♪ yvonne: 7:00 a.m. here in hong kong. i am yvonne man. welcome to "daybreak asia." pacific set to follow wall street, with industrials and tech under pressure. the 10 year yield hitting 3%. bellwether caterpillar fell in the first quarter, described as a high watermark. betty: from bloomberg's global headquarters i am betty liu, where it is just after 7:00 p.m. tuesday evening. evening -- aluminum seeing the biggest loss in three decades. talking trade, steve mnuchin preparing to head the china for

renegotiations on imbalances in tariffs. ♪ betty: as we had predicted that we would be talking about the 3% in yields in trade. that is spooking the equity markets. not just investors, but u.s. consumers. chart,ook at this gtv which shows you how consumer sentiment is on the board on stocks. and as you can see, rapidly declining, showing on this line chart, the number, the percentage of u.s. consumers who think the stock market will fall within the next 12 months. rapidly falling into the red. yvonne: several factors bringing markets down. we take a look at what we saw in the bond market.

we finally hit 3% on the u.s. 10 year. it was also an earnings story. earnings beating expectations. we are still expecting 20% in earnings in the u.s. this year. caterpillar sealed the deal on how, when they talked about earnings here on forward are as good as it gets. betty: that really hit the market. let's pull up the board to see where we end today. and ugly day, the dow dropping 425 points. the s&p deep in the red. and the nasdaq. those big tech stocks tanking on this bearish sentiment. foras more on the wild ride stocks, the fifth day lower for the dow. losing streak for the dow since 2017. caterpillar says it is as good as it gets for the first quarter. in ausual thing to say

conference call, and it sends the stock tumbling. the dollar in focus as it rebounds. the10 year rebounding from key 3% level bond traders have been talking about for months, as the stock market moves lower and risk aversion became the order of the day. let's go to big movers. had a lot to do with earnings. let's look at gtv dollar rebound. when we talk yields, the dollar rebound is the blue, the white -- the white is the dollar rebound. they are starting to correlate, which a lot of traders are focused on. let's go to big movers. earnings tells a story. caterpillar got a big drop. the stock was actually rallying until the conference call, when they talked about profit being at the high water mark in the first quarter. analysts felt negative for the rest of the year.

google also moving lower. they moved higher on the innings be yesterday, but this latest session, the focus was on capital expenditures. 3m, another story of concern on wall street, about weakness. on stock taking a big hit the outlook for the company and the view this other bellwether a less was also sending than healthy outlook, adding to pressure on the stock. let's go back and the bloomberg one more time. the final minutes of the previous show, ramy inocencio talked about the outlook for texas instruments, moving higher after hours. the rosy sales forecast provided them to move up, the largest provider of chips. the forecast beat all the estimates. that is diffusing concern about orders trimming off.

the wednesday session as a positive in terms of text strength. betty: in the terminal and the metals market, that continues. aluminum, the biggest in decades after that run-up. su: it says a lot about the speculative trading taking place in aluminum, which had run up to multiyear highs. biggest drop as you mentioned in three decades, biggest two-day drop has a lot to do with the easing of tensions on the sanctions that would be placed on russo. let's look at how the adequacy -- equity stocks are moving. nationaling a hit, aluminum taking a very big hit. aluminum came off the three-year highs. oil on wall street believe could go to 80, but there is a view here there will be a of bearishterms

forecast for the supply data that comes out on wednesday. that is one of the reasons we see oil moving slightly lower. yvonne: su keenan, joining us in new york. not a good set up to what we are seeing in us -- asia. australia and new zealand, markets closed to observe a holiday. currency trading. let's see how we are faring when it comes to the aussie. all of a sudden, these rate differentials matter. the aussie seeing declines overnight, .7603. and the kiwi at .7113. we are also counting down to the opens in japan and korea. the dollar-yen not far from 110, which would have been ludicrous a few weeks ago. 3, a bit of a backtrack after that gain on the nikkei 225 yesterday. betty: markets of the top story

in today's edition of daybreak. subscribers can go to dayb on their terminals. it is also available on mobile in the bloomberg anywhere app. let's get the first word news with jessica summers. >> tesla rose above 30% of available shares on april 13. that is up from 25% two weeks earlier. it may show worsening sentiment about the company. however, it can be a signal to contrarian investors the worst may be over for a stock. it is reported on a daily basis i the nasdaq. tesla has fallen more than 5% since april 13. tax overhaul gave verizon enough of a windfall to buy yahoo!. billion,f them $4 slightly below the $4.5 billion it paid yahoo! in june. it had a big tax break because

almost all its revenue comes from the u.s. rate lower,to pay a down from 35%. the maker of the jet engine that blew up on a southwest airlines last week was about to recommend inspections. those would have included the turbine that failed. they had already encouraged them to check blades. initial inspections show it had meal fatigue. france is negotiations on a new deal with iran in a bid to keep the u.s. on board. president macron said it should block iran's nuclear activity 2025 and contain their broader influence in the middle east. president trump may have abandoned the current deal next month, but iran says it will walk away if that happens.

>> the united states has not lived up to its side of the problem, its commitment to lift certain sanctions, not to impede economic relations between iran's and its economic partners. prevented, dissuaded companies from engaging with iran. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. ♪ yvonne: jessica, thank you. more now on the risk aversion after 10 year treasury yields reached 3% of the first time since 2014. joining us now, i chief global economist. david, thank you for joining us. 3% of the 10 year, what does that mean for you? that wouldomething come later, rather than this

soon. with the steepening of the yield curve, we argue it has been adding to the dollar upside pressure. the big question for us, are you going to get even from here, and inflation scare in the u.s. that could drive it higher? that would be the biggest pain for emerging markets if that happens. we do not believe it will. we will see modest inflation pressures in the u.s. the question is, how sensitive will the market be to that? yvonne: and also the question, how did we get to 3% in the first place? we saw a surge in commodity prices. is the 10 year rising for the right reasons, or is it bad inflation? david: to take into account, quantitative easing as an instrument of policy, is finally ending this year. it is with the shrinkage of the u.s. allen sheet and ending the ecb's qe policy.

if you compare that to the past coming outs, we are now with the most aggressive start to quantitative easing since qe again. the problem for the markets, how do you judge how much of an impact it has, given it is an experimental policy? seencould be why we have market reactions to commodity price rises. betty: david, i would agree. it hasinvestors' minds, been abnormal for so long, will we see an abnormal reaction as we get back to "normal?" he outlined an instant -- interesting scenario of when he thought there could be a stampede in the bond markets. listen in. >> do you think we will see a stampede of a 16 come, weather in schwab accounts or elsewhere -- >> if they eke up.

two orsee rates jump up three basis points in the course of 90 days, you will have a bit of panic among some them -- some investors. betty: that seems an impossible scenario, but i see the point. if we see an uncontrolled spy, will that trigger panic selling? , extra retailly level selling coming into various funds exposed. much more the safer end of the spectrum. i think the most important thing will be, starting with whether that is traded in the first place. the main reason behind that, we think expected inflation should be relatively calm. even with inflation and the higher range. even with rising core pce

inflation above 2%. if we do get at, volatile tightening of financial conditions. -- conditions, let's say combined, that will also give the fed reason to not necessarily stick to what we think it is going to do, which is a clockwork style, 25 basis points through to the middle of next year. we think fundamentals justify it, but if markets become too volatile, they won't do it. betty: how committed do you think the fed is to three or four rate hikes this year? david: we think we will get a total of four from the fed this year, but it needs to be conditional on not having a volatile or disruptive style, tightening of financial conditions. if you get that, it is likely the fed will say, we would

rather go into wait-and-see mode. moves, a good excuse. central banks do not do that and they will stick with the quarterly profile. we willstick around, talk about trade tensions. breaking news from scheier. -- shire. breakthrough, i think for a five times is a charm. a revisedmmending takeda proposal. $30.33 in terms of cash. they have indicated takeda is what -- willing to recommend that proposal and the deadline .as been extended to may 8 it seems they are reaching more of an agreement when it comes to

the price and the structure of this deal continues. watch out for lines for that to see how takeda reacts. plenty more to come. this is bloomberg. ♪ is is bloomberg. ♪

♪ ."tty: this is "daybreak asia i am betty liu in new york. yvonne: and i am yvonne man in hong kong. -- will depart for china in days. trump sees -- if trump sees a good deal. otherwise, tariffs on chinese goods will take place as planned. our editor, joe sobczyk, joining us. what does this mean for negotiations? joe: good morning. sides havew, the two been talking at each other rather than with each other. the trump side has said it is

willing to negotiate, but has not set out terms or concessions they want, other than the broad outlines of complaints trump has had. mnuchin going there, i believe he is taking the u.s. trade representative robert lighthizer with him. maybe now they are getting down to brass tacks and negotiating a way out of this complication over china's trade practices and trump's planned imposition of tariffs. the irant's move on to nuclear deal. president macron trying to keep the u.s. in that deal, but adding to it. what was the reaction to that proposal? joe: it was a fairly muted response from the u.s. macron's proposal appears to be will paper over

big differences between the u.s. and the e.u. on the iran deal and perhaps by some time. tiem -- a -- buy some buy some time. president trump has been threatening to pull out of it. that is something macron, merkel and may have been trying to avoid since trump came into office. for him be a sweet know to consider staying and negotiating some sort of side deal. whether or not iran is willing to go for it, part of that would be negotiating away some of their influence in the region. it is really quite an open question. be at yet another standoff without any results coming in the near future. betty: thank you so much, joe sobczyk, bloomberg congress editor in washington.

still with us to talk about issues and how it may affect global outlook, david mann. let's start with the global economic outlook and how much it hinges on these u.s.-china trade negotiations, whether they are good or bad. david: this is exactly the problem. in whatever scenario you talk about, there are so many scenarios you could discuss, you go from a fantastic, best deal ever typed trade, coming from the china side, services bought from the u.s., all the way to the other end, that could bring us back to a tit-for-tat escalation of trade tensions, that no one is interested in, and everything in between. when investors and people talk through what could happen, there

are too many details to be able to judge it. the only thing people are in agreement on, at least this should be treated as a next her reason not to put all your eggs in one basket. have places to be producing outside of any one particular country, especially run -- especially one running a large surplus with the u.s. we will see how this goes. it, so far,t put the thunder has been loud, but so far, the raindrops have been small. yvonne: breaking news from algae, unexpected profit loss, won in theon negative. concernsther adding to that apple was seen struggling its an effort to diversify

screen supply and lg saying its won.was 9.84 billion we could be seeing more downside when it comes to this tech route in korea. the state dinner underway now for emmanuel macron. for the three-day visit you see the president in a talks with the first lady as they join the delegation in commemorating this visit. a lot has been talked about. the french president looking at a new iran deal. have not seen a lot of headlines, seems it is mostly on geopolitics now. betty: certainly seems that way.

now of course it is that view on this 10 year treasury yields, that 10 year yield. analyzing these factors, we were just talking about u.s.-china trade, where is your global economic forecast right now, david? david: nothing has changed where we were thinking the end of last year, a slightly better year for global growth, at 3.9%. that is versus 3.7% last year. we thought was exports, with so many acts -- temporary factors driving it up, they are feeding this year. there is a lag for the driving commodity prices. cycles are not as supportive for this year. even with the global growth being better for its supercharged -- a supercharged economy, we get the hide e --

high end for u.s. growth. you can, finally, after one of the longest periods of expansion, you can get a downturn later, but that is probably not until 2020. yvonne: the chinese seem to be changing their tone. they said, it will not be easy to maintain these growth targets, given the geopolitical tensions we are seeing. what do you make of this change in tone? david: it is one to watch for. least partially replacing temporary measures in place to provide liquidity to the financial system. i do not think they're looking to completely eliminate systemic risk, but they still need to achieve targets through 2020.

there is no doubt they will do whatever it takes to get that. beyond 2020, you will see a lot less emphasis. we could be trending at 5.5% or lower on growth. in the meantime, they will do whatever it takes to keep growth. yvonne: it is interesting, all these buzzwords like deleveraging were taken out. they were talking about boosting domestic demand. doesdoes it -- deleveraging go to the back burner and focus is on consumption? david: you get that continued shift away from excessively leveraged industries being able to leverage of more to generate more gdp. there is a long way to go on restructuring larger soe's that have major challenges ahead of them. they have a real balancing act on their hands. i do not think they want to read leverage up aggressively. they managed to keep corporate debt relatively flat, which is a

major achievement. what we are worried about this being done and limits on the amount and price of credit, that clearly must be having a painful impact already. therefore, they may react to that. yvonne: you can't really help stimulus, but you think tax cuts are in the picture? david: i would not rule out more rrr cuts. efforts,ay piecemeal rather than aggressive re-leveraging up. we have seen enough credit growth from the last few years, momentum, to drive up investments. surprise could be from the private investment side, rather than the infrastructure investment, which has been strong. yvonne: david, great to have you here in hong kong. let's do a quick check of the

latest business flash headlines. new environmental standards in indonesia would make it impossible to continue its flagship gold and copper mine. they say they were blindsided by quote, disappointing and shocking claims from the environmental minister. they said the dumping arrangement was agreed with the government in the 1990's. betty: coca-cola pushed into a range of new products, but most growth came from old-school carbonated drinks. diet coke saw growth in the north american market for the first time since the end of 2010. diet coke remaining the number three carbonated soft drink in the u.s. volume fell last year more than 4%. yvonne: london-listed biotech company shire prepared to accept a new offer from takeda after they revised the bid a fourth time. shire closed more than 4% higher.

takeda has a few experimental drugs of its own, acquiring shire could propel it to the ranks of a top pharmaceutical company. earnings we will talk about. this is bloomberg. ♪ this is bloomberg. ♪ 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: 7:30 a.m. wednesday in hong kong. we are looking at the financial district in central this morning. 30 minutes away from asia's first major market open. betty: almost looks like a videogame. those cars moving and the bright colors. seven: 30 p.m. tuesday, kind of dreary here in new york. markets closed to dreary as well, deep in the red for all three indexes as we saw that tech selloff. i am betty liu in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." >>

mnuchin is to head to china and the next few days to begin direct talks on trade. president trump says he thinks there is a good chance of making a deal, that tariffs will take effect on a good amount of goods. he will be the first treasury secretary to meet his counterparts in japan and europe. president trump radically changed his tune on north korea, just months after deriding kim jong-un as "little rocket man" he is now calling him honorable. a dramatic turn for the u.s., which has long condemned the kim dynasty for human rights violations. pres. trump: very simple, they get rid of their nukes. it would be easy for me to make a simple deal and claim victory. i do not want that, i want them to get rid of their nukes. >> japanese prosecutors reported

to have launched an inspection of the scandal at kobe steel. they subpoenaed documents related to years of fake quality reports. investigators have agreed to work with the tokyo metropolitan police department on a joint inquiry. spotify is targeting youtube with a new mobile version of its free music service. users will be able to access much of spotify, including some playlists on demand. and hopesg rolled out to persuade its 1.5 billion monthly users to upgrade. mium" approache hopes people will pay for add-ons. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. ♪ you.e: jessica, thank

we are counting down to the open . australia, new zealand and vietnam offline today. spooked bye getting bond markets, only sing 3% on the 10 year. the guidance is not very good. sophie: the devil in the details. in asia, our own batch of details. i will show you the companies we are keeping an eye on. lg display showed a surprise first-quarter loss and a slowdown in sales. it may have hurt their first-quarter profit. for japan we are waiting on cannon and a semiconductor player. it will be one to watch. in the health care space, a farmer company beat estimates and remain -- retains its operating outlook. takeda pharma on the radar. they're revised proposal is

equivalent to $64 billion. shire has agreed to extend the offer with takeda to may 8. --anese machinery players caterpillar said the first quarter is as good as they get. they said they are hampering earnings growth. one said it is an appropriate amount of conservativism. yvonne: we are certainly seeing that margin pressure. taking center stage again after we hear news of a pod -- a possible new iran deal. buying into this better, optimistic picture. sophie: more excitement and opportunities for south korean companies. but, not popping the champagne just yet. he is gradually -- it is down

6% years ago. he says it is all positive, but still early days. all talk at this point and nothing put in place. a lot of it has to do with samsung and the global outlook for the tech sector. samsung shares have fallen, down 17%. chipmakers overall have suffered among these looming concerns for the space. samsung posted results thursday. bloomberg intelligence expects a slowdown in operating profit growth. betty: thank you, sophie kamaruddin. let's take a deeper dive at the landmark for the global bond market. the 10 year treasury yield hitting 3% for the first time in four years. kathleen hays here with more. the 3% been watching level, but it has only been

recently we have been hearing about it more and more in the markets. now we hit this level, now what? kathleen: one of the reasons we are hearing more about it is because of the stock market. they think about dividend yields, they look at bond yields and say, maybe this will put the brakes on stocks. we saw that in trading in the u.s. and the latest 24 hours. as we get three-year -- 3% bond yields, the deepest, most liquid in the world, why? fed rate hikes, three, maybe four this year. -- wall street, maybe five. donald trump, tax cuts, spending, how do you finance it? you sell a lot more treasury bonds. index,th the crb commodities raking out. the fed is a shrinking its balance sheet.

all those help drive the drop in price, raising yield. another gtv chart you can take a look at. it touched a 3% landmark. you can see the trend line broken well above it. this could keep going. in your mind, draw a red line down. what is the impact of rising yields? why do we care? rising mortgages, increased housing costs, costs for small businesses. the dollar could hit exports. competition for stocks, as i just mentioned. but, it is good for savers. finally you can buy bonds and earn income. jpmorgan saying by the end of the year, the yield will only be a 1.5%. 3.25%. says

still, a little more to go. yvonne: i think jeffrey gund och echoed that. what is the impact globally? kathleen: we have already seen indonesia coming in to support its currency. we know emerging markets are vulnerable. a weaker currency can hurt exports, but what about capital outflows? ecb meets thursday and are expected to signal, yes, more pullback on bond purchases. at the same time, plunging german business confidence. sentiment in spain and france also looking weaker. with the yields rising in the u.s., maybe messing up yields around the world. ecb, a little more hesitant.

when you have yield curve control and a policy to keep that in place, you do not have to worry so much about this. it is interesting, as the boj thisready to meet write a, may attract bond purchasing, a gb later today is expected to go well. yvonne: thank you, kathleen hays, counting down to that ecb and boj meeting. semiconductorhe industry breathe a sigh of relief after texas instruments reported first-quarter earnings and guidance. biggest maker of chips found in pretty much every electronic device. let's bring in ramy inocencio. what is there around us that does not have a semiconductor chip? that is what texas instruments is banking on here. especially with earnings and revenue, the top estimates on

both sides. not just that. it was not just the first quarter numbers, it was also the second-quarter guidance, net income, $1.39 per share, beating the estimate of $1.22. billion, and the estimate was for $3.9 billion. hop into the first bloomberg terminal chart that i have. i want to show you revenue growth. the white line is the stock price. we can see revenue growth as a percentage here. when this filled in, we are expecting 6% growth. you're probably thinking that takes us around here, low, relative to the rest. you are right. especially with of the concerns of last week, the knock on effect from that apple iphone x's, this is better than expected. let's go to my next bloomberg terminal chart.

earnings per share versus the share price. we see the range guiding upwards of $1.39 a share. the estimate was $1.22. if it is $1.39, it would be the highest on the screen. we have to measure profitability. every investor is concerned about that. the concern, not existent. 8% for the profit margin. this is the fourth highest, as you can see here. -- very good good numbers for the top and bottom line for both revenue, earnings per share. not just for the first quarter, but the second quarter. betty: we saw that reaction, shares jumping 4%. tell less more about the reasons behind this. ramy: the concern was first about the things we hold in our hands, the smart phones with semiconductors.

we have to remember, it is not just the smartphones, it is industrials. our cars, our automobiles get smarter, those semiconductors will go in there. they already are. that is why we are seeing a flip. we see a decline in phones, and a rise in terms of automobiles and industrials. especially with texas instruments being one of the biggest providers to the automotive industry. not just that. hop back into the bloomberg terminal. i want to show you this. semiconductor stocks have attended to rebound when valuations get as low as they 2016, 2018y did in here and right now. as it goes higher, it has passed its president -- precedent. betty: wynn resorts falling in late trade.

investigation,er as you know, by gaming regulators, about the actions of steve wynn, and the board handling of allegations against him. chris to bring in our palmeri. what stands out in this earnings report? chris: pretty strong earnings beat. it was light, in their original casino in macau. the casino dragging the stock back a bit. chris, we have been talking about everyone looking for to this conference call from the new ceo. he is already talking about, their spending is not sustainable, they will downgrade projects. is this a new wynn, a new regime? that is what he is trying to communicate, changes that the

board, parental leave benefits. the big news today, this is his first conference call since taking over in february. he is downsizing a lot of projects, particularly in las vegas, where they were planning a $3 billion resort. inmay not have a hotel, might be more of a beach environment for high rollers. he is rethinking a lot of what his predecessor did. yvonne: what about from a cow? cua --t about from ma macau? as the newing hainan gambling hub. chris: they asked his long-term strategy. clear china is the focus. he plans to refresh the original property in macau.

he said non-gambling is a big focus for them and he also which is onapan, its way to legalizing casinos, they spend a lot of time traveling to japan. he said he sees himself in the game there. yvonne: now that we have moved past the scandal with steve wynn, how has the resignation affected the company? recent data said the job applicants were as high as ever. bookings were up in las vegas, where you would potentially see the most impact of these allegations against the former chairman. from a business standpoint, they do not seem to be hurt. the question is, what regulators find. there will be another review on steve when's license. we will probably hear a lot more.

the damage could potentially be a negative report comes out. this stuffard knew was going on and did nothing. yvonne: chris palmeri, thank you, to break down the wynn earnings for us. certainly a big one for wynn macau. a drive to impress the world's largest car market,. this is bloomberg. ♪ his is bloomberg. ♪

♪ we are counting down to asia's first major market opens this morning. japanese futures looking like -- following the huge declines we saw in the u.s. nikkei futures down 0.7%. kind of gloomy over in tokyo. this is "daybreak asia." i am betty liu in new york.

yvonne: i am yvonne man. global carmakers have converged on beijing. the beijing auto show opens wednesday. we got tom mackenzie there for us the next couple days. tom, good to see you. seems the beijing auto show is more focused this year. china opening up the auto sector. how do you read the mood music so far? from the executives we have been speaking to in the lead up to this event, they have been underlining this is not only the largest car market, this is the car show they focus on every year. this is by far the number one event for them. and for the reasons it is of interest. it does throw up interesting challenges. sector,ication, the ev

how much china is spending on ramping up electric vehicle production. onhave 174 electric vehicles display today, 124 our local brands. of course, the changes china has around foreign ownership. foreign car companies will be able to take majority ownership by 2022. vehicleare electrical -- electric vehicle makers, by the end of this year. go into gtv. 2018.p that chart from from 2016. 24.1 millionw vehicle sales. volkswagen taking up the biggest share. 15% market share for vw. honda and vw.

sedan demand starting to slow, but suv's pretty strong. it is a difficult environment to navigate. what will be interesting is hearing from these executives over the next day or two how they readjusted their plans and focus not just on the domestic market, but the global market as well. spoke to the new volkswagen ceo and how he is retooling the company. he will take advantage of the changing market. how is the -- how is he retooling the company? he is saying what they will do, particularly in china, ramp up the spending. $18 billion they will be spending, particularly on a lecture vacation, autonomous and wireless technology. that is a key focus for him.

as he refocuses to ramp up this for electrification. take a listen. >> we are well set up in china, we have a long-lasting relationship with our partners, over 30 years and now -- 30 years now. >> you would not rule out selling a fully owned operation? we build our own vehicles, we are investing in mobility, investing in startups here. for the main production [indiscernible] which sectors and china provide the best of growth opportunities for dw -- vw? >> electric cars.

china is investing heavily in electrification. there is a lot of pollution in the city. the chinese government is very committed to electric cars. they are investing heavily in battery production. [indiscernible] what would you say your three key priorities for restructuring as a global business? see unprecedented change in our industry. the question is really to be fast and pioneer and adopt one of the areas. the key is to acquire new skills. and it directed dealing with at the customers, which we have not been able to over the decades.

to build up those capabilities are most important. tom: are you starting to see material impact from trade tensions on your business? >> we are concerned because automotive is about heavy investment. you cannot invest in every market. we need low trade barriers. for us, it is a concern. in china, we have high volumes. concernt so much of a for the volkswagen brand. higher tariffs would be a concern. vw saying they expect to grow faster than the overall market in 2018 in china. facingpany is also continuing investigations both in germany and the u.s. over the emissions scandal, that continues to overshadow vw to some degree, but they are

optimistic about opportunities in china. betty: thank you so much, tom mackenzie. tom will have big interviews throughout the day from the beijing auto show. up next, hakkan samuelsson joining us live in the next hour of "daybreak asia." and later in bloomberg markets, we talked to the ceo of a chinese electric car startup, neo. stay tuned for all that. this is bloomberg. ♪ this is bloomberg. ♪

♪ ."onne: this is "daybreak asia betty: much more ahead in the next hour. in just a moment we will be live from the beijing auto show to speak with hakkan samuelsson. yvonne: looking for to that, and thoughts on hour,

the u.s. 10 year yields reaching 3%. can we hold to those levels or break above that? more from him in a moment. this is bloomberg. ♪ this is bloomberg. ♪

yvonne: it a.m. in hong kong, i'm yvonne man. welcome to daybreak asia. set to fall.stocks industrial zantac under pressure. the 10 year yield reached 3%. the biggest to climb into two weeks and bellwether caterpillar fell as it described the high watermark. globalbloomberg's headquarters, i'm betty liu after 8 p.m. on this tuesday. steve mnuchin prepares to head to china to begin direct negotiations. tonected cars and elect drivers with luxury crossovers, we will be live at the beijing auto show.

yvonne: and we've been hearing as good as it gets, does that hold true when it comes to economic growth or earnings growth? , when it of these comes to chips. this sigh of relief. state media saying that it looks they may are concerned not be able to meet their growth targets given the geopolitical uncertainty. it just will boost the economy and boost the consumer demand.

>> all in an effort to protect against whatsoever so far as a stock market route that teams limited to the u.s. and we have certainly been here before, yvonne. it has echoes of what we saw back in 2008 and even 2000. let's get to the first word news with paul allen. paul: treasury secretary steve mnuchin heading to china to begin direct talks on trade. and these chinese counterparts, at g20 gatherings in europe. has radicallyp changed his tune on north korea just months after deriding kim jong-un. he also says they hope they meet

very soon. such praises a dramatic u-turn for the u.s.. despite the warmer tone, the president still had a song -- strong message. president trump: i want them to get rid of their nukes. interest and the available shares on april 13, it is up from 25% two weeks earlier. it could be a signal to contrarian investors that the worst may be over for stocks. short position data reported on a delayed basis by the nasdaq every two weeks. 5%la has fallen more than since april 13. japanese prosecutors are reported to have launched an inspection of the data scandal adco-based deal. investigators have subpoenaed documents from the company relating to years of fake

quality reports. investigators from the tokyo district public prosecutors thece have agreed to work tokyo metropolitan police department in a joint inquiry. locally 24 hours a day on-air 2700 inred by more than more than 120 countries. i'm paul allen. this is bloomberg. take a look at the regional benchmark right there, seeing the market open pretty soggy so far. we see a as of the decline was on wall street and arrange a factor shaking up the midweek from treasuries to earnings. caterpillar results profit a move in asia machinery makers after they were overshadowed by the company sing the first quarter is as good as it gets. the cost be down by almost 1%. we are seeing a pick up when it comes to u.s. futures and the 10 year treasury yield. the3% mark and we see

dollar below the 109 handle. only steady ahead of that summit on friday. let's check in on shares this afternoon as a company says there is a certainty a firm offer will be made saying it is willing to recommend the revised bid for the japanese company. whichalso seeing moves reported a first-quarter net income and the company maintained operating profit outlook. seoul.to look in lg displayed after it posted a surprise first quarter loss and a slowdown in sales, that stock off by about 1%. that is looking tempered. ahead of the earnings due

thursday. over in japan, we wait for results from tokyo to check on the stock for its peers and the last word, betty, as remy has been pointing out that while there has been a decline into demand for smartphones, there is greater appetite from the auto space as illustrated by texas instruments. after of its revenue last year came from the automotive and industrial space, betty. betty: thank you so much, sophie, on the markets. let's get back to the beijing on her show. welcoming china's decision to lift a two decade policy that cap foreign ownership of joint ventures. that change may energize global players into the world's largest auto market and may persuade chinese companies to seek it does abroad. we want to cross over to tom mackenzie. a huge event you are at. tom: betty, yes, significant topics that we will be grappling with as executives are lining up.

autonomous vehicles and the growth of the market as well. what better to talk to than the ceo who joins me now. but he was talking about the changes around foreign ownership . what kind of impact the you expect to see from these regulatory changes. >> we have the favor of having full control today because we team up with our owners. today, where they'll be wonderfully controls. and consolidated financially, the longer term for the business. i would say that is positive. i think competition will be very .trong the domestic players will be

more competitive. it is where we would be for the business and we would have a high quality product made in china because want to exploit and -- export. and i think it is the wrong with had protect business in the country. especially for the customer. we also can support them. ,e'll produce their cars supporting lincoln and being a global ram. they are probably one of the

most likely brands of being a success. >> what is it looking like in the first quarter and what are your sales looking like at the end of the year? >> continued first quarter is up , 23%. and there is no reason to believe that this year will not be another year of growth. tom: what are margins looking like? that will come back with probability in a couple of days. spending $11 billion. what are the biggest challenges? >> the biggest challenges on courtside.

the conventional courts are getting more and more complicated. we need more battery production capacity. it is something that has to be developed. people to invite invest in those areas. if you look into 2025, we will see that half of that will be pure electric. >> more than investment, capping that at $11 billion. the last one comes this year.

the number will fall down because it is a new investment. tom cole and daimler might be the future investment for volvo. can you confirm those reports? >> it is pure speculation. >> you see that key competitor. >> the tweaks and the possible corporation. it is always the last car on this platform and the midsized one. it may be a brand-new factory.

, itwhen that is released has been done. and especially in the suv area. >> the concerns around trade pensions, where do you think this is now? are you likely to see a material impact? are exporting we a lot of cars to the u.s.. wouldat, of course, jeopardize that if they had trade restrictions.

so half of the 4000 jobs created in the u.s. will be trade to export. we believe that concept has been a good demonstration that free trade is good for us. tom cole and you got a deal with uber to supply them with 24,000 vehicles. you expect to see the ridesharing sector become an increasingly important climate for automakers like volvo? >> absolutely. there the first customer with the potential of settling cars for ridesharing application. short-term mobility, it is half an hour, one hour. ,hat will be done by these guys uber and lift. and we will concentrate on more longer mobility.

that segment, we believe it will continue. and we populate urban areas. and that will grow in the first place. >> and what about the potential ?or ipo the kerry much indeed, the ceo of volvo at the china auto show talking about the growth they are seeing in the chinese market here. .uv's and the investments yvonne: and they talk to the ball the ceo -- volvo ceo. they'llask simon says e about all -- fasdal his thoughts later. betty: and reaction to texas

instruments earnings in just a moment. this is bloomberg. ♪ loomberg. ♪

yvonne: this is daybreak: asia. betty: i'm betty liu in new york. investors in the semiconductor industry breathe a sigh of relief after texas instruments reported first-quarter earnings and second-quarter guidance. found in pretty much every electronic device out there. data and details on this. instruments is the bellwether for semiconductors, the biggest one other that make these things. the demand, according to them, is good. counterpoint what we've been in the second half, they will see a pullback in terms of revenue. also tsmc which applies chips to apple. to the numbers.

it's not just the first-quarter earnings which were good. it's also the guidance higher. you can see on your screen that dollar $.39 aone share and the estimate was $1.22. $3.9 billion there, the top moving a little higher. i want to show you my first terminal chart with revenue growth. here.s in the purple purple bars. you can see the stock price moving with revenue as you would expect. when this fills in for the second quarter, we are expecting a rise in revenue of 6%. you might be thinking, hold on, 6%. what you're as seeing here. this is better than the expectations. in my bloomberg terminal chart and profit margin is what i want to show you. a 65% profit margin, almost a

record here between the fourth quarter and the first quarter. but we will see how this goes. the analyst -- you can see the color on your screen. the buys has been maintaining themselves for the first part. they stand at 13 buys of the yellows hold 19, and there's is 13, 19, and one. with regards to the premium. take a look at the closing price of $98 and change. the 12 month price target is 120, almost $121. yvonne: the apple suppliers like tsmc, hot high -- hanhei. it looks like a bad omen when it comes to the conductor concerns.

what are the reasons we are seeing ti a bit insulated from all of this. >> you have to look at what is happening with the automotive industry. we don't just have smart loans. we have smart cars as well. so the saying texas instruments supplies 50% of the semiconductors of cars so while we are seeing a fall or a saturation from the smartphone demand, and their they're falling demand for semiconductor chips, we see this ise and the line in my head that we've only just begun which is why we are seeing this jump in terms of the after-hours price of 4%. we look to see how this happens with u.s. trading that the expectation is very positive. betty: just some or breaking news, a big deal. a global deal here in the

pharmaceuticals industry. at tecate over in tokyo dropping the most in's 2013 after those headlines came out a little while ago that sweetened its offer for shire to about $64 billion. seal the deal in pursuit of this global takeover. the company though, because it , taking ag much more hit right now. watch.ainly one to yvonne: moving on to caterpillar, the early rally to plunge an unusual remark and executive during the conference call. it declined after reporting record profit. let's go to su keenan with more on this. they raised the earnings and the forecast. it all kind of takes a turn.

u: to borrow a line, was it something i said? it would cause the turnaround. it but they beat on the top line and on the bottom line. they raised their forecast and you can see the drop off there. take a look at the today intraday chart. side. on the this could be as good as it gets. the design was to rein in expectations. market ticket and said it is not going to get any better. and that decline was rather dramatic. you could see a dropped more than 6%, an amazing turnaround. as japan comes online, what has been the reaction to some of their rivals? let's take a look because they have actually turned lower.

perhaps the concern is that there are some issues with metals with caterpillar expressed. it could be concern for the rivals as well. typically a rivals losses the other companies gain. in terms of how it was perceived here, there was some disappointment in terms of the reasoning of how margins are expected. seen as appropriately conservative seeing that there were issues. they tried to manage expectations and it didn't work. it staff hired -- it backfired. >> let's take a look at what some of the numbers are. up $10.25. they raised the outlook.

potential impacts geopolitical , they have not been included. the intention was not to cause the stock tank. betty: remember, bloomberg users can interact with the charts just showed here using gtd go. browse the charts featured on bloomberg television and catch up on key analysis and save the charts for your future reference. this is bloomberg. ♪ is is bloomberg. ♪

betty: let's get a quick check of the latest business flash headlines at this hour. freeport says environmental standards and indonesia would make it impossible to continue the flagship. by shockingdsided and disappointed claims.

dumpingears it has been into the high-altitude line because the agreement was arranged by the government in the 90's. they decided to build a plant in thailand when it was clear that the u.s. would abandon the partnership. matt levens said he would run have not invested there but it was necessary to act as an important market. it will cut 260 u.s. jobs and closing the plant in missouri. yvonne: can a report in bangladesh still, not doing enough to protect workers in the textile industry. more than 1100 people were killed when a factory collapsed. bangladesh'sess is largest clothing operators to generally comply with safety standards. many do pose life-threatening risks to workers. yvonne: coming up, a shot and arm for the ticket a deal.

it will recommend a $64 billion revised bid but you can of course sweeten their bid there. we have the details from tokyo next. this is bloomberg. ♪

yvonne: betty: good morning out of singapore, 830 right now and the lion city. half an hour away from the open of trading. i'm yvonne man in hong kong. , let'sty liu in new york get to daybreak asia. at first word news with paul allen. paul: francis proposing negotiations on a new deal with iran in a bid to keep the u.s. on board. president macron says a new agreement should blocked iran's nuclear activity through 2025 and and the ballistic missile program. he also says they will contain a broader influence in the middle east. president trump abandon the current deal next month. iran says it will almost

certainly walk away if that happens. >> the united states has not lived up to it side of the bargain. and its commitment to lift certain sanctions, not to impede economic relations between iran and its economic partners. it has done all of that. it has threatened companies from engaging with iran. last year's tax overhaul gave verizon enough of the windfall to buy yahoo!. assaves the carrier is much $4 billion, slightly below the $4.5 billion that paid for yahoo! in june. almost all its revenue comes from the u.s.. it expected pay an effective rate of his little as 24% this year, down from about 35%. the maker of a jet engine that blew up last week was about to recommend inspections, including

the turbine that field -- failed. they urged carriers to check older fan blades but a draft circulated could of expended that risk to include the engine on the fatal flight. inspections show it had a metal fatigue. spotify is targeting youtube with a mobile version of the free music service. users can access much of spotify's paid service including some playlists on demand. rolled out ahead of youtube's new subscription service and doves to persuade the 1.5 billion monthly users to upgrade. spotify's premium approach as a no-cost offer. powered by 2700 journalists in over 120 countries. on paul allen. this is bloomberg. yvonne: this is how asian

markets are shaping up so far today. sophie: holding steady below 109 and deepening some of the 10 to see thet is hard dollar-yen past 19 from here. we take a look at the broad moves and there could be some tailwind for the region including china policy and we will see how it plays out when china comes on board at the bottom of the hour. u.s. futures are pointing higher after that. the 10 year yield hovers around 3%, given the tug-of-war. recovery after hitting a after macron and proposed negotiating a new deal with iran. 7% this surged over month over geopolitical risk in the middle east. , they fellck mover over 9%. this on this revised deal to buy shire.

takeda has lost nearly 33% since hitting the years peak in january of this year. it is now trading at a november 2016 low. >> let's get more on the pursuit of shire as sophie just mentioned. the acquisition and the pursuit of shire, this big global deal in the pharmaceutical industry. stocks tanking on this. what is in it for takeda. >> like many other japanese countries, it faces a shrinking domestic market with the population on decline. the experimental drugs and late by acquiring shire, it obviously brings out a huge growth potential for them.

the latest offer being considered is the fifth it has made. we'll tell you how much or how important the cato sees this deal for his future. >> we see a 60% premium. investors are a bit concerned right now, but are we getting closer that we could reach a deal? >> the indication is that this is likely to come to an end, making it the biggest takeover by a japanese company ever. is recommending it. >> what does this mean for other japanese companies? will we see more outbound deals

from japan like we are seeing from to cato? >> output from japan has been steadily increasing. we have also seen megadeals come through last year. this year, certainly there's been a lot of interest. we go back and sort of stem to the fundamental problem of a shrinking domestic market. makers have repeatedly said that japanese companies interest in foreign assets, especially those in the tech sector is likely to remain strong. there is likely big japanese names from hitachi saying that they are very active in considering. there is a bigger foe those sitting japanese companies.

the tokyo bureau chief on to cato. predicting the yield for months now and other we've rounded up the number, is it so important? , drivers ofhigher this selloff. similar moves next year.

you keep yields low the long that ishe short end? how we will pay for donald trump stimulus. more bonds being sold and also makes yields potentially rise higher. continually shrinking, this is on the list. let's look at a really cool chart. , it puts what is happening right now into a decades long perspective. does this show us it is over? look at the trend going back to about 1985. the yield is risen above pretty smartly.

briefly hitting 3% in trading in the u.s., now just under that level. what does it mean? look at the domestic economy. they are already moving considerably higher in the u.s.. can make a difference. stronger dollar, we've seen that. bond yields look pretty good. .t is good it you can make some money on it. falling stocks put a lid on this. move to 3.2 5%. it is definitely the higher yield. >> what is the global impact of this rise? we have already seen it in indonesia and emerging markets looking into currencies. if the dollar keeps rising, then

indonesia has already stepped into crop up its currency. it could mean better exports. garde against if this trend continues. seeing theiday, yield moving higher betty. betty: the olive for story of treasury yields. the bloomberg's reporter is here with the preview.

>> and how bad the company is, forcing the company to sell $13 billion in assets. no one knows how bad of a been facing, it is more from the annual report. >> we want to know all kind of those related figures. label ishat cash unable to cover that. week.really

wonder if theto ratio is for the deteriorating, the second one is about the interest expanse. pay most of the interest. of asian financial companies, so we want to know what do they still need to pay. this ratio is kind of worse. >> the bond is rally now. we have these. many of them have $7 billion, but they want to sell. office buildings in london and in new york, it's enough to cover that issue.

that, they may need to sell more to address the government policy. >> thank you. our conglomerates there. higher treasury yields are a sign of underlying economic strength. the head of fixed income joins us in just a moment. this is bloomberg. ♪

yvonne: this is daybreak asia. i'm yvonne man in hong kong. betty: i betty liu in new york. the 10 year treasury yield marching above 3%. people asking if the market and bonds are finally over. a bloomberg spoke exquisitely

with walter bettinger. about how investors would react when they see losses in their bond funds or etf's. >> it remains to be seen how far interest rates go up and how fast they go up. that will dictate the extent of the losses. >> they will lose money. they will lose money. it >> in mutual funds they will. if they are holding individual bonds, they can hold that bond to maturity and get their principal back but in fairness, people don't talk about the yield they will earn in the meantime is less than what market yields would be on new bonds. is a concern and we try to do a lot of education. what a commune in a rising rate environment. is the thought that i will get out before it happens. that won't work. it is something we hear from some investors. that is not a strategy for success. >> do you think we will see a stampede of fixed income whether

it is charles schwab or elsewhere? the patients on rich rates go up and how far they go. if the e-gov as they sort of our now, i don't know you will see it. if you see rates jumped 300 basis points in the course of 90 days, you will have a bit of panic among some investors. yvonne: bikinis lucidly with wall -- charles robb ceo walter bettinger. exclusively with charles schwab ceo walter bettinger. now that we have hit that 3%, the pace in which we get there, can we hold these levels right now? are definitely concerns and there is a reason to have those concerns about the present levels. but i think the point here is that element of surprise that we saw here is missing. this is the most announced

.nvironment going up in a short time. >> it's more about inflation expectations. and what was seen geopolitics, this is what we see that gives us certainty about where to go next. >> where we see it now is fueled definitely buy a positive reason and higher global growth. that is the main reason. and the expectation to higher inflation. higher oil price and definitely the fed who is rattling with a bit more rate hikes down the line. here, themportantly, major reason is that the fear is

mostly on emerging markets and the bonds so the fear is that we will see a major selloff. >> this is how much we were affecting the currency market? >> and all off selloff is staggering. it is a much stronger dollar. we're not there yet. as being see that fear the big reason. speaking of fear, looking at the gtb chart, not so long ago, we were really fearing the flattening yield curve. showing the spread between the two and the 10 year the five and the 30 year. i kind of don't get it.

one minute we are worried about 3% yields and the next we're worried about flattening yield curve. is this over now? >> the very flat u.s. yield curve, it is a symptom that the market has been in balance for one or two years. i also think it shows us the market should have known that the 10 year yield at some point could move and also couldn't move quite fast. ist i'm saying is that it announced that we will see higher tenure yields of inflation continued the path. it is simply an imbalance between the two-year and 10 year yield. we're not above knowing the outcome of this. and the 10 year u.s. yield at 3%

and above. on a much stronger note that in 13 and 14. on the other hand, i could be a bit concerned about the size of the bond market. we the shrinking marketplace have trade these bonds in. biased. is still more everything will be ok despite that we see more volatility. a bit higher yield. >> what you think about china? it is almost a haven to government bonds and we have a gtb chart here that shows the china 10 year yield premium over treasuries. we have seen that roloff quite a bit here. ofis almost a mirror images what we are seeing in the corporate debt market in china and what we're seeing in the u.s.. are there still moves we have seen last week? >> at think we have seen quite

good performance. and i will say and the long-term, yes, the chinese market is there to stay and definitely will become even more popular. and also as we see it opening up towards global investors very soon. in the meantime, we could expect more volatility. but keep in mind that i also see the chinese bond market is more like safe haven assets. in that context, the bonds will investorsed also by abroad. yvonne: head of fixed income trading, joining us here in hong kong. , featured on bloomberg television are catch up on some of the key analysis. you can also save charts for future reference as well,

getting ready for your morning meeting. this is bloomberg. ♪

betty: a quick check of the latest business flash headlines at this hour. the world's top lawmakers are at beijing auto show, the first event china decided to lift years of restrictions on foreign ownership's. about $11 to spend billion on electric vehicles. but the infrastructure needed to

handle such cars still needs to improve. says chinese automakers will become more competitive. it will be more competitive this they are not protected. that is the bad news maybe for the outlets, but i think i see it being business is good. we need to have a high quality property made -- product made in china. and i think it is the wrong way to try to protect the business in the coming months. volkswagen shifting into overdrive, bolstered by spending on the chinese joint ventures. it seeks an edge and electric self driving autos. about $18 billion on tech investments in china over the next five years. which would be 44% more than its domestic battery powered car program. sayseijing on a show, dice changes happening ever faster. >> we are well off in china.

the venture partners over 30 years now, and our successes the success of those properties. don't plan any change of ownership. betty: and a mercedes-benz is considering extending the ultraluxury model with a crossover to take on high-end rivals such as bentley. a concept model at the beijing auto show included white leather lie flat seats with massage and aromatherapy functions. wow. and a built-in service, mercedes says it is a totally new archetype. rolls-royce and for re have also added suvs to their lineup. errari have also added suvs to their lineup. yvonne: let's take a look at what is coming up over the next hour on bloomberg television. let's get to rish. ishaad: it is a concept car, so

unlikely that they will ever make it. yvonne: a little bit of aromatherapy and a little bit of tea. [laughter] rish: we have asset management ceo rich patel happening very shortly with some thoughts about what is going on. she will be joining us at about five minutes or 10 minutes time from now. and behind the hong kong dollar peg, john green will be joining us in just over an hour as well. and beijing car show. warren gaveted electric startups in china $1 billion, raise for competitors. $.10 am atheir led by surprise. betty? betty: a lot happening on your show. this is bloomberg. stand by for bloomberg markets. ♪ welcome to the xfinity store.

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♪ markets asia-pacific ,liding, tech and industrials the 10 year yield hitting 3%. global construction stocks april weather for global growth. indicating weakness ahead. one tumbling the most in five years. a sale at $64 billion. in hong kong, i am rishaad salamat. >> i am live at the china auto show. we will be speaking to the ceos of