♪ yvonne: 7:00 a.m. here in hong kong. bloomberg'sfrom asian headquarters. i am yvonne man. welcome to "daybreak asia." tepid u.s. retail sales stoke fears that consumer sentiment is cooling. opec changes its tune on a supply, saying production from rivals will top growth demand this year. betty: from bloomberg's global headquarters i am betty liu in new york. blackstone says that u.s.-china trade imbalances must be equalized. we have our interview with ceo of blackstone, steve schwarzman.

lawrence kudlow, to replace the gary cohn. he is seen as a trump team player. ♪ betty: what a day, another day for the markets where we had again a day of declines. retail sales were setting the tone for investors, saying perhaps consumer spending is shaky, and this economic recovery we have been in so long might be shaky as well. i want to point out breaking news we had a few moments ago that might add bullish sentiment, the senate rolling back portions of the dodd-frank law, listing burdens for financial institutions, including smaller banks. that could be a lift for the

markets tomorrow. yvonne: certainly deregulation has been simmering beneath trade concerns. larry kudlow will be interesting replacing gary cohn. he has been the trade hawk concerning china. asia -- china. -- weighd be way down ed down. betty: let's check how the markets closed a few hours ago in the u.s. the retail sales report setting the tone, declines in the s&p, down 0.5%. the dow off by 250 points. 0.2 percent.sing stocks dropping a third straight day in a row. we mentioned a retail sales number, cooling down. su keenan with a more on the nitty-gritty of the markets and what happened here. it was a risk off day, and

even though we have the firing of tillerson behind us, there is protectionism, the shuffling the deck of the foreign-policy team, how that will affect the market going forward. weaker one the dollar the week sales data. -- weak sales data. downis important, the dow, 1%, a third day lower. let's go to the movers. what you saw, harley davidson taking a hit. also announcing they are all in on electric bikes. investors not sure that is what to do for the turnaround. hit,t jewelers taking a their outlook not inspiring, particularly with rivals like kay jewelers.

a lotr had a big rally, of positive news for the company, and comments by analysts they are ripe for a takeover, given their clean balance sheet. let's go into g #btv 550. this is called across asset challenge. we have pointed out the research of templeton. this white line is the treasury yield gap of the s&p 500. where you see yellow circles it is higher. what templeton is telling us, the gap between the 10 year and really a chart showing bonds are giving stocks a run for the money in terms of return. that is an underlying cut -- threat to the stock rally we have seen. yvonne: thank you, let's see how this is setting up for asia.

losses when it comes to the australian stocks. nzx 50 pretty flat. trading under straley of -- trading in australia underway. .he aussie holding around .7876 we did get decent data out of china. 274 on pretty steady at the aussie -- 2.74 on the aussie tenure. abe's scandal still simmering here. but we are seeing stabilization in the yen, 106.29. we did see a drawdown of 0.9% on the nikkei 225 yesterday. washington, president trump wants larry kudlow to replace gary cohn as his senior economic adviser. he is it seen as a longtime

player and confidant in the president's inner circle. joe, tell us a little more about larry kudlow himself. he was a good friend of gary cohn, has similar types of the views when it comes to free trade. how will he manage differences when it comes to the president on that front? joe: both kudlow and the president are roughly the same age, have some of the same experiences and worldviews. like the thing is, president, he made a second career as a star of television, someone who goes out in front of the tv. that is something the president respects a bit, the ability to present yourself on tv, make an argument, and be a good face for the administration or business, whatever it may be. i think they have got those two good things in common. there could also be working in

avor, he is used to being in front of the tv, used to speaking his mind. you don't want your divisors overshadowing the president -- you don't want your advisors overshadowing the president in any way. that may be one adjustment made in the relationship. yvonne: what we have seen from the departures of rex tillerson and gary cohn, there were heads butting against certain things. what do you make between larry kudlow in the president? joe: both made statements that the other's views on trade or maybe not what you think. they are in favor of lower taxes, less regulation. has quite a record, in

favor of free trade, free which may come in conflict with populist instincts and programs the president wants to present. they say they are in sync on trade. mostly that reflects on china. that has become trump's main focus. it has been coming up again since the more broad tariffs were announced. kudlow as well has said he thinks china needs to be taken into account for its trade practices, which he contends are unfair. betty: is this going to take some of the president's power over tariffs? that as aan see long-term project. there is a bill in the house matching one in the senate, that requires the president seek congressional approval for tariffs. it won't affect what he has already announced. there is no real appetite in

congress to go after and try to overturn the tariffs trump has already announced. they don't really have a lot of time to be spending at this point on these measures, and going against the president of their own party. i think it is an interesting sentiment, but i don't think we will be seeing that anytime soon. betty: thank you so much, joe sobczyk, our bloomberg congress editor. let's get first word news with alisa parenti. steveckstone group ceo schwarzman says there is a serious imbalance and trade barriers between the u.s. and china. he is seen as close to both beijing and president trump, and has reportedly counseled the president against imposing tariffs. he told bloomberg television chinese leaders understand the playing field needs to be leveled. >> there is no doubt there is a serious imbalance between the

u.s. and china in terms of market access, and a tariff levels, and nontariff barriers to investment limitations. part of this happens in the natural course of things. >> the european union is questioning the rationale behind president trump's trade tariffs, saying they will jeopardize transatlantic ties. will seek anbloc exemption, and also countermeasures. mario draghi said a potential trade war with the u.s. posed more risks and uncertainties to the recovery of the e.u.'s economy. >> there are potential second-round effects that could have much more serious consequences. these include the risk of retaliation across other groups, and an escalation of trade tensions, and the potential for negative effects, which will weigh on business investment in

particular. ofrussia says the expulsion 23 diplomats from the u.k. is unacceptable, unjustified and short sighted. blamed russia for the nerve attack on former spysergei skripal and his daughter. the u.k. has also cut all high-level contacts. hold londonthey responsible for the deteriorating relationship. democrat conor lamb and republican ricks the cone locked in a race to close to call for u.s. house seat in pennsylvania. lamb claimed victory with a lead votes, in an election that saw over 200,000 ballots passed. the gop may challenge in court. the seat has been republican for 15 years. angela merkel starting her fourth term now as chancellor.

it brings to an end six months of political drift. the coalition of her conservative party, and the christian social union and the 709 seats ind, has the bundestag. she had to give up some industries to former government. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti and this is bloomberg. alisa, thank you. coming up, our exclusive -- our exclusive interview with cathay pacific. we go over the later -- latest results. and samsonite's chairman. betty: that is later this hour. nomura telling us why it is bullish on korean stocks. this is bloomberg. ♪

♪ betty: this is "daybreak asia." i am "bloomberg technology in new york. i am betty liu in new york. bloomberg'ss go to global economics and policy editor kathleen hails. -- kathleen hays. what ails the consumer? of spending the last few months, it is starting to sink in, one month, two months, three months, where retail sales have been negative. let's take a look. it is pretty striking. september, october, november, decent gains. a lot of spending and credit being taken on. the last three months, a little on the negative side.

what is interesting about this also, the consumer is sagging after a strong fourth-quarter performance. personal consumption expenditures were up 3.8% in the fourth quarter, that was a big thing driving gdp. another thing that is fascinating, let's check out g #btv 7123. i will show you you have got personal spending. this is not just on goods, but services. it has come down. even so, consumer confidence is rising. that is one reason why people are optimistic this will turn around. meanwhile, the atlanta fed, they have the gdp capped. it just got cut to 1.9%. it was recently at 2.5%.

when they first issued it, it was up to nearly 4%. tax cuts, jobs are growing, isn't that going to bring spending back? we don't know. let's give a brief mention of purdue serve prices, the producer price index. it accelerated year-over-year. however, the cpi was nice and well behaved. the fed things a lot of people are betting, they will keep their three rate hikes as a consensus forecast. they may talk about the consumer, tax cuts and the impact. do for now, hold their fire, the march rate hike, sit back. it will be jay powell's first presser, first press conference. we will get his insight on what he is thinking about the federal reserve as a whole. kathleen, thank you so much. kathleen hays, our economy editor. lower after today's trade in the

u.s., a third day of losses in the domestic markets. lackluster sales stoking concerns about consumer sentiment. our guest from nomura joining us in new york. jim, these markets are so linked up. are we making too much about how much central bank policy could affect the market? jim: there is a lot of high-frequency data. lastts like korea up 42% year, china, 45% last year. it is not reasonable to think markets will continue with that type of performance every single trading week. three or four possible rate hikes in the u.s. this year. markets like korea are dependent on the u.s. consumer. we expect some nervousness. betty: and disruption. i want to pull up this chart, g #btv 550. i know this focuses only on the u.s. markets, but it tells an

interesting story. the gap between the s&p and the dividend yield continues to widen, which is making it more and more attractive perhaps for those to get out of equities and go into treasuries. -- first of an impact off, what does that mean for u.s. markets, and what impact might that have on asian markets? jim: think about inflation. ree rate.yields risk-f that has been squeezed because inflation is coming through. inequities, you have dividends. shares go down, dividends go up. companies have the ability to increase their payout and prices, in some cases. that can be seen as a hedge in terms of inflation. yvonne: jim, we are still waiting on more details from what we get here on the trade side of things from the u.s.

before the market has discounted the fears of steel and aluminum tariffs, take a look at section 301, a good have a more immediate effect, i guess you could say. do you think markets are properly pricing in it potential systemic trade risk? jim: when you think of markets most exposed to trade in commodity-type, the koreans and japanese markets. if you look at north asia -- china, taiwan, korea and japan, those markets are more exposed. markets in southeast asia armor contained. these markets have evolved over time -- markets like malaysia and thailand. markets like indonesia for the demographic is very attractive. the impact of external effects is probably less. are still looking bullish when it comes to korea. why so? are we going to see korea

discount narrowing, given the fact of geopolitical tensions seem to be easing now, or what are you saying? jim: we heard the corporate governance reform story in 2017. korean stocks were at 43% last are. companies like sam some electronics, world-class company, products, consumers, trading at less than 10 times earnings. what i heard this week from u.s. investors, investors think about the next thing. governance reform may continue. we got some resolution in three to four to five year views with north korea. investors are thinking, what is the best way of playing that market? it happens one day in the future. betty: jim, looking at what is happening with the npc, the pboc getting more power, reshuffling

of the cabinet, president xi, unlimited leadership powers, getting rid of terms in china, does that change your view on chinese markets? how do you play this? jim: that is the biggest event so far this year in asian markets. what it means is more certainty. over the last few years, i think a lot of investors have doubted the gdp growth numbers out of china. 80% 10 years ago. one thing xi will cut is the quality of gdp growth. thinking about externalities in china like pollution, health care reform, education. there is noknow, potential challenge to the leadership. we know over the next 10 years with certainty, policy implementation will go in a certain direction. as an investor, you should have decent clarity, before you should be exposed. betty: when i think about checks

and balances, a little bit of a different story in china. it makes you more bullish they will be able to stick to those goals of growth in china? think of a democracy like the u.k. or the u.s., then you have an incumbent government which might decide a policy. a new government comes in and changes it. we know for a fact, if china sets a goal, they -- betty: they will stick with it. jim: a great amount of certainty, we think. betty: thank you, jim mccafferty from number of. -- nomura. bloomberg subscribers go to dayb on their terminals. it is also available on mobile. this is bloomberg. ♪

♪ this is "daybreak asia." i am betty liu in new york. yvonne: i am yvonne man in hong kong. hong kong says sponsors of ipo's in the city have been extremely reckless, indicating more penalties are on the way after unit was hit with finds. they will announce the results of an investigation into 15 companies in the next six months. tom atkinson says the commission wants to hold individuals accountable as well as firms. betty: aviation regulators and china asking airlines owned by the hna group to pay overdue bills, including fuel and airport fees. they are demanding payment, even though further action has been suspended to not disrupt flights. was told to pay all of its fuel arrears, or be

sold off. expectationcartel's for growth for a fourth consecutive month. that suggest the flood of new construction is undermining its efforts, along with russia, curbing the global glut with output. planning tort expand its grocery home delivery service from six u.s. cities to more than 100 this year, as a food fight with amazon heats up. uber, a $10 service fee. part of walmart's pushed to persuade in-store shoppers to purchase online as well, where they typically spend twice as much money. including me. up next, we hear exclusively from the blackstone ceo and chairman steve schwarzman as china's -- about china's rise as the -- as a world power.

this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ yvonne: 7:00 a.m. thursday on this buggy morning in hong kong. 30 minutes away from asia's first major market open. betty: 7:30 p.m. wednesday in new york, where markets closed lower yet again. those retail sales numbers setting the tone for a down day in the market. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." let's get the first word news. kudlowp loyalist larry is the white house choice to succeed gary cohn as chief economic advisor. he has known the president for a long time and is honored to be offered the job.

kudlow is expected to offer familiarity and support to the president as he removes moderating and dissenting voices. he served as an advisor to president reagan. china's security regulator has hit a company with a fine for manipulating the stock market. they say the group used a team of traders with more than 300 different accounts to manipulate the share prices of three shenzhen-listed companies last year. ratedgents said to have the taipan office of their casino operator. fbi investigators took documents. although the company says it knows nothing about the claims raid. imperial pacific has attracted attention for the sheer amount of money recorded at its saipan

casino, far larger than the grandest records at macau. it is official, finland is the happiest place in the world. the happiness index ranked company -- countries based on factors such as life expectancy, and corruption. finland has dominated the risk, -- the list, with norway and denmark in the top three. the u.s. falls to 18th. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti and this is bloomberg. yvonne: we are counting down to the opening in tokyo and seoul. let's get the latest with the sophie kamaruddin. politics are weighing on the markets in the white house in japan. >> markets might -- may be unnerved, whirring about inflation and trade protectionism. as jim mccafferty said, we cannot forget china, the clarity

it is providing. the worries tiles up, let's flip the board to check the yen, the gauge of risk sentiment. the yen has been testing 106. aussie stocks falling a third day. regarding kudlow, that big item of news, there could be news are going to protectionist was not set to replace cohn. soon after accepting the role, kudlow says he supports a strong dollar and could take a tougher line on trade with china. as for the embattled abe, staring down a tough march. the opposition boycotting, regarding the budget due to start april 1. we hadf that wednesday, japan's biggest companies including toyota, nissan and honda raising wages.

yvonne: better than last year, but not that great. sophie: they are also falling short to boost consumption and inflation. not the best since abenomics have started. we have not seen expectations boosted among households, regarding the future of inflation. in that time, they have more than tripled bonds in hopes of boosting prices. check out g #btv 7441. kuroda revealed they have bought issuance this year and it is infiltrating the jgb market. volumes really falling over the course of these past five years. kuroda has a second term coming up. yvonne: sophie kamaruddin, on what to expect in the markets this morning. cathay pacific seeing respite from its earnings woes.

a surprise profit in the second half of 2017 with a pick up and cargo and premium travel demand. that is helping narrow their net loss to $161 million. joining us, ceo rupert hogg, his first tv interview since taking the job six months ago. welcome to "daybreak asia." this is quite a turnaround. i'm sure you're very vindicated by these. what will be the focus of the transformation plan this year for you? what areas are you focusing on the most? rupert: thank you for having me. headline numbers for 2017, notwithstanding the pickup, sobering numbers. that is why we launched the transformation program. there are three pillars. the first is, finding new sources of revenue. the second is, adding value to the customer. the third is, we must be much more productive and efficient

than we have been in the past. on the first, adding new sources of revenue, we took 22 new aircrafts. the latest to go to more destinations, three new destinations last year, seven this year. that is ambitious for us. that helps by joining points to hong kong, new sources of revenue. say to what do you people when they are like, this earnings report is really what we saw with recovery in cargo and passenger yields are still in a bit of pain? how yields,bout albeit declining come are showing encouragement now. is it safe to say the worst is behind us for cafe --cathay? rupert: we have been a big investor in cargo for a while. we have a great fleet. with of the world economy in good shape, we can see demand grow. that is been a big factor. on the passenger side, there are

positive signs. if you look at the yield in the second half of last year, 2017, it was stronger than the yield in the first half. that is a trend that reversed from 2016. if you take a two-year journey, we can see yields improving. why is that? we have seen more in the premium cabin. yvonne: is it sustainable? rupert: i think it is, we have a great offering in those cabins. while the economy has been quite strong, that always generates demand for travel. yvonne: talking about your cargo business, this is what came to your rescue for the second half. but this is a highly cyclical business. we have seen signs things are slowly moderating on that front. are you concerned about a potential trade war that could weigh on the growth you have been seeing? rupert: underlying trends are

quite positive. the growth in e-commerce, internet shopping, is basing -- lifting. i don't see that trend going away. calm economic and political environment is best for our business, but we have a balanced network. we move a lot of cargo to north and south east asia and europe. it would not be good, but i think we would get by. yvonne: the area cathay specializes in our mobile parts, phones, computers. those are looked to be in the next list of tariffs trump wants to slap on china. how are you going to mitigate this? are there areas you are looking into on the cargo side? rupert: the range of what is moving is increasing. we put a lot of focus on pharmaceuticals and products that need real care when they are being moved. that is the first thing.

we see a big increase in food. as incomes, people become more affluent, there is a demand. so there are other factors. better than as trade war from our perspective. betty: i am curious about your premium passengers, your business class travelers. yourre you going to in transformation continue to grow that section of your business? i talked about finding new sources of revenue. and doing things the customer values. in terms of new sources of revenue, we talked about new destinations. we took 22 new aircraft over the last two years. we will take 79 new aircrafts over the next 70 -- over the next 14 years. we are investing heavily in our

lounges. we are about to open another one in hong kong. we are going to do a lot more in terms of food. food is going to be a big concentration for us. finally, we are going to introduce wi-fi across all of our long-haul fleet. it will take a couple years to do that. we are looking at things customers value. that is what we are focusing on and investing on. this is a big harbor, big nexus in the gateway for the greater bay area. there is a lot of traffic and we aim to attract that traffic to us. betty: when you are traveling, business or first class, food is important. and wi-fi, for the business traveler. in terms of existing partnerships with other airlines or forging new partnerships,

what is your thinking about that over the next six to 12 months? are you looking for new partnerships? are you looking to deepen partnerships with other airlines? rupert: we have a few partnerships. the growth in our home a market in the market we serve is it strong. our organic growth plan is to grow by 3% or 4% a year. our plansrgely, around that, we are a founding member at the oneworld alliance, and proudly so. that gives a lot of the value to our customers. i do not have drastic plans for new partnerships in the immediate future. betty: how about ticket sales? especially for your long-haul flights, you want to serve the premium passenger, but also your base passengers as well. are you looking to cut fares, undercut the competition, to bring up passenger numbers?

rupert: the fares are set by the market and this is a very competitive market. there are 100 different airlines which fly into hong kong. we have to compete on all segments. if you look at our load, how many people we carry, that is been flat over the last two years. by and large i think we are successful in filling those planes. we do have to be cost competitive. of course the markets are growing. one of the challenges which led to where transformation program is that there is a lot more competition. capacity has grown faster than demand, even though demand is growing. that is why we are so focused on values,the customer finding new sources of revenue and expanding our route network, and flying to hong kong, one of

the best connected cities in the world. we must beality, more productive and find a way of getting more efficient, year on year. if we do those three things, i am confident about the future of cathay pacific. yvonne: cost is big. you have been on the bad side of hedging losses. it seems things are clearing up. you have a lighter hedge book. expenses are still rising from 7%. you have ruled out more cost cuts. where else could you slim down? rupert: we are trying to keep our costs without fuel flat. within that bucket of costs are a lot of cost we can influence and control. we have got plans to address all of those to make ourselves more productive and efficient. yvonne: let's talk about technology in terms of improving? rupert: we spend a lot of time over the last year setting ourselves up for the digital revolution and the ability to get greater insight from data analytics.

we are seeing that come through in lots of areas of our business. humility -- cumulatively, that adds up to a better operation. yvonne: we heard from the chairman, he is pleased with the progress you have made so far. i have a chart to show how things are faring with regards to the stock prices. it seems the market is on your side. still have not been able to convince analysts what we are seeing, and define what they are saying with the stock price. transformation plans that could potentially reverse everything in the next two years? rupert: i think the main thing to remember about the transformation plan, this is an intensive business, a three-year journey. we have a plan over three years to get us to a point where we are returning over our cost of capital. there have always been risks, outside factors.

but if we focus on the same, it will make us more rid -- more productive. it will create more sources of riven -- revenue. yvonne: appreciate it, rupert for, cathay pacific ceo, his first interview since taking that role. how china is a stepping into a global vacuum, led by the u.s. plus, we will hear from blackstone's steve schwarzman on trump and trade. this is bloomberg. ♪

♪ betty: this is "daybreak asia. i" am betty liu in new york. yvonne: and i am yvonne man in

hong kong. trumps america first policy allowing china to raise its chance. of ang's announcement overhaul to help it achieve great power status. let's get to our china correspondent tom mackenzie, joining us in the great hall of the people in beijing. tom, how are we seeing this divergent -- divergence when it comes to the u.s. and china on diplomacy? tom: at the national people's congress what we have seen is china announcing an overhaul, a reshaping of its diplomatic tools, as you said, as it tries to take a more assertive role in the world stage. reshape rollso around the global trade and diplomacy. it has said it would be more proactive. this reshaping of china's diplomatic agency follows to

ensure their diplomats are empowered. and also around moves to see what china's infrastructure internationally is built out of. so china is very focused. it has a strategy in terms of developing its diplomatic clout. as you alluded to, it: with what is happening in washington, tillerson fired by tweet, and previous moved by trump to step away from tpp and alienate some of their allies by initiating or threatening the use of tariffs, whether that is south korea or a stroll you. -- or australia. we expect to see nominations for the heads of economic agencies and diplomatic agencies. these are men and women with decades of experience, in contrast to those at the heart of the administration in washington. betty: what challenges does

china face in growing its diplomatic clout? there are a lot of concerns regionally, in the south china islands,buildout of what many see as military facilities. there is the regional concern. and there are concerns around the belt and road initiative, india, germany and the u.s. suspicious about the belt and road initiative, what it means and what it says about china's influence regionally, but more broadly as well. there are the differences and diplomatic spending. china still spends a far less on its diplomatic corps than the u.s.. but that is changing. china is upping its spending on diplomacy as trump suggested billion lastom $55 year to $30 billion this year. he could have a significant implication for both nations

going forward. betty: tom mackenzie, in beijing, with more perspective on these efforts in the u.s.-china relationship. what is next for the u.s.-china relationship, as president trump -- on protectionism and replaces rex tillerson as secretary of state? blackstone ceo steve schwarzman says there is an imbalance beijing needs to address. there is no doubt there is a serious imbalance between the u.s. and china, in terms of market access and iteris levels riff levels and non-tariff levels. this happens in the natural course of things. when you are a less developed country, you have nontariff walls. we did that in the u.s. in the 19th century, and that helped

build of those restrictions. the issue now, with china having evena large economy, though per capita it is not as , but inne would think terms of aggregate size, it is the second biggest in the world, and it is growing at double the rate of any developed economy. it is sort of time to make that change, to make that transition. i think the senior people in china well understand that, because it is in their interest countries'other interests. if you do not normalize this, populism develops and developed world's. -- worlds. people demand action.

and it is spinning around and everyone is a loser. >> if i could infer from what you are saying, are you saying there could be justification for these tariffs, to make it a more level playing field? >> i did not talk about tariffs. you need a normalization of access between countries. it is called fair trade. e country should be keeping any other country out while they get to go in, it is not fair. betty: a more level playing field? steve: you need a level playing field, and the best products and services win. that is all that is trying to be accomplished. this will take some period of time, but responsible, intelligent people know this is something that will have to be done, and it should be done in an orderly and thoughtful way.

i am hopeful that will be the case. betty: if and not tariffs, what other lovers could be pulled -- if not tariffs, what other levers could be pulled? steve: there are other levers. attention hasat been gone and we should move to an execution case, which would be good for everyone. yvonne: that was blackstone group chairman steve schwarzman. go to dayb on your terminal. it is also available on your mobile in the bloomberg anywhere app. customize settings to get news you care about. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. leavinggenerale leader over a legal matter that predates his appointment. the bank has not identified the issue, but said he resigned to preserve the company's general interest. socgen is under investigation in the u.s., for bribery in libya. yvonne: shares fell on worries of suppliers keeping up with the pace of production. spirit air facing hurdles in boeing's most737, popular planes. boeing wants to produce 57 of the jets by the end of next

year. betty: in the next hour, samsoniteo that, chairman going over what it could mean for the travel industry. this is bloomberg. ♪

yvonne: we are live. yvonne:welcome to daybreak asia. thought -- stocks under pressure. opec saysis slide as reduction from independent rivals will be a big deal this year. it is just after 8:00 on this wednesday. justin trudeau confident that the nafta deal will succeed. he says it will be a win, win, win situation.

larry kudlow is the white house choice to replace gary cohn. he is seen as a trump key player. ♪ we are hearing from justin trudeau. take a look at this chart. certainly is risk being factored into the dollar right now. we can see it as being weighed down by the likes of gary cohn, the globalists. more people seeing the risk of the u.s. tipping towards the progression is policies. it will be interesting to see how larry kudlow will influence this. he said he is backing a strong

dollar policy. he said to buy dollars. he is making the news himself. yvonne: it shows you how much confidence is being lost in the dollar. many of the investors flying into the yen as a safe haven. it is also interesting. you have a falling dollar in the face of investors talking about a fed rate hike. the central bank of finance often an odd situation where they are raising rates while the dollar keeps falling. yvonne: it is going to be a conundrum for jay powell as we count down to his first press conference next week. investors are scratching their heads over the conundrum. asia stocks have been set for a second day of losses. this wall of worry piles up. stocks in japan sliding.

day in --ia, a third of losses. the economy grew less than forecasted in the fourth quarter. have -- foreigners are still shying away from japanese stocks. checking in on the yen, which is adding to overnight gains. this is trade and political issues spurring caution, as you drive -- guys just discussed. we have investors ditching dollars. there is a 30% chance of a u.s. led trade war. that is front and center in investors minds.

the results are not bad but not surprisingly good. they are not the best. yvonne: all right. thank you so much. sophie in there on the markets. let us dive deeper to what is going on in the markets with our markets live macro strategist in singapore. let us focus in on this news about the replacement of gary cohn as the chief economic advisor. is this going to have a big impact for advisors -- investors? 4 it is. >> it is. what will that impact be? the market is divided into two camps on this whole trade story. it has been going on the past couple of weeks. believes that trump

sees the stock market as his approval measure. he will not do anything to severely hurt us -- hurt the stock market. he does not want a full-scale trade war. the other camp is worried by the direction that trump is going in and feels he is keeping a lot of hard-liners in the administration. he has gotten rid of the moderates. try to focus on the trade war with china to appease his supporter base. some days you get the sharp falls or sharp rises depending on which camp is dominating the narrative. yvonne: where other markets? where do investors think kudlow is going to fall in those camps? how much influence is he going to have on the president? what is the feeling of that? question, he first

has made clear that he is on a hardliner. trump's policies in terms of being harder on trade and against china. he falls into the navarro ralph camp there. coin, other side of the to conan tillerson. he -- people have been working at -- worrying and the last 24 hours. everyone wonders how much influence any of these fighters -- advisers have on trump. yvonne: before he stepped down the tv side of his role, he said dollars sell goals. the dollar seems like a recoiled spring right now. snapually it is going to and we can see a sharp reversal. is now the time to start

limiting your dollar exposure? certainly the dynamics of the dollar have moved more positive at the margin of the last couple of weeks. the real yields rise has been exceptionally are -- large. inflation has not picked up that much yet. the data has been mixed. growth in the u.s. is still very good. overall, the marginal fundamentals of the dollar are improving. there is still a structural overweight of the dollar. it has dominated in recent months. reserve managers are still selling down there dollars. it will end at what point -- some point. we are waiting for that decision on 301. there are reports that the president could be shaking -- seeking tariffs on imports tech

-- targeting technology and whatnot. if those measures target china and go ahead i think that it is a severe situation for all equity markets. i do not think it matters much what sector. centerpiece of globalization and is particularly vulnerable. if china is specifically targeted by the u.s. there is no way they can ignore these kinds of moods. they have taken the other -- upper hand. they're waiting to react to see what the u.s. does. once their target moves against china, this is potentially a very worrying situation for all global equity markets. yvonne: thank you. joining us from singapore.

day'sn follow all the trading on our blog. there is commentary from our bloomberg expert editors so you can find out what is affecting your investments right now. betty: let us give them first word news. reporter: thank you so much. chosentrump has susan -- larry kudlow as director of the white house economic council. has known the president a long time and said he has been honored to been offered the job. he also served as an advisor to president ronald reagan. says theregroup ceo is clearly a serious imbalance in trade barriers between the united states and china. he is seen as close to beijing

and president trump and has counseled the president against imposing tariffs. he told us that china's leaders understand that as their economy develops the playing field needs to be leveled. doubt that there is a serious imbalance between the u.s. and china in terms of market access. and tariffs levels. areas.tariff let -- part of this happens in the national -- natural course of things. reporter: justin trudeau says he remains confident nafta talks will end in success. he told us there are always approve the long-running accord adding that he would be happy to accelerate negotiations if required. he insists canada is not a national security threat to the u.s. and nafta will end in a win, win, win situation. long-term stability

that is very attractive. yes, there are still a couple people saying, what is going to happen with nafta? i am confident we will get to the right place on nafta. achievableminently when, lynn, when. reporter: u.s. agents are said to have rated the office of the islands casino operator. fbi investigators took documents. the company says it knows nothing and denies any wrongdoing. they have attracted attention for the sheer amount of money recorded at the casino, which is much more than even the biggest resorts. this is bloomberg. ♪ betty: thank you.

searching for a deal. time is running out for struggling trader noble. we will have more on this drama. yvonne: a case full of cash. this is bloomberg. ♪

yvonne: -- betty: this is daybreak, asia. yvonne: a case full of cash. the world's largest brands of largest maker -- luggage maker. let us unpack those results. tim parker joining us. thank you so much for joining us. the last time you mentioned the 2016 results, how are things going? how he going to be able to

sustained that momentum? >> there are two things. we are seeing pretty strong global growth, evenly spread. theoryare traveling consistently. it is still the thing that people most aspire to do. business travel is very strong. we are enjoying a lot of success with the recent acquisitions. a lot of things are coming together, i think, to present a strong backdrop. yvonne: asia is going to lag behind the rest of your markets. about hong kong, india, south korea, some of your weaker markets. dueyou seeing more upsides to geopolitical tensions easing? >> in the fourth quarter of last year, we saw the indian markets gather strength. hong kong is around the bottom.

i have been waiting patiently. pictureseing stronger here. china is doing very well. of 2017 withe end a good amount of forward momentum. yvonne: you have to sell more of your lower segment brands in china like -- in countries like china and india to get the market share back. are you worried about margins at this moment? no doubt that we enjoy higher margins on more premium products. markets a huge value that chameleon addresses. although it may have a slightly diminished impact on margins, generally the opportunity there in terms of market scale is a fantastic thing. speaking on margins, i'm curious. we are so bombarded here with

e-commerces and company is coming out with the latest new innovation. everything from sox to whatever else.- socks to whatever how do you break through that noise? do find itself spending more marketing dollars? >> we have always had a strategy of consistently increasing the spend behind our brands. marketsce has opened up to a lot of companies entering and rising and then falling quickly. consumers generally, especially when they buy luggage, are looking for a product which is going to last them. they're looking for products that actually deliver real benefits. i am seeing quite a lot of noise out there. people pushing one particular

feature or another. i can honestly say it has been -- had relatively little impact on our three big brands which have a very substantial share of the market. yvonne: talk to us about non-travel items. oft is still a small portion your business. you -- do you plan on growing that it more -- that more at all? >> there is a fantastic opportunity. we will continue to work with that. in what way could you give us a further glimpse into that? >> no. i think generally. there is a major opportunity there. we will see what happens over the coming months. focusing on e-commerce, this acquisition of ebags happened last year. what are you learning so far?

different trends you. learn about in the asian region? >> we are learning quite a lot. space gives one a lot more flexibility, in terms of bringing on brands. we are also seeing that if we can generally reduce the range of brands that we offer to the consumer and offer them brands they recognize and give them value for their money, that is often a much better way forward than simply creating a sprinkling of different brands and having lots and lots of different channels to deal with. theometimes confuses picture in terms of what the consumer can see. yvonne: your ceo mentioned last time that he also target e-commerce to generate 25% of your revenue the next couple of years. parties orthan third

more directly on your website? how does that fair when you open new brick and mortar stores? >> we have a general ambition to get our direct consumer about half.to ebags has made a different formats. our e-commerce business is now up to around 14%. i can see that easily growing to a quarter of our business. we react generally to how markets develop. what everybody can see is that e-commerce consistently outperforms people's expectations. i would like to see at least 50% of our business going through our own channels. i think we can build that. a piece ofople, luggage is not the easiest thing to carry out of a store.

many people are very happy to order it online and have it delivered. [laughter] yvonne: we see that was forced out there. you have been strike -- quite strategic. you are venturing into more tech connected luggage, i'm wondering if you're looking at any startup to help you on the front. >> we keep looking at all swords of businesses. buytrend has been for us to brands that fit into our portfolio. although we have nothing planned at the moment, they'll be the trend of the future. if we see something that is different and interesting, we will definitely take a look at it. yvonne: what would other opportunities be free of, in terms of acquisitions? >> there is a huge market out

there for nontravel products. the market for women is a very important market. that represents a huge opportunity. can see an honest growth in sales for products that are female oriented. yvonne: always a pleasure to have you here. for more breaking news rev you are, we have launched tick-tock by bloomberg. live video coverage and hourly updated news. jump on twitter and follow it. this is bloomberg. ♪

yvonne: this is daybreak: asia.

betty: quick check of the latest business flash headlines. regulators in china asking airlines to pay overdue bills. are told air safety officials are demanding payment. further action has been suspended to prevent disruption of flights. told to pay their bills or be cut off. hong kong says some sponsors have been extremely reckless and more penalties are on the way after local units were hit with a fan. they are seeking other punishments and will announce the results of a punishment -- investigation in a few months. the commission wants to hold individuals accountable. willsays oil supplies exceed growth and demand this year.

has raised its expectation for supply growth from the u.s. and other producers for a fourth consecutive month. the flood of new production is undermining its efforts. prices have retreated since january's three-year high. spirit error systems is facing hurdles in meeting increased output. provides 70% of the 737 fuselage. boeing wants to produce 57 of the jets per month by next year. walmart wanting to expand a grocery delivery service to over 100 cities this year. the food fight with amazon keeps up. walmart's broader push to persuade more of its

in-store shoppers to start buying online as well where they typically spend twice as much money. a look at your markets here. currencies across the region. we are seeing relative dollar weakness on the upside. we are seeing strength in the dollar-yen. we are seeing these ripoff when it comes to trade concerns on when the u.s. is going to be slapping those tariffs on chinese imports. we are thing the dollar one flat rate now. betty: markets are still on edge. let us take a look at some of the markets that are already trading in asia. about 2/10 ofdown 1%.

of the index still down. aussie index still down. this is bloomberg. ♪ mom you called?

oh hi sweetie, i just want to show you something. xfinity mobile: find my phone. [ phone rings ] look at you. this tech stuff is easy. [ whirring sound ] you want a cookie? it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around.

>> 8:30 p.m. in singapore -- 8:30 a.m. in singapore. i'm yvonne man in hong kong. betty: you are watching daybreak asia. let's get to the first word news. regularinese security hit a logistics company with fines totaling $878 million for manipulating the stock market. the csrc says they refuse a team of traders of 1300 different accounts to manipulate the share prices of three shenzhen listed companies. it is six times as much is they earned by illegal actions.

the european union is questioning the rationale behind president trump's trade tariffs saying they will undermine trans-atlantic ties. the block ostrom says will seek an exemption but will also prepare countermeasures. draghi setnt mario of potential trade war with the u.s. post more risks and uncertainties to the recovering eu economy. >> there are potential second-round effects that could have much more serious consequences. this includes the risk of retaliation against other groups and an escalation of trade tensions. and the potential for negative confidence affects that would weigh on business investment, in particular. democrat conor lamb and republican rick's account are still locked in a race that is too close to call. claimed victory after holding a lead of 627 votes in

an election that saw 228,000 ballots cast. the gop is not conceding and may challenge the count in court by alleging voter irregularities. that seat has been republican for 15 years. russia says the expulsion of 23 diplomats from the u.k. is unacceptable, unjustified, and shortsighted. the embassy responded and blamed moscow for the nerve agent .ttack on a former's -- spy at the expulsion is the biggest since the cold war and the u.k. has also cut all high-level contact. and global news 24 hours a day powered by more than 2700 journalists. >> the asian markets, and let me see a downside of .1%.

it we talked about how a tough week it has been. it >> the damage continues. check out what is happening in tokyo with japanese stocks falling. consumer staples and industrial exporters, they are the biggest drags with the yen edging toward 106. this is getting online protectionism. it is unlikely to lift the dollar and the risk of rate hikes is still skewed to the downside. check out shares in sydney. lower for a third straight session. the aussie dollar is keeping an even keel. midweek -- the a , we see stocks slide .1% and the kiwi is sinking as we did see the missing fourth-quarter gdp growth from new zealand. sayingital economics this signals that it could be on hold until the second half of

2019. i want to check on some early movers in asia highlighting department store operator group leading investors, jumping the move since may. it did upgraded to buy at goldman sachs for later this week. it is sliding of the franchise owner expects to close more stores in the next year. steele is leading to drop among koreans makers. the company makes steele and cast pipes used for general construction. was led by, it industrial stocks. movers todayf the and boosting wages to kickstarter inflation is what the bank of japan is counting on. he keeps trying to reach the 2% inflation target. global economic policy editor kathleen hays here. the annual spring wage negotiation, a win for the

workers. >> as the bloomberg news team in tokyo wrote, these weight -- wage hikes are not bad but they are not that good, either. let's remember, prime minister abe has been a big proponent of job owning, urging companies to put in 3% wage hikes. because wages are lagging. let's take a look at #btv 8499. last year, cash earnings for workers were up 0.4%. cash earnings for workers are this white line. for inflation, they were actually negative by 0.2%. ande is the cpi rising, that is the main number which is still far from the 2% target. what actually did we see.

toyota is raising wages for a fifth straight year. the have listened to prime minister abe. near before his 2.4. nissan is 2.4. 2.3% for hit tai chi. -- hitachi. has saidovernor kuroda many times that we have to get at least 3% wage increases to hit the 2% target. a little bit of a push and may be appealing to the national desire to get to 2%. a lot of householders don't want to pay more. at any rate, i am a bit of an optimist. at least you are seeing bigger wage increases in the week before. and it looks like toyota, one of japan's most important corporations leading the way. betty: they have to get the talks finalized by april 1.

does the government still support the target? kathleen: is still seems that way. governor kuroda is officially renominated to be the head. his to parliament again today. and he was questioned pretty aggressively about yield curve control. what will you exit and how you will exit. and in terms of the bond purchases, mr. corona noted that was 75% of thean japanese government bond issued in 2017. three fourths is a lot. and what you find when you speak to people outside the boj, many of them worked and concerned that they are buying and destroying the secondary market. also big on the question of raising the 10 year yield target. with that be a step towards exiting stimulus? he did not want to get pushed too hard on that.

the pressure is building and the news team in tokyo today noting that it was his own allies in the lep, his own party that would question him aggressively and forced the finance minister to alter documents in this scandal which is getting more and more attention. it is a line from prime minister abe pushing for policies, a big part of the three-pronged approach to reviving japan's economy which it has revived, but anything that puts cloud over his political power is something everyone is watching, especially when it comes to boj. political stability has been a pillar when it comes to what we see in the markets there. kathleen hays joining us from new york. prime minister just intrude oh remains confident the nafta countries will reach a positive accord on trade.

he told bloomberg television that canada is not flinching in the face of president trump's protectionist threat. >> part of this story is reassuring the tens of thousands of steele and aluminum workers across the country that we are working hard for them. to secure the exemption on that because, quite frankly, it makes sense. you can't say canada is a national security risk to the united states and we are partnered on so many issues. and complex integration means that the tariffs in canada will be harmful to american workers as well. we made that argument and continue to work for it on nafta. to all be able to get win-win as the president said a couple of times. >> how much does it hurt that you have to wait? done so many things around inflation, immigration,

there's a lot to realize that canada is a very good place to invest for the long term. we have long-term stability on economy, politics, social, immigration. and it's very attractive. a couple ofill people saying, what is going to happen with nafta. there is an eminently achievable win-win-win with nafta. >> canada lobbied hard for the 232 exemption. you talk to the president several times. his new economic advisor today, larry kudlow, you were on the phone with the president making concessions hand over fist. is that correct? what did you give him? >> canadians know i have been consistent standing up for canadian interests. that is what they like to me to do and that's exactly what i'm doing. we are getting the exemption, we

are continuing to stand up. we know getting a good deal to canada is a good deal for the united states and mexico. -- >> you're not giving you are not giving anything at this point. >> negotiations are happening around the table. >> half of nafta could be done by the time the april meetings wrap up. if you get to that point and the calendar starts to intervene, are you willing to spend the talks and keep it going? canada does not have the pressures that the u.s. or mexico have. doing ourigent about homework, showing off, and making sure we are delivering creative ideas.

accelerate so we can accommodate them. canada is not the one creating time pressure and we will continue to work. >> if the talks were suspended, with that affect -- p.m. trudeau: the president has said as long as there is a nafta, there will not be any tariffs. once wehave a nafta improve it and we have a nafta now. we're pretty good on not getting tariffs. >> you have been very upbeat about the possibilities but i have to ask, with all the talk from washington, why? nafta has been good for the united states, canada, and mexico. there are always opportunities to improve it. level of collaboration, coordination, integration into the economy has positioned and better able to take on the

world. and i know there's a greater opportunity for that. canada is a trading nation. close to 500 million people as well. can create growth and we need to do a better job of ensuring that everyone gets benefits from that and very much why we are being awful in the demographic. women's rights, things that will make sure that what we have around globalization are actually demonstrating that growth and everyone. ministeranada's prime justin trudeau there with a bloomberg's mike mckee. confident,g so quite canadians are, that this nafta deal will get done. and mentioning their that, you know, despite some of the other things you might hear about president trump, he's stood by his word when he deals with the prime minister.

it's interesting. we spoke with steve schwarzman didn'tackstone that mention tariffs specifically but said the u.s. is right and wanting to level the playing field here. it may not be in the form of tariffs, but other ways to level the playing field with other countries. and you could say justin trudeau is sharing the same kind of you with the president when it comes to the plainfield with china. -- playing field with china. enter is over in china so the steal capacity that was implemented in november comes to an end starting today. see what has happened in the market in light of that. see -- and what we did see is a huge surge. they try to clear the skies. winter is usually the worst time.

at the highest level in eight years, but now that these are coming to an end, this could be a big headwind. we see prices fall a bit here. not helping is the inventory in blue. surging to a five-year high. it will be a big headwind. you add export tariffs to that and it could get pretty messy here. this could get very messy in the market. ratcheting up the trade tensions even further. , the fire sale may not be burning off enough debt. and airlines can be flying into financial turbulence. we will get the latest on the company next. this is bloomberg. ♪

betty: this is daybreak asia. i'm betty liu in new york. yvonne: i'm yvonne man in hong kong, and let's take a check at

the yen. just below that 106 barrier, there is a lot of risk. but just with the trade tensions, we have trade data larry kudlow named as the new replacement for gary cohn. and shinzo abe facing a lot of pressure here in this lingering political scandal at home. it isn't so much as a strong and story is a dollar weakness story. in falling to that one of six level, the dollar. bigs move on to another story, hna continues to shed assets to pay mounting debt. but it may not be fast enough to

manage the groups finances. stephen engle has more. askede regulators have hna airlines to pay their overdue bills. that's right. the china aviation hna,istration has asked basically, and the airlines to pay their bills. the deadline is coming up. the fuel supplier, there for one is a deadline tomorrow at 4 p.m., pay off your unpaid fuel bill which is reportedly been unpaid since october. as we've been reporting, the hna group which includes high , hong kongs airlines, a number of different assets under that, they are trying to sell upwards of $16 billion in asset sales. and, you know, this is really tough going for this airline

right now. in deutsche bank, hilton subsidiary, they are really trying desperately to raise capital to pay off this debt pile which the government obviously is trying to do leverage. is just one of seven where shares have halted right now. what kind of issues is this creating? just a: no issues, confidence level in the airline right now but these shares are likely to be suspended at least for another month. that airo hearing news china is said to be in talks to perhaps by capital airlines which is owned by the hna group. it would be another one of these assets. part of their stake in deutsche bank. -- they are also pledging all of their stake in bo hi capital in exchange for

financing. bo hi capital owns avalon holdings. we heard from the ceo seeing that we are not for sale. it is causing lots of confusion as far as what they are disposing of. will meet these targets, especially paying the fuel bill. it doesn't seem like we are going to see any let up here at this point. stephen engle there, our chief north asia correspondent. another company we've been following for years, china reaches a deal with shareholders ahead of a bond maturity next week. for the past 24 hours, the company revised terms that it would go through restructuring even if shareholders blocked the plan. as get to our asia credit reporter. of this.he background what will be in this proposal? >> they came out with a statement saying that they have 46% of the holdings signing onto

a proposal, a binding agreement. and it says, basically, it's trying to appease two sets of holders. we have sweetened the deal saids the table that they since january. and for perpetual bondholders, .hey have improved payouts some analysts are saying for holders, the new $25 million payout is in bond versus cash. this is not necessarily better. that theyntioned threatened to move the main center of interest to the u.k. and a for u.k. administration of shareholders don't approve the plan. and it basically means appointing an administrator and

selling the company assets. it is a mess, i have to say. >> one is 50% in terms of numbers. one is 75% in terms of holdings. noble yesterday and asked that they have a 65% approval now. yvonne: thank you. our asia credit reporter. what you need to know to get the day going in today's edition of daybreak. subscribers will go to tv on your terminal. you can also customize your settings and get news on the industries and assets you care about. this is bloomberg. ♪

betty: this is daybreak asia. i'm betty liu in new york. yvonne: i'm yvonne man in hong kong. look at what is coming out the next the hours, let's go to david and see what he's watching. david: we will continue the airline conversation. the ceo of the airline

there. in about 40 minutes time, the stocks are epically bad. good analysts are not terribly excited over the prospect of the stock price. and the prospect of the company. and we join us from bnp and we will be talking about, again, approaching when we get the new governor on march 19. they might be suited for a job and it doesn't necessarily mean the students actually get it. that marchre getting of good guests continuing their, david. markets trading here in the asia-pacific, let's take a quick look and certainly, that softer close here in the u.s. hitting the tone as well in asia. the nikkei 225 with the dollar-yen falling below 106 and below 150 points.

down .5%.in korea the s&p asx 200 lower by .4%. and for some of the markets that are set to open in just a few moments, take a look at the asian futures trade. acrossretty much read the board. it singapore, taiwan, and malaysia. in the prospect of a trade war continuing to way on the markets. yvonne: we continue to see the strength here. progress continues with david and haidi next. betty: this is bloomberg. ♪

♪ david: when you have problems with whether, do you ever can indicate directly with god? the time.hu: all we used to say it was a local call. [laughter] david: you are skeptical. what is the pleasure of being prime minister? pm netanyahu: investigation. [laughter] [applause] david: the israeli economy is doing quite well. pm netanyahu: is anyone here not investing in israel? invest in israel. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright.