approach. denounce some,y we will finance sanctions. and if you continue on until they abandon everything, while that be acceptable to north korea? we are talking maximum to the very end. but is that really practical? that is something that comes to my mind as well. ramy: hold on one second because we are also watching the landing of the spacex falcon rocket right now. we have a guest waiting in the wings. the successful landing. times up until today, now it is 24. 11 of those have flown back in the air. half have landed on drone ships. another success for spacex.

we will get some analysis on all that. right now let's head back to the ambassador. ambassador, -- do we still have the ambassador? maybe we don't. ok, he is there. we are all captivated by space, i'm sorry. ichiro: i am working on space as well. [laughter] ramy: in terms of the take-home for mr. abe, i would gather in watching net press conference that we got as close to something good without actually getting anything in return. go back tor. abe tokyo with and what does he say to the electorate now? think -- so, that is

why i put those two points about missiles. he said clearly that all these missiles will be taken up, and mr. trump did not deny it. i think he can say to the audience that it is not only long-range missiles, but shorter missiles are going to be a point of discussion, or negotiation as well. say that the abduction issue was so forcefully taken up, and also maximum pressure. i think he has things to deliver. on trade issues it is more difficult because he said we are going to discuss free, fair and reciprocal trade, and that reciprocity could mean not only a level playing field, but

balancing the figures. what hewe have to see will explain to those who will ask questions about this discussion. was that really an agreement? what kind of word was used. in english it was translated to deal. somethinga, or different that could be some deals. we have to watch and see. view, tonese point of lift a tariff on steel and not a very huge export from japan.

cars, but weing have more investing in the united states in we're not exporting steel that much. produce.cannot but steel and aluminum does not balance out with new fta or something. if you lift this for you do that kind of discussion by president trump does not really do anything. the text and iad have to be very careful. a little incomprehensible to me. [laughter] appreciate your very frank views.

thank you very much for joining us. the joint news conference at mar-a-lago after two days of talks between president trump and shinzo abe. we have this sense of mixed messaging in terms of where we tbd versusade, bilateral deals when it comes to north korea as well. chiro joining us. a very busy how it was an busy ahead. lift off in space. maybe not lift off when it comes to the u.s. japan relationship, but a lot to get through. trying to get answers to all the questions you are asking, seems like we still had mixed messages when it comes to tpp. seems like president trump is saying look, i will only be for the tpp deal if i can get a deal i cannot refuse. but he is still referring bilateral trade deals, which for japan might not be a good deal

right now. the political drama at home i'm not sure how the japanese feel about these kind of scenarios at the moment. north korea could perhaps be the easier battle. ramy: to think that north korea could be the easier battle, that is so interesting. one thing i did note is there one some -- there was a messaging on point. they both said maximum pressure when it came to the issue of abduction. obviously that will play very well at home with regards to mr. abe with his approval rating between -- below 27%. a lot of things is still unclear. i think we will have to digest this and see what happens with the reaction when mr. abe had some. let's head to the markets, shall we? we have to look at what is happening here in the u.s. let's look at the boards. the u.s. markets ending a little mixed, similar to the press

conference we got out of mr. abe and mr. trump. the s&p 500 we're calling it up, 1%,down just about 1/10 of nasdaq and getting up just a little higher. it was a very mixed day when it came to, take your pick. earnings a mixed bag. morgan stanley fell. commodities rising. the dollar up what treasuries falling. -- up but treasuries falling. we're calling it flat. yvonne: for once we are not focusing on equities. we saw such big news in the commodities market. a 3% jump when it comes to crude after we saw inventory from the u.s. fell. -- yields treasury higher. breakeven rates climbing. the debate about whether this

will converge over the next six months is still going to be the big focus for many of the market. let's look at how asia is set up as we are taking a look and digesting comments coming through from shinzo abe and mr. trump. we are seeing some upside when it comes to stocks. 7318 for the kiwi right now. taking a look at trading australia just under one hour away. futures looking pretty positive. still could see some decent rallies when it comes to stocks. yields not going a lot when it comes to the aussie 10 year. we're counting down the open in japan and korea. take a look at the dollar-yen. we did not see a lot of reaction to these at mar-a-lago. holding steady-- right now and we could see a rally after a big jump. close to 1.5% yesterday. let's get you caught up with what is going on in the rest of the world.

bill dudley says he does not see a compelling case for rate hikes. growth and higher inflation does not necessarily mean policymakers should accelerate the pace of tightening. he added the so neutral rate which the fed says will keep prices steady is probably 3%. doubly retired in june and is being replaced by san francisco's john williams. japan's finance ministry official is quitting after allegations he sexually harassed journalist. he denies the claims but say they make it impossible to continue for the administration. he also says he will sue the magazine that accused him. his resignation is a new blow to prime minister shinzo abe as polls show rising dissatisfaction with him and his government. cuba is beginning the process of selecting a new leader, only the

third since 1959 and the first not to be named castro. 86-year-old raul castro succeeded his brother fidel 10 years ago. raul, cuba up to the outside world including the united states. he also approved a launch of a private sector economy. world debt has ballooned to $154 trillion. the imf warns that could make it hard for nations to pay back borrowing and respond to the next recession. the fiscal monitor reports as global public and private debt swelled to do hundred 25% of gdp in 2016, the last year for which it has data. it also says the u.s. government is forecast to have a worse debt profile than italy by 2023. launcheds successfully

nasa's mission to study so-called goldilocks planet's. it lifted off carrying the spacecraft which will search deep space for planets that resemble earth in that they are not too hot or too cold. they looked at thousands of bright stars over the last decades. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. let's get back to u.s. stocks because we saw the s&p 500 posted its third straight day and that was helped in part by strong earnings from morgan stanley and the rise of oil which yvonne mentioned earlier, all of which boosted energy stocks. but ibm fell which kept the dow in the red. back and forth. >> we had the rally earlier in

the day that pretty much came down to unchanged at the end of the that. let's go into the market snapshot. what we have here is a focus on the yield curve tightening. greater debate on potential inverted yield curve is something everyone is key big and i on. -- keep make an eye on. -- keeping an eye on. a big jump. alcoa ahead of earnings which are after the bell rallying because we have aluminum at a six-year high. the underlying commodity. ual was surprisingly strong. ibm of course is the big drag. let's go into the bloomberg real quick. stanley low on the day but it's trading revenue surged. 11 billion is the number you can see. you have to go back to comparables.

that has been to take away story for all these banks. bounce back on the trading revenue has a lot to do with uneven equity paths. ramy: a lot of volatility. i love the airlines. united airlines jumped the most since january. especially since all the volatility. what actually happened here? let's dive into this. >> their outlook is strong. with a really impressed investors with is pricing power. there was concerned there would be pricing wars. they alleviated those concerns and you can see the gains were across the board. even southwest airlines which had a fatal death yesterday in an emergency landing managed to get a gain out of that. ual, yes it has been a very tough year for them with big scandals. the last two conference calls

resulted in selling of stocks. this was the opposite. many believe that puts the company well on its way for a turnaround. yvonne: you mentioned commodities, we saw them surge the highest since 2015. you look at nickel, aluminum, alcoa also reporting saying this crazy market could get even more crazy. guest: absolutely. aluminum at a six-year high. let's go right to the bloomberg. metal outperforming a strong day for commodities in general. you can see that right here. this is the industrial metals index. almost straight up in this past session. let's look at the commodities themselves. oil at the highest point of the day up 3%. still closed with a significant gain. had to do with a supply report we are starting to see a supply glut. across the board gains for everyone extra for palladium.

lumbar was even at a record the other day because of strong housing. after the bell, alcoa reporting that theytlook believe the sanctions russet is imposing is going to continue to which is already strong because of underlying demand. so that definitely was a strong report and it effectively translated into thursday trading. yvonne: we're going to watch what happens in asia as well. for more let's get back to our top story, the joint news conference between president trump and japan's prime minister shinzo abe. now by the phone from a lot of -- from mar-a-lago. what do you think was the biggest take away on north korea and the trade front? tost: the president spoke shinzo abe over these past two

days and it seems like they had productive meetings. but when it came to actually having deliverables for the japanese prime minister on trade, it did not seem like the president offered much. there was no agreement to get back into tpp unless the u.s. is offered a deal he cannot refuse, that he's not going to get back into tpp. talked about may having some bilateral trade agreement but it was not clear what the mechanism was going to be for the u.s. in japan to come up with that agreement. on north korea the president said he is willing to have the meeting, even if the u.s. does not receive any assurances about the three americans who are currently being held in north korea. the president said if things are not looking good for that meeting that he will not have the meeting. or if he gets to the meeting and there is no actual movement on coming up with a good deal, that he would respectfully excuse himself from that meeting. it does appear that the

president is still on track to have a meeting with kim jong-un, the leader of north korea. we do not have a venue, we don't know where it will be, but he said he will try to have them beating by early june. -- have that meeting i early june. -- by early june. after getting some research on denuclearization, the president believes is on track to have that meeting and he has high hopes for doing what he said revia's administrations have not been able to achieve in the past in dealings between the u.s. and north korea. yvonne: what does this leave for japan? didn't see much shinzo abe got a lot when it came to tpp. the president still prefers a bilateral trade deal with japan. even when it came to missiles, we didn't even get to the heart of that. seems like they were mostly talking about denuclearization, but not really talking about

icbms or midrange missiles. did shinzo abe come out of this not fruitful at all, not really getting much out of it? toluse: the thing that he didn't get was a lot of alone time with president trump. he got to hit the links and spend time golfing. they had dinner, they had social gatherings. he was definitely able to make his case on all of those issues you mentioned including missiles. but we only really heard that from shinzo abe, we did not hear president trump say anything about missiles. he did agree to take up the issue of abductees. he said that prime minister abbe was very excited and animated when he made the case. because of that, president trump said he would agree to take decades -- take decades to the north korean leader. but on trade and on missile defense we didn't hear the

president say much. didn't seem like prime minister on a will be going back to japan to talk about it. ramy: that's what it seems like. does this eliminate third wheel syndrome for japan? analysts have been saying it is now the u.s. and china, u.s. and south korea, and japan has been sideline. to me it does not seem like that, but what is your take? toluse: when you look at the optics, bringing prime minister abe to mar-a-lago to spend personal time with the president does kind of give you that close feeling that the president and the prime minister are very close. administration officials we spoke to earlier said president trump had met with prime minister abe more often than any other world leader across the world. so there is that level of closeness, but it has not yet

transferred to deliverables for japanese on trade, on missiles, on north korean policy. it does not appear that including hisp is japanese counterpart when he is making major decisions whether it is slapping tariffs on steel and aluminum and giving exemptions to various countries and living japan off that list, or making discussions with the north korean leader and not telling the japanese in advance. what has kind of overshadow this is that we heard the president confirming that the incoming secretary of state and now cia director still mike pompeo met with kim jong-un. tell us about how unusual this is, and what exactly was achieved in this visit, and in what capacity did he go there. what capacity was he therefore? -- he there for? pompeo, president

trump's choice for secretary of officialsinistration say he went in capacity of top diplomat of the u.s. leading with the -- meeting with the leader of north korea in part because the president is so anxious to have this direct sit-down, he wanted to make sure he had a high-level official leading these talks. the president tweeted earlier he believes the talks went very well. he said north korea is showing great respect to the u.s. and that he is prepared to have a one-on-one meeting with kim jong-un and i believe that is why he sent his cia director and incoming state department leader to north korea because he wanted to be able to say that these talks are actually moving forward and get a sense of whether or not north korea is serious about denuclearization. the fact they are still talking about having a meeting with the president is an indication the meeting went well and the

president does believe the north koreans are serious about denuclearization. yvonne: thank you. our white house correspondent in mar-a-lago joining us by the phone. let's go back to the markets. we saw stocks edge higher on the booze from commodities, although treasury yields show a shadow over an otherwise healthy looking economy. david, numberng in one ranked u.s. government bond strategist for 11 years. he is also a picture printer to bloomberg view. thank you for joining us. seems like when it comes to equities we have an able to put this whole syrian issue, trade tensions on the back burner and focus on the fundamentals. can we stay that way or have we heard things today that changed that view? daivd: i don't know -- david: i don't know that we can

stay that way but it is important to know that syria did not do anything. more back and forth on trade has not done much. what we are doing better these last few days are on earnings. i think there are broader concerns. obviously the stock market had done a bit of a correction, there has been anticipation for a good earnings season. i don't think it has last because the stock market and bond market heaven trading on our political headlines -- on are political headlines. i am not trying to guess political aspersions on the we like toion, but study fundamentals and we like to study the economics of things. spikes we look at the are seeing in the vix index and volatility, they are not because the economics. being caused by particular things coming out on a given company having trouble. it is all about tweets, headlines, raids on the lawyer's

office. and it is a lot of other things that it is very difficult for market strategists and analysts to participate. now stocks are having a better time. yes, we have the earnings season, but once that is out of the way we have to continue to look to politics. yvonne: we kind of saw glimpses of that today. it was not just the focus on equities, but what we saw on the bond markets and commodities. just focusing on commodities, crude surging nearly 3%. a rarethink it we become safe haven amid these geopolitical tensions and protectionism? they seem like a short win when we see prices surge to the magnitude we have seen. david: yes, i think that commodities are a place to go to when the bond market, which is sorted been in a sideways area for the last two days and the stock market starts going up, i think people look for

alternative places to go to. i am not sure it underscores a strong demand side. it might, but i do think there are factors that may commodities for periods of time look attractive. i would put it more in the alternative asset class. maybe we can shift the momentum for something else for a moment. ramy: david, you were talking about your concerns. i want to dive into the bloomberg to talk about concerns with what is happening with treasury yields spreads. go to gdp go for our library to check this out yourself. these are at their lowest ever since the financial crisis, 2007 all the way to the left. what do you make of this? obviously we all know this is a harbinger of a recession. david: i absolutely think it is just that. we have the fed who is hiking, obviously. when you listen to them, there is no sign that they want to slow down.

if anything they want to accelerated. -- want to accelerate it. with all due respect to dudley, everyone else at the fed seems to be inclined to go. when you have the fed hiking, when the economy appears to be doing well -- but we are not doing gangbusters, you have the yield curve flattening and flattening. when you look at the yield curve as a harbinger, or you can look at so many other things. look at money supply or other arcane things we like to look at. there are some signs that we are anticipating a recession. i am not say necessarily in the next six months and i don't necessarily see an inverted curve in the next six months. within the next year if the fed goes three times, four times, i think we will be looking at an absolutely flat yield curve. i think it is anticipating weakness. ramy: interesting. very quickly one other thing you

were talking about was volatility rising. it seems it is way off of its recent peaks. i want to show you this other one about cross asset volatility comparison. down.cy volatility down, where do you think this is headed? david: i think it is headed higher, then lower, then higher. i know that sounds a little too glib, but i think we are merely a headline, we are merely a policya reversal of some of the administration that would change that. syria, we had the airstrikes, that did not do anything. right now the -- that -- when you look at the spikes over the last 18 months or so, they all are very much related to activity that is going on in washington. and i do not think that is going away. we do have a midterm elections

and there is a lot of other stuff going on. ramy: thank you very much. more coming up. this is bloomberg. ♪ this wi-fi is fast.

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♪ it is 7:30 a.m. here in hong kong. saw some decent rallies but it was a mixed picture when it came to u.s. markets. it really was earnings driving that but plenty of moves going on in commodities and bonds this morning. ramy: thursday morning for you, wednesday evening here. hairts closing just a above the flatline. s&p 500 up three for three. we had a mixed bag of earnings. oil rising 3%. of course we have been covering the recent meeting and press conference of prime and mr. andzo abe of japan

president donald trump. yvonne: you're watching "daybreak asia." let's get the first word news now. >> president trump says he and japanese prime minister abe will continue to work together on trade to reduce what he calls imbalances. after talks at mar-a-lago, the two said they agreed to cooperate on free, fair and reciprocal trade. hassays japanese investment been gaining in the u.s. while the president wants greater access to the japanese markets for american goods. >> we are also working to improve our economic partnership by reducing our trade imbalance and removing barriers to u.s. exports. the united states is committed to free, fair, and reciprocal trade. and we are committed to pursuing a bilateral trade relationship that benefits both of our great country's. caroline: the president also

said he would abandon plans for an this stork summit with kim jong-un if he said it would be successful. he said he would politely walk out of any meeting if it was not going well. convincing kim to give up his nuclear weapons would be a great thing for the world. bloomberg has been told sweden and switzerland are possible locations for talks. >> if we don't think it is going to be successful, we won't have it. we won't have it. meeting that's a is not going to be fruitful, we are not going to go. if the meeting when i am there is not fruitful, i will respectfully leave the meeting in will continue what we are doing. caroline: u.k. prime minister theresa may suffered a double the feet on brexit with the house of lords supporting a bill to remain in the customs union, and one protecting people's

rights until after the split. it was the seventh largest turnout in the chamber's history and had it considerable rebellion. turkish markets rallied as president erdogan called a snap election for june 24. more than one year earlier than scheduled. it's a -- it should consolidate his rule, transforming the political system by eliminating the prime minister's job and weakening parliament. a state ofins under emergency after last july's failed coup. the fcc is -- not street probably will have to comply with much tougher regulations approved at the end of the obama presidency. commissioners voted to seek public comments on a new best interest obligation for brokers

that is not as stringent as a fiduciary duty that means investment advisors have to put their client's interests first. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. yvonne: counting down to major market opens. this a lot of questions now about the durability of this global economy. you have the treasury yield curve continuing to flatten. sophie: worries being intensified, more talk about the vix being rigged. that is certainly the chatter on wild street. -- walk street. china will be front and center here. especially after the mixed messages we got from u.s. stocks.

you have stocks pointing higher. i want to highlight one potential source of optimism, the steady rise in producer prices. march ppi extended a small rebound from a year ago. news fromwill have this press conference to consider. trump spoke of working closely on trade. that is something that might have to be done regarding that imbalance. yvonne: of course we're focus on commodities. we see metal in particular really reacting to what we have seen so far with the u.s. having sanctions on russia. what sparked this latest round? sophie: there has been turmoil in the metals market when it comes to aluminum. but nickel has now become front and center. these are worries that you and other russian equities might be -- countries might be hit with sanctions.

this rally could be short-lived because it is much of do about nothing when it comes to the physical fundamentals of the nickel market. bullish sentiment -- higher demand for electric vehicles. just to take a look at what is helping to spur this uptick. it can see nickel, the blue, is now soaring above aluminum and oil. when it comes to these sanctions the u.s. is placed on russia, there is a potential cautionary tale to be had from oil. trump has to decide by may 12 with a two extend waivers on sanctions. oil trading at highs ahead of the opec meeting. ramy: sophie, thank you. looking at the bloomberg commodities index it is now up

the most since august of last year because of this whole rally we're seeing across the metals. meantime, let's get back to the earnings carousel. morgan stanley has reported record first-quarter profit as well as revenue, but the ceo says he does not want people getting ahead of themselves. our finance editor joins us now from san francisco. walk us through these earnings. what is the top headline we need to know? dan: the earnings were a record across the board in all the divisions. morgan stanley seemed to really hit their marks, if not exceed them. they passed $11 billion in revenue for the first time. that was a record, obviously. they exceeded expectations in fixed income. they exceeded expectations in investment banking. in investment banking, they were the best on wall street. they were up 7%. so far this year on the league

tables with m&a advisory, morgan stanley is leading the charge. ramy: morgan stanley leading the charge, but i'm looking at their share price right now, up 0.04%. what happened? dan: is what we have been seeing since friday when jpmorgan kicked off this morning session. -- earnings session. the numbers come out, they all look spectacular, and the shares startek line. then investors take a step back and the think of themselves, or at least this is what they are hearing, this is maybe as good as it is going to get. what will sustain this kind of level we can only possibly move down from here. like he tookems most of the time during his call to manage expectations. we don't want to get ahead of ourselves, even when wells fargo is talking about how they reached their return on equity target already.

-- the vix can change quickly. do you think that is what led to the move we saw in the stock change overnight? dan: is certainly contributed to it but it happened with just about every big bank that reported earnings this week. now we have gone through the six biggest banks and where seeing patterns. we are seeing equity trading very strong. in theseeing the tax cut trump administration has really helped fill in the neck incomes -- net incomes of all the banks. people are just wondering what is next and whether this is systemic. yvonne: appreciate your insight here. dan joining us from san francisco. amazon shares rose in late trade after ceo jeff a those published in annual shareholder letter -- he announced the numbers of data amazon prime numbers has topped 100 million worldwide.

until now the company had kept the number of subscribers a closely guarded secret. soberbring in spencer joining us from seattle. they have more of a cult following this -- what was the takeaway? spencer: you talked about it just before, the 100 million prime members worldwide. the significance of that is investors have known that prime membership is extremely strong and the u.s. and helps make customers loyal to amazon in the u.s. where amazon dominates e-commerce. the significance of this is it indicates that prime membership, value opposition is gaining traction overseas. it hints that amazon will be able to replicate its u.s. success in other markets like europe, japan, even india. all that means is there is potentially a lot more revenue

for amazon to bring in through this prime membership program. yvonne: that is really what investors are looking for. it has never really been about the profits, but the revenue and how much money they can deploy and what that means in terms of. investment plans. what else are looking for in terms of expansion? spencer: they have been adding things onto prime as well. there is also additional tiers of service, kind of like a la carte add-ons. you get a base level of music streaming with prime but you can get additional levels if you pay an additional amount per month. that is just one example of how they had different tiers to prime memberships. jeff bezos also chimed in on company culture. i feel it might be a veiled swipe, especially what is happening with the tech industry with facebook in particular. what are your thoughts on that?

he reiterated a lot of what he said in years past like on customer obsession and how customers are never fully satisfied. he really honed in on this commitment to excellence. if you can create a culture that the man's excellence you can teach people to be high achievers and rise if you create that culture and a danger of not doing that is that people get stuck in a malaise and not reach their full potential. so definitely a lot of cheerleading about the amazon company culture. ramy: you cannot blame them for that. bloomberg i would say has a very similar culture, if you don't mind me saying. let's move right along but stay in the text fear because -- tech sphere. facebook is moving a team to build its own semi conductors. it adds to a recent trend among

tech companies to supply themselves and lower their dependence on outside chipmakers which include intel and qualcomm. martin has the story in san francisco. congrats on the scoop. mark: this was a story in collaboration with our facebook wizard doing a great job and our chips expert. facebook is following apple and amazon and google into this world of chip development. why is this important? it allows them to have finer control over future devices. it would allow them to build the processors that power all the data centers, their server farms across the world and allow them to more finely tuned oculus be our headsets, smart seekers. vris a long-term -- oculus headsets, smart speakers. ramy: facebook actually closed flat.

what would you say in terms of what investors are thinking? i cannot see exactly when this news hit. mark: the stock market is so volatile as you know. the things that the stoxx moves on it is always a surprise. it could be very minor and move the stock. it's really an up in the air kind of gain. this is a long-term thing. it is not a piece of news that will affect the stoxx at prime -- stocks at time of publication. yvonne: there's a lot of questions about execution. it's a very expensive process. how do we know this is going to work well for facebook? can they do this alone? mark: we have no idea.

but you need a manufacturing partner. they will probably find one in asia. will it pay off? for them, hopefully. for consumers, they will not see much benefit right now but he could make for better hardware devices. in makes sense to do these things if you are a company coming up with hardware that everyone has in her homes. it is important for amazon to do this. of course it is critical for apple to do this for their devices. but facebook doesn't really have anything to put this in. it is also the biggest indicator we have of how serious they are about hardware and how much hardware they want to do long-term. this is not cheap. this is a massive effort that is going to require tons of hires, so much money spent, partnerships on a scale that facebook has never approached. they better know what they are doing and they better have big plans for what to do with the chips to make it worth it. yvonne: a good point.

they really have not said where they are going to use the chips other than just the broad umbrella of ai thank you, mark. next we are going to begin to president trump and prime minister abe's news conference. this is bloomberg. ♪

♪ ."onne: this is "daybreak asia trump says het and japanese prime minister abe will continue to work together on trade to reduce what he calls imbalances. let's get some reaction from what we have been covering the past few hours with isaac stone fish, senior fellow at the asia society. i want to get your initial reaction to the press conference. we were talking in the break how there was a stoic and composed

body language. what is your take? isaac: it does seem like japanese prime minister shinzo abe is really forced to this -- to respond from the defensive. he is facing mounting scandals at home. deal with a u.s. president who really wants to rectify the trade imbalance, which he and a lot of other very serious people do not think is an actual problem, and he is quite afraid of what trump might do with north korea and how that might jeopardize japanese security. ramy: we were joking in the past hour about which one is more difficult. korea, or is north it something like bilateral trade deals, tpp. which one do you think is that can that can i -- be fixed easier? isaac: that's a great question. i don't think bilateral trade deficit is something that needs to be fixed. trump has firmly for a very long time considered that a problem.

i think that it is easier for abe to let trump do what he wants to do on north korea and potentially face the security trade isces, whereas more difficult to change the consequences are smaller. flies back. abe home, what is he trying to fashion in his head when he addresses the media, when he addresses his electorate, with his approval below 27%? isaac: it is striking that his approval rating is lower than even trump's low approval rating. win, and heeeds a really needs is something that can give him back the energy and the vigor that he has. going toe is really focus on what japanese voters care about. the abductee issue is major. it is unclear if they are alive or not but there are roughly one dozen japanese who had been

abducted, and that is a big political concern in japan. i think he is going to emphasize that particular issue and how he is working for the good and the safety of the japanese people. yvonne: when it comes to security fell, i am -- security, though, why do you think japan has been so sideline with these north korean talks? he has held high-level talks with the u.s. according to president trump. he is set to meet with moon jae-in. wide you think japan has been missing out on all this? isaac: i think we have to give kim jong-un credit for being a canny operator. i think he is good at playing the different sides off each japan out inving the cold to further extort, in a way, concessions from them later on. exactly how japan lost a chance to really be part of this arrangement, but they certainly did, and it is not to

the benefit of japan. yvonne: is that going to force the prime minister then two strike a trade deal with the u.s., just so japan can preserve some regional status? isaac: i think the chances of him striking a trade deal now are much higher than at any point in the past. i think he has to watch out for seeming as too craven, too pr o-america's interest as opposed to japan's interest. i think it will be delicate on his part as to whether he can strike a trade deal and still seem mikey has japan's best interest in mind. ramy: we haven't spoken about u.s. chinese relations. what is happening here? how does china get played into this? isaac: we just heard the news that xi jinping will likely visit pyongyang first trip for china's communist party secretary during his term -- his reign.

are doing isthey they are trying to remind all signs that the road to pyongyang goes through beijing, and this is a very important relationship for them and it cannot just be that the u.s. and south korea and north korea are talking without beijing having a seat at the table. ramy: point taken. $5 billion in trade for 2017. notably that has fallen by $1 billion. we will leave it there. isaac, thank you very much for your thoughts. don't forget, our interactive tv function. you can watch us live and catch up on past interviews as well as dive into any securities or bloomberg functions we talk about. bless become part of the cover station by sending us messages during our shows. this is for bloomberg subscribers only. this is bloomberg. ♪

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this is "daybreak asia." ramy: let's do a quick check of the latest business flash headlines. southwest airlines is stepping up engine inspections as the discount carrier grapples with its first accident to ever kill a passenger. it says ultrasonic examinations of fan blades on its engines will be completed within 30 days. the ntsb says it found indication of metal fatigue where a blade was missing in the engine as it exploded about 20 minutes into a flight from new york to dallas. brazil prosecutors in saysa mine wants 30 more days to resolve a deal -- friday.en't given until

at least 19 people were killed when the dam collapsed in 2015. --ic liquid below did polluted waterways. most a bank tumbled the after they gave property investment loans based on faith applications. you reap-- it was already japan's worst-performing bank stock this year. yvonne: coming up, the market check. the asia-pacific session kicks off. we're going to look at what is going on with chinese bonds. what asset -- this is bloomberg. ♪

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yvonne: 8 a.m. in hong kong. we are live in bloomberg's asian headquarters. the top stories this thursday, keeping up the pressure. the u.s. and japan thomas tuchel push north korea toward historic change. the summit moves closer. the president confirms the cia director was in pyongyang. ony: we are past 8:00 p.m. wednesday. asia-pacific stocks faced a mixed start after wall street edged higher. rising oil prices boosted energy producers. of the a commodity story day, crude lifting the bloomberg

commodity index to its biggest session gain in almost a year. yvonne: we are digesting the mixed messages we got out of that mar-a-lago conference. shinzo abe and mr. trump. not a lot of answers when it came to tpp. ae president said he prefers bilateral trade agreement with japan, not a lot in terms of missile issues. whether that was discussed. we have a lot of head scratching but we are watching commodities as well as the yield curve. there was mixed messaging coming out of mar-a-lago. on other issues, abductions of japanese nationals bite north korea, there was some headway, i noticed there was the same

messaging, maximum pressure when it came to that. that is something that likely him to japantake saying that is something we got even as you point out a lot of lack of clarity when it comes to the big geopolitical issues at hand. let's get the first word news now with tom mackenzie. spacex has launched nasa's mission to study so-called goldilocks planets. the falcon nine lifted off on craft that willhe search for planets that resemble their earth. there are not too hot and too cold. building on the work of the kepler over the past decade. of overhauling the conflict interest rules. wall street will not have to comply with tougher regulations

at the end of the obama presidency. the is not as stringent as duty that means investors have to put their clients interests first. bill dudley said he does not see a compelling case for rate hikes. he said strong growth and higher inflation do not necessarily mean policymakers should accelerate the pace of tightening. he added the so-called neutral rates which they fed says will keep prices steady will be 3%. he is being replaced by john liam's. ballooned and the imf said that could get nations to pay back are owing and responsive in the next session. the semi-annual report says the global public and private debt swelled to 200 25% of gdp in 2016. the last year for which it has data. it said the u.s. government is

forecast to have a worst profile than italy by 2023. japan's top finance minister official is quitting after allegations he sexually harassed female journalists. he denies the claim but said they make it impossible to continue as vice finance minister for the administration. he said he will sue the magazine that accused him. his resignation is a new blow to prime minister shinzo abe as holes show rising dissatisfaction with him and his government. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am tom mackenzie. this is bloomberg. withe: we do see equities a decent rally at the get go but the true story will be on commodities and funds. the latest with sophie kamaruddin. positive start a but we are getting ominous

settings in the bond space given the move we saw in treasury yields overnight. we have the 10 year rate holding at 2.87% as that trade fears cast a shadow over the other beige book we got on wednesday. taking a look elsewhere, here is what is happening in seoul, the at 1%. data from the bank of korea showing march pbi extended a small rebound from a years ago. checking in on what is going on with sydney shares with commodities very much in the limelight, checking in on materials and energy players, both segments gaining ground trading at three-year highs as we wait on a opec meeting and materials over 2% given the uptake across the metals complex. arecan see aluminum layers

leading, that is down to aluminum jumping over my percent. tracking that rally in aluminum which is trading at august 2011 highs. looking at ehp after they said it would boost nickel production as the battery boom back ends. to support the market early there is going to be a prolonged time of undersupply as the shift accelerates. , worries thatkel other russian companies could be targeted by u.s. sanctions. the uptick in nickel on this chart. with thee analysts speculation this rally could continue. it will be relatively short-lived given the fiscal weakening.cators are we have a debate whether the intern -- the [indiscernible] ramy: the u.s. closed in mixed

territory. now to the top story. the talks and the subsequent press conference by president trump and shinzo abe. our white house reporter is that mar-a-lago and joins us now on the line. i guess when it comes to japan, when it comes to mr. abe going home, what does he have in hand to show for it? >> probably the best thing he can show is a few pictures on the golf course with president trump showing the have a close relationship. president trumps private resort having close talks but when it comes to substance he did not receive any of the things he came for including a steel andption on aluminum tariffs. the president has offered exemptions to a number of u.s. allies but the pan was left out. he did not get assurances that

the discussions with north korea would include talk about short range, something japan is interested in. they want to make sure that whatever deal gets done between trump and kim jong-il -- kim jong-un is in interest. and trump did not say he would be interested in getting back into the tpp which is the japanese governments preference for the u.s. not much in terms of deliverables for the japanese but the photo ops and the signal that president trump and prime minister shinzo abe are -- have a close relationship. >> as you were going through the list i have this checklist in my not.and it did one thing that is crossing the bloomberg is sent to be secretary of state is lying as

he is confirmed, mike pompeo discussing u.s. detainees. this is according to a senior official. when donald trump was asked why a white house reporter during the press conference whether he would sit down with kim jong-un if that was not addressed, it seemed like he hedged, i felt like maybe he was not exactly prepared for that. what do you think is moving ahead, is it something that needs to be resolved before those talks if they do happen? >> this is a major point. white house advisers want this to be resolved either before or during this meeting, they want the president to come home and say he brought home an american or three americans who were being held in north korea. if that does not happen, the president will be guilty of what he accused previous presidents, he was credible as critical of president obama when president

obama was not able to discuss a release. president for 15 months and those americans have been in north korea for that entire time. he hopes it will be a good outcome but he did not commit to bringing them home, as part of these negotiations, he did not draw a red line or say he would walk out of the room if these americans were not released. he said he hopes things will go well and they will be a positive result and he did send mike pompeo to send the message that this is very important to the united states and that message was sent to and delivered directly to kim jong-un. it is clear that is something that will be on the radar for these talks that are going to happen in the next few weeks. yvonne: it seems like they are using this visit to north korea pompeo to solidify his confirmation as the next secretary of state.

are the republicans going to get their way on this? >> the administration was clear and blunt that they believe this was the message the president was sending that monk -- mike pompeo is the top diplomat. he is the state department director in waiting and they want his confirmation to happen as soon as possible. it is clear that a number after mcclatchy voted for him for cia director are not going to vote for him for the state department position. republicans are largely unified but there is the wildcard of senator rand paul who said he is ,pposed to this nomination president trump said rand paul has never let him down and he believes he will come around. there is a very tight margin, 51 republicans, 49 democrats, a couple of people who are out due to medical issues. it will be a very tight vote and it is not yet clear that mr.

pompeo has the votes he needs in order to become the next secretary of state. it is a crucial time because this meeting with kim jong-il jong on is supposed to happen in the next couple of weeks, early june is the timeline that president trump announced earlier this week. yvonne: thank you, our bloomberg white house reporter joining us from mar-a-lago iphone. president trump says he and shinzo abe will continue to work together on trade to reduce what he calls imbalances. after talks at mar-a-lago, the leaders say they agreed to cooperate on fair, reciprocal trade. japanese investment has been gaining momentum. the president wants greater access to japanese markets for american goods. i want to bring our bureau chief here in hong kong. great to have you here. what do you think shinzo abe agreed -- achieved in this visit?

>> one, they played golf. on the north korea front, they why to be on the same page. he was able to achieve that. what japan wants is to make sure maximum pressure is applied to north korea until he gets what it wants. that is something that president and he mentioned that he would bring up the issue of the objectives that have been a key issue for japan for decades. at the talks. in that way there is something he would be able to present to the people. again, there were a lot of issues that he wanted to also cover but could not, especially on the trade front. he was not able to get much on that front, i think. he thinking i am going to have to get into the bilateral trade deal with the u.s. to get some kind of

exemption when it comes to steel and aluminum tariffs or do we get the u.s. to join tpp? the president made it clear that he was not interested. a very going to be difficult situation going forward on that. to abe'st does this do approval rating when he lands in tokyo? >> this will not greatly improve his support rate. been belowl rate has 30% which is seen as a crucial line especially among the politicians and it has been said the atmosphere in parliament and where the parliament sits is changing once that figure crosses that line. i think he will go back and

obviously try to tout the fact that he and president trump were aligned on north korea and what he achieved. a series of scandals he faces i think still is a bit more heavy and the country is still much more focused on that. i was speaking with analysts earlier whether that solved abe's problem. with korea and china and the u.s., or are they that third wheel? >> hard to say. japan, korea, and china are scheduled to have a meeting in early may. north korea would be an issue. now whether japan would be able to play a crucial role when you

-- with talks, it is not clear. japan will have to -- try to have a say but based on the conversations and what was discussed, what came out of the meeting from our logo it is hard to see that japan is getting into the talks on that front. you have to wonder why kim jong-un is isolating japan. i want to focus on what is going on at home. we seem to have more fallout when it comes to the finance ministry and one of the more senior officials stepping down over allegations of sexual harassment. this issue is not going around, even the drama around the finance ministry. it has not died down. at all. the top bureaucrat in the finance ministry, one of the steppederful in japan down, he has denied the allegations and said he would sue the magazine. stepping down does raise the question among the public, the feeling of the trust element is

hard to regain. that is playing out now. yvonne: thank you. our bureau chief joining us here in our hong kong studio. we ask what is happening, the chinese on market after that rrr, yields are set to tumble even further after wednesday's slump. --y: this hour wittier trust ittier trust. this is bloomberg. ♪

ramy: welcome backramy:. yvonne: asian stocks for a mixed start as the s&p edged higher. the bloomberg commodities index had its biggest session gain in almost a year as oil rises and

u.s.-russia tensions boost industrial metals. turning us is the chief investment officer at whittier. so muchtalking about uncertainty happening in the markets. it is hard to focus on the fundamentals. where are you most worried when it comes to the fed, the yield curve inversion, commodity moves or just trade tensions? guest: there is no shortage of negative headlines that the market has chosen to for caps on -- chosen to focus on. geopolitical issues make for great trauma and theater but they rarely alter secular trends and fundamentals in the economy. the biggest dynamic in the market right now is a growth story. globalnchronized recovery in growth, corporate

profits are rising and almost these other issues, what are people focusing on? people fret about higher inflation and higher rates, trade wars, tariffs, we suspect those are likely to be distractions. dangerous at the moment but in the end, it will not be sufficient to take the focus away from growth in the economy and the earnings front. yvonne: you take a look at what we have seen in the move of commodities, crude is 3% and aluminum, nickel seems to be the next item. it seems like it is a short win when it comes to geopolitics and sanctions. is it the sign of a healthy economy, at what point do we worry it is too much of a good thing and not just a supply issue but also demand? crude has asike in much to do with the desire to continue the production cuts. -- global market for oil has

is going to be balanced naturally. oil is finding a new equilibrium level here. in some ways higher commodity prices are symptomatic of greater demand. that is a positive and consistent with the growth story that we have chosen to focus on. that this is worry as good as it possibly gets, it cannot get any better than this and this is i'm switching the focus to the u.s. earnings landscape. let me offer a couple of arguments to counter that popular thinking. earnings growth in the first quarter here in the u.s. and for the rest of the year will be quite stellar. ramy: are you still with us? we're having some technical difficulties.

why do we try to get him back sandeep.was you can browse recent forts and save charts future reference. remember that. this is bloomberg. ♪

ramy: welcome back. still with us is the chief investment officer at whittier trust and i want to bring back a number terminal 2 show the unusual upgrades. you are saying how growth is strong as evidenced in 2017 through 2018. pick up on your thoughts when we left off. >> a lot of the consensus expectations are probably priced in but we still think on our first team that there is still room for positive earnings

surprises. markets do not react instantaneously to new information. and in the u.s., fiscal stimulus deregulation, they are all good not to which we have adjusted to yet. as wecond observation is go through this quarter, 2019 come into sharper focus. as people look at earnings projections for 2019, they will see growth of 10 percentage points. earnings are not going to plateau here, the growth rate might but 2019 earnings will be higher than those in 2018. that should be enough to lift stock prices higher. i want to throw a little bit of cold water on this. we are seeing further flattening in the yield curve here. treasury yields spread at their lowest.

follow me all the way to the left, the lowest ever since the financial crisis. this is a harbinger of recession, that is what a lot of people say, weigh in. guest: this is a precursor to a recession. this is nearly flattening, the yield curve is still positive and we would contend that the downward pressure on long-term rates which is causing this flattening even as the fed continues to raise its projections for rate increases at the short end of the could of has to do what -- with what is happening overseas. there is a diversion said monetary policy, the u.s. central paying -- bank is embarking on on a tightening cycle but the rest of the world is still stimulated, global monitoring commission -- conditions are still easy and with low for an interest rates, that is putting downward pressure on u.s. interest rates. causing them to be below 3%.

we will have to leave it there. thank you so much. more to come. this is bloomberg. ♪ welcome to the xfinity store.

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8:30 a.m. in singapore. ramy: you are watching daybreak asia. the first word news with tom mackenzie. president trump says he and japanese prime minister shinzo abe will continue to work together on trade through what he calls imbalances. after talks the leaders say they agreed to cooperate on reciprocal trade. japanese investment has been gaining momentum in the u.s. while the president wants greater access to the japanese market for american goods.

president trump: we are working to improve our partnership by reducing our trade imbalance and removing barriers to u.s. exports. the u.s. is committed to free, fair, and reciprocal, very important word -- trade. we are committed to pursuing a bilateral trading relationship that benefits both of our great countries. tom: the president said he abandoned plans for a historic summit if he feels it would not be successful. he said he would politely walk out of any meeting if things are not going well. he tweeted convincing kim to give up nuclear weapons would be great for the world including north korea. sweden and switzerland are possible locations for talks. >> if we do not think it is going to be successful, we will not have it. we will not have it. if i think that it is a meeting that is not going to be

fruitful, we are not going to go. if the meeting when i am there is not fruitful, i will respectfully leave the meeting. and we will continue what we are doing. tom: turkish markets rallied as president or to one called for june 24.election the vote should consolidate his theman rule, transforming political system by eliminating the prime minister's job and weakening parliament. turkey remains under a state of emergency followed the -- following the failed coup. cuba is selecting a new leader. only the third since the 1959 revolution. and the first not to be named castro. succeeded his brother fidel 10 years ago and is stepping down in favor of the vice president. cuba opened up to the outside

world including the u.s. my he also approved the launch of a small but final private sector economy. day andews for hours a by tick-tock at twitter. i am tom mackenzie. this is bloomberg. mark -- let's get an update with some of -- sophie kamaruddin. are falling, tracking the overnight drop we saw in treasuries, we do have them steady amid worries over a flattening yield curve. afters catching a bit climbing pass the rate of inflation. checking on bonds, markets do not seem to be pricing any geopolitical risk. according to credit agricole. the nuclear issue may translate into higher risk. the korean won has reduced the odds of a rake -- rate hike.

the korean won is heading for second weekly gain. and check out the yen, slipping after trump and shinzo abe agreed to work closely on bilateral trade. the hong kong dollar is creeping back toward 785. range boundstaying with lower volatility. the focus has been on the biggestgiven rally since august and check out what is going on with metals, sustaining gains, copper trading above $7,000 and we do have nickel continuing to soar after jumping the most since 2009 overnight. we are seeing that reflected in how miners are faring. alcoa raised its earnings forecast on diminishing gaining of aluminum and

ground, ubs saying south32 will be one of the beneficiaries from that rally we are seeing in aluminum. and getting over 3% after its latest update. >> there is a lot of mayhem on the metals markets especially from the russell sanctions spreads even beyond aluminum. traders ared scrambling to secure supply cut off by the russia producer. david stringer joins us. why is everyone so worried about russell and how big is the impact for investors? david: what we are seeing, what we have seen overnight is mayhem, some of the concern spread beyond aluminum. nickel prices have been rallying, they searched on wednesday. the most since 2009. that pushed the year two date

gains to 20% and we are saying palladium posting its longest winning streak since august. we are seeing some of the markets reflecting some of the concerns we have seen and aluminum. the fear that u.s. sanctions could be extended beyond rusal. major producer of nickel and palladium. that is why we are seeing gains. there has in no let up in the gains, people still scrambling for supply, we have seen prices hitting touching august 2011 highs. materials also record highs. it is still pretty volatile in the metals complex. we heard from alcoa that reported earnings after the bell and they are thinking that

things will get more crazy. what is the company's outlook on where prices are heading now? reporter: that is right. what is interesting from alcoa is they see prices likely to hold some of these extreme gains we are saying and not necessarily as a result of the fallout from the resolve -- rusal issue. not because of the sanctions, that is because of a slower pace , capacity buildup in china. that will exacerbate and prices could hold some of the gains we are seeing. of the raw, one materials, they also see a wider deficit in that market. according to alcoa, we will see the price gains continue. also reporting this

morning, any surprises? longer anre is no iron ore producer. a bit of bad news, we've seen the share price gain this morning. it has trimmed its iron ore forecast for the year. it is having some issues with equipment which means it is lowering that target. it should still hit a record. it also sees output to rise a year later. in copper some issues in australia. it has narrowed the range of its forecast. as we've seen from the share price gains, it does not seem to be troubling investors too much. yvonne: thank you. stock price up 2% for bhp. for bloomberg

subscribers, check it out. it is also available on your bloomberg. customize your settings. may cares that you about. metal mania is what we are talking about. investors are pumping money into u.s. drugs the startups as beijing seems to be a global leader in new medicine. chinese venture capital funds that all must one point $5 billion into the sector. adding to a flood of cash going to groundbreaking health firms waste in the u.s. let's bring berg gave mccombs for more. even ifnteresting story biotech is good for china. is china a good bet for biotech? is good. money as you noted, it was about 1.5 billion last quarter, a quarter before that it was slightly more. that is 40% of the total investment going into that sector, it is already a very hot sector in the u.s., a lot of

bets going in there. there is evidence that china is a good bet. bear as the demand is a well. when you look at china, the numbers always come into play. a massive population, they are having a surge in cancer cases. the figures for i-16 were 4 million new cancer cases, 3 million people lost their life to cancer so there is a huge demand. the government is channeling into biotech development, pharmaceuticals develop met because they know the demand is there. there is also this idea that overseas investment in china has been controversial. the government is cracking down on some of the biggest companies investing money overseas but they have given a green light to these sorts of investments so that means if there will be more chinese money pouring into said,h companies, as we the demand in china is also there so it does look like it is

a good bet for biotech companies to find chinese partners and investment. growth there but we have to remember the trump administration included made in china medical devices as a target for those tariffs and that long list, several dozen pages. could a trade war felt the country's plan to build this biotech industry? that is the challenge. this is not the classic no-brainer where you say just invest at will. there is that concern. this is one of the most heavily regular did industries all over the world, not just in china but everywhere. there are signs china is very serious about opening up its market. it announced in march that it intended to reduce the tax on cancer or the tariff on imported cancer medicines and it did so a week ago. they removed all tariffs on cancer medicine. the same time they removed the

tariff they lowered the price. government around the world and most every country tightly control the price of drugs so you are -- if you are in the drug development business you -- there is a concern. if you cannot sell a blockbuster of --n a country the sign be size of china you have to careful, to our building up development in that country. 3.1 millionith people you have to make sure it adds up. thank you. just ahead, chinese bond yields, those tumbling the most since 2016 after the pboc's reserve ratio cut. outlooket the sovereign sovereignubs management. this is bloomberg. this is bloomberg.

yvonne: this is daybreak asia.

york.i am in new let's get the chinese bonds because they're yields are onbling the most since 2016 wednesday. after the pboc cut their triple reserve requirement ratio to steady bank liquidity. joining us to make the heads or head.of this is the asset i want to go into the bloomberg here because i want to show our viewers exactly what is happening with those yields. 3.48% for the 10 year, a day ago it was 3.61% because of their triple archive. talk to me about the impetus and the motivation from the pboc here. ashley: a pretty big move. what hasontinuation of been happening since the last month or two. chinese bond yields, tenure bond yields up close to 10% and now

closer to 3.5. extentt move has been an -- an extension of what we have seen for the last month or two. given a lot of bond investors confidence to get back into the market. domestic investors in china have been avoiding the bond market. the latter part of last year and early this year, concerned of what was happening on the deleveraging side. the triple gave them a sense of havef and allowed them to some confidence to put some money back to work in the bond market. ramy: you know what also gave them a sense of relief, a few weeks ago bloomberg included chinese bonds. index.global aggregate i chaired a panel talking about this. what do you think will be the impact on the chinese bond market while you -- and while you answer, head to my second bloomberg chart.

the bond market in china is the third biggest in the world here in the white line. go ahead. is the biggest bond market in the world, it is a $10 trillion market equivalent size, over 60 trillion. with ana massive rocket opportunity for international investors. we will expect you see a continuation we get that inclusion into the index. you will see a continuation into what is happening. bond flowsn huge from foreigners into the china bond market, 17 billion u.s. dollars equivalent in the march quarter. that is more than all of 2016 in total. it is already happening, foreign investors are looking at that opportunity and this is going to be further developments next intoas it officially comes

the benchmark. what investors have to do is understand you do not have to wait for it to come into the benchmark to participate. this is -- has been a good performing bond market, it gives you diversification benefits. correlated with other bond markets. it is something they should be looking at now, not just waiting until the index happens next year. what does this tell us about the policy framework of the pboc question mark benchmark rates is still out of picture, whether or not they could beat cutting that rrr once again how much further lower can yields go? >> you should look at this in context of the policy framework and deleveraging agenda the authorities have within china. sector hasbanking

shrunk enormously in terms of its growth rate. virtually not even going anymore, that has come down dramatically. if you are taking away credit from that off-balance-sheet part of the economy, you need to ensure that in this big balancing act the authorities have been trained to manage the credit still flows to the real economy and growth met -- rates continue to be maintained. cutting the rrr allows banks to have extra liquidity. it gives them some ability to land month deposit growth has been muted. the banks need that extra liquidity to continue to lend to those parts of the economy where the authorities want them to. the small enterprises that still need credit. you cannot choke off credit i cracking down on the shadow banking sector without making some allowance within the on balance sheet part of the banks to allow them to continue to have an economic outcome which is what they desire. yvonne: what does this mean for

the renminbi? see much of a not reaction in the renminbi. most of the reaction was in the bond market side. when you have had rrr cuts in the past you would have seen the currency weakened. i think investors are pretty confident and this fund flow as i mentioned, the amount of foreign investor flow that is going into the renminbi bonds already, that is helping to support the market. the economy is still performing ok, helping to support the renminbi. the outlook is more than just the general outlook for the us dollar and the renminbi is very well. we will continue to see the redmond-based a relatively stable as opposed to what might have happened in the past with the rrr cut, we would have seen the renminbi weekend but that is not likely to be this case this time. yvonne: even is that spread

treasuries and chinese bonds keeps narrowing. thank you. joining us from singapore. the big question will be our chinese bonds a better buy than chinese stocks, that will be the big question after a series of mixed signals from the u.s. overnight, a-shares broke of four day losing streak. asia's worst performer outside of the philippines. let's get to our chief correspondent stephen engle. aephen: there has been flowing into bonds but traders becoming a little adverse to risk right now given the trade frictions going on. you can see it reflected in asia and the stock links to hong kong. let's bring up the boards and we can see the shanghai composite index down. down 13% since the high of this year in january 24. it has fallen in four of the

past five sessions. it did break the four day losing streak yesterday but there is some negative bias, shenzhen deposit same thing. of the last for out five sessions. the stock link, mainland stocks,s sold 584 u.s. the largest winning streak since the shenzhen launch in 2016. this could weigh on regional equities. yvonne: and hong kong dollars. ramy: what is this we are learning about a possible delay of the release of the new rules for the asset managing products? stephen: this dovetails with our previous guest because it is linked to this reserve ratio requirement cut that we got on tuesday. basically we were going to get, the communist party approved these new rules that were proposed in november to rein in

shadow banking with new asset management product rules. we have been expecting the publication of these rules but now we are learning from people familiar that these rules have been delayed. why does the rrr factor in and also the trade friction? because most strategists say the new rules will likely crimp or restrict liquidity, domestic liquidity and it shows the rrr cut that maintaining stability and maintaining ample liquidity are the priorities right now. we do not have a timetable on when the new rules will come out bettery want to control this ballooning industry of asset management products. they want to cap leverage, reduce duration mismatch and more portly, do away with these implicit state guarantees on the imp which is leading to investors seeing the industry is virtually risk-free. they want to take out some of that risk and the anp market.

yvonne: we have some lance coming in from the hong kong monetary authority. they have been spending billions dollars, saying that 50 billion hong kong dollars and outflows is not too much, they are saying they do not see a large scale of shorting the currency and they are saying hong kong dollar purchases operation is smooth and sound. rates are slowly rising and the expect that to continue. there is -- they are still downplaying. how much more can we continue to defend it before we start worrying about liquidity? stephen: that is right. we are getting some property numbers so we can see how that tightening is going to be affecting them. will continue to watch those lines coming in from the hong kong monetary authority. let's do a quick check of the latest business flash headlines. southwest airlines checking --

raising inspections. will be completed within 30 days. it found indications of metal fatigue where a blade was missing in the engine that exploded try minutes into a flight from new york to dallas. ramy: prosecutors in brazil say the shuttered san marco iron ore line launched 30 more days to clear a deal that would result in lawsuits. they had been given until this friday to combine suits with more than $50 billion. 19 people were killed when that dam collapsed. a wave of toxic liquid polluted water waves across two states. -- it: server go frank gave property loans based on

fake applications. they provided that bank with documents that were falsified to make her look more credit worthy. it was japan's worst performing bank stock this year. now for look at what is coming through here. let's bring on rish. about thislking meeting which has been taking place with shinzo abe and donald trump and what does he make of it, did he get what he wanted question with regards to the exceptions on steel and aluminum but they are locked in a bilateral trade deal. looking at what that means for north korea. ofing on to the bank singapore. what he is making of what is going on and where they are putting their money. and the head of research mark keenan.

having a look at their investments. the contrary and market views. coming up in over an hour. there we go. thank you. before we hand over to you, let's do one last check at how markets are trading. you can see green across major markets. the nikkei 225 up .7 of 1%, catching positivity even though we saw a mixed bag coming out of the u.s., the s&p up just barely. yvonne: that is it from daybreak asia. the news continues with rish and heidi next.

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