♪ here in hong a.m. kong. we are live from bloomberg's asian headquarters. i am david inglis, welcome to "daybreak asia." mark zuckerberg offering a response to the data scandal saying mistakes were made and user information must be respected. sheryl sandberg said it was a violation of people's rights and facebook must work to regain the public trust. betty: from bloomberg's global headquarters, i am betty liu in new york. a rate rise at the fed, as expected. a hawkish jay powell indicating another two hikes this year and more in the future. president trump expected to slap

sweeping tariffs on china. shouting at beijing, not going to help. ♪ betty: david, as with every said meeting, we get some answers and many more questions to answer, and that seemed to be the status quo at this meeting. it seems certain to me, we will get more rate hikes this year. i want to pull up a chart, g #btv 4916. what is baked into the markets right now, still on the fence rateen three to four hikes, despite what we heard today from the fed. hikeis steepening rate

path, what it means for 2019 and 2020. watching this press conference by jay powell, you got the sense of this is an economist talking, the ceo, and investor, talking about monetary policy. david: it was different, wasn't it? cohn, the terms he used, very interesting. a lot of people were watching for the language. what was surprising and he alluded to this, the 2019 and 2020 dots. 2019 at 2.9%, and 2020 at 3.4%. they don't have to stick to that if conditions change. let's quickly check how

the equity markets reacted to this, what seems to be a more nimble fed, or one that will react more to data. lower. slightly the dow losing 45 points. the nasdaq slipping, down 0.3%. i different day for facebook, with mark zuckerberg and sheryl sandberg coming out with the statements on this cambridge analytica news. it looks like we are setting up for a softer open in asia. david: it does. not very convincing, you look at these moves. keep in mind the market was on a flyer yesterday. flip the boards, have a look at australia. flat start when you look at the markets in sydney. .7767 is the pricing run the currency. yields up three basis points. tokyo was closed yesterday.

we will get trading across treasuries. bond futures, as well. 21,230. we're looking at maybe a little bit of catch-up. dollar-yen, 106 is your level right now. we will see what asia does with treasuries, and how we price around the fed. betty: let's talk about the fed, steepening the rate hike path for 2019 and 2020, but not this year. kathleen has more of the details of jay powell's first meeting. how do you think he did? kathleen: i think he did very well. he speaks clearly, directly. i think janet yellen as an economist to wanted to explain had ae intricacies, style, a way of communicating that was different.

jay powell gets right to the point and moves on. only 45nference was minutes, instead of an hour or more. what did we see? fed perhaps a bit more hawkish. yes, they do see more rate hikes in three years. maybe the doves are on the back foot now. they have three rate hikes penciled in for 2018. people saying this move opens the door to four rate hikes in 2018. let's jump into the terminal, .ng at dots you can see the previous array of dots, what is coming from each fed official. where it was before the meeting, where it is now. it was a narrow consensus first three rate hikes. there were six people not seeing that, and four seeing more.

you have six seeing three, six that seefour, only two less than three hikes. a slightly hawkish tilt. you have a three in 2019 and three in 2020. urges. key, the hawkish the faster speed of hikes next year. interesting they stuck with of the three hikes for now -- they stuck with the three hikes for now. david: they stuck with their guns. kathleen: they see a lot of stuff picking up next year. that is why they are convinced inflation will do what it has not done, only once in five years, and that is hit and exceed that 2% target. the had a policy statement, economic outlook has strengthened.

here are things they are looking at. they raised their gdp forecast to two pointt 5% 7%. they see the potential as 2.8%. unemployment will fall to 3.8% this year, it is at 4.1% now. pce deflator is supposed to hit 2% in 2019. it is at 2.7% now. ce is supposed to get to 2.1% in 2019. it is much lower, 1.5% now. jay powell does not see any reason this economy is getting stronger, here is what he said. market remains a strong and the economy continues to expand. inflation appears to be moving toward the fomc's longer running goal. kathleen: when asked by the

reporters in the 45 minute long press conference, he does not see inflation and -- inflation acceleration. he mentioned the fiscal impact is a significant factor in the boost in the gdp outlook for next year. our globalleen hays, economic editor, from the fed to facebook. mark zuckerberg has broken the silence over the cambridge analytica scandal, promising to audit and restricted data collected by these apps, as well as being more transparent with of the users. in a facebook post he wrote, we have a responsibility to protect your data. we are by selina wang, our tech reporter. i am waking up in asia today, a lot of our viewers, as well. what do i need to know, what is the key take away from facebook? selina: zuckerberg has tried to stay out of the limelight, tried

as hard as possible to not say anything about the cambridge analytica scandal in which 50 million profiles of users, personal information was turned over to cambridge analytica, which is linked to the trump campaign. zuckerberg put a post on facebook about how they will make users feel better about the data on their platform. they will do a large-scale investigation on all these apps that may have had large-scale access before they changed their policies. that will be a huge effort. there are huge number of apps that have that access. they will limit the data developers get. if you have not logged into facebook for three months, developers cannot get your information. they will make it more obvious to the user what data they are giving away. they will put it at the top of the newsfeed and make it easy to adjust that. betty: is that going to be enough? selina: absolutely not. say,e seeing congress

mark, thanks for the post, but that is not enough, we are asking you to testify. this is well beyond a pr issue. there are governments around the world asking for the ceo himself to explain what is going on. even though this post was a great first step, there are a lot of questions he does not address. why, if they knew in 2015 this information was misused by cambridge analytica, why didn't they disclose that to the public? after that, why didn't they do a rigorous and internal audit of their processes? that has not been answered. be on no, and he will television later today to explain this in person. how unusual is this? selina: it is unusual for zuckerberg. he prefers to sit under the veil and protection of facebook. hes issue is so important, recognizes he needs to reach

people beyond those that log into facebook and view the profile. he wants to hit a mainstream audience, so we will be eagerly watching what he has to say. he has been well prepared by his pr teams. betty: thank you so much, selina wang, with the latest on facebook. let's get to first word news with courtney collins. >> first up, president trump said to be ready to introduce sweeping sanctions on china thursday. we are told the tariffs will be worth $60 billion, although the plan may still change. last year the president demanded an investigation on allegations beijing steals intellectual property and forces american companies to transfer technical know-how as a price of doing business in china. the european union has a plan to tax big tech, saying it must tax companies that get money off information, even if they are not physically present.

on anyd include a 3% tax company where it exceeds the equivalent of $8.6 million. the european commission estimates up to 150 companies could be affected, around half from the united states. tencent is warning investment in content and technology will posting margins after quarterly profit that topped projections. spending more on ai in video could hurt profitability, but strengthened short-term growth. they almost doubled to $3.3 billion, driven largely by its vast social network, including wechat. >> our platforms continue to gather steam. [indiscernible]

one billion after the 2018 chinese new year. >> south korea proposing talks with the north next week to discuss the upcoming summit between president moon and tim johnson. -- kim jong-un. they want the meeting at the border on march 29 to determine the exact date and agenda of the historic talk. earlier this month, they agreed to hold a leaders meeting in april on a border village. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ david: coming up, we hear from obama's former treasury secretary, jack lewis. trump prepares to announce $60 billion in tariffs against china. betty: val look for fed hikes

and how it is positioning itself. this is bloomberg. ♪

♪ david: this is "daybreak asia." i am david ♪ ingles in hong kong. betty: i am betty liu in hong kong -- in new york. chiefkudla is a investment strategist at mainstay. and joining us also is kathleen hays, who has been watching the reaction to the fed. david, i know you were on your way here. i don't know how much you got to see of the powell press conference. but what did you make of what he said today? david k: the statement referring what we know,ed we have a strong economy. if you look at the fed rate outlook for this year, next

year, whether we get three or four hikes is this year, we know what the path was higher. betty: was it clear to you? one found at the comments from powell quite unusual, were his words. you have the expectation of three rate hikes, but the and 2020 seemed not to coordinate with the forecasts being put out. david k.: we are seeing more dovish outlook this year, even more hawkish in 2019, 2020. was aas interesting too statement that stocks and real estate prices in some areas may be stretched. it goes back to when a fed official talks about stocks, they rarely say they are undervalued. janet yellen spoke about it with biotech stocks being stretched.

we had originally a game on the announcement for the fed rate hike. we had the dow lose more than 250 points. kathleen: what is interesting to me, the bonds rallied. weakening, even before the press conference started. i think that is one of the things that is interesting about the fed says it is going to do and what it means for markets. we don't care how much the fed hikes rates as an equity investor, as long as the economy is getting stronger. who knows, maybe it is repositioning. was it hawkish? you would think you would see a selloff in bonds. david k.: it was interpreted as more dovish. the dollar declined in value, a big decline. bond yields came back a little bit.

economy is strong and stocks do well for bond investors, we know what that path is. treasuries, [indiscernible] betty: i want to pull up a chart. g #btv 3894. at this point what it looks like is that the two-year treasury on ,he shorter end of the curve after the statement today, has fully priced in the fed for this year. that may mean this flattening we see have -- we have seen so far may be coming to an end or slowing. do agree with of that, and what kind of impact might that have? david k.: we saw the steepening. there, if our concern

we are looking down the road, the potential for the curve, we are getting close. what we see now around the world is, interest rates are coming up globally. netnow that this year, quantitative easing goes to quantitative tightening. we don't think a recession is anywhere in sight. david i.: this is david in hong kong. nice name. the spread is at 57 basis points. it squeezes down further short-term before hopefully it trends higher. what does it mean short-term? i have heard a lot of people get into financials. what do you think? david k.: we like financials, we

are overweight financials this year. we see net interest for the banks will improve. there are other factors, with a pro regulation regime in government changing to deregulation or softening of the dodd-frank positions -- provisions. we like that. what is happening with interest it isacross the curve, favorable for net interest margins. kathleen: go ahead. i was going to jump in and ask about the u.s. dollar and how much difference that makes for someone invested in equities? the dollar has been weaker. you have the 10 year treasury yield around 2.8 and change. it looks like it has plateaued. how will that relationship play out? will it depends on whether the

fed comes through with a more rate hikes? or is something else driving it? david k.: we have been a dollar bear for a while now. we thought we would see it. when we look at what is going on with tariffs, with the is happening with quantitative tightening versus easing around the world, we see the rates go up. the other central banks are lagging the fed. we think the other central banks are in catch up, starting to raise rates. we see further weakness for the dollar ahead. investors,rs, u.s. and international investments do not hedge. we end up with two contributions to our total return as u.s. investors. we have the underlying

securities in our favor, helping our overseas investments do quite well. david i.: david, based on these latest projections, we have six rate hikes, eight or nine ahead. somewhere along that trajectory, growth peaks. when do think that will become a 2019? david k.: i am sorry, david, again? david i.: we have a six or eight -- we have six rate hikes and eight or nine ahead. when you think growth peaks in the u.s.? david k.: that is a very good question. -- whenthat right now we look at the fed raising its expectations for gdp growth from 2.5% to 2.7%, what we have seen ,ith gdp growth in the u.s. what we see with synchronized growth lifting all boats and helping exports in the u.s. and growth globally, we look forward

growth for 24 to 36 months before we think we are into a problem. what are the risks? growththat we have a policy mi, that the fed hikes too fast. or, inflation, the other thing about all these rate hikes, what inflation are we fighting? pce at 1.5% is well below target. we don't see inflation being that much of a concern, either. looking next year, we look for an expanding economy not just here, but globally. david i.: david, appreciate you coming on the program. what a stalwart you are getting through this. mainstay capital management founder. also, kathleen hays. turning to facebook, we are getting lines coming through based on a statement that mark and cheryl know how serious the

situation is and are working with the rest of the company and leadership to build stronger protections, that they built a company and are instrumental to the company futures. knowines, mark and sheryl how serious the situation is, and are working on stronger protections. outclients, dayb check on your terminals. it is also available on your mobile. this is bloomberg. ♪

♪ just bringing you up to speed on the headlines that just crossed on facebook. serious sheryl know how the situation is, in an emailed statement. are working with

the rest of facebook leadership to build stronger user protection. built the company and are instrumental to the future. watching the shares, and japan. japan markets opening in half an hour. this is bloomberg. ♪

♪ you to full clear morning across hong kong. that is victoria harbour. 30 minutes away from the reopen of markets in tokyo and seoul. yesterday --se closed yesterday, to mark the start of spring. we looking at gains of 0.4%. betty: it was also the first day of spring here in new york, but you could not tell that with the weather. the snowstorm blanketing all of the northeast. 7:30 p.m. here in new york. markets also closing a touch

lower after the fed meeting. i am betty liu in new york. david: and i am david ingles in hong kong. you are watching "daybreak asia ." >> facebook ceo mark zuckerberg has broken his silence over the cambridge analytica scandal, promising to audit and restricted data collected by some app developers, as well as being a more transparent with users. zuckerberg wrote, we have a responsibility to protect your data, and if we can't, we don't deserve to serve you. losses were higher after hours. the new jerome powell-led said it raised rates, as expected, and forecasted a steeper hike path next year and 2020. he noted improving economic outlook in the u.s., but continued to project three rate hikes this year. it suggests the fed is looking

past soft to data, and expects a list -- a lift from tax cuts in december. >> another step in the process of gradually scaling back monetary policy as the economic expansion continues. this gradual process has been underway for more than two years, and it should continue to serve the economy well. central bankd's has held interest rates at a record low, and indicated it does not expect to raise them anytime soon. the acting governor says inflation is expected to weaken further before trending up toward the 2% target. the kiwi dollar maintained session gains after the statement, which omitted any mention of the exchange rate. usrces in china are telling -- has been appointed the new regulator, overseeing the $43 trillion sector.

he has been running it for a year, but now takes on a wider and more powerful role. the merger was announced at the national people's congress as a key part of the president's campaign against corporate debt. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ david: courtney, thank you. lots of things to consider. let's get a sense of where we are market-wise, as we had to the market in tokyo and seoul. sophie is here to map things out for us. decision,he fed currency markets had a number of catalyst to consider today. we have the dollar down, falling the most. also playing into the forex space. lower, thetracking mexican peso and canadian

loonie. weo in focus this thursday, are waiting to learn if trump will follow through on speculation he will announce $50 billion in tariffs against china over intellectual property violations. this continues, wall street journal reports china is considering countermeasures. the aussie falling to a december low, but it has since recovered, supported by higher commodity prices, ahead of the aussie jobs data. they expect a 20,000 gain in payrolls last month. we have that to consider for the aussie dollar. aussie stocks on the back foot this morning. indonesia and the philippines up to bat today. as courtney mentioned, we started with new zealand, rates held at a record low. the rbnz expects inflation to weaken in the near term. david: that seems to be a 2019 story. hong kong raising their base rate to 2%.

japan is coming back online. anything to know about? >> not a great start to spring, we have tsunamis to look forward to, cherry blossoms. and the grizzly bears. that could add pressure on the japanese stocks. bill be eying manufacturing data. i am watching contractors in the rail bid. are set to file criminal charges against them on violation of antitrust, with a move coming as soon as march 23. watch kajima and their counterparts. betty: thank you. you remember the special elections last tuesday in pennsylvania, with a proxy for how the november midterm elections might go? sayingt conor lamb republican rick six own has

conceded the special election in cone --ania -- ricks a ccone has conceded the special election in pennsylvania. but thealmost made it, republican just could not nab that seat. conor lamb saying his republican opponent has conceded, after days and days of the vote counting in this special election. let's get back to another subject of president trump, the tariffs. bloomberg has been told president trump is to make an announcement on tariffs against china on thursday. $60 billion worth of duties will target more than 100 different chinese products over perceived problems with intellectual property. enda curran has more on this. how bad is this package?

enda: this is what we have been waiting for for some time. the u.s. has been accusing china of stealing intellectual property and forcing technology transfers. a probe has been going on in the background ever since trump took office. we are close to getting the announcement with full details. more than 100 different types of chinese goods. that will bring trade tensions to new levels. not had much of an impact on china at all. this is the first direct hit on china, and it is a broad array of goods. we are deep into china's supply chain. china,the backlash from what is the reaction expected from beijing? enda: china has been relatively subdued in their responses until now. they were china to calm tensions.

they have been reserved and what they said publicly. there are two camps. there is one that thinks there are legitimate complaints against china when it comes to protection and technology transfer. china can give mr. trump a headlight and when -- a headline win. it is the biggest importer of soybeans from the u.s. agricultural constituencies that will hurt the u.s. political base. it could push into other sectors. boeing aircraft putting restrictions on investment and the like. we are nowhere near that yet. once we have the details, see how well china response. david: as we mentioned, more than 100 types of chinese goods at stake.

if they did benefit from developing these products -- the other angle to this, u.s. companies have come out and warned, because it increases the cost of doing business. enda: that is the big risk for goodsump, he risks making in the u.s. more expensive and sending up inflation when trade -- when the fed is already raising rates. a lot of big u.s. multinationals have made it clear they view china as an affordable and competitive manufacturing base, that is why they are urging to go slow on all of this. it'll be interesting to see how he handles this. the tone and mood could be quite different this time tomorrow. thank you, enda curran. tom mackenzie spoke exclusively with a former treasury secretary. they talked about tariffs. conflict is not going to

resolve a lot of those issues. -- findingssured ways to keep pressure on is important. to leaders, and then when you do things like the tariff decision, it creates a lot of risk. >> the tariff position is not the right approach? >> i don't think this steel tariffs will have a direct impact in china's economy, because they don't export that much steel to the u.s. exemption,see the what the net effect of tariffs are. if china is measured in its response, that would be a good thing. i regret there is a question whether or not the u.s. action foundation.sound this tariff decision does not seem to be well-timed. >> do think this report of $60

billion of tariffs on a range of products imported from china, could that be the trigger that forces china to retaliate? >> what i would tell china is, is to not make their own actions the cause of the conflict you are describing. china has done many things that they are rightfully being pressured on. it is a message they need to hear from the u.s., they need to hear it from europe, the other producing nations. what the u.s. should not be is that outlier, the u.s. should be driving the world to a discussion where it leads to better outcomes. tohow do you craft tariffs target china, given the complexity of the supply chain? actionsnk targeting that are violating international

law, international agreement, are entirely legitimate. if there is something going on, measures is a legitimate response. putting a tariff on steel and aluminum is not a targeted approach. we see the exemptions buildup. the idea there is a national security reason to put a tariff on canadian steel does not make sense. this is a question about the u.s.' place in the world. we have to worry about the world saying [indiscernible] we have a for the last 70 years had an alliance system with europe and asia. rely on uscould being the protectors and rule of law. i worry that policies that weaken our leadership in the world have much bigger consequence than what is the retaliation and tit-for-tat. betty: that was former u.s.

treasury secretary jack lew speaking to our china correspondent tom mackenzie. we were talking about tariffs expected from president trump with enda curran there. presidenthouse saying trump will be signing the memo on china trade at 12:30 p.m. eastern time tomorrow, that will kong.30 a.m., hong 100eting up to or over chinese products. we will be watching for that signing at 12:30 p.m. tomorrow. elon musk's road to success may be paved with gold. may be the largest ceo compensation deal on earth. this is bloomberg. ♪

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

in hong am david ingles kong. it was another blowout for tencent, but there also came a bit of a warning. stephen engle has the story. the profit nearly doubled, but that is not the whole story, is it? >> no, it is the same story as far as pc and mobile gaming revenue and profit. really fairly strong. let's get to the numbers. the net income almost doubled, a good set of results for the fourth quarter. 28 billion yuan. handily.it quite the problem is on the revenue and marches -- margins. revenue was up, year-over-year. it was below estimates. the numbers -- where did they go? david: i think the most in three years. $10.5n: you can see it,

billion. we were expecting $10.8 billion. then the cost began to soar, that is where it is weighing on the margins. you are getting squeezed on the margins. it is telling you a lot of different things. they are paying for a lot of content, whether it is videos or music. they are investing in new areas. alibaba, they are getting more revenue from advertising. they are going into traditional retail, artificial intelligence, cloud computing, they are building up of their paying system. had to say, tony ma speaking english at the news conference in hong kong, what he had to say about the user base, now over one billion. >> our platforms continue to gather steam. we see it increase 11%

year on year. one billion after the 2018 chinese new year. stephen: interesting forward progress for this company, which of course has been one of the best performers on the hong kong stock exchange, the stock has more than doubled in the last year. betty: aside from earnings, what stood out from tony ma? what about the possibility of data breaches? stephen: that issue really in the highlight now because of the facebook data breach. we did hear from the president of tencent say, no way this could happen. again, they have more than one billion users globally on the wechat and platforms. will they come back to the mainland? hong kong is the main listing for tencent.

the government has made no secret they would like the tech alibaba and tencent, come on back with a cdr on the mainland. the chinese have to change their laws to allow a secondary listing in the mainland. they are open to it, but it has to be the right market conditions. they are also open to a potential ipo for the music streaming business. they invested heavily in companies like spotify, another in southeast asia and india, building up their spotify-like music. betty: there are not many businesses they are not in right now. stephen: hundreds of businesses. betty: incredible. stephen engle, thank you. let's stay on technology and talk about tesla. elon musk is not short of the dollar, after they approved a

pay package worth $2.6 billion. our reporter covers executive compensation, published a report that moved to the share price after it was found out it was $2.6 billion, what he will be paid. >> that was good news to tesla shareholders. betty: normally that is not, you're overpaying your ceo. >> they think musk is worth it. they want him to stick around another decade. betty: are there concerns he wants to leave tesla? >> musk has said explicitly he does not plan to leave tesla anytime soon. given other ventures he is involved in, and there are only 24 hours in everyday, there are people concerned he is spreading himself too thin, and might be too interested in another venture. toty: is this an attempt address the merry-go-round we

have seen in tesla? leaving, an so many flood of executives have left tesla recently. anderson: that is a question that has been raised because they had seen quite a few. two at tesla,mber which makes musk even more important that he stay at the company. be done in terms of concession planning, if there will be a number two hired. there is opportunity he does not have to remain the ceo, but he can still be eligible for that award as chief product officer. he has said if there is there -- is a clear successor, he can hand over the ranks so he can design and work on intricate things. i am curious what the

specific goals are that are attached to this pay package? it is not as if elon musk is underpaid. how much money is needed to keep them motivated? that is something that has been raised by critics of this pay package. he has about $20 million in net worth, half of that is tied up in tesla stocks. does he really need more equity to stay motivated to come to work every day? in terms of goals for the plan, it is straightforward. they want to make tesla one of the biggest companies in the world. at the top end of the performance targets, tesla needs to hit $650 billion in market value, more than facebook and berkshire hathaway. it also needs to drastically grow revenue and earnings to hit the upper targets. david: any indications when tesla will have its first

profitable year? anders: that was also something critics pointed out. the earnings target that is listed among the goals concerns earnings, excluding certain items. one of the big californian pension funds came out against this award today and said, we like elon, we like what the company is doing, but we want a clear path to target. that would be a suitable performance goal to have. there is nothing on that right now. david: thank you so much, anders melin. this is the function on your bloomberg if you want to get a sense of how much rich people are worth. elon musk, number 46 on our list, $20.3 billion. number 14.

you put the average together, top 100 billion. $26average net worth, billion. check that out. this is bloomberg. ♪

♪ ."tty: this is "daybreak asia i am betty liu in new york. david: i am david ingles in hong kong. best buy said to be planning ending [indiscernible] looking to end of those talks based on security concerns. betty: another blow for the world's largest smartphone maker. there have been national security concerns raised over huawei and zte among the

lawmakers. huawei has already had a tough time in the u.s., shut out by telecom carriers. this is not adding favorably to their expansion plans. best buy severing those ties. we're watching the markets in the open. david: let's have a look at the prospects. underway, 60 minutes. we are getting a little strength on these, the story is when you look at the fixed income and sovereign space. betty: we are also counting down comingopens in japan, back online after the holiday break yesterday. you can say nikkei futures pointing to a higher open or rebound. the nikkei 225 before that holiday, down 0.5%. the dollar continues to slide with that interpretation the we are not going to see four rate

hikes this year. more ahead. how many hikes it sees the fed making. catch our talks with a chief economist. this is bloomberg. ♪

♪ david: it is an :00 a.m. here in 00 a.m. here in hong kong. this thursday, president trump is expected to sign. the feds take a hike is expected here -- expected. globalfrom bloomberg's headquarters i am betty liu in new york just after 8 p.m. on this wednesday. mistakes were made but offers no apology. it was a violation of people's

rights and facebook must work to regain trust. ♪ very good morning to all of our viewers. we have to get started with a quick check on the fed. they did not change the plot for this year but it was really for 2019 and 2020. it was really more long-term. the other thing of want to .ention, wirp we are done with march and it looks like either may or more likely june. shows 80%., it

probability, again, injured. -- in june. betty: the question is how many. conference, expectations were released for this year. there are still quite a few questions about next year and the year after. particularly with the disconnect between the plot and forecast, particularly gdp. how do we get to more rate hikes or steeper paper -- rate hike paths? they did pretty well but had more exciting to do in the markets. david: betty your pointing out earlier not so much like an economist but more like a ceo. more people can understand. this is the guide but we are not

necessarily stuck to it. let's get an indication of how markets are treating this. sophie is here with a look at the opening numbers. sophie: we are going to see grizzly bears will be. lowered out of hibernation so far we are seeing ace -- if let's start to the open in tokyo. the one is jumping. last night, it was at 1072. said, it isgovernor hard to determine the arch impact from the feds decision and it is hard to determine the rate differential with the fed. we kicked it off with new zealand and asia hold on a big cash rate their. uncertainties remain and near-term inflation should we can. indonesia is expected to hold at

4 and a quarter percent. as noted earlier, the philippines maybe more exciting as life gets harder for central bank watchers there. sydney, ahead of aussie job seats, we are seeing stocks continue losses. the aussie dollar is creeping higher. the currency maybe trading around tensions and crosshairs. jack lew talked about not shouting at china. we are counting down to trump shining -- signing a memo. checking in on japanese steelmakers, we have kobe steel in the spotlight. the new chief opens the door to deals at its this is units. one of the heavy at --

heavyweights in tokyo citing 1.5%. and ohes of cut them off my gosh a, the fair trade commission in japan is reportedly set to file criminal charges against them on violations of antitrust good -- antitrust. betty: thank you sophie. the fed as we mentioned, steepening its rate hike path for 2019 and 2020 but not for this year. for more, here is our macro strategist with his take. how are investors digesting all of this? isthe initial perception that overall, it was a dovish meeting. that is because the move towards hikes. overall, the base case is still three hikes this year. it is important to emphasize that overall, he delivered the base case. it was actually that he did not deliver the hawkish surprise that somewhere that -- betting

on -- some were betting on. there were only one. removed from getting four hikes this year. it was an on dovish dovish outcome -- undovish, dovish outcome. the dollar is where most of the bets were. see was of this play out. i expect that to balance out over the rest of the day. betty: onto another issue. another issue that the markets are watching of course, are the collisions of the big economies of u.s. and china. we just had the news out a few moments ago about president trump citing -- signing this tariff against china tomorrow. how big of a concern is this for investors? patrick: i think it is a massive concern. a lot of investors have their

head in the sand's. they are hoping that it will not be delivered. i already heard an investor saying, maybe he will only pretend to sign it. he is certainly waiting for the last moment. people are very hopeful here. i think the fact is, china said they will reciprocate. this is a very negative sign for markets. when does this take for tech and. -- end. do we think that time -- trump would just let that go? i do not think it is fully priced. very quickly we will see this start to dominate the whole fed story and the fed story maybe forgotten about by tomorrow. david: in fact, i was going to put those things together and asked what you thought? many of our guests have pointed out that a quicker pace of tightening is the biggest risk for markets. thinkhis in mind, do you

that trumps tightening is the biggest risk for markets? patrick: i absolutely think it is. submite not going to tightening very quickly. they have given us lots of time and things have gone very gradually. they have continued that message that he is optimistic on the economy but he is not going to rush thanks. i think it is important to emphasize, central banks are still pumping it went -- equity into the system. obviously, it would be a big wonder if he tightened fed -- too fast. it is right on the radar and we are overlooking it. it is not just china and the u.s., it is also europe and the u.s.. i think this is a very good -- big danger for markets that is completely underpriced.

david: we appreciate it mark. you can catch all of his work. get a quick check of what is happening across markets. what you're looking at right now is a piece for garfield reynolds. a lot of good stuff to follow their. -- there. let's get an update on first word news. here's paul allen. paul: thank you david. the democrat says his republican opponent has conceded defeat in last week's congressional election and southwestern pennsylvania. it is a remarkable upset in a longtime gop district that president trump one like 20%. he will secede republican tim termy, and a term --8

congressman. canceledhts have been in the u.s. on thursday. it is the fourth system to hit the region in the past three weeks as high pressure over greenland incubates repeated noreasters. and estimate $1 billion in damage. sources and china are telling us that gosh reaching has been appointed the new regulator. running the cbrc for about one year. the merger of the two bodies was announced at the national people's congress. it is a key part of the president's campaign against corporate debt. tencent is warning that investments and content will weigh on margins after posting quarterly profits. they plan to spend more on ai

and video. shares almost doubled to $3.3 billion driven largely by vast social networks including we chat. >> our platforms continue to gather steam. one billion after the chinese new year. global news 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries, i am paul allen. this is bloomberg. betty: thank you paul. president trump expected to speak about new tariffs against china thursday. we will look at implications of direct actions. david: up next, security chief

economist jerome powell. the view on the path of the federal reserve. this is bloomberg. ♪

david: this is daybreak asia. betty: the federal reserve may a more hawkishs rate hike in the future. right now, they are not ready to take it. kathleen is here with the key takeaways of jay powell's first meeting. are they more worried about inflation here? >> i do not know if they are worried because they are promising to rate hike more than they said. they made a quarter-point rate but 2.5% widely expected they still have three rate hikes this year.

what is different is the rate hikes in 2019 and 2020. three and 2019 and three in 2020, that was not expected. inflation in 2019, the headline number is getting out to 2% and the core of the 2.1%. they see gdp this year at 2.7%. potential is 1.8%. unemployment is down to 3.9% in 2019 and 2020. let's jump on the terminal now because everyone around the world is looking at this. 2985. their inflation forecast is that 2.1%. we are stuck so much lower right now. you have the core at 1.5%. fs, we can move the headline up to 1.7%. look along it has been since the fed was able to obtain that number. as out mentioned, the tax cuts are why we are seeing more growth.

powell also said he does not see an inflation acceleration yet. i think it gives a little bit of question to how fast the fed can go. what it means for markets in the united states. what it is going to meet around the world. david: kathleen, the rate hike was largely expected anyway. the change and the path for 2019 and 2020 was not the surprise. what does it mean for asian central banks moving forward? david: you are talking eight or nine more rate hikes overall than people have been looking for. not too surprising that we saw hong kong raising its key rate. that is just an autopilot kind of thing. four other countries, i think it has more to do with how things play out and currency. today, the dollar weakened. some asian currencies could see

themselves going higher which could hurt exporters. the head of the bank of korea was testifying and he said the re-hikes were expected. that is fine. hiked say, the 2019 rate looks somewhat hawkish. market volatility might increase if this rate hike outlook shifts on economic data. we are going to be data dependent now. we are wondering if the fret -- fed will be more aggressive. ,f course, if you look at japan we know that they are so far from their inflation target. boj. the key number on the there is no way they could even if they wanted to start reducing stimulus. of course, when the governor was testifying earlier for his ,eappointment as mr. lee is now

he made it pretty clear that in 2019, that is when they will start talking about removing stimulus. i think there are other places that are definitely going to be watching this very closely. it puts a whole another interesting element into this mix of what is going on in asia. dealing withries employment, exports, the fed, and the dollar. ratenows if the federal hikes in the future. better joins us live now out of tokyo -- patrick joins us live now out of tokyo. has your outlook changed from this time yesterday? isrick: i think it interesting to do a borrow between the federal reserve. the u.s. growth looks to be just

under 3%. inflation will start to recover. inflation will be back to target next year or the year after. of course, what they do is consistent with the scenario. if you expect growth to continue just under 3%, then, you can expect inflation to be back to target. as you know, they are neutral rate in the u.s. is at 3%. the fed is driving it to 3% and this is perfectly meaningful and europe. the big issue is whether they are right or not. they can make two mistakes and you just discussed one of them. in the u.s., we see absolutely no sign that inflation would be reappearing. labor costs are very stable. prices will be in the range

of six to five and $70 -- safety five dollars and $75. inflation stays where this. 1.5 percent in the u.s. and 1% in europe. issue is that -- the reciprocal position of the economies. you have a lot of tension. it is more and more complicated to recruit. that theery much forecasts are right. they will have to be revised. david: that tells me that what you are saying that the global growth is negative. when can i expect inflation to come through?

things, aou two different view of rich gets and unemployment. the u.s., unemployment is just above for which is, historically low. likely, unemployment is very close to what economists would say structural unemployment. in europe, unemployment is still very high but if you look at the problems european companies are facing, they have to hire more. it may be the case that we have a problem with the labor market. in reality, the output gap is very small today. betty: we were talking earlier saidone of our editors who , there is a lot of talk about central banks and monetary policy but the markets may be ignoring the bigger impact which

is this pending trade war between china and the u.s.. do you think we are underplaying that riskier? -- risk here? patrick: i do not see the chinese retaliating. look at what the prime minister has been saying the past few days in china. in china, the discussion is lower rates to make it easier for foreign investors to access the chinese market. no one in china is telling you there will be a trade war. if you really have $50 billion of additional tariffs in the u.s., this is the equivalent of whichitional .3 inflation would cause growth in the u.s.. it would be very damaging to the u.s.. what the u.s. imports, more and

more, they do not produce. you cannot substitute the imports. doing isare basically paying more. shock tot a negative growth. it is a very bizarre policy. again, there is no way to substitute domestic products and imports. betty: what about the collateral damages to other economies? particularly in asia. people look at australia for instance, that could severely get hit by the street or. -- this trade war. if you listen to my point that the volume of u.s. imports will change very little. paying for the rest of the work

is very limited. think is a much patrick. hank you patrick. do not forget about tv . and diveatch us live into past interviews. this is bloomberg. ♪

betty: let's get a quick check of latest business news headlines is our. -- this hour. they have some -- halted sales. best buy will not order any more smartphones when current inventory runs out. other check -- other chinese

tech companies are viewed with speculation from washington. huawei is said to be developing a smartphone. it would actually run alongside android. potentially bringing the technology into the mass market. let's confirmed that they have met but the collective that -- declined to comment further. the company has come under pressure from smaller rivals over 40 subscribers but is seen extending its lead when it rolls out 5g. significant took subscriber shares. the revenue contribution from the business from a small. david: coming up, president trump is set to sign off on a memo targeting what the white house calls china's economic

aggression. we will actually be looking at what to expect, what may be on the sideline. this is bloomberg.

betty: we are watching for some breaking news outright now on the astronomy markets. the jobs report coming out for the month of february. seeing the unemployment rate tick up just slightly here at 5.6%. in terms of an -- employment -- 17.5.7 and a half that is an undershoot of what economists projected for 2000. interesting here, the participation rate which way the white -- the participation rate going and at 65.7%. that is actually a little bit

above what economists projected at 65.6%. that maybe the reason white you saw the pickup in the unemployment rate. while the markets were quite robust in australia, maybe taking a slight breather here. it is not just the rates that we are looking at but the wage growth. this unemployment rate is still above that five points -- 5% that economist expect. david: it is a different set of data but it is the same problem globally. where can it reasonably go in the world and not get called crazy? six 5000 was her full-time number. it is worth noting -- six he 5000 -- 65000 was your full-time number.

he put those two things together. 50,000 net full-time jobs created. this is one of the most unpredictable economic predictors of their. -- out there. let's get more market reaction. sophie: we are not seeing that feed into much to the action down under. aussie stocks continue to fall. and energy players are the bright spots in sydney. extending gains at a six-week high. the aussie dollar, we are seeing again a bit after the jobs data. the one hand, we have the rate hike indicating a firmer global economy and therefore, given the

lingering traits, the aussie could be dented by the u.s. and china showdown. over in seoul, we are seeing the cost be back above a 2500 level. jumping.s it is ready to break out of its recent trading range. japanese stocks gaining ground. the nikkei 225 up one third of a percent. the dollar extends losses after falling the most in two months. let us take a look at the action in tokyo. i want to show you the nikkei index break down by sector here. as we see, japanese stocks have been fluctuating throughout the morning. financials are losing at just /10th of 1%. electronic makers are gaining ground. perhaps growing

because of the outlook that the fed has given. the state of the u.s. economy is looking solid. exports are looking at that assessment was some optimism. elsewhere in the region, energy stocks leading the gains by almost 3% there. betty: think you sophie. -- thank you sophie. david: facebook ceo, mark zuckerberg, has broken his silence over the cambridge analytics scandal. in a facebook post, zuckerberg wrote, we have a responsibility to protect at -- your data and if we can't, we don't deserve to serve you. stocks were higher after hours. the country could leave the european union for a trade deal is agreed.

brexit is just one month away and it could happen with no clear idea of the future relationship of the uk's is trading partner. he is confident that the city of london will retain its status as one of the leading global economic standards. >> i have no doubt that london will maintain its position of global dominance in financial services. we are professional service capabilities that is not replicated anywhere else. legale regulatory and trademarks and the reputation of the bank of england. paul: south korea is proposing talks with the north next week to discuss the upcoming summit between president and kim jong-un. they will determine the exact date and agenda for the historic talks.

earlier this month, the two countries agreed to hold a meeting in late april. saudi arabia has told bloomberg there is still no decision on where the international listing will happen. finance and minister says the ipo remains on track and the kingdom is still considering the merits of york, london, and hong kong. energyek, the saudi ministers of the listing could be delayed until next year depending on market conditions. global news 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries, i'm paul allen. this is bloomberg. david: 16 hours from now, president trump will be signing the memo. targeting what the white house is called, china's economic aggression. he is expected to announce about $50 billion in tariffs against china. i've set my alarm for 12:30 tonight. why is he doing this?

what does he hope to gain? >> the president is doing this is a way to send a signal to china. and is the first trade terror of action geared directly at china. this one is directed at china and will affect about 100 of because of good spirit jodi: -- goods. jodi: it is done after a seven-month investigation looking into intellectual property, what the u.s. views as u.s. property -- intellectual property relations. they have been stealing from the u.s.. soy want to stop with it they are going to retaliate with a broad set of tariffs. david: there's a story out there expect them toy

attack. is that the primary concern that we should have right now? jodi: yes, that is a big concern. the story points out that there are several arab -- areas where china made retaliate. china is the largest market for u.s. soybeans. china may be hurting itself as well. there will be agriculture, technology. interesting to protect u.s. intellectual properties. the whole reason for this is technology firms maybe one of the targets. the other thing that would be affected perhaps, would be consumer goods. that is a concern. another concern is the whole economic framework. if you start having the trade was, his is going to slow a worldwide economic recovery? the managing director is concern about that.

republicans on can -- capitol hill are concerned. kevin brady, whose committee looks at trade matters for the u.s., simply said, indiscriminate tariffs would hurt the u.s. and instead of going ahead with these, they need to do an examination of what measures can be taken to try to stop china. they need to do so in a way that does not target individual products. they are worried about the retaliatory affects as well as, economic concerns. betty: the trump administration, what do you think they found in intellectual property violations? how do you think china will respond? jodi: as we just talked about, china a very well retaliate. there is a great concern about that. in terms of what the administration found, a lot of this was aimed at what they

found were technology transfers. u.s. companies cannot invest in a lot of ways in china. there are four investment provisions. they are compelled by the chinese to transfer technology. it also happens on the other side according to the administration's review, that chinese companies do technology transfers in the u.s. that could be strategic for china. again, what i think we are going to be watching for in did -- great detail is how this plays out on the economic stage both in the u.s. and in china. betty: thank you jodi. speaking of tariffs, one company that could be affected is abm this. the consumer must come the first and protectionism will not help. think of ourtry to

consumers. thatink that if this or approach is better for our consumers, what would we see out there? for example, if we put tariffs on aluminum in the u.s., for sure it will increase price for consumers. at currentinum prices, that will represent to percent-3% more for consumers. businesses out pressure, inflation it is more electable inflation. -- double inflation. that will be a burden for consumers. again, we are try to do what is best for consumers. some things are not necessarily good for the. -- them.

david: do you make strategic decisions now or do you wait and see? -- do you wait and see? >> as i said previously, the stars are aligned. most markets in the world have good economic growth. before our optimistic about the future -- people are optimistic about the future. hopefully, it does not take the energy of what we see out there today. david: coming up next, profits at tencent. we will have a closer look at the company's results ahead. this is bloomberg. ♪

betty: this is daybreak asia i am betty liu in new york. betty: tencent out with results yesterday.

target aboveice 500 hong kong dollars. we are at 462 as we head into the open. this time, it also came with a warning. for more, let's bring in steve engle and our industry analysts for the sector joins us. >> good profit numbers. it was above estimates but again there were warning signs as well on the revenue as well as margins. revenue was up 51%. there was not -- that was not as good as estimates. 51%, andrevenue is up margins are further getting squeeze, that means a 72% increase in costs. they are buying a lot of content in music and video. they are investing in artificial

intelligence, other computing services like cloud computing. they are spending too give a good run to alibaba in the advertising space. again, these costs are coming up. what they are trying to continue to do is build this ecosystem on the back of a billion plus users on the social media platforms. speaking had this to say about we chat and user numbers. >> our platforms continue to gather steam. we have seen them increase 11% to 989 in 2007. one billion after the chinese new year. ,odi: couple of other points they are saying that the music business can be suitable for an ipo and it would also be open to

a domestic listing if the conditions are right in the rules allow it. >> the president is saying, there is no way there could be a get a breach like there was on facebook. david: what stood out to you? >> a lot of people will be focused on margins like steve mentioned. if you look at the financial results of the past two years, margin seven coming down constantly every quarter. it is not something that is new. i think the market expects it. a lot of it is driven by a mixed change in revenues. if you look at the core revenues from gains and advertising, the margins are actually quite stable. the margins are coming down because of very fast-growing payments in the computing business revenues. these businesses cut -- terry margins that are much lower.

overall margins are coming down but they can certainly make the case that payments is a good business to be in. as of the last quarter, mobile payments from tencent is the number one mobile payments application in china. those are active users. i think, investors can be concerned but it is not something you. -- new. david: we know margins of and squeezed. we have been expecting that. they missed revenue even though they were 51% of. -- up. it is a bit of a concern that revenue miss by quite a lot. >> other revenues which is mostly payments and cloud computing businesses is quite vocal to estimate because it is growing at a 100% plus rate. decline oftial mobile games. david: his honor of kings losing

steam? jodi: i think in the fourth quarter there were new job as of games. >> there were a bunch of survival shooter games. tencent has launched its own games that have been popular. they have licensing from korea. they are subsidiary. games have a very successful shooter game called, fortnight. some of these games, even though they are doing very well, they are not making money. monetization has to take a few quarters to come in. we will see a rebound in the next two quarters. david: i'm curious, earlier it was mentioned that the data breach issue that we are seeing on facebook right now, that is a big dominant headline, it may not be as big of a concern on tencent's part. betty: isn't like there is a backlash against some of these social networks that make it harder for companies like

tencent, if they are looking at a global expansion in the u.s.. privacy is ata fall for big companies like facebook and tencent. any breach will affect their share price by quite a bit. will havelike tencent to take a lot of steps to be very careful with their data. this was mentioned during the conference call yesterday. tencent does not keep chat data of their users. they are an extremely secure level. it is in their own interest to be very careful about this especially, after what happened to facebook. i think certainly, there will be a lot more scrutiny on how data is being handled. it could to be a win for them. david: think is so much. -- thank you so much.

40 minutes away from the opening of markets and hong kong. coming up, china's biggest oil and gas company reports earnings after the thursday close in asia. this is bloomberg. ♪

amid: this is daybreak asia

david invest in him -- hong kong. david: higher oil prices over the past year. betty: with higher oil prices, there is reason for investor to be optimistic. as oil goes, so goes the fortunes of all of the oil companies out there. they are of about 30%. of course, we will be seeing a lift in terms of revenue and operating profits. revenue, there's also cost cuts. i want to switch from revenue to sales here. the blue bars is petrochina's net income, net profit for the past several years.

we can see that it did hit a low in 2016 but we are expecting that to jump up to 23.9 billion yuan for 2017. you could see in yellow mother price of red crew coming from the recent low in 2017. still, it is a far cry from where we are seeing highs here. let us move into the margins a little bit with my next bloomberg terminal chart. this is the bloomberg crude oil dashboard. we are looking at the upstream, midstream, as well as the, downstream. bloomberg intelligence is affecting for the upstream, it is going to rise fairly well because oil is expected to be of more than $50 moving ahead here. with the midstream, there is expected to be some pressure because of tariff cuts. refinery,n, for the

it is expected to be a little bit under pressure as well because of supply that a strong and soft demand as well as, higher competition. a few things to look out for after the close on thursday. one more thing for all of you investors out there, this is one of my favorite charts, the analysts recommendation charts the company. take a look at where the red is on the right-hand side of your screen here. nowe is zero cells right and the number of buys for analysts is actually at his highest in the past 11 months. you can see that there is actually a premium of about 25% or so between with the current price is in the estimates coming up. of course, when it comes out positive ahead as

we are expecting those numbers to drop. david: earnings are certain the key piece here. a look at what is coming up over the next year hours. -- few hours. we will be looking at mark zuckerberg talking about what is going on and what steps he will be taking to try to manage the scandal that has engulfed the company so far. theing also at tariffs and fed rate and what it means. we will also be looking at tencent. a real mixed bag the tencent. in some regards, very positive and in others, a bit of a mess. us.way, she will be joining she is an alice -- and analysts. a little bit of what is on his way.

here is how we are trading right now in asia with some of the markets that are open. the nikkei coming back of and rebounding really after the holiday. futures also showing gains across the board. ahead,as we look hopefully what we are seeing right now will bode well. up.res are on their way it for "bloomberg daybreak: asia". ♪ retail.

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