>> welcome to daybreak australia. shery: i am shery ahn in new york. we are counting down to asia's major market open. haidi: here are the top stories we are covering. banking on change. australia's lenders brace for impact as he will commission dishes is report on financial misconduct. is optimisticp deals will be done with china and north korea. he will meet with xi jinping at the end of the month. says forcete house remains an option in venezuela.

confidence a transition of power is underway. shery: let's get a quick check of the markets close. a mixed picture as we saw the s&p 500 barely gaining but the nasdaq losing .25%. disappointment forecast really weighing on the industry. at the same time we got a strong u.s. jobs report, not to mention some progress on u.s. china trade talks which lifted sentiment. the dow gaining .25%. energy companies were the best performers on the s&p 500. seeabove $55 a barrel as we concerns in venezuela not to mention a slowdown in u.s. drilling as well as a more optimistic outlook for demand when it comes to economic growth locally. let's see how we are looking at the asian session. haidi: we're setting up for a quiet week things to the start of the lunar new year holiday. hong kong, taiwan, singapore

among others will be closed for much of the week. in the early part of the trading session we are some downside when it comes to trading in new zealand. the kiwi dollar, a crucial week. the aussie and kiwi dollar were battling out for the worst performer in the g10 group. both of them rallied to 3% so far this year. rba to be waiting on the see if we get a hawkish comment after the fed turned a dovish as well as new zealand labor market down. sydney futures setting up for a modest gain of about 3/10 of 1%. let's get you the first word news now. su: president trump is reportedly ready to meet his chinese counterpart xi jinping in vietnam at the end of the month. days of talk two

on the 27th and 28th. the idea was floated when chinese trade delegates were in washington last week. the president said at the time the progress is being made but no final deal would happen until he met xi. brexit is seen as one reason why nissan will not make the new suv in the u.k. the company says it is a business decision that uncertainty about britain's relationship with the eu makes it hard for companies to plan. it follows news the u.k. auto industry has seen investment almost halve in the past year. huawei has pledged never to do any harm as it faces widening accusations of espionage. said theny's chairman company would never intentionally hurt a country, an organization, or an individual. the u.s. wants its allies to stop using huawei equipment and the company's cfo remains in

vancouver. flooding has worsened after authorities were forced to release water from a dam that has swelled to 250% capacity. 500 homes are underwater with levels not expected to start subsiding until late monday. has dumpedng monsoon one week of heavy rain across the area. airports and schools remain closed. global news 24 hours a day on air and on tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. australia's inquiry into banking misconduct comes to a head monday when the commission finally reveals its findings in a final report. the industry is bracing for a long list of measures to atone for years of wrongdoing and

scandal. editoret to our managing on the ground waiting for this report to be delivered. it is a day of reckoning after many aunts -- many months. what are we expecting? ed: good morning. byare very much being guided what we learned from the interim report that was released in september. a pretty good indication of what the commissioner is thinking. we may see a shakeup of industry structure, particularly that one-stop shop approach, everything from banking services to advise and wealth management. they said that poses too much potential for conflict of interest. he is also likely to look at lending standards. banks, structure of the where staff were likely to put their own targets and bonuses

ahead of customer needs was something that he particularly picked up on on the interim report. look at any will indication of recommendations of civil or criminal charges for the misconduct that was unearthed during that year-long inquiry. shery: of course the government has had his reports in slate let's week --since late last week. so what are we expecting? the government has had this report since late friday afternoon, so it has been a very busy weekend wading throgugh 1000 pages of -- wading through 1000 pages of recommendations. response to this will be guided by the need to restore community trust, to ensure competition in the banking sector, but it also raised one crucial point of concern, that an overt reaction, that too much of a knee-jerk

response to these recommendations, particularly around lending standards, could cause a credit crunch in australia. could cause the oil to simply dry up. so, that is really going to guide their thinking. interestingly, this report is being released into -- we have elections expected in may in which the main opposition labor party is expected to win. labour has been relentlessly attacking the government for not holding banks to account, and indeed for dismissing the need for this inquiry to take place for long time. treasury secretary has said he intends to adopt all of the report's recommendations. haidi: we know the big banks, the big four account for a quarter of the stock market in australia. what kind of response or

contrition or reaction are we expecting from the lenders? edward: banks have already got ahead of this report. they have started to exit their wealth management units. some of them have shaken up executive pay and renumeration. and some have even cut fees as well. what is interesting as i think the banks are very much aware that the court of public opinion is against them on this. -- and theentary commentary from the head of the australian banking association in september when the interim report was released was very, very interesting. she said it was a day of shame for the banks. very unlikely we will see much pushback against the commissioner's recommendations. shery: really appreciate your time, ed. finalg a release from the

report into financial and banking industry misconduct. we expect that report just after 4:00 local time today. still ahead, we take a look at a dividend bonanza coming for aussie investors as companies try to avoid a possible tax overall. shery: next, china's stimulus measures should start to yield results soon. this is bloomberg. ♪

haidi: we're counting down to the monday morning session here in sydney. features looking like mild positivity. up about 3/10 of 1% when cash trading begins. a big day for the aussie lenders, the big four banks as we rate a report into banking and financial industry misconduct due out later this afternoon.

watching for reaction to the share price on tuesday. elsewhere, a big week for central banks. the rba and reserve bank of india, also the bank of england out with its decision. large parts oft, asian markets are closed this week for the lunar new year holiday. i am haidi stroud-watts here in sydney. shery: i'm shery ahn in new york. the week ahead on wall street springs a fresh round of earnings including google on monday and president trump's delayed state of the union speech tuesday, both sure to have an impact on trading. su keenan has more. let's pick up where he left off friday with really another strong number for jobs. su: that believe the market but we also had the negative impact of amazon. let's go to the chart because it is down from 20% from its september high on that disappointing sales outlook, and that clearly put weight on tech,

so you barely saw the major averages eke out a gain. we have google reporting this week. let's quickly go into the market snapshot. what is interesting in the mix is crude. back above $55. i will get into that in a moment. it has a lot to do with bears being pushed out of the market because of optimism. let's go into some of the big earnings we can expect this week. google will be front and center. we have also have google reporting -- twitter reporting later in the week, softbank, disney, general motors will also be in the spotlight. that could clearly drive sentiment, as everyone looks to will be therely view on outlook, there view on trade and other issues. gtv is where you can find our library of charts on the strong jobs number. it has changed the outlook a bit outlook,e did have an

the next move by the fed might be a cut. that has now been reduced. the strong jobs report seems to solidify they would just be patient when they raise. haidi: after we had the shutdown delaying a lot of data, we have more data points ahead this week as well including the latest on trade. on top of the delayed state of the union, is always a speech from president trump is expected to make waves. they will listen closer to the speech so we will get more scrutiny than normal partly because of who trump is and because of the timing. let's look quickly at the issue of the economic data being delayed. we have the goods number from november released. there was a government shutdown so a lot of this data has not come out. there was an expectation that factory data will have increased. we will be getting trade and housing data, so that will

be some of the on the tape headlines the market will be trading on. as for president trump's speech, we know he will focus on immigration, probably say other remarks that could impact construction, that could impact defense, and again, that will be closely followed and clearly drive trading on wednesday. let's take a look also at oil because as i mentioned, there has been a significant shift in sentiment in that the shorts are on the run. data showing a lot of major investors have reduced sure positions. when strategists said we clearly -- we need more bullish information. shiftingcuts clearly the balance between the bulls and the bears, as well as the economic outlook slightly that positive -- net positive. shery: for a closer look at

where things stand let's bring in franklin templeton portfolio manager. he helps manage $2.5 billion included templeton global growth fund. thank you so much for joining us. we know even your funds had a very challenging year. i wonder if 2019 offers more opportunities with the fed's change in tone. peter: i think the key thing for -- in in 201 we saw's8 i 2018, it was a challenging year for markets. markets came down. that leaves the valuations of many stocks looking interesting to us. outside the u.s. you have any major markets trading on 11, 12 times earnings. if we see some inflection and economic growth, than people can have more confidence in earnings. at that point you have valuations of stocks look pretty interesting to us. there have been some

earnings disappointments blamed on the stronger dollar. now with the fed signaling a pause, does this mean the so called dollar vortex will not be an issue in 2019? peter: clearly for u.s. companies reporting in u.s. dollars, the strength of the u.s. dollar has put a headwind into reports in u.s. dollar terms. we have seen some disappointing earnings through the season so far but overall we are coming through with solid earnings growth in the u.s. by a broad range of companies. the tailwind of a significant tax cut. in the season for companies outside the u.s., but so far you will see headline misses here and there but overall we are encouraged by the earnings picture we are seeing. i think for markets outside the u.s., most notably the emerging markets, if we see less dollar strength, and clearly the fed being on pause for a period or

not hiking four times like did it in 2018, that will flatten out the trajectory of the dollar. that has to be a positive for many of the emerging-market economies, stocks. tailwind.k dollar i'm glad you brought up emerging markets because i want to bring up this chart which shows in addition to the rally in e.m. assets you are also seeing a drop in volatility which is in a contrast of the past couple years where feels like e.m. bore the brunt of the worries which in the last few months have been plaguing developed markets. this is a chart take a look at how emerging-market volatility is at the lowest versus developed markets since at least 2013, possibly beyond that. do you expect that low level of volatility to continue? we do get some resolution on the trade front. you can see e.m.'s skyrocketing for the rest of the year. volatility, i think

you have to look at it in absolute context as well as the rebel -- relativity between developed and emerging. a emerging we have seen number of significant headwinds whether it be the trade war, whether it be the rising dollar, lately in 2018 we saw whether it be the government shutdown in the u.s., whether it be broadening of economic uncertainties and political issues. so, we are seeing a pickup in some developed market volatility's, but that was from a very low level. at the start of 2018 you are seeing all-time lows in volatility. i think you'll see a normalization of volatility, probably q4 was a high point, that was an extreme marketing environment for various reasons and whichever way you cut it. i think some normalization of volatility. 2018 was an, early unusually low period of

volatility. we should not expect to go back to those levels. we are seeing central banks unwind some extraordinary monetary support for the market. we have not had this level of central bank support before. so, as that unwinds there has to be some uncertainty, and that speaks to how markets and spreads will deal with it. unwinding looking more of a sanguine situation for the markets? is a lot of talk about whether what we're seeing is a power put on the markets. here in australia parsing about a 50% chance from the rba will actually be a cut rather than a hike. is market arrest already in terms of investment returns pricing in much more dovishness from major central banks? peter: i think what you have seen over the last six weeks or so, and clearly the fed will be the most important central bank around the world, it really has

been a bit of a 180 from communications. six or eight weeks ago it was very much about balance sheets running off. we already had a runoff of about half $1 trillion in the u.s. that is a change in that function and clearly we are seeing more dovishness, a more neutral element to the fed's announcement. it does mean something to markets. but if you look at payroll announcements, they still show you is economy is growing strongly, wages are increasing. withertainly in the u.s. payroll strong, as your charts, showed a few minutes ago, pricing in a cut felt really aggressive. how many more rate increases we will get in the u.s.? do we pause for six months or a bit longer? it is really uncertain. the outlook for australia is a little more challenging. clearly getting some soft signs, particularly in the housing

market. then we have the banking royal commission report, which for a very household leveraged system, their financial how that feeds into housing will be critical. that is potentially leaving the outlook for the rba more uncertain, even know the economy here has also been relatively resilient over the years. shery: over in china the pboc really has not moved at all in the past few years when it comes to the broader interest rate cuts. as this chart on the bloomberg shows, the pboc as compared to the fed or ecb has only moved on key rates since 2016. how much of the policy tightening we have seen in the pboc before the recent loosening has played into the economic slowdown there, and how much has it been because of the trade tensions with the u.s.? i think if you look at the shadow financing within the

chinese system, there really has been an effort with the last year or more to tighten up, to bring more of the financing of consumers back into the main banking system, where obviously the pboc has much more oversight. so, i think it is less about interest rates in china. it is more about how much of the financing happens outside the formal banking sector. and clearly as that has tightened, that has been a significant contributor to the slowdown in china, i think far more so than the trade wars that we have seen so far. ultimately so far trade has been more about knocked confidence to spending intentions. clearly seen the first couple round of tariff increases in the u.s. and responses from china, but so far with inventory stocking up ahead of those, that has not been a massive negative for the chinese economy. it has been much more about the cut to shadow financing. the pboc has cut the reserve ratio requirement somewhat.

and we are starting to see some fiscal stimulus in china as well. we have cut income tax, increased about the ability -- deductibility. so yes, the other economies, with the exception of the u.s., china has not changed interest rates so much but they have been 18 hashe last -- over 20 been enacting other forms of stimulus. no doubt 2018 was a weak period for china's economic growth. shery: thank you so much for your time today, peter. you can get a roundup of the stories you to know to get your day going in today's edition of daybreak. user terminals or on mobile in the bloomberg anywhere at. you can customize your settings so you only get the news on the industries and assets that you care about. this is bloomberg. ♪ t. this is bloomberg. ♪

haidi: let's get a quick check

of the latest business flash headlines. top apple supplier foxconn says it will go ahead with a new factory in wisconsin after talks between the chairman and president trump. the announcement is a reversal of last week's news foxconn was ready to abandon a project with the promise to deliver 13,000 new jobs. foxconn secured massive incentives to build the plant. wisconsin's new governor says the deal is quote, lousy. haidi: a group is selling his last plant at a hong kong airport, ending plans for an enormous residential project. the land will be bought for about $500 million u.s. they raised almost $3 billion u.s. to reduce one of china's biggest debt piles. next, china's pledge to the u.s.

sees progress in the latest round of trade talks in purchases of soybeans. we will go live to washington with the details next. this is bloomberg. ♪

>> futures looking like a little bit of again, 0.3% when the cash trading session begins. a lot of great deals in liquidity. a lot of asian markets, including hong kong, taiwan, the others are closed for the lunar new year. >> let's get the first word news with su keenan. su: we start with australian banks.

a wide-ranging inquiry into misconduct. , the royall report commission could propose -- changes to compensation, and even recommend charges against firms and senior executives. president trump says that military force remains an option in venezuela but is confident that a transition of power is underway. he said he was not inclined to negotiate with president nicolas maduro. two other countries recommend juan guaido as the i nterim president. the news says that a meeting

will be held at tokyo's district court. his denialll confirm of all charges related to financial misconduct. of anis now the launch international yacht show. the 300-foot vessel has a price tag of $130 million after the auction failed to attract realistic bids. at the imdb investment bank. global news 24 hours a day on air and on tictoc and on twitter. i am su keenan and this is bloomberg. a little bit of downside

when it comes to ko we trading -- kaylee trading. let's take a closer look at what lies in store for the kiwi and the aussie dollar. we had one of the board members -- the next move is to be up rather than down. a slow and disappointing indicator, economically out of australia. it will be a quiet week for markets across the region. we are looking at no trading in south korea, taiwan, or vietnam today as lunar year celebrations get underway. a shortened date is underway for hong kong, singapore and malaysia and markets.

a look at the aussie and the kiwi dollars. it is a very different story in 2019. >> huge turnaround. dollarscular, in the case, it is strange because the turnaround has come at the same time as rates traders have become more bearish on the rba. dollarld say the aussie and others doubt this rate cut. we will get more on that tomorrow when the rba meets. one of the things going on with the aussie and kiwi is both of these currencies have central banks seen as potentially dovish, even if where they are would tend toward the hawkish side. you can see it dramatically dropped at the end of last year.

what the swap premium tells us thatere isn't a perception australian rates will move down, relative to kiwi rates. why has the dollar dropped so far? shery: gold seems to be back in focus. ther years of being on sidelines, gold producers are in the limelight again. >> gold in the limelight and gold producers with it. the turnaround in the price of gold is a big part of the story. that is part of what went around in the background to make this big merger deal late last year. the turnaround in gold has been driven by the turnaround. the dollar is no longer acting as a haven.

that is transformed the picture for gold producers. we've seen how gold producers have taken off. that is potentially good for australian new crest mining. that is one of the companies that have been subject of speculation that they will go with iron, gold, and -- australia gets quite a lot of money from gold exports. that is another part of the picture for australia, gold and other commodities rising. you might expect more strengthen the aussie dollar. you will get more strength in gold mining going forward. asian blog was our editor. thecan find the charts in gtv library. extend transfers

of u.s.-purchased goods. bought one million tons of u.s. soybeans. something concrete is coming out of these trade talks. where do things stand now? >> it is so interesting. almost every time that there is a round of trade talks, china ends up buying u.s. soybeans which they need because the u.s. is one of the world's predominant and major suppliers. we don't know what the next steps are, but president donald trump is pretty optimistic about getting a trade deal with china -- talking about how the massive

tariffs have hurt the chinese economy and he is hopeful that there will be a deal. that was a report president trump could meet with president xi in vietnam later this month. trump has said that any deal he strikes with china will have to be signed off by him and xi. it won't be something his underlings can get done by themselves. deal.d not stopgap this suggests that february could be a busy month. haidi: president trump busy for other reasons too. cbs in aed on wide-ranging interview. among the key things he said, north korea wants to make a d eal. listen. pres. trump: he will find out

state of the union or shortly before. the meeting is set. he is looking forward to it, i am looking forward to it. haidi: since the singapore summit, we have not had any substantive evidence of the denu clearization proces. s. what are we expecting? agoe talked a couple weeks about how kim is going in with specific asks. dial itsave the u.s. military exercising in south korea. he will want the u.s. to ease up on economic sanctions. whether the u.s. is a pair -- is prepared to do that is unclear. the dynamic is shaking up that president trump might meet with xi in vietnam. the expectation is that before that, he could meet with kim jong-un. that could be an extraordinary couple days. the effortseem like

toward denuclearization have caught hold in north korea. the reports suggest that they are going in the opposite direction. a poll out today shows that most americans think a second summit should not take place. have are the president talk about venezuela. what is interesting to me is he is considering the use of u.s. military force. what is the latest we have? >> i think that president trump, like any leader of any country, didn't want to take anything off the table. he said military forces are a possibility or that he would not rule it out. that is probably where we stand. theid say he feels like transition process is playing out.

that many countries around the world are getting behind mr. gu aido and his government. justin trudeau of canada spoke with guaido today. the preferred outcome is for the process to play out. there is an interesting meeting of latin american foreign ministers, plus canada, tomorrow. more pressure is expected to be put on president maduro. he did strike back in an interview on spanish television. he rejected the ultimatum from europe and elsewhere to have immediate elections. defend the country against any invasion. a volatile situation in venezuela. military intervention by the u.s. never off the table, but i don't know that anybody would think it imminent.

shery: back to the economy. the u.s. posting two economic indicators, january jobs and auto sales. the results could hardly have been more stark. the jobs report beating all expectations. >> we have a nice round number. of consecutive months growth. this is a record streak we haven't seen in recorded history. i'll show you where we stand in terms of how much we saw for the january jobs number. this is coming from a slight downward revision from december. this is despite what is happening with the partial u.s. government shutdown, the division here, and concerns about the slowing economy.

slight vindication with regard to last week and the pause with the fed. it is not just the job numbers but the average hourly earnings. this did disappoint. the estimate was for 0.3%. with regards to the huge pop,tum, that 304,000 job this is nothing of great concern. a lot of people are saying because there isn't wage pressu re, this isn't a big deal. larry kudlow spoke earlier. ebolient.ry ebola >> more people are walking and prospering. rising.ty is

we are sticking with our 3% economic growth rate. >> i hopped into the world economic probability function, and looking ahead through january 2020, no one is expecting another rate hike. the unemployment rate is 4%. a little bit of a tick higher. if this continues, that could take down again. haidi: you cannot really say that about the market. do we blame the weather for that?

kim and that is what two car companies are saying. chrysler and honda both are blaming the weather. there were incentives cut after the holidays. people stopped cutting. look at your screen right now in terms of the negative. fiat chrysler, toyota, honda, nissan. they all missed in terms of your run your change. analyst estimates higher than that. gm, --ght spot was with excuse me ford, saying deliveries were up by 7%. we're seeing demand for suv's and trucks. we have this continuing narrative where u.s. automakers see the biggest demand in those areas. look at your screen right now.

16.6 million cars on an annualized basis. the expectation was around the -- 16.9 $16.9 mi million. many are saying they are still bullish for 2019 because the outlook is strong. haidi: coming up next, australian businesses bracing for a tough year ahead with no shortage of headwinds. we will tell you what to look for as the earnings season kicks off in earnest in australia. this is bloomberg. ♪

shery: i am shery ahn in new york. haidi: i am haidi in sydney. drama, a softer outlook for commodity prices and we are awaiting that final

report from the european banking commission. investors could see a boost in dividend payouts. john talk about that with hansen here in sydney. it's been a bust in the u.s., by and large. there are more uncertainties when it comes to -- we have a falling housing market. a mission coming out this afternoon. it has been stronger. strong earnings, strong dividend growth. that is a positive light. i think it will be a mixed reporting season. still pretty good for the resources. the focus is on the other sectors. is one we arek watching this week and we have the commissioner final report

due later today. do you expect that to play out into the forecast and of the narrative? >> that depends on the report. the interim port wasn't too bad. i think banks have been tightening credit and applying the letter of the law. it may be ok for the banking sector, but we also have the soft housing market. not a great outlook for the banks, but strong recommendations would be needed for them to cut dividends. shery: how much of an impact will the proposal have on investor psyche? >> i think it is having a significant impact. you are seeing a number of the llc's announce investor

dividends. there is a rush for some companies if they are able to pay out a lot of special dividend or even to text buybacks this year. >> do companies have the capacity to reduce -- >> you do need to pay the cash out. you need to have either excess cash or there are companies in australia that have lazy balance sheets that don't have a lot of debt and interest rates are low and they aren't getting higher. some companies may take an opportunity to restructure the capital, return some to investors and borrow some money. there are some companies like -- a fair bit of cash on board. if it can sell up the petrol

business, they'll be in that situation. haidi: sectorwise, what is your pick? >> i think resources will do ok. bhp rally strongly last week on bad news, the bad news being the which targeting supply and affecting resources, but i think resources will do well. in the last year or two, they have been widely using capital and won't waste it by over investing. but last week they already gave back a massive special dividend which was almost as large as the normal annual dividend. investigators -- investors already have good cash in pocket . haidi: the uncertainty seems to continually engulf the nature of

the australian economy. does that create bud selig -- volatility and uncertainty? certainty -- certainly creates uncertainty and headlines. it may reduce the refund for some investors, but not all. it's not as though the credits are not valuable for all investors but those affected are affected in a big way. you have the increase in the capital gains tax, falling property markets putting in place are getting rid of the negative gearing. that is worrying investors. haidi: thank you for joining us. we will be back with more daybreak australia. this is bloomberg. ♪

shery: i am shery ahn in new york. haidi: i am haidi stroud-watts in sydney. wall street firms are preparing to lobby china for changes that would make it easier to short stocks through a trading room in hong kong. some banks are seeking a relaxation of rules. morgan stanley is also pushing for these changes. -- is said to have taken a state in pharma giant -- squid. the impact it might have are unclear and neither party has been prepared to comment. they are responsible for one of the most successful cancer drugs in recent years. delhi reports from new say that the -- administration

may begin to sell -- two india by this year. top bureaucrats are saying that the process would require shareholders to meet and order the accounts. lester the government failed to attract even a single bid. for daybreakit australia. trading is getting underway. close to theg start of staggered trading here. this on a day when we are expecting the final report into the commission. elsewhere around the region and quiet day with a number of markets closed already for the lunar new year or are seeing half-day trading sessions. -- cioin the next hour, richard mckay joins with his

outlook for the year. he says that china matters most for global investors. daybreak asia is next. ♪ i'm a veteran

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>> in the evening from bloomberg esquibel global headquarters in new york. i'm shery ahn. welcome to daybreak asia. haidi: asia-pacific stocks set for a modest monday. strong u.s. jobs numbers and positive comments on trade talks. president trump is optimistic on deals with china and north korea. and a