♪ 7:00 a.m. here in hong kong, i am yvonne man. welcome to "daybreak asia." pointingific futures to a lower opening after equities slipped in new york to read oil and gold jumped on escalating mideast tensions. also digesting a more hawkish tone in the fed minutes. policymakers edged toward faster tightening. betty: i am betty liu in new york, where it is just after 7:00 p.m. wednesday evening. mission accomplished, mark zuckerberg survived a two on capitol hill. even critics retain their doubts on the company.

some of government actions could be justified. ♪ betty: we had the fed minutes, tensions in the middle east, and u.s.-china trade lurking in the background. what came up later on in the afternoon, markets hearing the hawkish tilt in the minutes. let's quickly look at how the markets ended today. deep in the red, but not as bad as we saw earlier in the morning. 0.5%, the dow losing 219 points. the nasdaq down 0.4%. we mentioned rising tensions in the middle east, president trump tweeting out he would take

action against syria after the suspected chemical attack. then there is word perhaps there would be more level minds about how to respond to syria. that reassured markets a little. oil prices spiking up. the treasury yield interestingly enough, yield coming down just a bit. gold tilting down 0.3%. a flight risk off sentiment as you are opening up trade. .vonne: certainly watching dollar ruble, dollars lira on the move. there is no clear strategy.

we are down 0.3% on the nzx 50. the kiwi holding at .7360. trading in australia under an hour away. the aussie at .7760. not seeing the big flight into safety. pretty muted start when it came to stocks in the nikkei 225. we saw a downside of 0.5%. 106.81.ation out let's get you caught up with first word news with courtney collins in new york. >> the hong kong dollar fell to the weak end for the first time since the range was imposed in 2005.

the asian trading day began thursday. according to three new york based traders, who saw the move. the hong kong monetary authority is obliged by the dollar if there are any such orders. such purchases would effectively push up interest rates. paul ryan says he has no regrets about retiring, saying the it has beenarty -- the subject of rumors for months, he only gave vague answers when asked about his plans. he joins the queue of republicans heading for the exit. new research shows total foreign direct investment between the u.s. and china fell 28% last year from 12 month earlier. int was driven by a drop chinese investment in america from $46 billion to $29 billion.

beijing tightened controls on overseas investment while u.s. national security officials clamped down on chinese acquisitions of american companies. mostlyckerberg emerged unruffled after a second day of testimony on capitol hill. house, he said facebook has done enough to ensure use it -- user data was not misused. hereturned may it -- repeated mea culpa, it was my mistake. he said there should be more federal regulation and zuckerberg agreed more federal action may be in order. 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. ♪ is the fed getting more hawkish on the path of rate hikes? marchs of the fomc's meeting read by some analysts

that more aggressive policy tightening may be in the word. with moreays is here on the keywords and phrases we have to watch out for. --hleen, has the fed rack ranked up its raises? kathleen: that was the knee-jerk reaction when they released their march 2021 meeting. a number of participants indicated the stronger outlook for economic activity, along with their increased confidence inflation returned 2% over the medium term implies the appropriate half over the next few years would likely be slightly steeper than they had previously expected. people said, hawkish tilt. let's think about it for a minute. when the fed shifted their dotp lot and reporters asked jay powell about it, we knew they moved the consensus to three hikes may be four. -- maybe

four. when the fed talks about a slightly steeper path, they are looking for three or four hikes, they are also thinking that could happen in 2019. a cautionary note, even though they are still dismissing tariffs in that meeting as something that does not make that much difference, they are saying and escalating retaliation would be a downside risk of economic outlook. apart from that, they agree the economy is looking stronger as the year wears on. there was debate about potential growth, anything above 1.8%, in the fed's view. to boost inflation, get more people in the labor force, or if it runs the risk of overheating. betty: stay with me. i want to bring in alice rivlin. a former director of the congressional budget office and

former vice chair of the federal reserve board. she joins us from washington. great to have you with us. alice: good to be here. betty: i know you are in inflation skeptic. are we reading too much into the minutes of this fed meeting? alice: i did not think there was much news there. we already knew the economy was strengthening. moreed has been predicting inflation for a very long time. in the fomcsentence minutes for quite a long time, that we expect inflation to approach our target of 2%. it has not happened. now it looks more likely it will happen quite soon. that wethe expectation will have a steeper set of rate hikes is not surprising. but, there was really not that

much news here. you attribute these numbers to base effects of what we saw in the march cpi report? talking to guests earlier who said there was more momentum in these numbers. -- we have not put recent oil inflation into these reports. alice: there is definitely more momentum in the economy and more tightness in the labor market. that likely means more inflation. a little more inflation. inflation has been very clear cent.-- quies one has to be skeptical it will shoot up. the cautionary note in the fed minutes is certainly reasonable that inflation will go up a little more than they expected last time. the chances of additional rate

hikes -- rate increases are higher. fomceen: if you are on the and looking what goes on between the u.s. and china, how would you respond? i want to put one more thing on the table. night, yesterday morning, depending what continent you are on. you know of dan's work very well. his view seems to be much more concerned that we are at the beginning of a struggle between the u.s. and china. you have one developed superpower, what has been an emerging superpower, and they are coming to the table over trade. intellectual property, was china's promise to change, they have not budge. if you were the fomc, how concerned would you be that might change or economic outlook? alice: i am concerned, even though i am not on the fomc. yvonne: [laughter] a trade war between the united states and china is an absolutely nobody's interests

and we should avoid it. i do not think the chances we will actually get into a trade the sense of competitive tariff increases are very high. maybe i am just saying that would be so stupid, that neither country is going to let that happen. i basically think that is right. there certainly are trade tensions between the u.s. and china over intellectual property and other kinds of things. get workedpe will out with each side using its leverage to get what it wants, but i do not really expect a full-blown trade war, though it would be disastrous if it happened. betty: we would hope nobody would be stupid enough to allow that to happen. [laughter] alice, i want to ask you about the yield curve.

we asked a prior guest about this. how concerned are you over the flattening yield curve? do you think it will go up with the fed naturally unwinding the balance sheet and the rising budget deficit here in the united states? we are going to need much more supply to finance this deficit. alice: i am most worried about the long-term deficit. speaking of things that do not make sense, current u.s. fiscal policy does not make sense. we are stimulating the economy with a big tax cut and some spending increases at just the wrong moment in the business cycle. on top of that, adding to the already quite rapidly increasing future debt. that cannot be good. that in several dimensions. in the near term, i think we will have a straight -- slightly

stronger economy and maybe a little more inflation. in the long-term we have to get on top of this rising budget deficit, or we will be eaten alive by servicing the debt higher and higher interest rates. kathleen: i want to switch gears. when they show john williams, san francisco head of the san said, whyfed, they not a woman, this should have been a woman. what is your view and how do you respond to that? alice: i am not much for choosing people on gender or any other characteristic like that. i think you need the best person for the job. john williams is a very experienced person with all the right qualifications to run the new york fed. i was not worried about that at all. yvonne: alice, talk a bit about the budget. i do not quite understand this.

how does president trump plan to lower the deficit when the fiscal deficit is going up? report that damning we could hit a $1 trillion deficit by 2020. how do you square that contradiction and a what point does it come a concern? alice: i do not square that contradiction, it is one of many in the trump administration's economic policy. he talks about higher growth over the long-term, but is also talking about cutting legal a point whent higher growth depends on more people working. some of this does not make much sense, including the aspect you just referred to. alice, we are going to leave it there. i thank you so much for joining us, alice rivlin, and thank you to kathleen hays, reacting to the fed minutes.

still ahead, prospects of war. we assess president trump's options as he intervenes in syria. yvonne: testimony takeaways. what we learned from mark zuckerberg's marathon session on the stand. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. trialuckerberg is time on is over. joining us now is bloomberg's tech editor in san francisco. before we get to the regulation

'slk, how did mark zuckerberg day two go? the assessment was that he went unscathed. >> he had a tougher day today than yesterday. into account, he did very well. the expectations were pretty low. he can come across as very robotic, but he did it relatively good job. thene: it seemed to questions that came through in the house this time were a little bit harsher. he was unnerved on certain occasions. we have seen the facebook stock gain again today. did the company really emerge unscathed from all of this? alistair: in the short-term, nothing much will happen. over the longer term, the question, a lot of the politicians both yesterday and today were calling for privacy regulations,new

not just on facebook, but the online industry. that also included republicans who were not usually into regulating big american companies. yvonne: we will see what is next. thank you,rr, joining us from san francisco. more on facebook with our next guest, zeynep tufecki, the author of "twitter and tear gas." in an op-ed in tuesday's new york times wrote, because we do not sell our data directly or want to, extracting promises would be worse than a toothless remedy. it would only serve facebook's business model. zeynep tufecki joins us from the us abouty -- talk to what you expect. you do not have a whole lot of expectation going into these testimonies, but how would you rate mr. zuckerberg's

performance in d.c.? >> in terms of not giving out , i think he did a good job, the format was not set up to give good questions to him anyway. four minutes, five minutes per question, you cannot get anything. senators,sspeople and it shows you how complex the that our lawmakers and legislators cannot seem to get the details right. he at times could not get the details right. he answered some basic questions, i do not know. they were the kind of things tech reporters know. the ceo is confused about the product, the legislators do not have details. it shows you what a challenging environment it is to deal with everything facebook has unleashed. yvonne: what was striking this time with the house, zuckerberg

acknowledged facebook is gathering data from people outside facebook, not their users as well, which counters what they were saying, that users can control their own data. what did you make of all that? zeynep: he asked the definition of data and privacy. he said, we will keep your data within facebook when asked on privacy. the question on the table is, how do we keep our data safe from facebook? his concern might be how to keep stuff in facebook. but facebook for example, on android phones, was tracking and storing people's text messages and who they texted, even if they were not using messenger. it tracks you across devices. it tracks your browsing activity around the web, not just on the platform. the question he did not address is, how can we stop the facebook from collecting this much data

on so many people, including people who have never signed on to facebook? they get profiles that facebook creates for them. the data retention, the data collection, that is the key issue they kept answering around. yvonne: you have talked about before zuckerberg has been on this apology tour for 14 years now and has not exactly fixed facebook. is now the time where things be different? he is facing congress, has been grilled for 10 hours from these lawmakers. these lawmakers are now seriously considering some light touch regulation, whether zuckerberg likes it or not. zeynep: i hope so. he has been apologizing for 15, if you count the for the founding of facebook. there has been scandal after scandal. that comes from the way facebook operates, its business model, to collect the data and sell targeting. he kept selling -- he kept

saying, we do not sell data. that is correct, we are the product. what i am hopeful about this time, there are tough questions. we are transitioning to a digital economy. when asked, do you have a competitor, he could not answer. that is the problem. that scale of 2 billion people, it is harder for scale to operate. it is causing all these problems, the misinformation, things like the data being harvested out of facebook, the targeting, the situation in a, that comes up a lot, where ethnic cleansing was partially aided and abetting by these tools spreading information. these are huge problems. theurope we have a gdpr, state of production regime, which brings much needed privacy protections to european union citizens, the rest of the world, including the u.s., lags behind.

it is too big, too many problems to let it go on as is. the one thing i took from the testimony was that he seemed to be saying, let me handle this. do not regulate too much, let me fix this. nonstopd, 15 years of scandal, apology, scandal, apology, i think we need more oversight then yet one more promise. betty: is oversight the answer? zeynep: i think there are many answers. when people think of regulation, they think of something heavy-handed that will stifle an addition -- stifle innovation. i think the opposite. and kind of collecting data acquiring data is so cheap, it is stifling innovation. there are lots of different business models of technological options. having these digital conveniences without this excessive surveillance are being explored because facebook and

google are taking up all the oxygen and money in the room. the kind of regulation, rather than targeting facebook per se, we should change the principles, data collection, data retention. maybe data should have an expiration date. very concrete things that would help everyone. betty: we are going to leave it there. certainly the monopoly aspect being questioned about facebook has much to do with the innovation aspect. thank you so much, zeynep tufekci, of the university of north carolina in chapel hill. bloomberg users can interact with charts shown using gtv . browse recent charts, catch up on key analysis, save the charts for future reference on gtv . this is bloomberg. ♪

♪ are counting down to the open in japan and south korea.

in japan, nikkei futures are pointing to a higher open. we have seen a run into the japanese currency, given simmering u.s. china trade tensions, and what the u.s. might do to retaliate against syria. the dollar slightly higher against

yvonne: 7:30 a.m. thursday in hong kong. take a look at the waters in victoria harbour. minutes away from asia's first major market open. betty: very green over there. 7:30 wednesday evening in new york. spring is here, but the weather has not matched up. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia. " trump hasp, president discussed syria with his top defense team and his top defense team and is warning russia to expect a barrage of missiles. white house sources say the president has not decided how to respond to this suspected

chemical weapons attack outside damascus and no action is anticipated in the coming hours. he tweeted relations with russia have never been worse, and warned russia to be ready for a missile strike on syria. the latest fed minutes show a slightly more hawkish fomc, leaning toward a faster pace of tightening. several members noted a better outlook for the economy and inflation, saying and of propria path would likely be steeper than previously expected. however, officials were concerned about financial imbalances in the possibility of the economy overheating. to push ahead with overhauling its bloated state enterprises and will push for mergers insect errors that are plagued by zombie firms, bankruptcy and default. the head of the agency overseeing state assets worth $26 trillion says some soe's are fragmented and inefficient.

he says government wants to support current -- companies that are forward-looking. of the central, state owned in certain industries are too fragmented and have low efficiency. we will further push for mergers in power, coal and machinery. there is too much duplication of the moment. some companies only have a very low market share. although mergers shall take place on a voluntary basis. we support companies to come together of their own free will, guided by the market. the congressional budget office is warning the u.s. government is on track to pay more on interest spending than on the military. the cbo told the senate budget committee payments to creditors will trickle over the coming decades, far outpacing expenditure on defense. the forecast shows interest

payments topping military spending by 2023, and reaching $915 billion five years later. 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. ♪ tonne: we are counting down some of the major market opens in the asia-pacific. for more, let's get an update with sophie kamaruddin. yet another war of words with trump, not china this time, but russia. markets on edge of it. >> a few things thrown at investors. you have to wonder if the markets were paying attention, to the hawkish fed minutes. our focus will be on the geopolitical risk wrapping up over syria. gold and oil jumping. jump to the terminal, i want to show you the yen. the yen gaining ground against it g10 peers. trading back against the 100 day moving average. the yen rising, the british pound for the first day in seven.

we are getting comments from d.c., trump has made a final decision on syria. investors likely to remain cautious until the syria situation turns for the better. keep an eye on the yen crosses. a lower open in japan as well as korea. japan, key earnings to consider from retailers. back in move the dial. in korea, the central bank in the spotlight, expected to stand at 1.5% with a focus on what governor lee's intention is for the economy. remainst -- inflation far below the 2% target. they might lower the inflation forecast. as you can see on the board regarding the korean won, it is range bound in recent months. last week it reach the highest level in three years. it has appreciated more than 6.5%, and that is likely to hurt earnings. betty: the alumina market is having its own iran oil market movement. what is the latest on that?

>> we cannot ignore what is going on in the alumina market. a similar scenario when europe and the u.s. had sanctions against iran. aluminum prices, they are up more than 10%. jumping into the terminal you can see the relative strength index is signaling overbought territory for the metal. -- there isd to speculation russia may step in support, transferring investors to a nonsanctioned company. they are expected to fill the vacuum. bloomberg intelligence sees china making up 60% of capacity this year. betty? betty: thank you so much, sophie kamaruddin. president trump still weighing those options for u.s. military action against syria. he met with a jim mattis after tweeting this earlier. russia vows to shoot down any and all missiles fired at syria.

get ready, russia, because they will be coming. nice and new and a, you should not be partners with a gas killing animal who kills his people and enjoy the. we have the latest from washington. what exactly are the options the president is weighing, and when might they come? nick: the big thing right now is a military strike. certain. but the question, who the u.s. will do this with. presumably with allies the u.k. and france. the u.s. last time a year ago fired 50 tomahawk missiles at syria, but did so on its own. is theme the indication u.s. wants to do something in concert with permanent members of the un security council, the u.k. and france. china and russia would clearly not join that. it seems what is happening, the u.s. and its two allies are

working out the details of the strike, brett presumably, planners in london and paris would have been surprised, just as surprised as the rest of us were by the president's tweet this morning. betty: in a way, the president's tweet has limited the options, perhaps? there is a risk here the president has boxed in his aides to take only a certain avenue of action, right? nick: sarah said -- sarah huckabee sanders said all options were still on the table. she would not say definitely this is what will happen. what is interesting, president trump, years before becoming president had criticized the obama administration for what he saw as telegraphing his intentions and his moves before hand, saying he would never do such a thing. of course, that is exactly what he has done. the presumed target here will be president bashar al-assad's air

force and taking out its airplanes is so i launch these sorts of attacks again. the question, will the president's tweet and the basic acknowledgment the u.s. will strike upset those plans and make it harder to get those targets? can syria hide some of its air force or put them perhaps on russian bases where the u.s. would not attack? that is the calculation going on right now. yvonne: it seems like this time around there was a lot more collateral damage to think about. do you think that now that the u.s. is entering into a more direct confrontation with russia as well as iran? nick: that is clearly part of the calculus where the u.s. wants to minimize civilian want aies, does not situation where it would be hitting russian assets on the ground in syria, of which there are many. and iranian assets. it does not want to get them involved.

this is a very difficult needle to thread. the last time they launched tomahawk missiles a year ago, they were able to avoid most civilian casualties. the hope is they will do that again, but they want to maximize force and remove their ability to launch these strikes. yvonne: nick, thank you, joining us from d.c. with more on syria. the latest conflict rock to the oil markets, crude soared from new york to london. it rose 2%. volatility jumping as well. let's bring in su, who has the latest. tweetse shock and awe from the president, the fact the geopolitical conflict in the middle east tends to prop up oil prices in a big way, and optimism, bullishness the highest we had seen since oil was $105 a barrel. let's jump into the bloomberg.

what you see in this chart, crude volatility has jumped to levels last seen in february. this is the volatility. the size of the move has a lot to do with the fact saudi arabia, the biggest oil producer, had intercepted. time, you have donald trump warning russia they need to be ready for missiles. let's go right into some of the price charts. we saw oil hold quite close to $67. we can see that is a high for the year. not only a high for the year, the highest price in three years. we saw a lot of the oil stock charts jump as well. look at the size of the moves, noble, transocean, a lot of these are drilling stocks. as they move higher, it means you are likely to see, as a pickup in the activity. a lot of traders saying of there is demand here. it is not just a saudi arabia

and situation. demand has been picking up. the combination of those factors has been very bullish for price. betty: we also saw gold prices shoot to an 11 week high. how does that change the outlook for gold? su: at one point we were on track for the highest close in two years. the fact the fed came out with these minutes that show a slightly more hawkish than expected move for these, dented both. let's look at etf. they have not only been moving higher in price, but they are adding to their gold holdings for the fifth straight day. if you look at the volatility, you can see in this chart, it has not been an easy year to but in for gold bugs, the most recent weeks, it has in. safe haven trade has proven to be a good one for them.

let's also take a look at some of the gold stocks. not just gold stocks but mining stocks moving on this latest news. if we go into the bloomberg, i have a chart, 7148. shale prevails is what it is called. when typically the supply data comes out, which has been coming down. surprisingly rose last week. would normally drive what would be a bearish trade, but that was almost completely ignored in these moves higher. a bolton volatility and in price. let's go one more time into the stock chart. if you look at the three-year price history, you can see how dramatic the move is that we may just in these last couple weeks and definitely in this last session. betty: thank you so much, su keenan, on the markets and big movers in oil and gold. coming up, the simmering tariff spat with the u.s. and china.

this is bloomberg. ♪

>> after a huge economy like the united states [indiscernible] to say, are supposed knock yourself out and open up aade lines even more, that is really, i think, clever response. >> [indiscernible] even though china did respond to this ready seriously after the first imposition of the tariffs proposal. but, china is refocusing on opening up its own market, and also china wants to deliver the message that china supports globalization. >> the most important thing is to do more trade than less

trade. there is an entire sector still crippled with barriers and tariffs and reservations, and that is the service sector, including e-commerce in particular. we need to move ahead. the world is becoming more digital, we cannot have these barriers. names talkingig about the potential for a trade war between the u.s. and china. let's cross over to arlington, virginia and speak to cornell university senior professor eswar prasad to talk more about this. thank you for joining us. yesterday it was pboc governor yi gang signaling perhaps they would pick up the pace when it comes to the financial sector. is that enough to appease the trump administration? eswar: it is certainly going to help, but i do not think it will be enough for the trump and ministration. on the other hand, there has been a de-escalation of tensions that had rapid -- had ratcheted up weeks ago. they did proffer an olive

branch. president trump's tweet seems to have accepted that olive branch. but there are still questions of intellectual property. the issue is not so much that china does not want to do these things, the china wants to do it at its own pace in its own way. that i think is not good enough of for the u.s. their economic future [indiscernible] that the u.s. now dominates. mentioned issue like technology transfer, joint ventures. we have heard these reforms before these trade tensions flared up. perhaps it is more of a win-win for president xi to get his way. do you think president xi is willing to pull back on these threats to intellectual property, do you think? eswar: i think the chinese are playing this game effectively. they want to see moral high

ground in terms of trade negotiations. ofy did have one sent -- set retaliations it surgically aimed to inflict poetical damage. since then, they have backed up and are sending the message to adults in the room, who want to play this a better way, to a negotiated process, to negotiated multilateral trading rules. u.s. wants ay, the certain things from china that will affect china's industrial policy. china once to move toward and innovation-led economy. rather than the old, heavy industries. what the trump administration seems to want from china would strike at the heart of their policy. this will not be easy to resolve between them two sides. yvonne: it seems like the ball is in trump's courts. does he want to keep pushing on these, or push forward with tariffs he has proposed just to

adhere to his base? eswar: it is becoming clear the chinese will have to do two things. one is to give trump a big win. wings like intellectual property rights and so on do not play well in the heartland. what plays well to his base is the ability to say, i got the chinese to buy $50 million more goods from us. we are committed to reducing the trade deficit by a certain amount. it is difficult for china to make these promises. driven by macroeconomic conditions as much as trade policies. they could buy more goods from the u.s., natural gas, and they could say, perhaps we will buy more electronic components, if only you would sell them to us. team are those on trump's like lighthizer and navarro, they want to make sure china does make very credible and

concrete commitments to move forward on intellectual property rights protection and reducing the hikes to tech industries and limiting technology from the u.s. and other manufacturers. it will be tough on that component of the negotiations. betty: as they are going for this tit-for-tat right now, and as we have seen, maybe it will not be as tense as we have seen the last few weeks, what do you think is happening internally in china? i imagine they do not want to be in this position again, even if things are resolved, they do not want to be here yet again. what could they be doing behind the scenes to prevent this situation again? eswar: it would be difficult to avoid this happening. what china is willing to do, is opening up its financial markets, as president xi has already indicated. wants to have an

economy that promotes innovation, it needs those things for itself. the difficulty, they want to do this at a slower pace, and in a way that gives their domestic firms the advantage in the short run. by which i mean the next two or three years. from the u.s. side, this is not enough. it means chinese firms could eat the lunch of american and other firms. china is willing to make the commitments, but i still think it will be difficult to get them to make concrete time commitments. that is what the u.s. side will be looking for. there is a potential meeting of minds, but how china can make credible commitments even its track record not maintaining earlier commitments, met -- remains to be seen. betty: it certainly does. looking at the history, you can tell a lot what might happen in the future. there will be a few months before any announced tariffs will be put into effect. what are the chances you think

they will be able to resolve this before we start to see these tariffs put in place? it is not going to be easy to walk them back, given -- given the talk on the u.s. side is insubstantial. i think a settlement is likely because both sides have interest. thea needs to give trump cosmetic win and come to the table on the more substantive issues, but it could become [indiscernible] to some extent it will be driven by domestic politics. if things are going trump's way, he may be willing to give china a little bit of breathing room. if not, china becomes the focal point once again. one issue that has changed the dynamic in washington, the traditional life american businesses had, against these protectionist sentiments, those

do not seem to be getting the ear of the trump and ministration anymore. it is the base, the heartland, getting the attention. it makes it much harder seeing this solved in a peaceful way. yvonne: real quickly here, should we were allowed china will devalue the yuan as a trade negotiation tactic? eswar: i think that is highly unlikely. it is not a tool that would work if they were to push the renminbi down 3% to 5%. it could backfire by creating destabilizing capital outflows, it would depreciate what they are doing toward progress to a more open capital account. they do not want markets to get the wrong message. i do not think they will pull that trigger. yvonne: thank you, eswar prasad cornell university senior professor joining us from arlington. do not forget our interactive tv

function, tv . catch up on past interviews, dive into securities or functions we talk about. become part of the conversation, send us instant messages. this is for bloomberg subscribers only. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia." i am yvonne man in hong kong. betty: i am betty liu in new york. mustllion in taxes, and pay all that by tuesday. the wall street journal said it is linked to his successful bets against subprime mortgages, which earned him about $4 billion. he was able to defer payment until now, using a provision available at the time. paid $5 million in taxes

last year. and a: johnson & johnson telco company could have to pay punitive damages of $80 million for concealing their products were tainted by asbestos and posed a cancer risk. -- $80y makes it 100 million they must pay stephen lando over his claims they're laced talc products caused his cancer. forecast,loomy renewing fears about their ability to adapt to the amazon era. earnings would be $2.50 a share this year. analysts were expecting $2.77. the chain sells items easily bought online, have relied heavily on discounting of about 20%. it dropped to a level not seen since last session. coming up, we will be counting

down to the major market opens in asia. we will have reaction, investment advice from deutsche bank wealth management. this is bloomberg. ♪

yvonne: we are live from bloomberg headquarters. top stories, asia-pacific futures point to an open. oil and gold jump amidst tensions. suggesting a more hawkish town in the fed minute area -- minutes. betty: i'm betty liu. it is just after 8:00 p.m. on this wednesday evening. china laying out details on how it will lay out a sector. hoping for a level playing field. mission accomplished. mark zuckerberg's day to on

capitol hill. -- two on capitol hill. yvonne: it is once again a mix of bad news when it comes to the geopolitical tensions with syria and the fed hawkishness that we saw in those march minutes. also, earnings season coming through here. andave seen global profits the upgrades getting slashed at some point. you're seeing analysts downgrade. we have not seen a switch like that since september of last year. for any kind of catalyst for earnings, maybe could be limited. they are still pretty upbeat about what is to come when the u.s. reports start coming in this week. betty: it is taking away the one

argument -- at least one of the few arguments that they had in staying positive. looking at the geopolitical tensions that are overhanging the markets. earnings are still on track. that does not look like it from that scary chart. let's get more in the first word news with paul allen. thanks buddy. president trump has discussed syria with his defense team and .xpects a barrage of missiles president has not decided how to respond to the suspected chemical weapons attack outside the mask us. no action is anticipated in the coming hours. he tweeted that relations with russia have never been worse. the latest five minutes show a slightly more hawkish approach.

several members noticed a stronger outlook for the economy and for inflation. it would be slightly steeper than previously expected. officials were concerned about financial imbalances and price stability -- possibility of overheating. sectorsthe mergers and that are played by zombie firms. someead of the agency says are fragmented and inefficient. the government wants to support companies. some of the state owned enterprises in centering -- in certain industries have low efficiency. we will further push for mergers. there is too much duplication at the moment. some companies only have a small market share. all of the mergers will take

place on a voluntary basis. we support companies to come together of their own free will, guided by the market. the congressional budget office is warning that the u.s. government is on track to pay more on interest spending than the military. the net payments to creditors will triple over the coming decades, far outpacing expenditure. byping military spending 2023 and reaching $915 billion five years later. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. thank you. let's take a look at the market open here. really the only one falling when it comes to equities. sophie: we had a muted start when it comes to the session in

northeast asia. gains led higher by energy and industrial players. in tokyo, the nikkei 225 set for a another day -- another day of losses. energy.y you have alumina rising over 2% so far. skittisharkets likely given the political turmoil in d.c., but u.s. futures are pointing higher, saying a strike against syria is not looking imminent. in korea, the central bank is in the spotlight. won lookinghe study. been largely range bound. it is over the course of the

last six months, it has appreciated. investors on edge, we want to check in on the risk radar. yenend gaining ground -- gaining ground. gold is sticking study. oil retreating a little bit from that 2014 high that we had in the wednesday session. following trump's twitter threat of a missile attack, we want to go to treasury yield spread. it is now at 45.7 basis points. flattening accelerated. let's stay on the markets. let's bring in mark cranfield. he is just getting back on the topic of the fed. it is prepared to be

restrictive. how will that play out in the market? it sounds as if the fed might be slightly behind the curve, even at this age. they may feel as if they have not been quick enough, considering the strength of the u.s. economy, state of employment conditions. they're confident inflation will hit their target. it might even exceed it. this is an unusual situation is publiclyd admitting that they might have to go a little faster than they have been. this suggests that they are willing to raise interest rates to the point where the treasury wouldgoes inverted, which indicate that a recession is not far away. fed is not too worried about what is happening in the trade talks. we are probably looking at the projection for a $1 trillion fiscal deficit and sing that the stimulusat

will go on for some time. even if that means that they cause a slowdown in growth, the fed is willing to do that. yvonne: we have been talking about what is going on in syria. we are waiting for some type of response. is this more noise? the lesson that we learned from about a year ago when the u.s. struck syria is that the market impact was relatively short-lived. we would expect something similar to that this time. some might and the relationship between the u.s. and russia is worse than it was a year ago. that adds to the possible risk of something going wrong. if the u.s. do what they usually do, which is very targeted strikes and they give some notice about it, it means it will not be a complete surprise. it points to the fact that it will have a fairly limited impact on markets.

thank you. mark cranfield joining us from singapore. you can get a market run down in just one click. there is commentary and analysis from expert editors. you can find out what is affecting your investments right now. we will stay in singapore. the head of discretionary aboutlio management, talk what is taking charge today? i think, when you look at the market reaction yesterday, it geopoliticalhe -- risks. we have seen many times before. we think it is more of a short-lived kind of market

event. unfortunately, markets reacting more to this on the political tee with trade attention -- nsion. we hope with the upcoming earnings season, as he pounded out -- pointed out earlier, we hope that this will turn the markets around in looking more at the fundamentals. yvonne: most people are quite optimistic about the first quarter. we are seeing more downgrades these days. are you more optimistic about the following quarters? >> you are also quite optimistic for the first quarter. we think the analysts might be a little too cautious here. it might open up for the companies to surprise the markets on the upside. we are seeing here is some potential upside, some potential over the next few weeks with

earning estimates being downgraded. when we are talking to the company, we hear optimistic views from them. expecting above markets and for the following quarters as well. betty: are we underestimating the risk of this trade war? we can agree if that we are in a war or not. the impact of this on the market, judging by what the fed is saying. they are watching this, but they -- it is not quite on their radar. we also have to admit that over the last few weeks, the risk for any sort of escalation has clearly increased. based on our assumption, we still assign a low probability to a trade war.

it cannot be in anyone's interest. both in the u.s. and from china's perspective, the trade war will escalate. , two of listen to trump his key objectives. one is to achieve substantial gdp growth, which ideally should be in the 3% area. within the trade tension and escalation, this target might be at risk. second, he is very much interested in a positive equity market. trade tension,of it cannot lead to this. and theo president xi .one was quite trimmed down we are expecting more happening

in the background in the coming weeks. these trade tensions have been affecting the currency markets. we still think with more interest rates coming, when you comments, we fed think that minimum to rate hikes will happen this year, which is expected by the markets. if the fed were to hike three times this year, i think this can turn around the u.s. dollar because interest rate differentials should play out one time. you're expecting the dollar to strengthen, especially against the euro, over the next few months. us.y: stay with we will zero in on the chinese market amidst all this. discretionary of

portfolio management. still ahead, how did mark zuckerberg do on day two of his congressional testimony? we will discuss his performance, later. yvonne: plans to open up part of in june.al sector what that means for global investment banks. this is bloomberg. ♪

betty: this is "daybreak: asia." yvonne: for global investment banks, the long wait could soon be over. beijing's detailed plans to open up parts of the financial sector by the end of june. we are joined by our correspondent. talk about the significance of this. >> we are getting details at long last. there is some degree of expectation. it looks as though china is

going to make it much easier for foreign banks to roam around china's landscape. on paper, it sounds quite exciting. they can run their own operations. it is coming quite late in the game. china has been well-established in banking and the financial community. they would have stiff local competition. it is no panacea. how serious do you think the chinese authorities are when it comes to tackling this? >> we are getting some mood music on it. we have had some mergers last week. they are cognizant of the problem and dealing with companies suffering from debt

and duplicating the same areas as others. nonetheless, we are not getting a feeling that they will completely breakout the sme sector.- soe it seems to be a gradual approach. it is certainly heading in the right direction. betty: certainly heading in the right direction. in beijing, what will we hear from her? her dominant message coming through seems to be cool heads on this trade situation. we need to be sensible about calling it a trade war. the biggest risk is to confidence that would hurt investment in china, u.s. and around the world.

no doubt, it would be another opportunity for her in beijing to double down on this message. both sides need to find common ground. they do not need a trade spat. certainly a core message from her. the wealthh us is management cio and head of discretionary portfolio. he was mentioning earlier about these moves and what president xi jinping has been talking about with continued financial reform and wall street bank getting an inch closer to being able to have a level playing field in china. do you think that none of that will be derailed by these u.s. china trade tensions? >> i think this is some sort of

compromise china is offering to the u.s. in terms of reducing the trade deficit, but also accessg u.s. companies to chinese markets. we are pointing to this direction. policyll know, chinese would be step by step and not a radical move. betty: always step-by-step, including the soe reform. looking at what is happening right now with the tariffs tensions and trade tensions, how are you positioning yourself in china > -- in china? >> from what we are hearing on the ground and possibly talking to our clients who are mostly

business people in china, currently, we do not really see any negative impact. business is as usual. i think the confidence is still quite high. the reforms, which has been in place and are going to come in the next few months, this will further increase china's positioning. and positive on chinese equity markets. we have also been a bit more cautious in terms of how chinese equities, especially last year. we have taken a more cautious approach, especially sectors that have performed extremely well. in particular, the technology center. now we are concentrating on domestic consumption and looking a little bit away from the tier one big cities, beijing and

shanghai, and moving into the second and third tier. nicelyd play out quite over the next few years. it is more a long-term strategy. not recoverede when it comes to some of these large caps in china. another letter that we got from were raisingthey the quota. could the stoxx overshadow all stocksod news -- overshadow all this good news? >> the have seen steps in this direction. the markets have to get used to it.

using this stock connect to trade directly into mainland chinese stocks and vice versa. using this opportunity to go outside china. time, it takes maybe longer than anyone would have expected. china is clearly opening up its financial market. it is going in the right direction. chart thathave a shows that when these flows come through, when it comes to stop on flows, we have not really reached those quote a limit -- quota limits. it will be a long going process. in the meantime, we are seeing the chinese bonds doing well. does it make sense to buy bonds over equities in china? >> do not really think so.

we are rather more positive on equity markets. bond markets, especially in the , andfew weeks and months especially in 2017, suffered from rising interest rates here. that with a better outlook on the earnings capabilities of chinese markets and variation being at a reasonable level, stay with equities over bonds. joining us there from singapore. find in-depth analysis of the newsmakers on bloomberg radio. .ou can tune in you can also download the app or viass it bloombergradio.com.

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betty: a quick check of the business flash headlines. in tworing investing swiss bank companies. they are weighing stakes in swiss port with a decision expected later this year. yvonne: toys "r" us told the bankruptcy court that it has seen $1 billion bids in asia. it would include intellectual property. toys "r" us filed for an groep see in september hoping to shed debt and turn itself around. the holiday season led to its decision to liquidate. forecaststing a gloomy . earnings will be $2.50 a share. tolysts were expecting

dollars $.77. 77.$2. we are going to assess mark zuckerberg's testimony. ♪ this wi-fi is fast.

i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops.

oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. yvonne: it is a: 30 and a sunny singapore. -- 8:30 and a sunny singapore. i'm yvonne man in hong kong. betty: i'm betty liu in new york. you are watching "daybreak: asia." let's get to the first word news with paul allen. paul ryan says he has no regrets about retiring, saying the republican party has achieved a great deal during his time as speaker. his teacher had been the subject of rumors for months. exit.ns the

more than 40 gop lawmakers either resigned or are not seeking reelection this year. it reached 785 at the -- as the asian trade started the day. they are obliged by the dollar. such purchases would push up interest rates. directearch shows investment between the u.s. and china fell 28% last year from 12 months earlier. that was driven by a drop in chinese investment to $29 billion. u.s. national security officials clamped down on chinese acquisitions of american come in these. tesla has again blamed the driver for the deadly crash in coliform you. the accident happened -- in

california. the driver was not paying attention to the road, despite the car providing multiple warnings. drivers are reminded that autopilot requires to keep your hands on the wheel. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. yvonne: time to see how the asian markets are shaping up so far this morning. let's get the latest. aphie: asian stocks on three-day rise. aussie shares swinging to losses. of 1%.uarter the korean won is holding steady ahead of the be ok decision. decision.

if there is any sign of dissent. ground.t that gaining this as the pboc pledged to open up markets. this is coming through in the dollar index. looking steady. weakness coming through in tokyo. the 225 up .2%. eon.nt to highlight annual profit rose to a record. the loss in shares falling after income guidance missed its lowest estimate. bes chinese business should profitable. the self checkout at will start will start testing this month.

forecast new stores by 2021. performer of the topics so far this morning, the rio. -- this morning. facebook investors liked what they heard. shares were up again, recouping some $25 billion lost in the scandal. the shares are up and it seems like zuckerberg left unscathed. it had been about 2% higher. we're looking at the 24 hours. you said recouping a lot of the losses here. basically, the takeaway, there is one that we have to center on. first, to regulation.

game of thrones. they say winter is coming, in this case, regulation is coming. accord as toin what is going to come out. democrats say they are coalescing. they actually do not want any regulation whatsoever. mark zuckerberg actually waited on this and give a little bit of ground. my position is not that there should be no regulation, but you have to be careful of what you wish and you put in place. mark zuckerberg said he did not think that facebook had any legal obligation to tell the commission that anything actually happened with that data.

one other interesting thing is that he said he wished that facebook did have the legal obligation. this is why we are seeing investors optimistic with that jump over the last two days. uncertainty either way is a good thing to trade on. the data collection from facebook is wider than we thought. zuckerberg said that facebook tracks people that are not even users. why are investors shrugging this off? >> this is really uncertain now. , butts have been out here it has not been confirmed by mark zuckerberg himself. he was caught unawares of. representatives growth him on this.

he said this is something that we really need to hone on. -- ais a different democratic representative to cut him off and told him to answer her question. personale collecting information on people who do not even have facebook accounts. isn't that right? yes or no? >> i do not think that is what we are tracking. thatu already acknowledged you are doing that for security purposes and commercial purposes. you are collecting data outside facebook. when someone goes to a website and it has the facebook like or share, that data is being collected by facebook, correct? >> that is right. , which of yourw

friends like the page. >> i do not think the average american understands that. >> a very testy exchange there. while there are these attacks that we are looking at, there is still no resolution. investors are not thinking during this time that we can push and until sometime that might happen. getting a little harder to decide. thank you. you can find this story on facebook as well. at -- betty: we will hear from the world's largest iron ore producers. our interview is just ahead. this is bloomberg. ♪

answer.china's donald trump threat and president jim pings response for xi topics -- president jinping's response for the topics of discussion. well is the biggest take away for you? obviously, the main man was xi jinping. that is where all eyes were focused on tuesday. his first opportunity to give a .esponse there was lots of speculation on what he might say. he took the high road. that was definitely the focus. i caught up with one of australia's richest men.

he met xi jinping yesterday morning. said xi jinping is a man of his word and a very affable person. he should be respected for the relatively moderate response to donald trump. i asked him about this issue with foreign businessmen getting promised fatigue. we have heard for many years about reform coming from chinese leadership and many people roll their eyes because they have not been able to deliver in the timeframe that many people want. andrew forrest says it is a good question. promise fatigue is something. president xi jinping says he is a man of his word. xi has said that to not go

through on his promises would be like cutting an arm from your own body. the credibility is everything. , how said this morning many gross wealth? yes, australia has run into nontariff trade barriers, such as we cannot get through these various hurdles. than my new show. it is big picture. his ideals are going to carry through. xi has said, knock yourself out. we are about to open up our

economy even more. that is a clever response, a response that has been in the pipeline for many decades. >> do the words trade war make you shudder? an illink a trade war is wind that would not do anyone good. look where the u.s. will suffer. it will suffer with agriculture, engineering come in goods because china will be forced to procure from other countries. australia to win over someone else's loss. approachedady been to see if we could convert

australia into a soybean manufacturer. might want to get all our schools the beans -- soybeans from you guys because you might not be able to get them from north america anymore. i do not want to see that happen. inadvertent repercussions of the trade war. >> how do you see it right now? is this as good as it is going to get? they are doing very well, but demand seems to be flattening, plateauing. even your own government mentioned that demand from china for iron ore is going to level out over the coming years. prices might go up, but demand has peaked. >> all of the signals i am

getting are that steel intensity has to increase the quality of growth. we have had the quantity of growth. that steel intensity has to increase. >> i know you never comment on prices, but our use of pliers -- are you surprised by the supply? demand is plateauing. actuallyproduction has come off the targeted, low-quality. 140 tons of iron or. through all that, you have actually grown demand for australian ore. the that tells you is that market in china is becoming more trusting of overseas supply. particularly, australian supply. >> i do not think andrew forrest

like that question. the question always remains, do beyonded to diversify being a pure iron ore play and having one market, china? they do have minor concessions to explore copper. andrew forrest was approached project.lng there is some diversification going on. with uncertainty over china's demand and oversupply situation, there is uncertainty. betty: it is good that you grilled him. what else did he say to you that was surprising? what else stuck out to you? terminal, it is interesting that he was approached and involved with some power companies in japan. he said that will be coming in

the next couple years. there is a move afoot with the enterprise tax bill that is a few votes short in the government. that would cut corporate taxes in response to what donald trump , in the u.s. has done. more -- theralia cheating scandal in australia come he did weigh in on that. he said australia is a fair place. this is really striking at the heart of the culture and character of the australian people. he said australian trade are great sportsmen. thank you so much for bringing that interview for us.

a lot of great interviews coming out from that forum. you can get a roundup of that story and many more to get your day going in this edition of daybreak. bloomberg subscribers can go to tv on their terminal. it is also available on mobile. you can customize your settings so that you only get news on the assets that you care about. this is bloomberg. ♪

yvonne: taking a look at pictures out of beijing. we are headed into this conference on china's road program. that is starting right there in beijing right now. we will hear from the new pboc governor. they will be giving their opening remarks. that is something to look ahead to for bloomberg subscribers. that's right. trade, the global economy, globalization will be some of the themes we will hear from this conference from both of them. the bank of korea is another .nstitution if inflation starts to move up, hereditor kathleen hays is with a look at the policy

decision that is just minutes away. no rate hike? kathleen: not yet. this is the first meeting that the governor will be presiding over after he was reappointed a couple months ago. the bank of korea hiked its key rate in november of last year and is expected to stay on hold for a while. here is why. at at this chart that shows 2% inflation target. it shows how the key rate has come down five times. five times since 2015. in 2017. spiked now it is far below the target. the next ring to look at is the economy itself. what is going on? according to this chart, demands look weak because we will see the output gap. it has been negative for six years. showing this difference, this

negative difference. it is a sign of the economy is not so strong and pushes inflation higher. i think, in the light of all of this, the next focus will turn. a press conference to hear what he has to say about all kinds of things. betty: what is he likely to say? kathleen: the consensus is they the rate this next three in next quarter of this year. the question is will the bank of korea change its 2018 forecast for gdp, which is supposed to be at 3%? they might think they have to accept and pull out their budget spending to adjust that inflation, which is running at 1.3%, far from their forecast of 1.7%. that is where people might see some change in the forecast.

if the governor gives the names of any policy dissenters, now people will think maybe they will move it up. if we do not see that, they might push it out. every central banker is being asked about the -- trade tensions. dependent on exports. whatever comes out of the press conference will be very interesting. betty: thank you so much, kathleen. a quick check of the business flash headlines. with $1nd manager billion in taxes that must be paid by tuesday. this ahead of the financial crisis which earned him for billion dollars. he used a provision available at the time.

he paid $500 million in taxes last year. yvonne: johnson and johnson have been ordered to pay damages of $80 million for concealing that their products were tainted by asbestos and posed a cancer risk. that is $217 million that they must pay investment darker -- bankers over claims that their asbestos laced process -- products caused his cancer. we are told they will pay $400 million for the three old is this which is a unit of shanghai late -- luxury resort company. thanyear, it raised more $4 billion, valued now at $20 billion. yvonne: now for a look at what is coming up on bloomberg television. what are you watching?

obviously oil. this rally going on with damascus and president assad. looking at what is going to happen next. looking at all this and iran's production. the executive director will be joining us from new delhi. the analyst on the program out there at the moment. his guidance or his targets on the seven asian equity agencies. protectionism and the multiples that remain, constrained by policy. discussing all that with him, coming up in about half an hour. beyond that, what about strategy?

asia asresearch for well. there we go. gang speaking. the new pboc governor's eking at this initiative joint conference being held by the people's bank of china and the imf. christine gay are will be giving her -- christine lagarde will be giving her remarks on trade and other issues. that is it from "daybreak: asia." market coverage continues with rishaad and heidi. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ david: what was the strategy that you used? paul: i was completely determined to recapture my parents' money that i had lost. david: how does somebody raise $5 billion in 24 hours? paul: it was first come, first served. david: you have an image of being a person that strikes fear in a lot of ceo's. some people are probably afraid they are going to get a call from paul singer. paul: it does not bother me anymore. david: if someone had invested with you in the very beginning, what kind of rate of turn what that have been compounded? paul: one dollar became $160. david: is it too late to invest retroactively into that? [laughter] >> 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. ♪