gdp. there is an appetite for moderation. we are getting some lines coming ahead. won't go through each.

we will parse through the numbers later on. six point 5%, about 6.5% is the number. looking at markets across the region. a stronger yen weighing on the nikkei 225. you have a fairly substantial metale for a lot of these producers on the asx 200. look at how they are trading. rio tinto and bhp all over -- all down over 1%. dollar-yen, 105.56. come 0.8%. have a look at euro-dollar at the moment. off lows of the day. more pressure coming on the currency. if you go back a few days, we did a kurt -- a survey. worst-case scenario would be at

about 120.54. that is a nonmainstream coalition led by the five-star movement. some distance from there. if you want to get a sense of where yields could blowout to come we could be looking at 250 bips. scenario, the threat narrows to about 117 roughly. a lot of things to talk about here. worst-case scenario, nonmainstream -- a blowout last seen in 2013 or we could push a little lower. david on some of the market reaction. let us get more reaction to the chinese headlines. china's correspondent tom mackenzie is at the great hall of the people in tiananmen

square. around six .5%. what do you read into that? tom: you have been noting that is bang in line with what we saw in 2017. there had been some optimism looking at china that either the growth target would be removed completely or it would be widened. that there would be more flexibility around it. it would then suggest that they are prepared, chinese policymakers, to take more of a pulln growth in order to that back. it may be a little bit of discomfort for some economists that they start with this rather conservative way of portraying the target. notingse, it is worth that this is such an important target for officials across the country to align their policies with and that is why

policymakers here have continued to settle. 6.5%. that kindmists expect of level of growth by the end of 2018. of course the chinese at risk if the relations continue to deteriorate. betty: over to the other headlines from this working paper targeting -- china targeting a lower budget deficit at 2.6% of gdp in the money supply growth to be steady with 2017. , what is china trying to signal here? tom: that is something the bond markets will be taking note of. we had reports that it would come in at 2.9% last year and 3%. is a much smaller

deficit they are targeting which will have implications for fiscal stimulus in the broader economy. in terms of monetary policy, they also say that it will remain neutral. we had been expecting with this new pboc governor an announcement. we may get details on that in the next week or so. the expectation is that whoever will take over what continue to pursue a policy in mind with his predecessor and around the neutral targeting by the pboc. but also, the central bank is likely to continue to focus on yuan liberalists -- liberalization. we are getting these targets out. it seems we may get a slightly tighter environment in a fiscal policy arena from the chinese government which again is targeted and linked to this deal risking -- derisking campaign. china wants to promote

balanced trade in 2018. be cutting 30to million tons of steel capacity. or defusehis dampen some of the trade tensions we have heard from the u.s.? possibly. certainly, china has been playing up its role as an importer and it has a major import exhibition it has been talking about with great excitement for later this year. it wants to stress to other trading nations, particularly the u.s., that it is going to be developing the consumer market here. the overcapacity, of course, campaign here, cutting back on steel and coal and other sectors have been quite aggressive in the last few years. they cut about 50 million tons of excess steel capacity last year and it looks like they will

continue to pull back on this overcapacity. it helps because they are creating stronger companies. of their attempts to persuade their allies and trading partners including the u.s. and the european union, that they are trading this -- that they are treating this seriously. whether or not donald trump and the administration takes the is another matter. is anothered matter. betty: we will talk more about what to expect in the next weeks -- in the next two weeks. lusconi'ss show ber central right log -- block is performing better than expected. the center west is being pushed

into third place. but no group is winning an overwhelming 30. .nne-marie horton is in rome we have heard from lawmakers in the five-star movement who have been saying this is a victory for them. ring us up to speed. -- bring us up to speed. reporter: i am here at their headquarters. they are calling it a try if. we are still waiting for the leader to hopefully come and speak. it is a victory for the five-star movement. this is the antiestablishment, eurosceptic group. they call for a referendum though they have dialed that back. they are seen as the biggest party likely to win the most votes. coalition might be seen as the biggest coalition. italia isat, fuerza

not showing what we thought. the league is also a big winner and they have had a strong showing. this could be dramatic. coalition, form a that will be dramatic but right now, five-star and the league are the two biggest takeaways from the polls and projections. betty: what does that mean for the rest of europe? and what about the talk that italy could leave the euro? likely that is not they believe the euro. should not be slaves to brussels or berlin but he dialed that back. and the five-star party leader also said that talks of leaving the euro are off the table but they are eurosceptic for sure.

this is why analysts are seeing the euro dollar erasing gains. you have to think that merkel will be waking up tomorrow and they will be trying to figure out how to contain this anti-euro momentum. 50% of italians voted for antiestablishment parties and that is huge. betty: i know we will be back with you with more. anne-marie from rome. you can also turn to your bloomberg for more on this. go to get expert analysis right now. for more on what is going on around the world, let us get to the first word news. to germany.g angela merkel is moving closer to her fourth term as chancellor with her official number nation by the german president.

bringing an end to months of political negotiations as well as paralysis. her position strengthened when the social democrats voted to support her and able to new version of the grand coalition. staying in europe, theresa may has spoken to the first ministers of scotland and wales after her latest speech on brexit. she repeated her desire for a deal that would allow frictionless trade with the eu as well as entering no hard border between ireland and the republic but she did not lay out how that could happen. back to asia, south korea is expected to send two high lever -- high-level envoys to persuade the north to enter talks with the united states. the visit is aimed at the denuclearization of the divided peninsula as well as improving ties between the north and the south. seoul said it will brief the u.s. after the talks. the australian trade minister as thoseffs, such

proposed by the president, will only end up reducing global prosperity. he told sky news that all still you is seeking an exemption from the proposed levies but is unclear if those will be granted. the australian industry groups say export dependent countries could be the biggest losers in a global trade war. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. i am ramy inocencio. this is bloomberg. yvonne: mourad china's conference coming up -- more on china's conference coming up. we will be back in beijing live. trump's new trade issues are raising risks for the region. this is over. -- this is bloomberg. ♪

♪

betty: this is "daybreak asia appear go i am betty liu here in new york. the national from people's congress is the growth targets. he is aiming for around 6.5% in 2018. last year, it was the same number but then he added the words "higher if possible." chinat to bring back our correspondent, tom mackenzie. thank you for joining us. let us get ready for these -- with these growth targets. we have heard six point 5% before. how will the premier strike a balance in growth and financial reform? guest: i think the emphasis of this year will be on the high quality growth. in that regard, there are three aspects they will work hard on. one is to prevent the systematic financial risk. the second is relief and the third is environmental

protection. slower thanggest a last year growth target. is what i would expect. betty: go ahead, tom. tom: carry on. ahead. tom, go in the efforts to contain leverage, we will have to see effortsthe deleveraging and that will have some

constraining on the speed of the growth. i want to talk a little more on some of the other aspects. we continue to hear president recently just tweeted a few minutes ago about how the u.s. has been on the losing side of trade deals for so long. meanwhile, you have china coming out and exploring the establishment of a free trade porch. how is this going to affect u.s.-china relations? china hitting economic growth targets? guest: i think that could be the single most important uncertainty for china in 2018. the overall global economic recovery is promising. i think the tensions between adding somena is

uncertainty to china's economic growth. in some sense, the problem has been there for a long time. so you will not be able to resolve them overnight. on the other hand, communications and negotiation's are really necessary and important in this particular period of time. with the tapering off of quantitative easing, it will create systematic uncertainties for all emerging economies. not just a chinese problem. tom has a question in beijing. tom: watch the policy priorities for the pboc and the new governor given those issues they are facing and the fed rate hike cycle that china is having to weigh up, of course. has a broaderc ande of policy priorities

not just the federal reserve in the u.s. fallingparticular year, the people's congress and following the central economic meeting, i think they will put more emphasis on stability and reforms in that regard. we will see increasing efforts trying to contain leverage and also companies will try to thest -- will try to fix balance activities. yvonne: we have been talking about the pboc. whore excited to hear the next governor will be as well as the structure. we have heard there will be a super regulator role for the pboc. how effective will that be when it comes to clamping down on the credit risk that we see in china?

guest: that will be necessary and important in two regards. some of the issues we have been seeing in the 15 and 2016 stemmed from the oversight or the lack of coordination among regulators inial china. i think a consolidation among regulators will help solve that problem. a more effective top-down approach to the leverage problem. to make this whole process more transparent and relatively easy to manage. whatever the structure or the past -- or the personal will be, it will be a more effective regulatory framework compared to what we used to have. betty: looking at this deficit target. 2.6%g for two point -- down from 3% from the past few years. will it be a good respite for the bond market?

we have seen quite a bit of liquidity into the bond system. could that be a good sign for some bond traders in china? guest: it depends. you are talking about a wide range of bonds ranging from the treasury bills to some of the higher risk and higher yield bonds. it really depends on which side of the market the traders are sitting on. we will see a better consolidation of the central government debt. e's are the central so going to do better. really quickly. one of our earlier guests says there is a question between the chinese president and a limitless -- and an unlimited an s term limit -- and

unlimitedless term limit. will this allow him to take more center stage here? stability helps with establishing better communication and trust. there is a clear and stable voice coming out of china compared to the relatively dynamic situation in the u.s. that is giving china a slight advantage when it comes down to the terms or negotiations of -- with the u.s. i think it does give china a slight advantage in that regard. betty: thank you so much for joining us. and also to tom mackenzie, our in beijing.pondent

plenty more to come on "daybreak asia." this is bloomberg. ♪

yvonne: let us get a quick check of the latest business headlines. china eastern has created a plan for partial privatization. the chairman said that the airline wants some more diverse ownership and that the plan would improve efficiency and strengthen its position on the global stage. and putting the 100 percent holding and logistics units to 45% has yielded good results. hyundai says it will consider changes ahead of president trump's tariffs. it's comments go beyond toyota and ford. they say it would make vehicles more costly.

into the winners and losers of president trump's trade tariffs. this is bloomberg. ♪

♪ betty: 8:30 a.m. in singapore. we are a half-hour from the opening of trade in the lion city. new york. liu in plenty of action in the last few hours. affecting the markets. everything from the news out on the italian elections to the chinese work report. david has more on how the asian markets are shaping up. there are so many pieces of news including italy and china. looking at the broader read. 30 minutes back there was a lot more risk aversion. looking at the equity markets.

, 105.50.n we are getting a backing up their of dollar again. the is a little off at moment. heading into the open in china, it is looking incrementally better. down 0.1%. u.s. futures were down by as much as 0.6% at one play. 123 at one point. 123.29. we are getting more lines out of italy which we will parse in a few minutes. have a look at the spreads. a lot of you are asking me to get this back up. the spread. italy over germany. looking at a 10 year worth 132 basis points. worst case scenario according to the survey we did a few days back. this has blown back up to 260

basis points in case we get a nonmainstream result there. best case scenario in terms of from 131., 118 keep that in mind. that is the thinking across the bond markets right now. weekly, we do have a busy on top of the heavy news flow. have a look at the agenda. we have a graphic up that shows you the things to look forward to in the next few days. busy next few days ahead. we have a key central bank -- we bank meetings,l at least four. we have a rate position coming out of malaysia midweek. and the aussie gdp numbers as well. that explains why volumes this monday are still quite light. betty: it does not feel like a monday yet. getting going and

already so much news is happening. speaking of the italian elections. the euro erasing initial gains. the anti-establishment five-star movement seeming to have performed that are than expected pushing the centerleft into third place. but no group is he -- has been seen winning a majority. anne-marie is in rome. bring us up to speed on what the latest polls are showing here. >> gridlock. projections are confirming we will have a hung parliament. the five-star movement is the standout party. they got 32%. to form a government, a majority government in italy, you need 40%. they are in the lead as the

biggest single party. election laws promote coalition building. in this scenario, the five-star will need to form a coalition. they have said in the past that they will not. you never know what will happen. and the center-right majority is be the standout coalition in terms of votes. but, what really pushed that coalition forward was the league. are the party to focus on now. euroscepticateo, received many more votes then berlusconi's party. betty: what do we expect to hear from the party leader? reporter: this is a total victory for them.

now, they say that other parties must come talk to them. they are not the random populist party but they are here to try and help form the government. what is interesting for demayo is that he has called for a referendum on the euro in the past but in recent weeks, he went to london to speak to investors and was trying to dial back on that position. it will be very interesting to see what he has to say. there is some movement right now. someone may be coming in from the party. we will keep you up-to-date on what exactly will be happening at the five star party headquarters. this for sure is a standout for them. as au look at the voting whole, more than half italian -- more than half of the italians right now are supporting populist parties, and anti-euro parties. i think italy will be the top of

the agenda for angela merkel. yvonne: a prickly partner italy could be for the eu. live you for joining us from rome. still a lot of moving parts in the italian election. let us go to ramy inocencio. ramy: let us had to china. the premier is now the headline speaker as china's national people's congress opens in beijing. the key take away from the speech is a growth target of about 6.5%. last year had the same number but the -- but he added the words -- "and higher if possible." nafta negotiators are said to have reached a deal on transparency. this in the seventh round of talks due to finish on monday in mexico city. alsoource says they have

wrapped up discussions on chemical industry issues but president trump's latest trade dress could derail these -- this progress. mexico is the fourth biggest steel provider to the u.s. in hollywood, black panther remains on top of the north american box office for the third straight week holding off new movies from jennifer lawrence and bruce willis. took almost $66 million in the u.s. and canada, that is the third best, third weekend on record. black panther has now rate in more than half $1 billion surpassing that mark two days faster than star wars: the last jedi." global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries.. i am remy inocencio. in our let us bring chief asia reporter. >> quite subdued.

i think at one point, the foreign ministry on friday said that the u.s. needs to play by the rules. thismay have complicated is the talks ongoing in washington. the bigger reaction came from the rest of asia outside of china. south korea, looking for clarity. japan reminding the u.s. that it is not a threat to american security. i think in asia the idea is that -- with friends like these, we need more respect. yvonne: the u.s. allies are more hurt by this than china itself. look at what we are seeing in these current tariff plans. been night ands day. the rhetoric on the campaign trail was very vocal and directed towards china.

there was talk about 45% tariffs . all of that went by the wayside. nonetheless, it does seem like his rhetoric is starting to increase again. steelhough these tariffs are not that punishing towards china, the concern is that they are a move toward something more broad. we are still not where we were on the campaign trail, that at the same time, the anti-trade rhetoric is picking up in washington. betty: as we have been talking china'se china -- about national people's congress, what about the tension playing into that? reporter: the timing is probably good for china and they will use to showan opportunity how stable they are. a stable economy. the president will double down

and become a leader for life. and they will reinforce their message to the world that they are the protector of the global and they believe in globalization. and they are having a very measured response. if anything, they left it up to thatu and it was the eu came out and talked about products affected. whether you agree with the president or not, i think they are reinforcing their message the american friend on the global economic stage. thank you for that larger perspective to the highly -- to the headlines we just had. staying on china and the u.s. and these trade tensions particularly the aluminum and which are expected to be signed as early as next week. peter joins us.

heard automakers talking about how punitive these tariffs will be. hyundai has said this will make it very difficult. be best theyan certainly will be advantageous for some industries. will be advantageous for american producers of aluminum and steel. but, for american businesses ast use steel and aluminum imports, they will be damaging and raise prices for steel and aluminum imports and put those producers in the us at a disadvantage relative to their competitors abroad. peter, as you rightly said, there will be winners and losers here. i want to point out a tweet we just saw from president trump in the last hour reiterating his

--ition where he talks about we are on the losing side of deals.all trade our friends and enemies have taken advantage of the u.s. for many years. our steel and aluminum industries are dead. sorry, it is time for a change. make america great again. as you mentioned, this will benefit the u.s., the domestic if tariffs come out , willare hearing reported this affect the recovery of these industries in your view? peter: the steel and aluminum producers will be able to raise their prices and they will become more profitable. no doubt about that. paid for byll be american consumers and it will be to the detriment of any

american producer who uses steel or aluminum in their production. their costs will rise and there competitiveness against the imports will fall. yvonne: we have been talking about how china is one of the likely targets of these trade tariffs even though they are not a big importer of steel but it is a difficult whack-a-mole. to what extent are these trade tariffs going to solve the circumvention issue? solve well, they may well the circumvention issue for the united states but they may well exacerbate it for other countries. so that more steel would be on the market for destinations to non-us purchasers. and that will put further pressure downwards on imported

steel into those countries and there is a winner and a loser in that as well. the winner -- let us start with the loser. the loser would be the domestic producers of aluminum and steel who will now compete with lower prices. the winners will be the people that can get the aluminum and steel at those lower prices. ironically, that will be to the detriment of american businesses who are competing with the or anything autos fabricated out of aluminum and steel. a huge range of goods. are not theriffs answer, what is the solution to getting countries like china to cut output? well organized anti-dumping measures are appropriate and they have been used increasingly since the

global financial crisis as the metal situation has gotten worse and intensified. the mostion is for efficient producers to go out of business, to be quite frank. and that is the solution at a global level as well as in individual countries. and so, if less efficient producers go out of business they will cease producing and we will left -- and we will be left with more efficient industries. there are a lot of transitional costs involved in that and there is a role for government to play in a merely a rating those transitions and lessening those costs. helping the industry restructure. and helping the employees find employment. when we had to much capacity wasnd the world, more than demanded, we have to close some

of these steel and aluminum plants. betty: we have a question from the viewers. the fact that the senior economic adviser to the chinese president during his trip to the u.s. did not meet with president does, does that single -- that signal anything to you about the potential trade war that could be looming? do not know about that particular piece of evidence or anecdote but clearly, if the on steelaising tariffs and aluminum, they are taking us all closer to a trade war of sorts. we are seeing a lot of retaliatory threats over the weekend. seeingaddition, we are demands within the u.s. for some relief from these higher prices, save for the auto industry for

example. ry --ne corolla president trump suggested raising tariffs on autos. this is a steep, slippery slope we are embarking on. peter, thank you for laying out the implications for us. moment, the premier will set china's economic course. we are live in beijing. this is bloomberg. ♪

♪ betty: this is "daybreak asia." i am betty lou in new york. yvonne: china is keeping its

economic growth target steady at around 6.5%. let us go to china correspondent tom mackenzie who is joining us live from beijing in tiananmen square. the growth target -- was it actually a surprise? tom: not particularly. 6.5%. line -- drop us that or higher." allowing themselves to come in a little more soft. fits into this deleveraging campaign we have been talking about. and the need to balance growth with draining credit and tackling the financial risk. a couple of other lines. in andicit target coming aiming at 2.6% versus last year

which was 3%. quite a change there. we also have some lines out and this ties into the tariffs story. capacity cuts. they plan to cut 30 million tons .f steel as well as coal. this is part of the concerted crackdown on pollution in china, particularly in the northeast of the country. it ties into that but they can spin it as a way to appease their counterparts in washington. we are also expecting retail sales to increase by 10%. they plan to actively boost imports. tying again into that u.s.-china relationship. they say they want to cut and consumerrs goods. they also plan to open up sectors including health care, education, telecoms and new

electric vehicles to foreign investors. and tying into the pollution story, they expect to see a 19% rise in pollution spending. we saw during the party congress when the president talked about ramping up environmental protection, we solve those environmental linked stocks reacting. they also talked about the need to develop the property sector, particularly the rental market. the property sector is a key issue for policymakers. there may also be a tax on property. they are drawing up a draft legislation around that as well. some sectors for foreign investors may be opened but this is also about combining the with more closely government organs. and a bigger role for the communist party in the private sector as well. betty: what about the growing sense of a global trade war -- how much will that reshape the agenda here?

tom: we have been hearing from the chinese in the last few days and they said they want to collaborate with the u.s. partners. they are trying to diffuse the tensions. they do not want to see the from administration moving beyond steel and aluminum to sectors where, quite frankly, they are not feeling too much of an economic impact. a are concerned that there would be a broadly -- they are concerned of a broadening out of these tariffs. the mood would be to ease or quiet the tensions and we have heard they are trying to set up a dialogue with the u.s. counterparts in beijing in the next few months, potentially. betty: tom mackenzie, thank you so much from beijing. do not forget our interactive tv function, tv . you can watch as live, catch up

on past interviews, and dive into any of the bloomberg functions that we have talked about. for bloomberg subscribers only. check it out. this is bloomberg. ♪

♪ this is "daybreak asia." yvonne: let us take a look at the markets trading in the asia-pacific.

a mixed start. are feeling the impact of these tariffs. in the euro is fluctuating as the voting began in the italian election or i should say the counting. closer to asely -- hung parliament. volatilitying about in the haven trade as well. most of the benchmarks with the nikkei 225 are leading the losses. betty: let us look at how the futures are trading in some the markets that are set to open in just a few moments. in singapore, the index -- the futures index is showing a decline of almost 1%. in taiwan, it is up almost 0.3%. in malaysia, a gain for the ftse. perhaps, there might be some

buffer here in asia to the decline. yvonne: it seems that is what we are seeing. risks arehe political using a bit as we look closer to china and look ahead to the speech on the work report. and the growth -- and the growth targets. the soft target remaining around 6.5%. the traders are focused on every word coming from the premier. it will be an interesting session here. coveragerket continues with rish. a lot to cover in the next few hours. this is bloomberg. ♪ . . . . .

>> china is setting economic targets as the national people's congress gets underway. growth is seen at around 6.5%. tariffs and trade wars casting a shadow over the two week event. beijing says it will always defend its interests. exit polls show berlusconi's center-right group leading the race, as traders assess implications. i am rishaad salamat in hong kong. this is bloomberg markets. ♪