♪ >> [speaking foreign language] -- ♪ >> good morning and welcome. >> counting down to asia's major

market open. shery: top stories this hour, treasuries slump u.s. stocks swing as the boj whitening. asian futures signally mixed start. elon musk hunting for a new ceo for twitter while the ftc deepens its investigation. we hear exclusively from the world's -- largest carmaker. this was a picture. a lot of volatility, not surprising given we are going towards year end. and then the boj shock change in yield curve demand. the 10 year yelled spiking toward 370. it is not just treasuries, it is a global bond rout. rising yields pressuring tech stocks with the nasdaq falling for a fifth session. which would be the longest

losing streak since october. also, a weaker dollar helping that send oil prices slightly higher. but, it has really been about the bond markets. what happens if you have japan perhaps repatriate some of those funds because yields are rising? japanese investors have $3 trillion in global bonds and stocks. half of that stashed in the u.s.. the question is what are the implications of a change in boj policy? haidi: this could take months to play out across funding channels around the world. in asia, we are -- shock announcement from the relic that essentially there will be doubling. in terms of a set of her equities, we are seeing japanese futures pointing lower.

one big beneficiary was the bank stocks. you can see that. we have seen a general outperformance in japanese lenders with a lot of traders betting the boj would be forced to pivot at some point. otherwise, we are mixed on the session today. probably cautious trading given what you said about the wall street session and a lot of doubt over the covid deaths being reported in china as well. whether officials may be perhaps downplaying the mortality rate. let's change now because we are focused on other asset classes. what is happening in the japanese yen? is now trading like this. including against the greenback but essentially a lot of investors are betting on further strength to come into the currency. saxo bank saying it has for the room to rally. soft yen could reach 125 to the dollar by january. other traders saying it could go

further given the fundamentals still looking weak. haidi: we have breaking news when it comes to sam bankman-fried. we are hearing the ftx founder has signed extradition papers and will return to the u.s. this is according to reporting from abc news in the u.s. he signed extradition papers and will return to the united states to face extradition charges. he had a confusing extradition hearing when it appeared he was not on the same page as his legal counsel. but we have heard he said he is ready to drop extradition fight and the plan appears to be back on track and we are expecting an extradition hearing to be rescheduled trade bahamas wednesday. we are now hearing that he has signed the extradition papers and will return to the united states. we will get you more details but of course we have had authorities probing his role in

what has been an extraordinary collapse of ftx that was had occurred in the bahamas he has been -- bahamas. let's get back to the impact of the boj surprise move. our editor kathleen hays is with us. she phrase correspondent for asia. and garfield reynolds. is this corona getting his house together? ? aren't they? why now? that is what i heard all day. think about it. what changed? markets are well behaved. that has calmed. inflation continues to rise. that would perhaps be opening the door between move, except for the fact that boj messaging has been come up we do not know.

we expect this to come down next year. and we are worried there might be u.s. recession leading to global recession if the fed keeps hiking rates. that would be another thing they would watch closely. when you -- the factors, one that comes up from christopher smith in tokyo is the potential that this was a little bit of political pressure. the prime minister's approval ratings have dropped. the japanese people do not like inflation. something needs to be done. here is what he said. >> these things to suggest he political pressure is coming to bear. it is not like what happened in this handover, where you get a certain creek. -- creep. there are two frontrunners.

i think the chances are we will get the more hawkish of the two. >> to your question, people are wondering, was this kuroda's small step towards what ultimately does have to happen? back away from yield curve control and start winding down stimulus. by taking a small step now, does he set the groundwork for the next person to have to make it big dramatic step when he takes over yet -- over? one thing is for sure, the door is open. the path is set. >> garfield has a swift market reaction. the dollar is down. gold is up. i wonder, what will drive the

durability of these market moves? >> the we -- the key question will be what happens economic the. -- economically. investors yesterday saying they had been short. they are now very happy. but they are also quite positive about u.s. bonds. early indications u.s. will lower next year. there might be the case for outperformance for u.s. bonds relative to the jgb and european. because of where the three central banks are now in their cycles. yes there are short-term concerns that you will get japanese investors working more money home out of treasuries and european bonds, if there is any left in australia as well. because of what is going on with the currency.

looking more medium-term, this has reinforced expert patients hear from u.s. yield slower rather than higher. that may or may not be the case, depending on inflation. there is a strong to -- strong constituency that 3.5% yields are attractive in 3.7% are still attractive. >> what's next for the boj is a key question. at a time when the governor kuroda's term expires. >> this defines what is going on. one of the most important four months in japan's modern history. in january, a meeting in the middle the boj made the move to double band. people are not expecting any kind of move. february, we hear who the deputy

governor is going to be. that will be announced about a week before the announcement of the governor who is actually going to take over. we've got two candidates. -- is the current deputy governor and -- was deputy governor in 2013 when kuroda became governor. after that, the wage negotiations you have covered in the past. this is huge. if you want to get sustainable inflation, which the boj wants, you have to see wages rising. the march meeting markets are starting to price in another move from the boj on wheeled curve control spirit -- control. and whether or not that happens. the real steps are going to be taken by the next governor.

that is an interesting question because if the you j is -- if the boj is this concerned next year, if they are saying inflation is coming down, will they move ahead with further tight when the new governor takes over at a time where you could argue more stimulus. the government just past a stimulus package. haidi: complicated for the markets. whether you see this as 12-week or the start -- there is a crack in the markets. how much do you see that creating water volatility? got squeezed out of short trades because corona had pushed back so strongly. it seems to be willing to buy

all of the 10 year notes that were out there. and then he is upended the apple card. you're going to get a lot of people saying it is worth doing on higher japanese yields. you're going to get a lot of people either deciding to cut their short yen positions were being forced out of. the very key level is just under 130.4. because that is the high for the yen. back in august when speculators started putting yen shorts on strongly again. if we get the yen going through that level, that could set off fresh waves of selling we have already had two massive short squeezes. not bonds, -- kuroda has a track record of pulling a big surprise, then

sticking with policy for longer than anyone thought. there's a chance the boj does nothing until the success or is named. even if the boj does nothing, there's going to be so much tension as the central that they could do something where the disappointment if it turns out this is not the immediate start of something big. it is being treated by the boj as if kuroda was characterizing it overnight is a technical move to improve market function. >> he was trying to make it really clear that these were not rate hikes or tightening. garfield reynolds and kathleen hays with our top stories around the boj shock. we have an alert on the bloomberg, the ukrainian president a lot of mere zelenskyy is planning to address the u.s. congress in person wednesday. we have seen an announcement by

speaker pelosi encouraging all members of congress to attend. there will be a special session of congress coming given the end of the year. we are hearing zelenskyy with address commerce. cnn also reporting he will be visiting the white house. let's get over to vonnie quinn. vonnie: sam bankman-fried has signed extradition papers and will return to the u.s. the ftx co-founder may be sent to the u.s. to face charges related to the crypto exchange collapse. behind bars for more than a week was denied they'll in an earlier hearing. u.s. house committee us at the vote on releasing donald trump tax information. it caps a legal saga initiated by democrats to release the former president'documents.

the vote comes in the waning days of the house democratic jordanian follows trump's referral for criminal prosecution by another house panel. china has confirmed it has narrowed how it defines a covid death. it counts only victims are tested positive for the virus then died of respiratory failure. adding weight to speculation that china's low official tally is hiding the true picture of chaos. the entire country has were fewer than 10 deaths this month's. this is bloomberg. ♪ global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. ♪ shery: elon musk said to be seeking a new chief executive for twitter after users told he should step down. the ceo has been uncharacteristically quiet about the results of that vote.

su: an executive that tweets one million times a day, get out of single word on the results of the poll other than perhaps from a couple of users planed they did not get to respond to the poll or a couple that suggested botts had influenced the out come of the pole. musket response saying, open but interesting." also tweeting a policy could put in place over the weekend and then decided to put up on a vote. he has received criticism that maybe you could be only for the blue check folks, but no word yet. some 10 million respondents saying musk should step down. no discretion at all about the many people who have raised their hands, including two people.

who were said to be in the war room with musk he first took over. we do know that musk reportedly is now seeking a new ceo. he said his is -- lot of pain. bloomberg tesla stock being used as a proxy for tesla twitter due to the intertwined nature and stories of these stocks hit a new low. it has completely missed the tech rally. and the more trouble. were that the federal trade commission has expanded its scrutiny of musk since he took over twitter. we know from a number of sources that two former executives involved with clients and security have spoken to the ftc. we are told that is their

concern, privacy and security issues. the company had previously agreed to -- haidi: still ahead come of the boj's experiment with small and -- is this a sign it has come to an end? we speak with takatoshi ito about their surprising bond yield strategy. investors should be preparing for further set x before positioning for a sustained turn in market sentiment. this is bloomberg. ♪

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>> bonds slumping with one of the last anchors for yields being removed by the bank of

japan. our next guest is a financial advisor at ubs. good to have you with us. when you look at your portfolio, you see global bond years -- yields rallying. what you tell them? >> the reality is the boj certainly caught markets off guard. you look around the globe and bond yields are rising. a little bit of a selloff in the bond market. but let's rewind back to october when 10 year treasury yields set up at 4.2%. we have still seen over the course of the fourth quarter a pretty steep bond rally. at this point in time, this reminds us that globally come interest rates are still rising. central banks are also -- it is a reminder we still might

see volatility in the bond market. but we still believe at this point when you can actually get income from the bond market, but they do pose an important part of client's portfolios because why do you invest in bonds? you couldn't really get either of those over the past few years finally you can and yes we saw a slump in the bond market today but over the past week for the first time in a while we have seen diversification working where we have seen stocks selling off and bonds rallying. today is a bit of a setback but overall the grand scheme of things, we are positive. >> you look at 2023, how risk on are you in terms of what you are recommending clients how they position? >> it is still going to be a difficult year. especially in the front half. if you think about 2020 what did we experience? it was a year in which markets

will be rated to high interest rates and that drove much of the volatility of loss the bond market and the stock -- stock market. now we think about what we are seeing in 2023, it is likely going to be a year of inflections. in the first half of the year, we will see slow if not negative growth. if you look at bottoms up consensus analyst forecasts s&p 500 earnings 2023, still expecting a gain of 5%. our chief investment office thinks a decline of 4% is more so likely. that is a wide gap to be reconciled. investors need to remain on their toes. particularly after what has already been a difficult 2022. it is not just going to disappear. >> we spoke to him one money manager who is seeing close to 50% cash at the moment.

is this an indication we have gone from no alternatives to their are alternatives? >> a lot of people seem to be talking about how tina is now tara. you're absolutely right. it used to be that so many people and esters were forced out on the risk spectrum because you couldn't get much from the bond market. you certainly couldn't get anything from sitting on cash. but now if you come into some cash, you can actually now make money in cash equivalents. look at short-term treasury bonds. look at the yield to can get. there are alternatives now. for us, it is one question if you have a liquidity event, you don't want to invest that all at once.

for investors that are currently invested in might be sitting on losses in the bond and stock market, we want to be saying now is the time to liquidate and go to cash >> we saw favorable earnings out of fedex and nike. does this build a better patient when it comes to the consumer? how are you investing around that? >> it is also good to see large consumer-based companies reporting strong earnings. but that does counteract the retail sales print we saw last week. we saw the weakest print 11 months. it is still up for grabs how strong the consumer really is right now. we will see how that continues next year especially if there is recession on the table. >> crazy day. crazy week. i hope you have a beautiful year end. this is bloomberg. ♪

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♪ >> look at after-hours trading. we're looking for clues on the health of the u.s. consumer. nike and fedex beat expectations. nike saw a buildup and inventory, but sales and gross margins did well. that x was able to cut costs and hike prices. more to come. this is bloomberg. ♪

>> take a look at some of the sustained upward pressure in the japanese currency. that was one of the biggest takeaways in terms of the market reaction.

not much of a move on dollar-yen. the u.s. dollar to the downside after the announcement. the aussie dollar is fluctuating. not too much of a move. the expectation is for sstaned upward pressure on the yen. that is going to potentially take off pressure that has been squeezing households as well as negatively impacting exporters. that is one of the major rationales for why this strategic tweak was taken. our next guest says the happy end to the boj super expansion may be in sight if the inflation is replaced by demand inflation backed by a large wage hike. takatoshi ito is professor of the school at international fail -- international affairs at columbia university. great to have you with us.

is this a strategic tweak before he steps down in april? potentially taking pressure off who succeeds him? or is this the beginning of what is going to be the exit of all exits? >> well. the move is tweak. it was to ease pressure on the 10 year bonds, which was distorting the yield curve. this will restore the liquidity in the 10 year bond market. it is a tweak. but it could be the first step towards exit. we have to see the development of the inflation rate and the gdp rate hike next year. but this is the positive development.

>> how positive of a signaling was it? how strong of a signaling to the markets, no matter what his real intentions are, a related or a tweak in terms of technical adjustments. the fact that he also eased by increasing asset purchases at the same time. is this enough to tell the markets not to get ahead of yourself? >> in the q&a session of the press conference, he emphasized, repeatedly saying this is not tightening his reasoning is that if you look at the real interest rate, nominal rate minus -- that had been declining because the inflation rate was going up. raising the nominal interest rate is just moving back to neutral in the real interest

rate cents. that part i think he is right. but he also denied this is not a step towards exit and he is not preparing for any change in the monetary policy framework. that is probably not quite true. [laughter] >> if you look at the inflation rate expect tatian for next year , that has been steadily rising throughout this year. looking ahead to 12 months from now, many forecasters and inside boj are catching up to the reality that inflation rate above 2% may stay.

in the recent past they were saying no, the rate will decline next year. the hawkish factors will disappear. but now, we are seeing there is hope that demand will be stimulated by a large wage hike which is partially in response to the high inflation rate this year. maybe next year we will see it demand inflation stabilize 2%. that is the foundation for the step toward exit. >> that in itself was boj thinking and is now a big change in the last couple of months. kuroda said last night that the forward guidance has not changed. seems there is substantial for the new governor left in a difficult position. the initial change in yield curve control has been made.

the concern about possible slowdown inflation in the second half, what happens if the u.s. goes into recession? the new governor position where no matter what japanese inflation is doing right now monday still could argue we still need stimulus. it could be tough. >> difficult position i am sure. it is not only managing the inflation and gdp and unemployment and balancing between financial stability and monetary policy. also relationship with the u.s.. relationship with the government. a lot of factors are moving next year and it will be very interesting to see is a central-bank water. >> why now?

what is the rationale behind the timing? all of the challenges, not to mention we have the -- negotiations in the spring, why not leave this to the next governor? he only has two more meetings left. >> in the last few months, there has been a lot of challenges to this 25 basis points. selling pressure on the 10 year government bonds. and to keep the ceiling, boj had to buy a lot of jgb's. in the holding of the jgb's have been accelerating in the recent months. that distorts the yield curve. i think they decided this is not

good for the market functioning of the bond market >> another thing that has been bandied about, just last week the federal reserve, powell comes out hawkish. and then friday coming see very hawkish. clearly kuroda had to react. he does not call it a rate hike, but it is a bit of a rate hike. how big of a factor has that been? >> it is not direct spillover from the central banks but through the market and bond investors. if they think the japanese bond rate should rise, they -- that ceiling.

that is a market pressure in response to what is going on in the u.s. and ecb. if boj was looking at the market, not the central bank. >> global market reaction has been huge. how important are the actions of the boj for the functioning of the global bond markets? anti--- and the fx markets? >> it was a surprise in that sense. not many forecasters were saying that a tweak was coming. that was the moment that kuroda wanted to change the band. he in a sense surprise was necessary.

the first step in 10 years or more is a big change. for the investor psychology and so on. i made it surprised how big the reaction in the yen and japanese stock prices. but i think that will be stabilized in a day or two. and investors start to ingest the path to hear -- from here to the next year. it was a shock, but it was necessary. >> if the hurdle for an exit from this super expansion program is replacing inflation with inflation, i am wondering

how the reopen of the chinese economy and their potential rebound plays into the global inflationary dynamic. >> the happy scenario is dependent on the u.s. not falling into severe recession. and china will not fall into a severe recession, or financial difficulty. of course, those conditions are very important. again, it will be data-dependent on how the boj can follow that scenario. >> wrapping this outcome is the gist of what you have told us, what you see, that if the inflation numbers continue to hold up, if inflation continues to hold next year at 2% or

higher, that leaning on the boj once kuroda leaves and someone new in place, the leaning is to continue down this path of normalizing after so many years japanese monetary policy gradually withdrawing extraordinary stimulus and getting something back to the future from a more what you would call standard kind of policy that will help get the economy on track? >> yes. any central bank wants to go to a normal position where the inflation rate is 2% in the nominal rate rises at 3%. in interest rates above inflation rates. this next year will be very crucial for the bank of japan to

step towards that new normal. it depends on the wage increases and that will move into the demand inflation when the supply-side factors are disappearing. >> takatoshi ito, columbia university. we appreciate your insights as we try to digest this boj surprise bond yield strategy shift. we will be speaking more on this with martin schultz. let's look at how investors are continuing to react. there's a lot of shifting fads at the moment when it comes to repricing and forecasting expectations. the focus being on the yen.

>> a lot of strategists saying yes it is going to be strength thing further from here let's talk one hall in particular, socgen putting a specific level and date. the call is that the yen will hit 125 against the greenback by january. that is down to a function of what is happening amongst japanese international investors. the sudden policy adjustment adds pressure for them to hedge foreign assets and buy more yen and holiday thin trading. as for which countries could most be at risk from these moves can you can see that japanese investors have more than $3 trillion invested in overseas stocks and bonds. more than half in the u.s. another lens stands out. -- and another lens.

>> we have to give a big shout out to those very few investors who were already on the bet the boj were crack. >> may be an early christmas present. some investors to get this right. some had been middle -- that the bank of japan would be forced to pivot. but the question was around the timing and a handful of them seem to have gotten it right. we spoke with bluebay plus chief executive officer, he expects the upper window yields to 75 basis points by march. here's what he said. >> do we think this is just an isolated move? no. this is the beginning of normalization. they have been increasingly struggling to hold their

emergency policy. that has now changed and we are on the pathway towards normalization and the market is going to be volatile along that path. >> we will have more on the boj later. but, sam bankman-fried reportedly signed extradition a person will return to the u.s.. this is bloomberg. ♪

>> south korea's hyundai has quietly slipped into become the world's third-largest carmaker and is battling ford for second place in the u.s. sales behind tesla. we spoke with their president. >> [indiscernible] we became the first ever -- mainly driven by strong sales in the --

global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- [indiscernible] >> i think the brand has been reinforced to gain more favor from customers. [indiscernible] >> compared with other legacy automakers? hyundai has a more realistic target for ev's. there is debate in the industry about the pace of ev transition but do you think you have a good sense of how long the transition will take and how ready you are to introduce the products and have the supporting supply chain? >> [indiscernible]

-- battery sourcing. we are thinking a joint venture with battery makers. and we have a -- uptake. >> what kind of ev experience do you want customers to have? >> reliable. performance. also, how fast? [indiscernible] how the inside of the car is good for your comfort. >> quite impressive, but is this

going to the new? -- is this going to continue? the chip supply, the raw materials in every category going forward. >> [indiscernible] we expect to face headwinds including inflation. how we manage our supply chain is a key concern. as far as chip supplies, we are working hard. -- having long-term contracts. rnd is working hard to innovate ships and developing chips. >> new look at specific

challenges in overseas markets, weighty see the biggest challenges and biggest opportunities? >> the u.s. market is important. [indiscernible] -- is one of the key focus in the european market by having the product line were competent. >> hyundai president and co-ceo speaking with reed stevenson. this is bloomberg. ♪

>> sam bankman-fried has been sent to the u.s. to face criminal charges. we're hearing details after what has been quite a confusing week of legal proceedings. annabelle: there was confusion as to whether sam bankman-fried, who had initially signaled he would fight extradition, then appeared to say he would drop it. his legal team see to -- legal team seemed to be unaware.

there has been a lot of confusion but we did get the sense that he was planning to return to the u.s. possibly because he could be granted bail if he does return. that could be a reason. also the conditions of the prison in the bahamas could be another prompt to get him back to the states. essentially, he has agreed to be sent back to the u.s. to face charges. he has signed extradition papers. that is what -- this move. officials awaiting to charge him on multiple chargers including fraud. a big journey ahead. >> here is a check of the latest headlines. amazon reached a settlement with the european union following antitrust investigations over the use of its arrival. the european commission says amazon made commit and's

including stopping the use of data for its retail business. the agreement lifts the threat of heavy fines. two morgan stanley bankers have departed after being placed on leave amid a investigation into their work. sources say their exit has opened a rift with a new york firm over their continued cooperation with the inquiry. the bank has never said why they were placed on leave. the u.s. has not accused anyone of wrongdoing. daybreak: asia is next. this is bloomberg. ♪

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♪ shery: you're watching daybreak asia coming to you live from new york and sydney. haidi: