>> a very good morning, i'm haidi stroud-watts here in sydney where australian markets have just opened for trade. sophie: welcome to "daybreak: europe." haidi: our top stories this thursday, investors are awaiting trade numbers out of china. says talks inp beijing are going well.

traders are still awaiting growth numbers out of japan. shery: let's get a quick check of how markets closed here in the u.s. and the wednesday session. the s&p 500 was led higher by energy and financial stocks. wti rebounding from the two week low in trading at around $54 a barrel. higher.t energy stocks the s&p 500 gained ground for a fourth consecutive session. senator marco rubio talking about taxing buybacks at the same rate as dividends, with optimism over potential progress on trade talks as well as a potential deal to avert a government shutdown offsetting those concerns over buybacks. take a look at u.s. futures, unchanged at the moment. let's see how we are setting up for the asia session.

a cautious start to the cash trade this thursday. the asx 200 opening fairly flat but nudging somewhat higher. earnings very much in focus in australia, pointing out some big movers this morning, i want to highlight one group jumping 8% after reporting a near 20% year on year increase in first-half net income. it also boosted its interim dividend per share to 18.5. it sees growth for the full year coming in higher. to highlight some stocks that we moving to the downside, than forecast profit on cash royalws given the

commission inquiry into the banking industry, but underlying profit did beat estimates for the wealth manager. and asx is under pressure, off 2%. we did have the company inorting 6.8% increase income on a statutory acis and it did see higher interest earnings and did boost its interim dividend. came inlf revenue higher by 6.5% year on year, but the stock is under pressure so far this morning. haidi: we do have some big guests today, but first we had an exclusive interview with that,y mcnally, after atinic stevens will join us 8:40 if you're watching it hong kong. let's get the first word news. >> the u.s. acted deficit

ballooned to $319 billion the first three got -- first three months of the fiscal year as spending rose but revenue was flat. growing.ected to keep that may stoke concern about america's national debt which topped $22 trillion this week. theresa may takes her brexit plan back to parliament later thursday, just six weeks before the u.k. is due to leave the european union. the group of conservatives in peace is still deciding whether to vote against the prime minister or abstain. malaysia's prime minister in waiting has told bloomberg that his country will not compromise with goldman sachs and that the bank must bear responsibility for its actions. saying the government is investigating potential crimes they may have committed, but not

sure if malaysia can recover what it wants from goldman as compensation. >> ever complicit to the crime. -- they were complicit to the crime. they must bear responsibility. goldman has responded to the allegations saying it raised money to benefit malaysia and none of the proceeds of the bond sales ever passed through an account controlled by the bank. also saying members of the government lied about the use of the money. global news, 24 hours a day, on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm selina wang. this is bloomberg. president trump says trade talks with china are making good progress. the latest round of -- round of negotiations continue in beijing. tom mackenzie joins us with the latest.

, a conciliatory tone coming from the u.s. president, leading up to the talks that will get underway between the senior leaders of trade and treasury in beijing. as you say, the president coming out and saying he is seeing progress from the talk that the chinese are treating the u.s. negotiating team with great respect. sayingeard from trump he's considering pushing back the march 1 deadline most threatened tariffs, and others like kellyanne conway saying that maybe they would consider a meeting between the two presidents in mid-march. at least on the surface, it seems they are trying to leave the door open to try to get some kind of deal. skeptics would say it's about the quality of any deal that comes out and that's why we are watching this so closely.

gaps to remain on some of the major issues around state subsidies and intellectual property and the enforcement regime. that is the focus point, what kind of quality deal will we get if we do get one before march 1. and if the deadline is extended, how much more time will they add to the clock to get the deal done? shery: an international security talks happening over the weekend. the u.s. and china are sending huge delegations. should we expect issues between the two for security? tom: it's interesting. it is the security side of the relationship that is becoming increasingly contentious. the focus and the pressure campaign from the u.s. on huawei is a big reason for that. you have the security conference taking place in munich on friday , expecting the largest delegation of chinese officials

led by the most senior chinese official to ever attend the event. he is a former u.s. diplomat known for being strongly worded on some of the core, redline issues for china. and you have mike pence who laid out a very combative speech in october for train china as a major security threat to the global trading system. so you have these two figures with their delegations in munich and at the center of the concerns around security is the issue of huawei. so we will be watching to see how contentious it comes between these two sides. it's now front and center even if you get some resolution around trade. expectingare also trade numbers from beijing in the coming hours. tom cole and this is important because it portrays or adds color to the picture for china in terms of the pressure it is under.

data, expecting more week quite frankly. export numbers are expected to drop about 3% for january. 3.3%% drop in december, drop is expected in january for exports. imports are expected to fall about 10% as well. then we have inflation data out on friday. the moneyl expecting supply base. , expectingtion another round of softness for china's exports. in light of the tariffs and the weakening demand picture overseas as well. shery: tom mackenzie, joining us from hong kong. central banks around the world are increasingly depending on the latest data to signal if they are on the right policy track. kathleen hays is here with a

look at japan's gdp report, due in about a half-hour. kathleen: they have a long way to go, but a rebound in growth suggest that maybe they can get people making more money and spending more money, boosting inflation. they are just coming off a rather unfortunate quarter. let's jump into the bloomberg library and look at a chart that shows you a number of things. gdp, where it's been at work might go. six quarters of positive gdp growth japan had back in 2016 and 2017. inflation did get about half way to target. this is a quarter that was worrisome, but there were natural disasters. you had a drop in of 2.5%, but with stronger consumer spending, stronger investment in private investment,business

government spending not so strong. our gdp tracker for japan, looking for a gain of about 1.7%. it is important to remember how important this is. the bank of japan was testifying to parliament yesterday, the lower house budget committee. it goes to show an important issue for the boj, for the government. the governor said it's my duty to make sure we pursue higher inflation. he thinks it is moving toward the 2% target. households are becoming less cautious about prices and wages. fed also got a big

inflation number out today. kathleen: inflation, consumer prices, it came in as expected, maybe a little bit weaker. it tells a story to look at some simple pictures of it. as we go into this chart, you see the yellow line that shows core cpi, holding steady around 2.2% for the second month in a row. cpiall, the headline falling year-over-year. a drop in energy prices. the fed key gauges run lower than this. inflation is just about at target and staying there. we've heard several officials saying the economy is in a good place. patrick had this to say when he spoke earlier. >> i continue to be in a

wait-and-see mode. we've used the word patients. patients is a virtue. in this situation, there is no need to move quickly because we can see how it unfolds over time. kathleen: he's looking for one rate hike this year and one next year. that is different than that officials were saying a month ago. haidi: kathleen hays there. breaking news on earnings from the singapore telecom group

billion. third-quarter net income coming in at 822 billion dollars and operating expense of 3.5 billion dollars there. australia, the business here accounted for more than 50% of singtel's overall revenue. let's look at some of the stock movers we are watching in the sydney session. sophie: bluecrest cresta snapping a three day rise, despite seeing gold production coming in strong. weaving to the upside, after reporting first-half underlying profit of 642 million come the company has lowered its view and said it is on track for an asset sale. telstra losing ground after reporting a 28% decline in first-half net income and cutting its dividend payout. a firm guidance

for fiscal 2019 as well as raised its dividend. saying it is eyeing china growth is top profit margins are narrowing. shery: we will get more on japan gdp rates later this hour. a strategists will join us from tokyo. he set the china risk for japanese companies is probably fading. haidi: and breaking down the numbers from the big aussie miners. this is bloomberg. ♪

haidi: this is "daybreak: europe." shery: back to the u.s. markets, where stocks rose for a fourth straight day, but not without a speedball. a senator's proposal to kirk stock buyback and investors did not like that at all. su keenan is here to make sense of that. that buy back triggering some jitters in wall street.

if we go directly to one of the s&p 500 charts, there was a bit of a dip toward the midmorning rally right there come causing the market to have a second concern there. what it means is a lot of companies have been buying back their stock during the dip. marco rubio now saying it should be taxed like dividends. take a look at the market snapshot. gold showing a little bit of weakness after-hours but oil showing strength. story, but webig saw with one of the big decliners yesterday, activision regained ground as goldman like this turnaround plan. ipo going forward with an and they are a big seller of them.

let's look at after-hours action. cisco announcing a bullish forecast. , what we have seen is a second day extension of the rally. it has a lot to do with cuts taking place in venezuela. shery: joining us from los angeles is caleb. let me talk with all this -- start with all this talk on buybacks. we're seeing marco rubio talk that.reframing the by that could have helped in the past. is this a concern right now? idea is not a terrible from an academic perspective. dividends and buybacks are essentially the same thing to a shareholder. so it is not a bad idea to have

them be treated equally from a tax perspective. the reason i would say it is unlikely is that over the long run, it may make sense and in the short run it makes zero sense. what i mean by that is, in the short one, stocks are going to ifloff fairly meaningfully legislation was passed in that direction because of the value of any asset, particularly the stock, is the present value of all future cash flows. if you say you're going to strip down all future cash flows by taxing stock by that, it's going to have a meaningful impact on share prices. few politicians are willing to make short-term sacrifices for long-term gains. unlikely, not a horrible idea, but i just think it is politically not feasible in most instances. shery: so far what has boosted the market has been the dovish

stance coming out from the fed. this chart showing financial conditions against the fed funds rate. if we assume that tighter conditions may have sparked the know thatishness con were seeing financial conditions bounce back dramatically. >> is a great point. in december, financial conditions tightened meaningfully. credit spreads widened. the dollar had been strong throughout most of the year. was doing the work the fed used to do. they raise rates and said the balance sheet was as exciting as watching paint dry. all that spooked the market and we've seen this mirror image in january and february where financial conditions have loosened, the fed has pivoted. 2016, thereck to was a similar scenario where oil

prices fell, the stock market fell about 13%, and the fed paused. the's for all of 2016 and the market rebounded, and -- they paused for all of 2016 in the financial market rebounded. it could be the entire year that they. -- that they paused. fact that the 10 year is at a position where if the fed hikes, they would invert the yield curve. we think it is unlikely they would do so until you start to see the curve steepen a bit. unlikely you will be in a position in the next couple of fed will feelhe any pressure to hike. haidi: the other interesting

reaction has been in the u.s. dollar. this chart looks at the dollar and how overbought conditions are at the moment. it rally every day except one cents the fed meeting. is that counterintuitive? what does it reflect at the moment? >> the dollar weakened from when powell spoke in january. announcement, other central banks around the world followed suit. bank of england started to pull back, ecb, brazil, russia, all becoming more dovish. a.s a relative talking -- a relative gain. it is all relative.

haidi: do you -- what has china given the u.s. that would be enough for a win? caleb: what i mean by that is that china has indicated they will give enough to give trump a win. all trump has to do is declare victory and have some movement on china's part. soybeansbe as small as , freezing the trade deficit for a number of years, it could be something on i.t., but china has indicated they are willing to negotiate enough for trump to declare victory, and head of an election year, his standards -- he will come out in declare victory very likely an hour expect that china negotiates here. the hard part will be holding

china to the promises that are made. haidi: thank you so much for joining us. there is more to come on "daybreak: europe." this is bloomberg. ♪

haidi: a quick check of the latest business flash headlines. january shipments of caterpillar to the asia-pacific fell 4% from year earlier, marking the first contraction in the region since the middle of 2016 and underscoring the outlook for the global economy. shery: indian media says the jet airways rescue plan faces regulatory hurdles and concerns. it cites unidentified sources saying the deal would not be finalized until march. lenders are said to be preparing

an emergency loan to help the beleaguered carrier beat a crack -- cash crunch. this is bloomberg. ♪ the latest innovation from xfinity

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with firstna wang word news. president trump has repeated his view that trade talks are making progress as negotiators prepared to meet in beijing thursday. of reportts, i had showing how much the trade war has hurt the economy. >> it's going along very well. we will see what happens. they are showing us tremendous respect and something which a lot of countries did not used to show the united states. they are showing us respect now.

>> he has hired someone to prepare his defense. he takes over from the former prosecutor who failed several times. carlos ghosn faces charges that could see him jailed for 10 years. an early election is on the cards in spain after the parliament blocked the 2019 budget. afteran was rejected win support. talks broke down ahead of the trial of 12 pro-independence leaders. hong kong securities regulator rates areest to say too high. cutting will cost by 50%. high prices have caused some hedge funds to leave while

goldman sachs has moved some staff to cheaper locations. occupancy costs are the world's most expensive, topping london's west end and beijing's finance street. it seems sporting star power only stretches so far. the allure of cristiano ronaldo phase two boost of bond offering on a five-year debt sale with no more than 50% higher than the deal. it followed local rivals as european clubs that have asked the bond market for financing. global news, 24 hours a day, on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm selina wang. this is bloomberg. we are half-hour into the trading session in australia. seeing the asx

by gaining .3%, led higher energy and health care sectors while communication and utilities are among the biggest drags along the financials which are moving to the downside. at 10 year yields steady 2.15% and the aussie dollar staying in a narrow range of ahead of consumer inflation expectations at 11:00 a.m. sydney time. taking a look at some of the big movers in sydney, a stronger than expected earnings forecast. the positive earnings momentum is expected to continue for the rest of the year. , theg to the downside biggest loser on the asx 200 falling the most on record after its results. the company has raised -- is predicting stronger growth.

suncorp group, profit fell 12.5%. higher lng production and prices helping boost profits in 2018, rising 28%. the company has raised its final dividend to $.91 a share, and 86% increase, taking advantage of its strong cash flow. what --t posting a one 104% hike in profit. thes well-positioned for second half. haidi: paul allen is standing by. any update on plans to sell off assets in south africa? paul: there was an update of

sorts, perhaps nothing definitive. on track to get some binding bids by the end of june. south africa energy coal, thermal coal plant that has been beset by few difficulties. it had some damage due to a dragline and protection of that dicker mind has been weighing on results. announce someg to findings by the individual. shery: new crest was out with earnings. what has the company said about the prospect for deals? paul: sophie ran to the details of the numbers. some pretty impressive strong free cash flow. goldis environment of big mergers, we saw one where

questions have been circulating around you chris, the world's biggest miner and will it make acquisitions? the ceo said there is no rush, we are willing to be patient. they are looking at deals that if if it makes sense, there will be a deal, so hurry up and wait when it comes to m&a with new crest. haidi: paul allen there in perth. we will have an excuse to interview with the newcrest mining ceo who joins us on friday. shery: let's turn to another company, aig. volatile markets are creating more headaches. surprise loss in fourth-quarter earnings driving the stock down in after-hours trading.

catherine, we are seeing aig disappointing and falling short of estimates for six straight quarters. what is happening with this company? >> it is a huge story about the turnaround of aig. a surprise loss can happen anytime, but aig has been trying to go over its own policies and understand how the reserves and how much money they set aside for those, they took a reserve charge in the fourth quarter two sure those up a little more. that is feeding into the investor concern about the company. they want to make sure the old policies that aig wrote years ago will not come back to bite them. they have been looking over them and trying to make sure they are up to speed. now they have completed a review of some of those main reserves. we will keep an eye out, can aig keep underwriting with better skill and make sure the old policies don't come back to haunt them.

haidi: you look at the major in terms of how investments played out. it was a big year for disruptions and natural disasters. >> it was. market investments hurt them quite a bit. alternatives and equity securities were down to help drag investment income down. people forget because 2017 was quite the year for catastrophes in terms of hurricanes and wildfires that's what the the country. 2018 was still pretty impactful. japanese e-commerce giant rakuten considering the impact of trade tensions when it does business with china. the ceo spoke exclusively to

bloomberg, talking about why the company chose not to go with the chinese supplier. >> when were deciding what kind use, irts were going to talk with the japanese government and asked if i should investment are not and they said no problem, use it. but i kind of sensed the potential risk, even at 1%. i told myself i could not take 1% risk, something may happen to prohibit the chinese network to be used. use huaweid not to or zte because of the risk. i don't know if it is true or not, but i'm very happy i did not choose that. that meansosen them, i would roll back one year.

i chose nokia. basically we are building our own hardware. we just by the antenna hardware from nokia, but in the next generation, we are an i.t. company integrating, core network, radio station network, all the technology by ourselves. >> do you think that huawei and zte's business could be seriously compromised as a result? >> it is obvious. it really close and they are still huge companies, they still have the chinese market. >> i don't know what is going to happen, to be very honest. as far as the telecom industry is concerned, it is very

vendorst to use chinese for a while. founder andakuten ceo with bloomberg's emily chang. coming up, japan is set to deliver its latest gdp numbers any minute now. we will bring it goes live, next. this is bloomberg. ♪

shery: we are counting down to asia's first major market open this morning. after two sessions of gains, we've seen that japanese yen lose ground for third consecutive session, hitting a 2019 low as we had more optimism over potential deals coming out from the china-u.s. trade talks, not to mention potential government shutdown being avoided here in the u.s.. we are awaiting those gdp figures for the fourth quarter.

we are likely to see a slight rebound. i'm haidi stroud-watts in sydney. let's get a quick check of the latest business flash headlines. it said it's moving closer 30% was completed in november and delivered on ratings agency demands for stability. the ceo says it now remains as the ratio of unsecured debt. shery: tesla is rushing to deliver the model 32 china ahead of potential tariffs next month. at least three ships are crossing the pacific.

the new duties will make the car more expensive in china and cars exported from the mainland were pricier as well. tesla reported smaller than expected profit last month. is saying as decision was prompted by emirates paring -- preparing to halve its order. an announcement on the eight creating may be made on thursday. , any: vietnamese carriers announcement is expected soon. been saying ho chi minh to san francisco would be its first route. transpacific flights are said to be a licensed to lose money. haidi: where awaiting the latest japanese ratings on gdp.

you. always great to have somewhat of ang moderate rebound in the latest quarter. the third quarter dominated by the track from actual disasters in the pent-up demand. this is where we are, how long do you think this is sustainable? got smacked in the third quarter with type .75% of- typhoons, down you always have to remember japanese revise their gdp numbers almost as much as they changed their underwear, so it will probably point in the right direction but much later. you get a much better idea out of the corporate profit numbers.

on the face of them, they are horrid. makes sense to say i'm not going to look at the 26% net at the but look operating profit, down 3%. just the same as 2016 when the global pmi was at the same kind of level. so we've got something of a global slowdown. can we get an agreement on freight? the chances are, something is in agreement, but the bigger problems like intellectual property will probably be put aside. where goes from there will be a function of who gets reelected. haidi: there are things we do know, one is that trade will continue to be an issue. we know that in terms of export demand there is a china drags

risk as well playing out. china trade number is coming out later today as well. shinzo abe seems to be in a better political situation to push it through. he said the economy is strong enough. to withstandy able this after it was disastrous the last time around? >> japanese consumption is very sensitive to tax hikes like this. the last one hit the consumer by about ¥8 trillion. this one is a two point hike instead of a three point hike. because it has not been applied to food and other such, and the effect comes to about ¥2 trillion. when i talked to government spokesman, they say they more than offset that with fiscal stimulus. that is probably not the main

issue this year. bonds.we saw the boj cut given where we are with concerns over the global economy, will this become a more regular occurrence? >> what the bank of japan has done to make what it is doing more sustainable, it has moved from controlling the amount of money it prints to controlling the yield curve. the you own basically half bond market, it is easy to believe the bond market. obviously it is simple are go for stuff. the best thing is to win without having to fight. what they are fighting is the threat of boj allowing them to control the yield curve without buying anything. some analysts get worried about this and say we are not buying as much, but i think those people probably need smacking. shery: where are we on inflation

or he treasures -- inflationary pressures with japan? with the rebound in gdp numbers, how much will this help? 0.1%, you do see people out there talking about the boj reversing what it is doing. it is difficult to understand where this is coming from. you don't reverse what you are doing when cpi gets to 0.1%. i would have thought it is quite what he iserse doing, even though it's not clear that what they're doing is helping. i'm going to jump in because we had those numbers onaking on the bloomberg, the quarter on quarter basis were seeing a rise of 0.3%, slightly lower than the .4% expected.

business spending rising 2.4%, better than expected. nominal gdp coming in at 0.3% as well, slightly lower than expected. private consumption rising .6% on quarter, also slightly lower than we were expecting. 0.3exports tracking percentage points from the quarter on quarter gdp number. as you say, this gets revised all the time. it is more or less on expectations that we have been seeing. getting back to what it means to ink of japan if anything, think we look at this chart every time we get you on, how far away we are from that 2% inflation target. it has been 20 years since the zero policy has come into play. really paid policy dividends and is there anything else the bank of japan can do at this point?

, it has gotof japan japan out of deflation. that is far and away the most important weighing. -- important thing. it is clear that it is not really working. are they just continue as is until we get a new governor. clearly they said they would give us asset price inflation. the stock market has gone down, not up. the state prices have gone down. you would have thought you would get some kind of effect, but it turns out not. shery: what about stock prices? we always say that japanese stocks are pretty cheap compared to other parts of the world. how big is the discount, and is this an opportunity? >> of course.

japanese5% discount on stocks. the earnings are not bad. , the return on equity in japan is the same as europe the last five years, not that you want to be compared to the europeans. it was an absolute disaster 10 or 15 years ago, and they seem to be getting their act together. what they need to do is start to buy back shares. they are just sitting on too much cash. it's the exact opposite situation of what you have in the u.s., you had a 72% increase in equity over the last dozen years. just wondering, is there sufficient political capital for shinzo abe to fire that third arrow to push through more structural reforms this year? >> i think you have a problem there. japan just happens to be a democratic nation and it's tough

to get some of these things through. revisions toet the working practices done last year to get performance-based pay. there was massive opposition to it. the labor ministry totally moved on their numbers, which really doesn't help. it will be a while before they can get that kind of thing through parliament. the truth is, they haven't done it. shery: thank you so much, nicholas smith. need tothe stories you know to get your day going in today's edition of daybreak. you can customize your settings so you only get the news on the assets you care about. this is bloomberg. ♪

haidi: let's get a preview of the market opens.

caution potentially for shares in tokyo and seoul. muted reaction to the lead -- the latest gdp data. we have plenty of earnings to react to. missing profit estimates for the and the japanese beer makers also due to report results. honda plans to recall vehicles in the united states. in about a half-hour we have an with timothyerview mcnally, talking results as well as plans ahead for the cambodian focused casino player. shery: plenty more to come in the next hour. we have dominic stevens who will join us for his first interview of the day. they just announced first-half net income coming in at 200 $46 million. we will talk to him about his plans to manage costs as what he is seen in the pipeline of ipo.

the market open is next. this is bloomberg. ♪

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>> a very good morning. i am haidi stroud-watts in sydney. where markets have opened for trade. >> from new york, i am shery ahn. >> i am sophie kamaruddin in hong kong. welcome to "daybreak asia." >> our top stories this thursday, asian stocks set for a wait-and-see start. they are weighing trade data out of china. president trump repeats his views talks in beijing are going well. leaders said

goldman sachs was implicit in the 1mdb scandal. the bank denies that, saying it was lied to. our exclusive interview is coming up. tofirst, let's get straight the markets as japan and south korea come online. sophie kamaruddin has the latest. >> i want to kick off with a snapshot of currencies, kicking off with the yen. little change after the fourth quarter of gdp data. coming in at 0.3%. compared to the estimate for a 0.4% expansion. the kiwi dollar extends gains and sterling picking up a touch ahead of the parliamentary brexit vote. the south african rand is under pressure before its state-owned electricity company. let's get the open in tokyo and seoul. little changed for the nikkei 225 after a two-day advance. the kospi looking to snap a climb.

there.sophie kamaruddin let's get first word news with selina wang. >> the u.s. budget deficit theooned to $319 billion in first three months of the fiscal year as spending rose by revenue was flat. the shortfall grew by 32% in december, compared to a year earlier, and is expected to keep growing. that may concern american debt, which topped 22 trillion dollars this week. theresa may takes her brexit plan back to parliament thursday, six weeks before the u.k. is due to leave the european union. are stillve mp's deciding whether to vote against the prime minister or stay. may says she will not wait -- not redraw the bill. an early election is on the cards after the parliament blocked the 2019 budget.

primean was rejected when minister pedro sanchez failed to win the backing of catalan backing parties he relies on for support. talks in the party broke down last week after the trial of pro-independent leaders, accused of clot -- accused of crimes related to the 2017 secession. helos ghosn replaces team as awaits a trial that have kept him in detention almost three months. he hired a lawyer to prepare his defense, who takes over from a previous prosecutor, who failed to win bail. ghosn faces charges that could see him jailed for 10 years. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am selina wang. this is bloomberg. president trump says trade talks with china are making good progress. the latest round of negotiations continue in beijing.

our china correspondent tom mackenzie joins us with the latest. more optimistic remarks from the president. tom: if you take him at face value, president trump and his team are laying the groundwork for some type of deal. the conversations are continuing in beijing with a lighthizer, mnuchin picking up talks with er. vice permit or -- premi those should wrap up friday beijing time. president trump saying negotiations are making progress. we have heard from his officials, possibly a one-on-one meeting with president xi in mid-march. he could push the deadline of march 1 back. seems to suggest president trump is readying for some deal. president xi will be coming in lighthizermeet with

and mnuchin for good well. skeptics say there is a lot of work to be done if you are going to get any substantial, comprehensive deal. of issues, especially around structural changes, and that will take time. maybe that is why trump has suggested the deadline will be extended. even if you get a one or two month extension, most china watchers do not think it is enough to get a comprehensive deal. movement suggests he is optimistic about what he sees with the talks with beijing. >> still, they could end up sparring over security issues. tom: very much. analysts say even if you put trade to one side, the longer-term friction expected willen these two sides focus on security and technology questions. you have a major meeting happening in germany friday.

you have a massive legation from member ofside from a the politburo and former chinese ambassador to the u.s. on the u.s. side you have the vice president leading a big u.s. delegation. they will be talking about national security issues and you can expect pushback from the chinese on huawei. you have the department of justice, 23 different charges on the indictment they released. you have diplomatic pushback from mike pompeo with u.s. allies trying to convince them huawei poses a risk, particularly around five g networks. that is creating anger in beijing. you can expect push down from chinese delegates. this question for tension around security and technology will play out in the long term. affectingthe 6 --

what the chinese economy is doing. what are we looking at? tom: a couple of caveats. we had chinese new year. that is something to bear in mind. many economists say it is the overseas demand picture likely to have the bigger affect on exports out of china. tariffs as well are having an impact. we are expecting exports to fall in january by 3.3%. in december, down 4.3%. imports also expected to fall. an indication of the tariff impact, more importantly, the overseas demand picture as the european union starts to weaken. inflation data out tomorrow. we will see what that means. and the ability of corporate's to pay down debt. we had a conversation about debt in china as well. will givesupply data

us indication as to the response from policymakers in beijing to supporting the economy as it flows. we think we will see a surge in aggregate financing and a doubling of new loans as well. >> tom, thank you. our recent bank of america survey found long em's is now the most crowded trading global markets. our next guest has been constructive on space. let's discuss this with janet saying, jf asset management limited equity strategist. we have seen this rally. this chart on the bloomberg showing how far we have come since the beginning of this year 200 dayly topping the moving average. i have to ask, has the market optimistic, when it comes to prospects over a trade deal and the fed staying dovish? markets haveng

started the year very strongly amid a backdrop of a dovish fed, as well as positive development from the trade talks. going forward we remain optimistic on em in asia. for one, the u.s. dollar is ticking up. potentially cutting rates in the next few quarters, along with of the narrowing of the growth gap between the u.s. and the rest of the world, the u.s. dollar should weaken. on trade, but chinese government has been very cooperative in giving out concessions. government is willing to pose a deal. that is positive. finally, the fundamental earnings. have been happening

over the past three quarters already. it is very likely it will fall from here. the risks are subsiding, while fundamental opportunities remain. we are optimistic on e.m. and asia for 2019. group -- go through the sectors. stocks have been rising almost twice as fast as value stocks of more mature firms that pay regular dividends. this has happened since the end of the last year or so. will this trend continue? what are your expectations and what do you like? janet: if you look at style, it is interesting. in 2017 it was a growth year. in 2018 values started to come back a little bit. in january this year we start to see a narrowing diversion of the

two in styles. i think when the markets are still figuring out if there are more headwinds or tailwinds in the market situation, it will be difficult a call whether it is a growth market or value market. from an investment point of view, it is important to maintain that. hopefully you should have a sense of the stocks, as well as on a cyclical financials to capture on the outside. >> i want to get back to your previous point, to shery's question about profit projections. you said they are nearing the bottom. this is our library, showing the divergence between emerging-market stock prices diverting from profit outlooks, for the first time in 2007. you see the emerging-market index gained 10% from the bear market lows of october last year. what we have also seen come a

negative correlation between earnings estimates with proper projections lurching toward a 15 month low. is there a risk to your outlook, that this is not the bottom, and what would create further bearishness or profit downgrades to continue? would it be an extension of the trade war? janet: there are a few things we can comment on. number one, if we look at the timeline, asian earnings, you have a position downwards since march of last year. it is already 3/4. we will soon have an annual report coming out in asia in march. it is possible we will see more downgrades, but in terms of the timeline, probably coming to an end. the second thing is to look at the u.s. dollar. last year the earnings got revised out mainly because the u.s. dollar was very strong. it was believed right now the weakening, and

that should be a good factor for the u.s. dollar earnings. , factors, asse two long as we are not going into a recession, 2019 earnings should be better. haidi: i want to get your views on china. chinese stocks had quite a start. the longest winning streak since this time last year. it has been a difficult few years for chinese equities. for chinese equities we remain positive. number one is on the policy response. government has been rolling out supportive measures since the second half of last year. they have gotten more cooperative and meaningful. it may take a few months for all these measures to get to the real economy, but we think it will come to a supportive backdrop.

the second thing is on valuations. the chinese come up for onshore or offshore equities, remain valued. china asia is still opening up to the world. msci will potentially increase later this year. we think the interest in offshore chinese equities will remain high. shery: we are seeing corporate defaults rise. we had a record year in 2018. is this going to be a problem this year as well? the credite look at market, it is important to distinguish whether there is a systematic issue. we think reports we saw last year were idiosyncratic.

going off deleveraging. i would argue that is a necessary but painful adjustment the economy has to go through. overall, we do not see other issues in the credit market. haidi: janet, great to have you on with us. janet saying, jf asset management limited. the we talked to the managing director of the asx. shery: and we hear from malaysia's ruling party about the goldman sachs 1mdb scandal. this is bloomberg. ♪ chs 1mdb scandal. this is bloomberg. ♪

haidi: this is daybreak asia, i am haidi stroud-watts in sydney. shery: i am shery ahn in new york. the malaysian ruling party said they will not compromise with goldman sachs over the 1mdb scandal. speaking exclusively with bloomberg, anwar ibrahim, accused of being implicit in the scandal, says it must bear

responsibility. >> they were complicit to the crime. the effect being, the whole image of the country, the confidence of investor and the state of the economy, they must bear responsibility. >> you reject the argument it was a few bad apples in the firm? figure,or such a probably the highest commission they have got, is not feasible theenable, to assume personalities and goldman sachs is not aware. malaysia safeguard itself against foreign banks, institutions, players? i think we have safeguards and policies. safeguards, ifhe

you have crooks running the system, they can always navigate. it is important to have institutions, rule of law and a credible leader with high, ethical standards. >> i need to ask you about china. china is heavily invested in how 1mdb gets involved. its position is tricky. what kind of relationship do you want to see between china and malaysia as the malaysian government works to resolve 1mdb? china is not directly complicit in the crimes of 1mdb. allould be brought in f at at the last stage to resolve part of the funding. itmade it clear to china remains an important partner in creating investments. we want to work closely with china. you have to accept the fact this is a new government. we are accountable to our the projecth means

must be reviewed. we cannot defend the costs. if we can achieve this understanding that the price is acceptable, normal, transparent, and the project would benefit local investors, then we can proceed. >> you were referring to the infrastructure deals with china. you talk about transparency, let's talk about your own plans. you are referred to as malaysia's prime minister in waiting. what is the timeline for you to become prime minister? anwar: there was an agreement among party leaders, [indiscernible] , that i would assume office at the right time. why don't we fix a date? be -- i want him to be effective, to be given the latitude to govern effectively.

therefore, we cannot give an immediate date. >> would you be happy to wait five years? anwar: he has made it very clear he will not exceed two years. haidi: that was the leader of malaysia's ruling party anwar ibrahim speaking exclusively to bloomberg. goldman sachs has responded to its comments, saying not one holdings pastor through their account. they say it was stolen for the benefit of members of the malaysian government. goldman said it was light to about the use of proceeds from these transactions. let's stay with malaysia. we will speak with gdp seekers in the country in the next few hours. let's speak with michelle, joining us out of singapore. we have seen slower economic growth across the region. does malaysia fall into the same trap? michelle: yeah. unfortunately it is a similar story in malaysia.

subdued is the word of the day for malaysia gdp. they are running at 4.4%. we are not seeing much difference in the bloomberg survey, carrying 4.5% in that report. that rate of growth all year. when you look at components you can see why it is subdued and staying where it is. 1mdb, a message they have been trying to preach on fiscal responsibility, consolidation. not much room for the government to get room that way. infrastructure projects, especially those canceled, the big-ticket ones with china and others. this is still a fairly new government from last year, working out the kinks in their new budget. the institute a new sales tax. ift still remains to be seen they can boost consumption out of that. they are betting yes and want to see some of that this year. still remains to be seen.

the export picture is not looking good amid trade tensions with the u.s. and china. china being malaysia's biggest trading partner, that is not helping the growth picture in malaysia. steady as she goes, but not so much room for improvement for malaysia gdp. shery: we have seen a sharp drop malaysia iss when an oil-producing nation. what are the top risks for the country this year? one of them, inflation is already near zero. net energy exporter not helping these oil prices getting affordable. it is helping other countries in the region, but not malaysia. tensions, still a lot of uncertainty's everyone on hold in the region. a lot of investors in wait and see mode, especially with u.s. china talks this week and a further deadline to come up to read we probably will see a central bank remain on hold this year in malaysia as a look at

that inflation picture and the growth and- weak uncertainties, and household debt that remains high. michelle, thank you. plenty more to come on daybreak asia. this is bloomberg. ♪ asia. this is bloomberg. ♪

shery: a look at stories trending across the bloomberg universe. profits are not falling, despite rising security concerns around the world. read stories on the terminal, goldman sachs says exposure to the global sump has intensified, though it would take a major pullback to potentially tip america into recession. tictoc, women in japan want to ditch the tradition of giving chocolates to their male coworkers on valentine's day. check out those stories online

or on the terminal. haidi: equal opportunity for chocolates, i say. let's get a check of the visit -- business headlines. caterpillar slowed his seventh straight month. the january shipment to the asia-pacific fell 7%, marking the first contraction in the region since the middle of 2016. underscoring the outlook for the global economy. caterpillar is warning of modest revenue growth in the coming months. its biggest share selloff in seven years. in india media report says the jet airways rescue plan faces delays, regulatory hurdles and lender concerns. unidentified sources say the deal will not be finalized until march. think of india said to be preparing an $85 million emergency loan to help the carrier beat a cash crunch. coming up, a look at the gaming

sector, casino operator nagacorp has strong 2018 results. they flock to the cambodian resort. we speak with the company chairman. this is bloomberg. ♪ . this is bloomberg. ♪

>> this is daybreak asia. i am selina wang with the first word news. japan challenging the loss, rebounding modestly last year after natural disasters in the previous quarter. gdp expanded on an annualized 1.4% through december after the biggest contraction in 2014. the data offer some respite the policymakers worried about growth as china slows and the trade war continues on. president trump repeated his view trade talks are making progress as senior u.s. and china negotiators prepare to meet in beijing thursday. comments ahead of the latest trade data in china, which will show how the trade war has hurt the economy. the president indicated he

postpone it if he thinks the two sides are moving close to a deal. pres. trump: it is going along well, we will see what is happening. they are showing us tremendous respect, something which a lot of countries did not use dish -- did not used to show the united states they are showing now. >> hong kong regulators the latest to say rents are too high. cutting rental costs by 50%. high prices have caused some funds to leave central. cheapere moved staff to locations. occupancy costs in the central are the world's most expensive, topping london's west and. it seems sporting power stretches only so far. cristiano ronaldo failed to debut a bond. the order book was no more than

50% higher than the $200 million deal size. rivals asd global european clubs that have tapped the bond markets for fundraising. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am selina wang. this is bloomberg. let's get a check at how markets are trading across asia. japan reversing earlier gains on the nikkei, zero point 1%. fourth quarter gdp numbers in line with estimates. spending making a comeback, but still seeing the japanese yen stronger today. 0.7% after three sessions of gains. haidi: we are seeing more positivity in australia, eking up from modest gains after a positive session and wall street overnight. the top gainer jumping the most

in a decade. magellan financial rose over 60%. biggest movers to the upside after reporting positive results and issuing a special dividend in one case. new zealand keeps going forward. pretty flat at the moment. it counts as a seventh straight day of gains for the index in australia. shery: other factors moving the markets, including macro factors. strong was alton 2018 driven by spending from chinese consumers. the casino operator runs the only integrated resort in cambodia and saw a 59% surge in last year.ip volume it rose to $390 million. the stock is up more than 40% since october. sophie kamaruddin is standing by with the nagacorp chairman. sophie: let's get to that chat

with tam, joining me in hong kong. thank you for joining us. tim: thank you for having me. sophie: we are seeing net profit rise 53% for 2018. that is reflecting the boom. cambodia is experiencing. you have been there since 2005. they are enjoying a ramp-up, i drive in tourism and vacation from china. let's break down the results in more detail. first quarter in particular. what were key drivers for growth in the last three months, especially given how macau has performed? we have seen a slowdown there. tim: quite delighted with our results for 2018. callsvestor unit gaming us the best global gaming stock in terms of performance. this is the first year-end results where we did half a billion.

we had a new milestone in terms of ggr, 1.4. net profit, $391 million. we have a strong dividend policy, payout ratio averaged 60%. going to the mass market, we had a good, strong performance in the third quarter. i think if you look at the totality of our operations, vip when up to $35 billion. rollings, a significant increase. that goes back to the strategy developed in 2013 when we were at about $8 billion. we combined the strategy of bringing and higher and junkets to bring in a higher and player, raising the limits. we did that in combination with initiatives we had as far as joining airline groups.

a working relationship with china international travel service. things thatmber of provide balance between our mass-market as well as our vip. if you look at the net profit, the majority still is the mass-market. the mass market will continue to drive the growth and development aworld.corp, nag if you look at the key drivers, july ofhad elections in 2018. stronga continues on a political stable course. secondly what is driving that, direct investment. we talked to earlier, if you skyline of cambodia, it is cranes and new buildings everywhere. 1890o many years, in the -- in the 1980's and 1990's, cambodia was re-stabilizing and

re-, but today, a great deal of investment, infrastructure projects, a close working relationship with china, and another resulting effect is tourism. we have seen those numbers go 450 thousand in the year 2000. this year it will exceed 6 million people. better than 900 something flights coming into cambodia and about half of those coming into phnom penh. one key thing i want to mention -- chinese visitation in particular is key. give us concerns about spending. how is that weighing in your strategy? tim: i will give you my candidate assessment. 2017, we hadt china visitation at one million. this year is going to exceed 2 million. that is 34% of visitation coming

in. that has had a real significant footprint on our particular property. 2f you recall, we built naga and opened it in the fall of 2017. we had our first full year. whether it is hotel occupancy, we had no cannibalization in terms of our business. thriving business built on chinese visitation. sophie: naga 2 became more of an attainment destination. do see that threatening the likes of singapore for example? tim: we set out to be the best gaming and entertainment complex in indochina. i think we achieve that. we also see growth and opportunity continuing in cambodia. you talked about the impact of china. number one, we are a low cost destination in relation to singapore, hong kong, macau.

phnom penh you can join us inphnom penh, cambodia, whether it is lodging, food, beverage, we are putting emphasis on our non-gaming facilities as well. i know simply because of the demand, they projected 2025 there will be better than 5 million chinese visitors. we expect 7.5 million visitors. this chinese growth will not slow down. off,if the economy tapers we still expect significant growth in chinese visitation because we are a low-cost destination. it is much easier to arrive in cambodia. i remember the days we had 170 flights going back to 2010. we have a lot of access now. new airlines, new infrastructure. a lot more offerings to people coming to cambodia. cambodia is now a destination.

there is a real demand for new hotels, non-gaming facilities. naga will take the lead in developing those requirements. sophie: how are you preparing for the potential introduction of the casino law? since the time we listed on the hong kong exchange in the fall of 2006, we have been that advocate for developing a casino law. increasing a regulatory framework and structure. it is important. we are a publicly listed company, transparent. industryo see the grow, but we wanted well-regulated in terms of guidance law. attracts, gives confidence to investors, shareholders around the world. we have always had to maintain strong corporate governance, strong internal regulations, because that level of regulation has not been there. i anticipate we will see a new

gaining -- gaming law. it will be good for the industry itself. we are one of the beneficiaries. sophie: thank you for joining us. tim: please come to cambodia. sophie: i would love to. that was timothy mcnally of nagacorp here in hong kong. asx boosting dividend after a rise in income. will be joined by ceo dominic stevens. this is bloomberg. ♪ this is bloomberg. ♪

asx saw a 7% surge and boosted its interim dividend. let's get straight to the exchange. sophie will bring in dominic stevens. great to have you with us. tell me about what the major growth of drivers were.

andhis level sustainable, thoughts about how you managed the cost side of things as well. goodic: yes, it was a half. the number you talk about is on a statutory basis. there has been a change to the accounting listing on our basis. we were up north of 10%. that is probably the best print we have done since the first half of 2014. it, it isthing about a cross listings, derivatives businesses, trading businesses, and post trading businesses showed 5% to 10% growth. that is a positive thing. on our expense side, we got the market to a number of around 9%, which is where we are. --is under lighting underlying growth of the business. we are investing in putting in

stronger foundations into our business. oure has been an expense in risk management systems, governance, clearing systems. that has added 4% to an underlying 5% run rate. this year. effectively i think we are up at 9% over the coming years. haidi: the revenue growth side of things continues to slow. i am wondering, derivatives, the biggest part of your business, do you see expansion, or what

growth drivers are you looking to add to the mix? dominic: in the derivatives business we have seen good growth. we put in a new derivatives trading platform in the middle of 2017. that allowed offshore traders to come on to our market. we have seen good growth there. the last six months, good growth end-user, fundl manager and banking side of the business. we are seeing that expand. obviously varies focus in australia on the post trade world. that is what we are spending a lot of our time on, around the replacement of the system happening over the next two years. in our trading businesses up 15%, our trading of equities. probably the best half we have seen in a while. that flows to post trade services as well. a business that is very broad across equities, technical services, data.

what you are seeing, all those businesses are up and there is diversification. listing business, notwithstanding the change in accounting methodology, revenue on the old basis, the flow was up 71% last year. good performances. >> to your point in replacing the system, how are you adopting blockchain and what will that look like? it is very interesting. first in theill be market space to effectively change the whole back market system of a country in the equity post trade world. in doing that what we are bringing to the market -- it is a long process.

30 years ago we had paper and chalkboards. now this is an endgame. you have a system which gives real-time information to people. those people do not have to met -- message asx to see if it is true, because they are sitting on the blockchain. they commission on that. work in financial services, so it has functionality. that i think is exciting for participants in the industry or stakeholders, is this is not a system where asx talks to the industry and that is it, by gold systems. they can talk to other people in the industry over this system. it allows people to build multi-participant workflows. that can be powerful to end users on the system to reduce their costs. helping your business as well has been the initial public offering.

on your exchange your facing growing competition from local players, especially foreign and tech company listings. what you have in terms of ipo pipeline right now? i think we have had a strong number of years. if you look outside the growth, over the last, four or five years one of the strongest out there across the globe. there is a demand for that type in australia. historically it has been more [indiscernible] the technology side has grown. as i talked about before, the primary and secondary listings are up 38%. that is a very strong performance. given the way the market has come back the last three or four months, that probably slows things down a bit.

we have an election coming up, brexit. at the moment what is working well for our trading businesses, where equity and business volume trading has increased, it may be a moderating effect on the market raising side. as things settle down, we recently had a strong tech listing and australia, which is an offshore company. the reason they are listed in australia, estoril you has a number of tech companies listed. that company with a business offshore sod as a good place to list because australians understood that part of the tech industry. shery: i am wondering given the trends and flurry of consolidation across exchanges, have you had interest from overseas exchanges wanting to merge with the asx? believer that if you go into history, there has

been talk about cross-border. i think the trend of the last few years, people are more focusing on their own businesses in their own countries. seen m&a transactions that have not completed because joining exchanges -- exchanges are iconic after -- assets. houses are very linked into the payment systems and banks of those countries. they are very hard to merge as well. i am not bullish on global mergers. we are focusing on underlying industry, which we think we can make a tremendous difference in in reducing costs and efficiencies for customers in australia. shery: thank you so much for joining us. that was the asx ceo dominic

stevens joining us from the exchange in sydney. don't forget our interactive tv function tv . if you missed out on any part of that interview, you can watch it again. us live and dive into securities or bloomberg functions we talk about. that is on your right-hand side. send us instant messages during our shows. you can ask guests a question on the bottom left. this is bloomberg. ♪ this is bloomberg. ♪

this is daybreak asia. i am haidi stroud-watts in sydney. shery: i am shery ahn in new york. the japanese arm of struggling chinese conglomerate hna is closer to winning an investment rating. avalon's sale was completed in november. there were demands for stability. avolon'smains to bring ratio of unsecured debt below 30%. >> tesla is rushing to deliver model threes to china next month. at least three ships are crossing the pacific, among fears they may become more expensive in china. elon musk said delivering cars

to china before any new tariffs would be key is a priority when tesla reported a small and unexpected profit last month. >> airbus said to be killing the just 12erjumbo after years in service. it is prompted by emirates having a current order for 53 planes and other wide bodies from airbus and boeing. on thursday an announcement on the a380 may be made. we are headed toward the open in china. let's get a preview of what to watch on markets with sophie. sophie: we are keeping an eye on sasa. we got a false check on the lunar new year effect. chinese shoppers held back on spending. ny optical expects 2019 net profits to decline by 15%.

guangzhou auto earnings softer. chinese trade figures for january likely to show exports falling at a slightly slower pace. malaysia gdpl get reports likely to show the economy is on a steady path with expansion cnet 4.5% year on year. before we handed to bloomberg markets asia, that key trade data as mentioned by sophie. let's look at how markets are trading in asia. the nikkei 225 seeing declines. multi-month highs. seen in growth third-quarter gdp from japan. further downside of 0.5%. modest gains each doubt in australia, given we had positive -- modest gains eked out in

australia. 0.1%, s&p futures down despite the fact we managed to end in positive territory in the u.s. taiwan futures feeling pressure, down 0.5%. chinese futures were higher 0.1% when they closed for hours ago. the chinese offshore yuan holding steady. lots of macro factors playing into the market, not to mention upcoming china data. that is it from daybreak asia. china open is next. this is bloomberg. ♪ this is bloomberg. ♪ this isn't just any moving day.

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>> 9:00 a.m. in hong kong. this is "bloomberg markets: china open." >> top stories, chinese stocks drifting on a wait-and-see day, despite gains in wall street. >>