♪ >> a shakeup at this stage. rex tillerson is out after disagreeing. markets are down a second day. investors wave data showing the economy is strength training -- strengthening. >> president trump once tariffs on a range of chinese goods, plus restrictions on investing in the u.s.. >> a test for the president as

pennsylvania goes to the polls. everything suggests it's a close race. past 9o, this is just a.m. >> haidi, it is just after 6 p.m. in new york, i'm betty liu, and we will be looking at how the action on wall street will play into the asia-pacific trading day. haidi was talking about the goldilocks scenario. numbers.at on the not too hot, not too cold. people are talking about inflation and whether the fed it needs to act. let's take a quick look at how the markets ended a few hours ago. you can see we lost a few points here. the s&p is down 6/10 of 1%. the nasdaq and the dow fell

as well. surprise announcement today, by tweet the president trump that rex tillerson is out. cadence to some of the rumors that have been swirling that they were disagreeing in some sense of acrimony. the wait was delivered, twitter, saying he hadn't spoken to the president ahead of that announcement, high drama and washington. take a look at the setup in asia, because the inflation numbers came in on the goldilocks scenario, but a lot of distractions coming in from politics and renewed trade threats from china. let's head over to new zealand and see how we are setting up or the asia part of the trading day. the kiwi dollar is trading down

at 23, we had steadiness when it came to the dollar index, but the kiwi was the outperform or out of the space. sydney, head of the open business hour, we are shaping up going into the day. has consumers confidence in an hour or so. the dataawaiting retail sales on production. they are expected to slow, slowing but a steadiness as well . looking at commodities, a little bit of a pickup in the commodities index overnight. gold is pretty much flat. crude is catching little bit but you can see it living -- slipping away a little bit. idea of get a better the outlook when it comes to u.s. shale production and how much they are adding back into the markets.

news with markd crumpton in new york. report from washington say president trump intends to push ahead with trade and -- trade restrictions on china. white house sources say he told cap members he once steep tariffs on a broad range of products. has beenes added he given a package of tariffs were $30 million the year and once more. the president is in california to drum up support for the border wall as he struggles to dissuade congress to find the money to pay for it. he inspected eight wall prototypes in the desert. the plan is facing resistance from democrats on and skepticism from some republicans. the president wants $18 billion for the project and continues to insist mexico will ultimately pay for it. is turning upnion

the heat on the u.k. saying the prime minister, theresa may, is ignoring the harsh reality of the split. michelle barnier says she does not accept that the eu will give the u.k. access to her preferred parts if she won't play by the rules. there will be more details of her vision next week, and some say she needs to pick up the pace. >> as each day passes, there is increasing urgency to negotiate this withdrawal in an orderly fashion. the present nature of the negotiations seem the european union and united kingdom have to act with certain transparency. mark: russia has dismissed a british ultimatum to come clean over the suspected chemical attack on a former spy in england. the former -- the horn minister rejected the claims is nonsense saying moscow had nothing to do with the attack on the spy and his daughter. supporte been rallying

for punitive measures against russia which could include diplomats being expelled. 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. the abrupt dismissal of rex tillerson is signaling a major shake of a foreign-policy approach. mike pompeo is trump's picked as the next diplomat. someone said to share the skepticism of the iran deal that has had straight to washington. joe is there with more. joe, there were rumors that tillerson was on his way out. some people were calling it rexit at some point. the shock of it this morning, the way it was delivered, it was extremely shocking. >> it is amazing that something

that was rumored for so long, since back in october, was suddenly sprung as a surprise without any leaks or indications that it was coming. in fact, in recent weeks, it was suggested that he is here to stay with his trip to africa. wasas there that the act dropped on friday. he looked surprised and shaken today when he came out to address the press at the state department in the state department employees. certainly -- this change comes at an interesting time near where we are about to see the president meet with the north korean. leader. how quickly can the new team gets in place for preparations of issues ahead? >> that is going to be a challenge. the hearings for mike pompeo,

the president's new nominee, is scheduled for april. he had been confirmed in his current job, the cia director, in the senate so he has already been through this process recently. that shouldn't take too much time. the state department is working with something like eight of the 10 top jobs, which are now open by departures, resignations, or they were never built in the first place. there is a fair amount of scrambling going to go on to get together and conduct these talks with north korea which, tentatively, were scheduled for may. it will be a very short window to get that's done. reading intobout the new secretary of state, what other challenges are we likely to expect in this process picks?ing the two new

>> most of the democrats in the senate are holding back fire. a few people opposing the first time around, said they would vote against him. be seen.s to he may have less of a tough time going through his replacement as the cia, who has drawn questions from democrats and a couple of republicans like john mccain about her role in cia "black site prisons," during the initial days of the war on terror. there is going to be questions -- even if he goes through, it will be a bumpy ride and you have to keep in mind that republicans now have a slim majority in the senate so they will need every republican votes that they can get. somebody that will choose to oppose both of them. haidi: we always appreciate you

joining us, joe. joining us after another extraordinary day in washington. this story cops our headlines today in daybreak. bloomberg subscribers can get their daily fix on the terminal or the bloomberg app. let's jump back into the markets. stocks are falling for a second straight day with this toxic combination of the firing of rex tillerson raising major questions. is there another shoe to drop after this? largely, you tended to see politics have an impact when they get back to the technical, but how do we see the reaction? >> you have the very strong members, you mentioned the goldilocks scenario, the stocks

are up in the dow and suddenly, the tillerson news rose questions, what's next? will build be a shakeup in the policy team at a time where trade and protectionism is front and center? let's look at the market snapshot. we saw the dollar hold steady. lower, bonds or higher, and we saw that adjust in the aftermarket trading. let's go into the big movers real quick. there were sizable moves. general electric added pressure on the market. it has questions about it's got is going forward. you have the california governor issuing good news and perhaps a lot of it utilities will be protected because of all the wildfires. silicom, this is a big player in the cloud space and they lost a major contract from one of the top 10 players. no questions about the silicon

product, -- silicom product. the tillerson have an effect? absolutely. especially in tech. if we go into the bloomberg, announcer -- g# bttv. look at what we are here. you have an analyst who is saying that the ratio between the index and his special basket of s&p 500 stocks show they were going into a peak during the last two sessions. >> we take a look at the two big companies, ge and another. >> and those two stories drove stocks lower. let's start with ge.

this is a massive decline for huge conglomerates. the today chart on them alone shows how big the drop was. it was about 5% at the worst of the markets. what you had was a number of analysts say they don't believe lower guidance, and jpmorgan comes out and says it is worse than you think. and may very critical question the credibility of ge's numbers. then we go into the qualcomm story, they are taking a hit, and broadcom is putting out a note that they strongly disagree with the order president drop but forward, that it is a national security risk. does it have other options? broadcom is acquiring and what is next for them, as well as qualcomm? there have been other offers for qualcomm as well. take a look at the philadelphia

sox index. this would've been one of the biggest deals ever in tech. it doesn't seem to have affected the chips stock which has been going higher and higher. they are not that concerned, and we saw the semi conductor index also known as the xo x -- sox ending at a high. it is interesting. betty: thank you so much. we are watching the special election inl pennsylvania. analysts see links between optimism in the stock market. we will check in on the polls, later this hour. next, investors are jumping into bond auctions after inflation of expectations. we talk about the outlook with the chief economist next. this is bloomberg. ♪

betty: good morning, i'm betty liu in new york. indi: and i am haidi sydney. after pretty tame consumer reports of a third rate hikes this year, catherine hayes is all over it. give us a recap of this report and what it means for the fed? >> bottom line, really is exactly what it is. we had that inflation scare, quote unquote. i did a fed will have to hike rates faster this year. but now we have the numbers to calm everybody down. let's take a look at what they are. in u.s. cpi rose 0.2% february. it had jumped 0.5% in january.

in january.3 of .2%, year-over-year and 2.2% in january, even the tiniest increase would have pushed entire. and, the core cpi, was unchanged at 1.8%. jumping into a bloomberg child -- chart. you have the core goods and core services. core services is the white line. they are steady. wages are not pushing up. it you were not getting that acceleration in the inflation measures. let's go down to core goods. deflation is the not as bad as it was. 1.1% year-over-year, -0.5%.is now back up to

i would say, we don't have to worry about inflation just yet. prices are not being affected at the store. they will say, let's leave the consensus at three rate hikes and let's see what happens ahead. betty: kathleen, hang on one moment. let's get more on this with our chief economist. constance, hearing this and seeing the numbers this morning, would you say the same thing? >> i hate to say it, actually i don't take you said, but kathleen nailed it. to calm downs because this is what we have been gunning for. 48 years we have been saying we have what did you get inflation back. now, we are having sustained inflation, and people should relax a little bit. the problem is -- >> why do you think they are? think, weblem is, i

toe all so conditioned believe it wasn't going to come. and, we are not seeing it in wages. to see it in the cpi a little bit before we see it in wages, i think that is maybe causing people to be concerned. also, think about where we are, real fed funds are negative. we happened to look back and did research on this and, if you go back historically, before the financial crisis, it was never negative. we should be running at 1.5% given this growth environment. i think people are now realizing this new normal may not -- we maybe through that. we may be getting back to a little more of a normal norm. betty: in other words, when you have growth, you get inflation that that could be very healthy. and rising bond yields could be healthy.

i want to ask about that. yields,ove up in bond -- risingor yields, inflation is already priced in. the end of the selloff, the top and yields, and less we see something -- are expectedl we to get rid of those crazy base fx of last year when we had the fall in the telephone prices. we had that competition and telephone services. as we progress in this year, getting past april, we will probably see higher cpi over year after year on a technical basis. then we look at the pce, if it corroborates it, the bond market will be concerned. if the deflator is more steady, i think you will see the bond markets -- the same thing

happens with wages. prime age,g bump in working age participation. that's 25 to 54-year-olds, increases that participation and we are able to see the big increases in the labor force, job growth, without seeing a push off in wages. at some point, that ends. when it ends, we will see a reaction in the bond market. one thatcpi print is has to be taken in context of several cpi print and other data surrounding it. when you look at the last month, you had the cpi, plus the jobs report with the higher wage growth, right? your chart on services versus goods holds a very important story people need to focus on. >> constance, do think some people have been expressing the

physical policy, tax policy, as well as trade policy will feed into a sudden surge of inflation? are these overblown? >> trade policy is very overblown, but physical policy is a really interesting consideration. in the u.s., we had the tax bill, which was somewhat stimulative over a longer. of time. stimulativeat, -- time andnger period of we got something that doesn't balance the judge it -- budget. we plugged in that into our model, we got a big surging growth. we got a big surge in wages, and a small surge in inflation. but still, a higher page of inflation and the bond market is it -- is reacting to that. the big thing is the physical stimulus from the budget act, not so much the tax or trade policies. >> constance, thank you so much

for joining us. bake you also to our editor, kathleen hays. we will be speaking exclusively with the blackstone group's co-founder and ceo, steve schwarzman on u.s. china relations. that will be at 9 a.m. in sydney, 6:00 a.m. in hong kong, and a 6:00 p.m. right here in new york. this is bloomberg. ♪

>> a quick check on the business headlines, the world's largest bank has been told -- says i feet bc sales comply with the banks secrecy act to require lenders to some -- to report suspicious activity. days tos been given 60

improve plans on controls. is missed" us payments to some suppliers in recent days as it heads toward expected liquidation. that toare telling us zahra's failed to respond to questions. the chain filed for bankruptcy in september under the weight of $5 billion of debt. volkswagen is stepping up the .hallenge to tesla that the deal wonder undermine the push into electric cars in the mainstream model three. volkswagen says it will equipped -- equipped 16 factories to produce electric cars up from three. it aims to turn up three vehicles per year by 20, 25 -- 2025. >> up next, the latest on the election in pennsylvania. republicans are facing a close

race. this is bloomberg.

haidi: it is 9:30 a.m. here in sydney where markets open in 30 minutes. it is looking pretty negative as we head into the session where wall street is that negative two -- is at negative two. hai in sydney,d >> president trump has ended his foreign-policy team by firing rex tillerson. to replaceroposing him with mike pompeo.

the president announced his decision on twitter. that is several hours after he called tillerson directly. he told reporters that tillerson had disagreed with him over issues including the iran nuclear deal. reports from tokyo say japan is exploring the possibility of talks with the prime minister and kim jong-un. the government has been forced to review its policy on in north korea, and light of president trump's surprise decision to meet with him in the summit. talks will be a departure for out a who has advocated maximum pressure on pyeongchang -- pyongyang. articles are expected to be found higher in search results. it is part of google's efforts to retain readers. it will also search data to see who is most likely to buy a subscription. google will provide more details on march 20.

lawmakers in singapore, start public hearings on laws to combat the news. the government is introducing a robust approach as it has with illegal drugs. singapore already has several the racial discord. the global art market bounced back in 2017 after two years of declining sales, rising all percent to close at $64 billion. the climb was led by leonardo da , which was knocked down performing $450 million in november. the u.s. was the top marketplace with 42% of the sales, followed by china and the u.k. shy at $68it fell billion. global news, 44 hours a day, analysts and00

journalists in more than 120 countries. haidi: a quick update on the market as we head into the asian trading day. it is pretty lackluster so far. the kiwi dollar is one of the out performers, or i should say the outperform or against the u.s. dollar overnight. early on, we are seeing a little bit of pressure coming down on the open here. we are looking at futures now, dollar -- all of those are expected to show a continued slowing, but the steadiness would be a theme as we continue to see the managed slowdown for the chinese economy. some of the pressure is coming off as we have that continued scandal involving the finance minister asking for them to resign and we will see how that

plays out in the tokyo opening. we have the u.s. 10 year yield, holding steady after seeing the biggest drop overnight. pretty robust demand coming out of that 30 year auction as well as numbers are hitting that " goldilocks," scenario again. fallinghese stocks are after the headlines out of the white house, as well as econ data. let's take a look at what we are watching, and it to the asian session -- i had to the asian ahead to the asian session and equities are not gaining momentum. >> not what you would have thought, right? it seems japan's equity market is stuck. you can see the trend with currency and people having a reasons on instability

around the trade war and lots of reasons why you would want to own safe haven assets like the yen. it is pushing massive pressure. relative to some of the other major markets in the world. the bulls take some solace in the fact that they are able to buy back in, as a lower valuation as they see the economy on a recovering path. as you mentioned, strong profit growth. they are using the office -- using this to -- ultimately, the fundamentals are still there, it is just that during these times of turmoil, you see the fundamentals thrown out of the window. everything becomes more aligned to the currency play. of things outty there for japan and they see

these key fundamental factors driving growth going forward. and options market, there are hints that the turmoil might be behind us. tell us more about these signals you are seeing. >> betty, we are pretty much through to the end of the quarter. a couple of weeks left. that fed policy, and meeting next week is a real major scheduled event, but none other than that. what we are seeing in the u.s. equity markets, and it certainly in the options market, is a return to some of those mid-january levels before the turmoil. one interesting chart here is the volatility of the vix and how it performs over the next 30 days. as you can see, that line has come back to where it was toward january.f

there is also things like the cboe that is come back down to levels similar to that mimicking the end of january. as it expressed -- as it is expressed through the equity markets, as a semblance of calm returning. we have the nasdaq trading at highs, and it is all adding to a semblance of calm giving that nerves were just shattered at the start of february. betty? turmoil before. adam, thank you very much. now, washington, turning up the traded on china. the president is saying he is calling for steep tariffs on china. tom mackenzie has the latest on this. tom, what do we know about him turning up each year? betsy, this is citing

sources saying a cap and beating that at a cabinet meeting, trump was with the u.s. trade representative with trade tariffs valid -- valued at $30 billion a year. trump said the number was not large enough. that he wouldhem, be making a formal announcement on these tariffs in the next few weeks. bloomberg is reporting that the tariffs could go well beyond what we have seen on stealing aluminum -- on steel and aluminum. have more of an impact on things like toys and clothes. that is a potential measure he could take and that would be something that would concern the chinese. they should also be concerned about this push that washington calls "reciprocal trade."

base, play well to his but of course, china will say that the situation, in terms of their development, is different. that is why some sectors are closed off. he also know this discussion is continuing in washington and that may lead to a trigger for the tariffs. china doesn't have a point person in washington with whom to address these concerns. ,ushner has been sidelined others have been sidelined, and tillerson is out. haidi: the drink to turn china into a tech powerhouse, how could this play into it? so the aim from china is to on roboticslligence and biotech and to be a global 2030 dependingor on which plan you are looking

at. what they need is a lot of innovation and tech from the u.s. and from europe. they are particularly concerned with what is happening in the u.s. and whether the issues will fromict chinese purchases the u.s. to china. that could hamper their up next to upgrade the economy. similar concerns are being addressed in europe by the likes of germany who is worried about it. mistake this -- is upping their stake. the court also proved something of a drag to china. china is of course reorganizing its government agencies and a lot of that will be around some of the regulatory bodies that will be looking at those issues. funnelhey are trying to credit to the priority areas like ai, technology, how they

square that with what is happening externally, and the desire on having more control. that is a key challenge going forward for china. >> tom, thank you so much for that. that's as we get into part two of the trade tariffs talks. outside pittsburgh, they are selecting a new congressman in the special election. republicans want to avoid an embarrassing loss while democrats are hoping for a backlash against the president. let's get it over to kevin's really who joins us live -- kevin cirilli who joins us live. tell us about the strategies from the big parties? hi, we are here talking about the candidate of donald trump being carried by more than 20%.

they suggest the race is now the next and it would be a massive upset should conner be able to pull it off. this includes president trump visiting over the weekend including his son. as well as former vice presidents like joe biden, campaigning here. steel country and a part of the country where the tariffs will resonate with voters on whether or not they will go with you republican agenda. >> kevin, what were the results here? are they going to be a good proxy for the midterm elections in november? >> betty, i speak with a lot of political sources that securely republicans who tell me a lot of republicans will watch this tonight to see a conor lamb can pull up this upset.

should he do that, you might see a recalculation on many republicans who might be scratching their heads saying, " look, the progressive base is fired up, they got to the polls and a conservative district." if that is the case, you could hear for -- here for more republicans. >> kevin let's switch gears and talk about the hostile takeover of qualcomm being halted. >> betty, i can tell you specifically, i spoke to one source that is very involved in the steel industry and told me still companies are looking that -- looking at that and looking at perhaps more tough talks on the way. if that is the case, they could be using the broadcom and qualcomm ruling as a potential idea that could protect u.s.

companies and keep out china industries from interfering. all right, kevin, thank you so much. kevin cirilli. up next, oil is sliding in new york. where do and in demand and analysis with -- analysis is straight ahead. this is bloomberg.

♪ i'm betty liu in new york. you are watching daybreak australia. there may be concerned that global demand may not be able to swallow the rising supply from the u.s.. opec leaders were saying the opposite last week and houston. what has changed here in the supply and demand picture? we have someone at the wall with

the details. betty, thank you so much. we are looking ahead this friday when the department of energy comes out with its most region -- most recent report on oil supply. here are pictures. we talk about cushing a lot, what is it? let's flip the screen to the first terminal charge. i want to show you what we are expecting here. 1880.btv million barrel hike and we are expecting that to rise higher to the 2.5 billion barrel area. if this happens, this will be the third week in a row, and over the past six or seven weeks or so, it has been on the rise. definitely a rebound from december as well as january. this swooped this,

down and this switch higher. i showed this in my next chart g #btv 379 three. this is the first time it has fallen in the past few months. the blue is the big concern aat opec has because this is 10 million debt -- 10 million barrels a day on track for the 11 million barrels a day that folks are forecasting. rising inventories, rising supply is definitely having an impact on the oil price. let's look at the board one more time where we can see trading. we can see crude getting a leg up whereat it had been down.

right now, they are below the 65 handle. and 64.64. isn't the kind of dance that analysts want to see. >> no it isn't. come with me to this side of the screen and i want to show you g #btv 4112. this is a dance traders don't want to see. what is happening? the wti april future is now lower than the may contract. this is not happened ever since october as you can see in the red. i will zoom in a little as you can see it better. this is for the past week now. centsnow lower by 0.2 six this implies that the future of oil could fall lower. why? because of everything we are seeing from u.s. shale.

no new story here, but this is finally going into contango. we will definitely want to watch that's because it could fall even lower because of this technical indicator. >> thank you so much for that. you can watch us live and catch up on past interviews using the interactive tv function, tv . any of also dive into the functions that we talk about. also, joining the conversation by sending is instant message on the show. this is for bloomberg subscribers only. this is bloomberg.

betty: good morning, i am betty liu in new york. haidi: and i'm haidi lun in sydney. headlines,k at the general electric is saying any

turnaround might be slow but jpmorgan says it might be worse than we think. they say the earnings and guidance is "not a credible number." ge is facing cash flow shortfalls on industrial equipment and inquiries. suspecting -- a supervisory board is approving the plan of more than $1 billion beginning this month. the decision is a sign of confidence as adidas tries to 2020 as it by changes larger rival, nike. -- lexus thinks it's finally found a way to catch up to the high-end both business. yachtsfer ultra luxury from the second half of this year.

about can carry 15 guests and it would carry a price tag similar to the views. one other one sells for about $3 million. fastest tourist destination is growing. a visit from the chinese president has helped the tourism industry by 90% in just three years. australia and new zealand -- i remember following the visit, all of the products that you could see on the trip. the tourism industry is absolutely booming. that's according to government figures released overnight. it started in 2013 when up a miss -- a famous chinese singer posted a selfie of herself cobbling one of the bears --

cuddling one of the bears. and thee went viral tourists started arriving in droves. up to 1000 tourists a day visiting this farm and even climbing over the gates at night to photograph themselves in the lavender fields. it is not just the lavender, the state is incredible on a personal note. my wonderful wife is a tasmanian. i miss her 18 years ago. it has wonderful world heritage listed. the white sand beaches, great scene,s, a great food and of course the wonderful gallery. >> book my next flight. [laughter] overseas visitors are starting to appreciate has mania more. -- appreciate has mania more.

approved -- appreciate tasmania more. tople are starting to move quite a location such as tasmania. merrill lynch moved to their a few years ago. can travel door to home andydney from his then he could then he used to be in melvin. if you are thinking of moving down there, get in quick. property prices are surging over 13% last year in hobart. that is double the rate of melvin. >> what a nice way to end this hour.

are up nextetty with daybreak asia. yvonne, what are you watching for us? where are talking about the latest on the shakeup with rex tillerson, and mike pompeo is said to be the next secretary of state. we talk to the advisor of the president. he has a lot of connections with and, ofgation as well course, when it comes to the trade tensions, the u.s. is said to be slapping -- ready to slap tariffs on china. all plays out in foreign policy as well, now that rex tillerson is out. how this plays into the summit of president trump and kim jong-un in may. >> we touch on some of those people who put --

>> that is a poor david australia. -- that is it for daybreak australia, this is bloomberg.

7:00 a.m. heret in hong kong, live from bloomberg's asian headquarters very i am yvonne man. welcome to "daybreak asia." tillerson is out after disagreeing with the president on iran. he learned of this the at twitter. aat set wall street down second day. futures across the region of asia are lower. betty: from bloomberg's global headquarters, i am betty liu, from new york. it is after 7:00 p.m. on tuesday. trade, trumpon wants new tariffs on a range of asian goods, plus restrictions on investing in the u.s.

plus, fear in the markets. it may not swallow up rising u.s. supplies. last week, opec was saying exactly the opposite. ♪ yvonne: breaking news and data from south korea, february unemployment numbers, the jobless rate at 3.6%, holding steady from what we saw the month before, slightly better than 3.7%. i don't think it will move for the dial. we are expecting to hear from the reappointment hearing from the be ok. -- the bok. he mentioned the easing of geopolitical tensions could be good for the central bank, in terms of reducing capital outflow away from korea.

stay longer inn holding rates and not have to follow the tightening path of the fed is on. betty: would not change of outlook for the bank of korea. economists focusing on the youth unemployment rate, and how to get that going. that is critically more important for the leaders in south korea. yvonne: that is right. let's take a look at how asia is set up. we did see stocks heading lower, the shakeup in d.c. perhaps we could see goldilocks back in the picture. today, trade tensions on china from the u.s., reportedly. we could see more sanctions on the trade side that could read -- could lead to more risk aversion. the kiwi at .7324. trading getting underway in australia. asset sales, six

investment, coming through the next couple hours. .7855, for the aussie. stocks in the asx 200 down 0.5 -- 0.2%. counting down to the opens in japan and korea, checking futures in chicago. we are expecting possibly a retreat of 300 points after modest upticks of the 0.1% yesterday. dollar-yen, we approached 107 yesterday. more strength coming back in, 106.49. betty: let's get straight to how the u.s. markets closed. we saw stocks falling for a second straight day. news,cal and economic despite inflation numbers coming in pretty same. the firing of a rex tillerson. is there another shoe to drop? su keenan joining us for more.

uncertainty, especially, the president reshuffles his policy team, and protectionism is front-end center. let's look at the market snapshot. up as much as 197 on the dow. look how it closed. tech stocks were at a record before you sell the selloff on the major market. what you see with of the dollar, it was steady. dollar,you see with the it was steady. general electric got a smack down from investors questioning the credibility of its earnings guidance. pg&e, a rare day the utility is a big gainer. the governor giving a break to utilities because of wildfires, that will benefit them. silicom, they lost a huge contract.

nothing to do with their products. look at how that stock was sensitive to that loss of revenue. at g go to the bloomberg #btv 7832. it is called, where is the bear? the thecharted against s&p 500 index, we are close to a peak. setointed out the ratios the bull market high in january were down a bit. the bottomyou x out stocks, which include the fangs stocks. you get a pretty good-looking bull market. it is relative in terms of how you size it up. yvonne: su, thank you, su keenan with a breakdown on wall street. the dismissal of rex tillerson as a secretary of state signaled a shakeup.

former cia -- cia director mike pompeo is the president's take as top diplomat. andalked to washington bloomberg editor joe sobczyk. we heard about the president talking about how pompeo was more in line with him when it came to iran and russia. joe: one ofof -- the things about pompeo, if he is in line with him, thinking-wise, he can go into meetings and discuss things with his counterparts overseas with a little more authority. tillerson never really had trump's ear, they were never on the same wavelength. that made it difficult for him to engage in negotiations or discussions because the counterparts would figure trump could change his mind at any moment. pompeo, having a closer

background with trump, being more in line with him on a number of issues, may be able to bring them back into the state department in a way that was lacking before. with tillerson out and pompeo in, how does that affect the team going forward, and the relations, sticky situations -- i am thinking north korea, coming up? joe: that will be difficult to quickly. confirmation hearings for pompeo are scheduled for april. there was talk north korean talks would happen as soon as may. that leaves very little time for him to get in and up to speed. you willa director certainly be informed on all the issues and analysis -- as cia director, he will certainly be informed on all issues and analysis.

many have fired or quit or positions were never filled. there is a lot of work to do. cia,o, coming from the certainly will not be unfamiliar with issues or analysis the government has in terms of dealing with north korea or other actors on the world's stage. betty: thank you so much, joe sobczyk in washington, our bloomberg congress editor on the latest in washington. i want to bring in someone who knows a lot about what is going on in washington, bill rosen. vice a former citigroup chairman and author of "banker to the world." we have a lot of topics to talk about. before we get to asia, what did you make of the surprise news about rex tillerson? bill: it was not a surprise. it has not been a happy marriage from day one. there were differences on a lot

of other areas. they did not seem to communicate very well together. i was not surprised, i don't think anybody was surprised. betty: i think the way it was delivered was a surprise. former head of the fbi, similar, when he read it on tv. what do you make of the trump elevating pompeo to this position of secretary of state -- good choice? betty: i think -- bill: i think so, they get along. and he will be up-to-date on what is going on with north korea, because of running the cia. in that sense, i think it is a good fit. the other point which is important, they both agree on iran. they both want to take a tough line on iran. of course, that was a problem with tillerson. betty: in your view, this was the right decision?

bill: i think it was unfortunate the way it was handled. if change would have been made, it would have been better to do it earlier. but it is necessary now. as the president goes into these negotiations, if it happens, it isim jong-un, important he has a secretary of state he can rely on and trust. the best example of a president and secretary of state, national security adviser working together where it was successful, was nixon and henry kissinger at the opening of china. the president wants someone he in send their -- there advance to talk over the major topics, so he does not step on a landmine when they meet. yvonne: thank you for joining us. we talk about gary cohn, rex tillerson, the moderators of the trump administration, trying to temper down hawkish rhetoric.

it seems pompeo is in line with the more hawkish side of things. how will the approach north korean talks? is there danger we could see more disruption and less diplomacy? bill: i think it is important sit when the two presidents down, if they do, the work done before hand is very realistic. you have to remember, kim jong-un has made it very plain up to now, he does not want to give up his nuclear capacity and marry the nuclear capacity with a ballistic missile. these talks will be difficult. the only way the united states can come out a winner, and north korea, and the world, kim jong-un is really prepared to denuclearize, and there is a verification arrangement in place that works. this is one of the problems we have with iran.

people think the verification process does not function. there, they don't have the bomb yet, the device yet, which they do in north korea, which makes it all the more difficult. yvonne: is there a sense with iran, now the pompeo is stepping the u.s. will pull out of this iranian deal? bill: a lot of people feel it makes it more difficult, given we are going along with the iran arrangement. as you mentioned and was said here before, there was a real possibility president trump may decide not to go along with the next waiver. that would open up iran. our european allies do not want that. this president and administration will insist on additional controls, particularly on the missile

side. betty: quickly on the fed, because you know many of the players here at the fed. inflation data this morning, did this make powell's job easier? bill: i don't think so. i think you have a three to four increases coming. i said that in that op-ed in january. my feeling is that we will see inflation creep up. i think it is a real possibility we could get as many as four. week is no doubt in the where you have the meeting, you will have an increase. job, the head of the fed is particularly difficult now. he has to ratchet down all of this balance sheet that was built up, $4.5 trillion built up over time, to basically get it down to a realistic level.

start to have quantitative easing, reduced starting last october. this is going to make the job very difficult to balance where we are in inflation, where the economy is going, particularly with this big deficit and tax increase we have had, along with interest rates. i think he has a very tough job. he has an heritage a very tough job from janet yellen. yvonne: bill, stay with us. we will talk more about china. global advisors president and ceo, sticking with us. let's get first word news. >> reports from washington say president trump plans to push ahead with trade restrictions on china. he has told the cabinet he wants steep tariffs on a broad range --products and curbs on he on chinese companies wanting to invest in the u.s., tariffs

worth $30 billion a year. president persuade congress to find the money. he inspected eight border wall prototypes in san diego. it is facing skepticism and push back. he wants $18 billion for the project and continues to insist mexico will ultimately pay for it. the e.u. is putting up the heat on the u.k., saying theresa may is ignoring the realities of the imminent threat. they say they don't expect u.k. won't win access to parts of if she -- the bloc, doesn't play by the world. she lays out her version next week. brussels says that she needs to pick up the pace. russia has dismissed a british ultimatum to come clean over the suspected chemical attack on a

former spy in england. sergey lavrov rejected the claims as nonsense, saying moscow had nothing to do with the attack on sergei skripal and his daughter yulia. they have discussed punitive measures, including diplomats being expelled. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti. this is bloomberg. ♪ betty: thank you so much. coming up on "daybreak asia," the decision to block broadcom's pursuit of qualcomm, the latest on a string of rejections on security grounds. it raises questions in investment in the wider tech industry. regulatoryjing's overhaul, what that means for pboc policy and foreign investors in china. this is bloomberg. ♪

betty: this is "daybreak asia." i am betty liu in new york. yvonne: i am yvonne man in washington. turning up the heat on china, trump calling for tariffs and restrictions on china. let's get the tom mackenzie. he has the story from beijing. good to see you. president trump slapping tariffs on steel and aluminum, he did mention this is not the only stop, the next seeming to target intellectual property. tom: this is the stage where it becomes concerning for china, they don't need to be too concerned about the metals tariff. but in terms of broader tariffs on a broader range of sectors, yes, that is going to get china's attention.

politico say they have three sources who told them trump was presented by robert lighthizer, representative, with a package of tariffs worth of 30 billion u.s. dollars a year on chinese imports. trump said the amount is not high enough. lighthizer has long been a china hawk, he will go out and come back with a higher package. the official announcement could be as early as next week. sectors including telecom equipment, tech, toys, clothing, furniture, a much broader range of sectors would certainly concern the chinese. it has been noticeable that here at the parliament in beijing, the chinese have steered away from talking about retaliatory measures. they are trying to cool measures. at what point does china feel it has to act and push back?

particularly with this intellectual property investigation, china may decide to step up its game. betty: thank you so much, tom mackenzie, on the latest news of china and the u.s. is back with us, global advisors ceo. what do you make of this accelerated press from the u.s.? according to these reports, $30 billion plus on tariffs of chinese imports. ,ill: vice chairman liu he advance to the politburo of china was in washington for several days. apparently he was told the united states was looking for a reduction in the trade deficit with china of at least $100 billion. that should come from exports of gas, cars, agricultural products, soybeans, etc. i think that surprised him,

because it was so large. i think it is a negotiating tactic, vis-a-vis the chinese. if you are not making an effort for this deficit on the trade side to decrease by allowing us to export more to you, we will take unilateral measures. this is a gamble they are going on. i think at this point, you are in the national people's congress, so you won't get much of a decision out of china until the 20th of march, when it ends. they are concentrated on, who will run the central bank of china, who will be the vice president under xi jinping, and things like that. more leverage.et it is interesting timing, as you point out. the national people's congress is going on right now. what did you make of the cabinet reshuffle yesterday and what key questions were you left with? the: the basic point here,

most important thing that has happened in this congress, is that xi jinping has a cemented his position as the strongest periodsince a particular of time. starting with one president, he said each would only have two periods of five years each in government. he threw that out. he did not identify anyone in the 19th communist party meeting this fall that something like this was going to happen. i am surprised some people are surprised that has occurred. i think that is what he had in mind all along. we have been talking about these latest developments from the clashes in the broadcom and qualcomm deal. has ambitions of

making china and innovative powerhouse. but can you still do that under an authoritative system, the lack of independent thinking? how much will that restrict that from happening? bill: that is something we will see. a number of american companies on the tech side of big positions in china. qualcomm is one of them. , a numbers big there of them are. we will see how china treats american investment in the high-tech area. this has been coming on for a very long time, along with the whole area of trade. as you know, intellectual property battle has been going on for some time. i am not surprised it has finally come to a head. you have to take them together, both the trade side and

intellectual property side, in a sense of what china and the united states do together. topic been on chinese depository receipts. it seems regulators are pushing chinese companies listed in the u.s. back home. do you think tech giants like baidu, alibaba, will really he call?ll -- heed the alibaba, jack ma, says he really wants to be a worldwide company. it will be interesting to see. tohink these companies want keep a foot not only in the chinese market, but the u.s. and international market. i think we're entering in the oft difficult period u.s.-chinese relationships since tiananmen square. betty: that is quite a statement. i would not think many folks would argue with you on that. speaking of historic precedent,

these upcoming u.s.-north korea talks, do you think they are going to happen? bill: that is the big question. i think these sanctions that have been put on china have a push to them as secretary mnuchin said, to where they are today. those sanctions are only because china is cooperating. we need china on that. that is another trade-off we have with china. betty: and yet we are turning up the heat on china. bill: exactly. we need to think about that. we need china to help us with kim jong-un. there are a lot of discussions of have to take place. betty: do you think there is going to be progress? we know there will be a lot of theater around this, but could there be substantive progress? bill: i think you have to try. the only alternative is something we do not want to face, which would be some form of war, strike or something like

that. what he isg-un, looking for is international recognition. as i said earlier, is he willing to denuclearize and put in place of verification arrangement that actually functions? that is the big question. we won't know until they sit down. betty: what do you think? bill: i think it will be tough. i gave the example of kissinger and nixon on china. anything is possible. but you have to sit down and talk. if talk does not work, you have to go another route. betty: bell, great to see you. bill: great to be with you and yvonne in hong kong. yvonne: thank you for stopping by, bill rhodes, global advisors president and ceo. we have an exclusive interview

with the blackstone group cofounder and chairman, steve schwarzman, talking from everything from u.s.-china relationship to their scholars program. this is bloomberg. ♪

♪ 7:30 wednesday and hong kong come up 30 minutes away from asia's first major market open. betty: it is 7:30 p.m. tuesday in new york. lower, close -- closing spooked about the news of rex tillerson, abruptly lowered. s&p 500 down 0.6%. i am betty liu in new york. yvonne: i am yvonne man. you are watching "daybreak asia ." president trump has fired secretary of state rex tillerson, proposing to rolet -- proposing to replace them with cia director mike pompeo. he announced this on twitter

several hours before he called tillerson directly. he said he and his secretary of state disagreed over key issues, including the iran nuclear deal. japan exploring the possibility of talks between shinzo abe and kim jong-un. the government has been forced to review its policy on north korea, in the light of trump's surprise visit to kim. toxic be a departure for abe, who has consistently advocated pressure on pyongyang. users global -- google who subscribe to news, will find them appearing higher in their search results, as part of an effort for companies to find and retain paying readers. and, data shows who is likely -- most likely to buy a subscription. details at an event in new york on march 20. lawmakers in singapore begin public hearings to combat so-called fake news.

the government is debating unrolling a robust approach, as they have with drugs. legislation covering libel and issues considered a threat to local security. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ that is right, we are counting down to the asia open here in tokyo and seoul. for the latest, sophie kamaruddin. we are waking up to more chaos in white house, the departure of rex tillerson. we saw what happened with gary cohn and markets were quick to recover. how do you think it will play out today? >> we can bet on this chaos we are seeing at the white house. the line up in asia we have chinese data very much in focus, retail sales expected to moderate.

when it comes to what is happening in the white house, hardliner pompeo perhaps rising to u.s. protectionism. on top of recent tariffs and trade measures placed against chinese imports. may not behifts over, more could be anticipated this week. checking on futures in tokyo and seoul, weakness of the open. check out aussie shares, down 0.8%. telco and tech the biggest drag so far. betty: in japan, adding to the dilemma of stock investors. --t else is on the agenda the agenda for japanese investors? sophie: machine orders for january, anticipated -- estimates are for orders to have grown nearly 5%. a 12% drop we saw in december.

machines numbers for in february indicated a slowdown, which may signal moderating export momentum, at a time that is not great for japan. yen, 5.4%n the against the dollar, year to date, frustrating investors who want to focus on fundamentals. japanese shares sometimes moved to the beat of the yen drum. one solution is to measure what ignoring theed, unknowns like developments in north korea. following he sees in -- falling japanese equities, the ability to pick up bargains. he believes japanese stocks will have profits in the long run. he is calling for the yen

script, to move out of the strong yen position, saying it is a great time to be bullish again on japanese equities. betty: thank you so much, sophie kamaruddin. oil sliding in new york amid concerns global demand might not be able to swallow rising supply from the u.s.. a quick check of how wti and brent are performing. new york crude up 0.3%. brent, down 0.5%. last week opec leaders were saying the opposite in houston. what has changed? remy inocencio is that the wall with the details. >> looking ahead to this friday when we get the department of energy's latest report, that is what we are looking forward to in terms of a potential rise, the third weekly rise in a row. we are expecting this is happening out of cushing. i have video, you can see what

goes on in cushing, oklahoma. let's dive in the bloomberg terminal. i want to show you the numbers, g #btv 1880. we are seeing the most recent week at 2.4 million barrels. line is theted expectation for the week after. forecast 2.5 million barrels. if that happens, we would see a plus to the upside for six weeks, since the start of the year. before that, it had been down for four weeks. a push is definitely happening as we see this move ahead. take a look at what is happening in terms of the fall and the rebound. 3793, that fall and the rebound is what you are seeing in the white line. in addition to that, the yellow line we are also watching.

this is the baker-hughes rig count. in the lastour rigs few weeks. as we are seeing this fall in oil also happen. in the blue, total u.s. production, 10.4 u.s. -- 10.4 million barrels. this is rising, as analysts have been saying, near that 11 million barrel mark. we will be looking at all of these as we move ahead. first to friday, the department of energy's most recent report. ofcontango --ear the fear of contango is back in the market. ramy: g #btv 4412, the title, can we do the contango? not a dance investors want to be doing.

futures trading below the may contract. we have not seen this happen since this past october. let me zoom into the most recent blip into the red. you can see this clearer, down by $.25, just between the contracts. it implies the fall even furthe. it also says the market is well supplied. what is happening with u.s. oil, we see what is happening in terms of reality. these are three bloomberg charts we are keeping an eye on. back to you. yvonne: thank you, remy inocencio. voters at a district outside pittsburgh selecting a new u.s. congressman, in a special election that could be a bellwether for the midterms. -- republicans want to avoid

an embarrassing loss in trump country. our reporter live in pennsylvania. we have seen big parties so far. are we likely to see a democratic upset? betty, that is what the crowd in pennsylvania is hoping for. i am at the headquarters of the democratic challenger to the republican. presidentdistrict trump carried by more than 20 percentage points in the 2016 cycle. the polls have them running neck and neck. outside money has poured in. top surrogates for each of the candidates campaigning heavily, including president trump himself, delivering a fiery campaign-like speech over the weekend. his the weekend. his son, donald trump, jr., campaigning for rick saccone yesterday.

campaigning for the democrats. i spoke with one source who tells me they are banking on a mobilized effort of the grassroots to shift voters who voted for donald trump in the 2016 cycle back over to democrats. country, the type of area where the president's tariff proposal, while controversial on wall street, resonated with union leaders. they said while they agree with that policy, they disagree with most everything else. that is why they are endorsing conor lamb. winne: if we see conor lamb tonight, are we likely to see more of a democratic wave? >> that is what a lot of strategists predict. conor lamb pull it

off, it may have many scratching their heads. many are looking at this election as a potential political bellwether for the midterms. betty: kevin, what happened -- what happens come november, given the new district map in pennsylvania? kevin: only in american politics, right? conore with supporters of lamb and supporters of rick saccone. they said they have been inundated with tv ads, and redistricting wall make people have to do this all over again. whoever loses or winds could run again in a few short months because of redistricting. this will disappear, it will be re-. there is so much at play. , it is quickly note impacting a lot of the steelworkers.

whooke to one steelworker told me they are carefully watching what happened with qualcomm and broadcom as a cfius.of cius. -- they think it could affect commodity deals. country thatthe backed candidate trump. wonidate trump pennsylvania, a republican candidate, for the first time since 1988. betty: there is been talk about how important these elections are. president trump has made a lot of moves to really curry favor in pennsylvania. how true is that? , i can tell you pennsylvania was a key

the white house. we hear this a lot of the time, it is why the cfius ruling is so interesting, why the tariffs have resonated in this part of the country, why we see such an emphasis on behalf of the administration to really focus on those particular policies. on the flipside, democrats out in full force, really trying to flip the script and sees momentum of what has traditionally been a very conservative to put it mildly, part of the state. betty: thank you so much, kevin at the pennsylvania elections. the implications of the block on broadcom's bid for qualcomm. this is bloomberg. ♪

♪ betty: -- yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new

york. president trump blocked broadcom's bid for qualcomm. the decision was based on national security grounds. joining us from san francisco, our litigation expert, matt larson. implicationswider does that have for technology, matt? >> i think technology investors and companies are concerned about what precedent this sets for m&a activity. there has all his been concern about foreign investment in the u.s., which is what cfius covers. the questions are if deals are in the works, if they are looking for someone to cooperate abroad. will he get rejected or get a heightened scrutiny from cfius? does it leave companies then, what is next for qualcomm? broadcom qualcomm, the

threat, the hostile takeover, is quelled for now. shareholders will turn their attention from considering whether or not a broadcom deal makes sense, to focusing on the qualcomm technology licensing business. prior to a large dispute of -- they have been in a huge dispute with apple. they announced $4 billion a year in unpaid royalties. the focus is getting that settled, trying to resolve that apple lawsuit and moving forward with business as usual. yvonne: there is over 40 cases worldwide with litigation with apple. when will we hear progress? massive lawsuit, over 44 individual cases across a different countries. next to watch out for, we are

expecting decisions in china and germany to be the first. and of the second quarter, early second half of this year. in the u.s., there is a bid in the u.s. international trade, that goes to trial in june. we are expecting a decision in december. it plays out in the second half of this year and we will see about the upper hand. yvonne: does qualcomm have the upper hand? how is the individual case looking now? matt: our view is that qualcomm has the stronger arguments. samsung. they announced a they are in advanced discussions with the company underpaying on royalties for a while. if they can sign-up other handset makers, it goes a long way for proving the royalty sector is sound and 10 a deal with apple -- pen the deal with apple. apple raised questions, whether

the rates are competitive, too high, and what the rate should be. overall, we give qualcomm the edge in this dispute. matt thank you so much, matt,, qualcomm. up one a lot more coming -- on thisetween deal that did not happen. we will be talking about the latest news on the tariffs and u.s.-china relations. ♪

betty: we are getting economic data from japan for the month of january. recovery ing a

machinery orders, more capital spending among japanese companies, up 8.2%. expectations was a rise of 5.2% month on month. year on year, machinery orders up 2.9%. a swing from a decline in prior months. expectations were from a recovery. these japanese companies continue to spend their capital. that is resulting in robust machinery numbers. that they recovery for the month of january. i know you have breaking news on the boj. yvonne: positive data, we are members, cpiboj gold is maintained under the january policy board meeting, appropriate to pursue powerful easing, according to most japanese numbers. inflation expectations are not firmly anchored.

perhaps more dovish members talking about that. we will continue to watch this. it does not seem like a big change behind the thinking of the bank of japan. let's get back to the story we are talking about. when it comes to qualcomm, broadcom, the collapse of this deal, which was blocked by cfius . and trade deals forced by president trump, could be slapping tariffs on chinese imports and takeovers. let's get the latest from michael enright, managing director in shanghai. thank you for joining us. what we heard from qualcomm and broadcom, more news we could see trade frictions with the u.s. and china. is this a clear signal, america first, a more hostile signal from president trump on chinese investment? michael: i think we are seeing a combination of things. i think we are seeing the results of a more assertive china in geopolitical and

economic terms. realization.s., a the u.s. has been relatively itsive, in terms of attitude toward trade and investment compared to china and some other nations. is the u.s. taking china's playbook and trying to pick and create national champions? michael: to a certain extent. the bigger picture is a broader clash of systems. , the freethe tenets market is supposed to dominate with somewhat of an invisible hand. china has a completely different system, and overt strategy through government action, try to support china to either acquired -- acquire

or become technology leaders. in the u k and e.u., we see a back in the tech sector. broadcom is not a chinese company. you cannot understand this without the wider picture of china-u.s. and direction. betty: while broadcom is a company, i'm not to china and their investment. it looks like china is not welcome in the tech sector in the u.s. where might they go? michael: they will go where they can. there was push back in germany with the acquisition of one company. we will see see, china try to develop or acquire technologies it thinks is critical for its future. there aresingly, people in the u.s., europe, who believe those technologies are critical to their future.

i think this is the first of whenbrushes we will see, it comes to both international trade and investments, where countries are going to more overtly stake out what they see their interest is in the technologies of the future. yvonne: you have written extensively on how important inbound investment is for china and growth. if we see chinese money curtailed in the u.s., could that reverse? not be at alluld surprising to see china in some way retaliate. certainly, if large tariffs are put on goods exported from china to the u.s., you can expect to see tariffs from china on goods coming from the u.s., and life being made more difficult for american companies in china.

the work we have done indicates, if you take u.s. companies operating in china, ripple affects through the supply chains and distribution channels. accounting for 4% of china's gdp. if you look at chinese exports to the u.s., again with all the ,ipple affects -- effects another 3% or so of china's gdp. whereas the impact of chinese investment and chinese imports are far lower at present. yvonne: thank you so much for joining us, michael enright, joining us from shanghai. what china's regulatory reforms mean for the economy, as well as foreign investors. we talked to a hong kong-based power tool manufacturer on how u.s. tariffs will affect the business and industry.

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8:00 a.m. in hong kong. welcome. the top stories this wednesday, a stake up at -- shakeup at state. rex tillerson is fired after with the president on iran. futures across the region are lower. mobilem bloomberg's headquarters in new york, i am eddy loop. president trump once -- betty liu. president trump wants terrorist. -- tariffs.