>> a very good morning.

welcome to daybreak australia. we are counting out to asia's major market opens. >> good evening. i am shery ahn. investors focused back on u.s. banks as they had an all-time low. >> risky christmas bonds are considered near zero. u.s. futures coming online in the asian session, slightly higher after we saw the rebound on the s&p 500. every sector gained ground. the nasdaq 100 was also up. really underperforming the broader markets.

there was a lot of volatility in the treasury markets. we have seen that range being surpassed over the past week. we are seeing that rebound in oil prices. look at what banks are doing. we saw that big rebound in the kbw index. first republic still under pressure. we have seen other regional lenders gain ground. >> that is right. we saw the bloomberg dollar index down at his lowest level in and around the month. we are seeing currencies in this part of the world.

the kiwi dollar a particular focus because we also had trade data coming through and we saw the deaths of it narrowing in the month of february 2 .7 billion kiwi dollar's. stronger exports coming into china and japan on the air. we are seeing that really being reflected in the further risk on tone in the market. the quibi is looking a little different. we do have equities as well looking to follow the wall street lead for the most part. using one of the standouts. already online. a little bit weaker. 30,000 seems to be the next line in the sense of the advocates. the question is how long will this be lasting here? when you have banking turmoil,

still ongoing economic uncertainty, mortgage as well. it really does is the best in markets as well. >> we continue to see uncertainty when it comes to that anyone bond losses. we are seeing losses. this was how much they had held in those so-called additional t-1 bonds because of the extraordinary government support coming from switzerland. we have seen a complete breakdown of 16 billion francs. european authorities have come

out. there really battled about who ranks first when it comes to the hierarchy of investor claims. especially if you have the next lender that could be in trouble. >> a lot of upset from bondholders. you so that widening when it comes to credit default swaps. that gives you an indication of how much broader vulnerability -- broader vulnerability and volatility there is. it didn't mean they escaped unscathed at all. we saw earlier in the monday session the biggest one-day move in european banks was in deutsche's. there is a sense that there is still that vulnerability to contagion as well. the city is widened by upses over the last month even though it obviously has not had to

digest arrival. we will be watching deutsche's given how far the revenues have fallen over the past decade. there was an ongoing set of issues that led to that final four. we saw that relief rally and some of those banking stocks. despite the fact that we continue to see the signs of stress remaining in the u.s. banking system, bloomberg is learning a federal mortgage backstop issued $304 billion in debt last week. i just can't window here. let's bring in kailey leinz. what does this mean? can you wrap what is happening with first republic? >> they are the poster child of banking express right now. but we got according to sources

familiar with the matter is basically a confirmation that banks are facing real liquidity challenges hence the tapping of that $300 billion in debt issued. this is a depression-era backstop that banks have the ability to tap. the lender of last resort being the federal reserve with that traditional liquidity backstop and discount window. we did get data last week. it really shows you they are dealing with these pretty challenges as we see a rush of deposits out of these midsize lenders. first republic enters the conversation here because it has been targeted as one of those banks that has similar concentration risk in terms of its depositor base. we thought $30 billion in

depositors and an attempted rescue last week. $30 billion is not a long-term solution. they really going to struggle with meaningful deposits going forward. we do know that jp morgan's ceo is leading a conversation about converting that $10 billion in deposits into a capital infusion. >> we are watching what is going on with the bank. are there still hoping to strike a deal? there is also the story about them trying to get money back from the bridge bank. >> yes, this auction process has taken point sometime. they did not find a better silicon valley bank over two

weeks ago. they did not accept a bid over the weekend jointly. they did make a bid on sunday for all of svb but the fdic's say they are extending that bidding through friday and are going to allow bidders to bid on the bridge banks, silicon valley bank and the private bank as well. the company said it needed to reorganize. >> limerick has learned that risky credit suisse bonds are said to be written down to zero by regulators. arrow financial reporter joins us now in sydney. so much unhappiness when it comes to how this was dealt with

across the capital structure. what do we know in terms of how the market is reacting? what's that is right. this decision to wipe out the 60 million francs worth of bonds really caused shockwaves through the market. it is interesting they are not actually trading at zero. we have learned that jp morgan, morgan stanley and other traders are buying that my two cents and selling them at two cents on the dollar. bonds can actually turn into claims on credit suisse. they are still not yet a zero because ideal has not closed. it will take another few months for that to close. these traders have until then to figure out how to make money out of these bonds that are supposed to be worth zero. >> what is the latest on how the merger is being received so far?

>> the market still figuring out the way forward. you so ubs shares down 16% and then up 7%. eventually settling around 1% higher for the day. investors are still trying to figure out how this will play out. they are not happy they have had to pause the share buyback plan. there was a plan to buy back about $5 billion worth of shares. that will not happen. ubs has to figure out what it will do with the credit suisse investment banking business. they will try to divest a bunch of non-core assets. that will not happen overnight. there are a lot of question marks about how this merger actually will benefit ubs. people think it will eventually be greatly beneficial but it will take time and then you saw s&p overnight also coming out and lowering the outlook for the bank on execution risks. there are a lot of risk factors

out there and investors still waiting out all of that. >> let's get over to vonnie quinn with the first word headlines. >> let putin says russia is ready to discuss china's initiative for ending the conflict in ukraine. putin spoke as he welcomed xi jinping to moscow for a three day visit. the trip marks the most ambitious attempt yet you play the role of peacemaker but ukraine's leaders have been cool to patients the u.s. and its allies have rejected it outright. president biden has issued his first veto since taking office. he has rejected legislation that would prevent retirement portfolio managers from considering climate change and other esg issues in their investment decisions. the labor department rules granted to do i trump euro requirement mandated that were placed retirement plans are focused purely on financial gains. sri lanka has secured a $3 billion bailout from the international monetary fund. the lender approved a 48 month

program which would include an intermediate and immediate disbursement of about $333 million. the nation is grappling with short -- the nation is grappling with soaring prices. the world's leading climate science body is warning that deep, rapid and sustained emissions cuts are urgently needed to keep climate change within livable limits. i would -- a new report has summarized five years of research. it says insuring the stability of much of life on earth is fast-moving out of reach. climate others are fast-track by every country and every sector. i am vonnie quinn. this is bloomberg. >> the latest on the feds tough call on this pause as bill dudley joins us and tells us

cutesy is likely to continue despite the banking sector turmoil. but first we will be talking market strategy with the financial and market upheaval here. this is bloomberg. his

>> we have a self-induced

crisis. >> very different than the situation we saw back in 2008. >> we think this is closer to the beginning and the end. >> we need to see some backstops in place in the weeks ahead. >> we are seeing more regulation in banks more -- both midsized and large. >> we need more supervision. not necessarily regulation. twice we are facing big fed meetings. we are still discussing if they are going to do 25 or not. >> there is an opportunity there for the fed to step in and really add a bit of confidence to the situation.

jp morgan chase strategists are warning a mix of bank failures, market turmoil and economic uncertainty as central bank continue the fight against inflation have increased -- >> we know marco so one of the biggest wars on wall street last year. we are seeing some of the conditions that look like this process. do you think it will end with the bubble burst in? >> and nothing so. i think this is a very short-term problem that the regulators will come in two. dealing problem right now is first republic. we think there will be a solution to it.

i think regional banks are important to the u.s. banking system and i think the jp morgan list was not right last year and this could be a little too much to assume that we will have a failure in our economy because of this. >> let's gauge how risk-averse or not you are. >> we see some value in the larger banks. clients have money in regional banks. even money and some of the bigger banks. when you have panic and worry, they are going to take you to the bigger boys because those are too big to fail. we are seeing a lot of clients move their money to treasuries

or the bigger banks. the bigger banks will get the bulk of the deposits. we will see if we will continue to suffer because of the lack of confidence unless they come in and actually increase the amount of insurance on these deposits. >> continue to see more and more of those trades we saw during the pandemic where you are trying to get defensive and then you go into these big techs with very strong balance sheets. is that the defensive player of the year again? >> it is for some. big tech is a good place to go. if we are going to see a slower economy, we will see potentially the fed pause here, big tech with the big balance sheet and the potential growth are going

to be a good play. some people are already flocking to that again. >> how are you positioning as you are headed toward the fomc? >> we are thinking they will raise interest rates this week. i think they will follow the ecb. they are basically saying they will pause. they are saying they are going to give the same message to say they are going to pause and see what is going to go on. they cannot deal with the financial distress. they can wait and see inflation is starting to come down. we are seeing it more around here for the very first time. i think this banking promise we have in the fact that they have probably pulled back some of their bonds, people pull back some of their spending.

they don't need to go to battle to increased interest rates. the market is estimating a drop in interest rates. we'll think it will happen. but they are already calling for that. we think they will pause. this will be good for high tech stocks to outperform. >> good to have you back. we can get around up of all the stories. these are the stories you need to know to get your day going. this is your function on the bloomberg. you can also customize your settings. this is bloomberg. ♪

>> amazon is laying off 9000 more employees, adding to cuts that were at the lodge of violence in the company history. let's go to sarah frier joins us from san francisco. do we know which department this would likely affect? is there any sense that the belt-tightening may be at a point where we now there isn't more to come? >> you never want to say it is the end because once they do this, they may decide there is more to be done as others in the industry have done but i will say what we are seeing here is cuts in their hr and recruiting department and advertising and twitch which is their videogame streaming service. these are all groups of the

business they think could be more streamlined. that is a language we have heard from other executives, meta-just had more cuts they announced. this is just a time across big tech we are really seeing a lot of focus on profits. >> tell us about how these cuts at amazon fit in with other layoffs we see among tech companies. same sectors? focusing on the same things? >> hr and recruiting cuts make sense. especially if you are going to try and lessen your workforce. >> in the advertising industry, this is seen as an interesting new layer.

you are zooming out. amazon among the other big tech companies really hired up during the covid-19 pandemic when consumers are really rely on amazon and on all the web services in order to live their lives and once the pandemic ended and then you had to work in ukraine and inflation and all sorts of other stressors on finances and on the business, all these companies that really hired them had to figure out what to do with the fact they are now feeling bloated and efficient. quick sarah frier there. there is a quick check of the latest business flash headlines. they will finance the record-breaking order from boeing and airbus. the sia says they are confident of securing the fund apostolate and thanks to the backing of the

parent company's here. the statement gary seeks to look for lucrative routes to the u.s. and europe. >> there is financing available for these aircraft. we have already made some downpayments from the aircrafts on internal fronts. >> this year has ample capacity to feel its growth as well is taking on intensifying competition. india has a fleet of 302 aircraft and nearly 500 jets. the ceo said the company has a steady flow of jet deliveries to the end of the decade. that will help growth. that w- [announcer] imagine this having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color

and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

>> you are watching daybreak australia.

banking system stress may signal the next direction for u.s. stocks. could this be the beginning of the end for the bear market? >> that is what mike wilson is saying. what he is focusing on is that falling credit availability. he says u.s. stocks will remain at an unattractive level for some time until we see that equity risk premium start to rise to the 400 mark. he says the collapse of sp -- svb credit suisse is exactly how the bear market ends because what he says happens is an unforeseen catalyst. that really focuses investors to look at what has been staring them in the face all along. they have been tracking the treasury yield curve inversion. >> the real trouble starts at

the bond market says the fed will be cutting here. the bond market is seeing some sort of recession. >> treasury yield curve inversion, we are currently just around that 50 mark in negative territory for the two year yield. in the meantime, he is suggesting that investors stay invested in those more defensive areas of the market. >> you know people are getting worried. he was so bullish in terms of his attitude last year. he is now sounding the alarm. this first quarter will really

mark the high point for stocks and 2020. that is the opportunity here. what is really driving that is similar to what michael wilson says with that concern around access to credit that is really being compounded in the market as well. they are referring to the last stage in a longer time of economic prosperity. certainly a term that will probably be focusing on a little bit more in the months ahead. >> bill dudley also saying the u.s. central bank will keep going with a runoff of his bond portfolio. kathleen hays is here with the latest. does a pause in the hiking cycle make sense?

>> it is interesting. he is an opinion, last. bill dudley said it is pretty obvious, they are not going to cut rates and they are not going to do a 50 basis point hike. he says when it comes to zero, the idea is the base case, do no harm, do the right thing. make sure you are aware of the difficulties of the financial stability. he thinks he would not argue for the 25 basis point hike. he does for the pause which he is in favor of saying. let's listen. >> the key is do no harm. we still have an inflation problem. we can do both.

we will use monetary policy to bring down inflation. >> you have to do it in a way that doesn't alarm people. >> what he was trying to say is that if you stop hiking rates, people are going to say they know something we don't know. the point is they are going to have to explain very carefully why they are pausing, how they are pausing and what it is going to be in for the economy. that is the point that bill dudley is trying to make their. >> we know the ecb decided to do. >> they have a lot of tools. that is one of the points she made. she is shrugging off the fed dilemma where it seems there is a choice that has to be made. she said there isn't a trade-off. in fact, they have all the tools they need and they are ready to use them.

>> we are very confident that the capital and liquidity positions of the bank are very satisfactory. >> even noted that among the tools they have, they have some more than the federal reserve. maybe that is what gives them such confidence. they did not signal any future rate hikes as they have in past meetings. for now, bloomberg economics coming back to bill dudley and the fed this week. she thinks he will do the right thing and he will follow the path that the ecb has started. let's get you the first word news with vonnie quinn. >> we begin with the ecb

president. saying there is no conflict between the central bank inflation and its responsibility to stave off financial system stress. she told eu lawmakers there was no trade-off between price stability and financial stability. europe's banking sector needs to remain strong. >> we are very confident that the capital and liquidity positions are very satisfactory. with significant capital ratio and the coverage ratio way in excess of requirements. question p morgan and deutsche bank have several claims filed against them with ties to jeffrey epstein. a demand district court rejected a majority of the claims. the judge allowed three of the best to proceed.

global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. >> i put in has welcomed xi jinping for three days of talks. allowing them to present the peace plan. david ingles is in hong kong. keenly awaiting any developments. what is the key takeaway? >> the key takeaway is what can xi jinping do to get blood may put into come to a negotiating table with the other parties. the issue is not between moscow and beijing. they have that no limits partnership. xi jinping did not reiterate that pledge of a no limits partnership. we all know every relationship has limits and the war in ukraine since that pledge was made before the war started more than a year ago has been tested.

the key takeaway could be if xi jinping goes to moscow which he is there for three days starting yesterday, can he move putin? can he persuade him to back off on the work? that would be progress. so far, everything before the cameras has been less about the war and more about their relationship. let me paraphrase a few things they said about each other. president xi did not even mention ukraine. mostly that china values its relationship with russia. putin called president xi a dear friend. that is the big issue here. what are the details in this 12 point blueprint that beijing unveiled last month only to be

fairly derided quickly by the united states, its european allies and ukraine because it doesn't necessarily address the withdrawal of russian troops from ukrainian soil. >> they think the other is becoming murkier.

what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

quick some pressure on the emerging as a today. we ended sort of flat. look at this chart on the bloomberg. this is showing how the volatility index has traded

below the u.s. gauge for a few days already. there will be less turbulence in emerging nations. no guarantee of insulation. let's bring in the managing director. also joining us is maria. you have the story out about how they were sticking to their guns when it came to that conviction about the emerging markets. >> they are saying this is not emerging -- and emerging markets crisis. this is a swiss banking crisis. one of the outcomes last week was bond traders around the ron

kind their expectations for hikes. if the federal reserve does not hike as much, that will eventually be positive for emerging-market assets. >> we don't think that em can be completely decoupled from the developed markets including our financial stability risks. even the possibility of a recession down the line. assets generally thrive in a set of scenarios here.

but not sufficient condition as it came through. we are starting to see some of these here. we wondered if the rate cycles will be completed. early in the year, we started to see growth and inflation in the u.s.. we have been uncertain look for where the dollar will be. even if we have this issue of uncertainty related to financial stability, we believe this is not yet over. >> typically in the past, we have seen china as a significant anchor for the broader complex. quick thank you.

it is a great question. i believe china's reopening is a better bet for the domestic chinese and not so much for asia at large. if you notice the export situation and china has started to weaken. any kind of improvement is going to be seen over the coming months. that will not so much be one that benefits the best. i am not quit as sanguine as many others are. i believe they need to provide more stemless for the economy and that their property sectors still have quit a long way to go . >> we have seen some of those cases fitting a little bit.

even before the banking issues. >> absolutely. the stars aligned toward the end of last year for emerging markets. we saw a inflows since mid-october. all the way until late january. we will have to see. we have investors from various telling us the outcome from now on is too risky to predict. we don't really know where this banking situation will take us. jp morgan also recommending clients cut through their em bond exposure because there is -- -- with some of those tactical windows being closed, where do we go? >> if you would like me to give you some trade ideas in em, i know that brazil is facing a lot

right now. by brazilian acids have already priced in issues like -- risks of the central bank losing its independence and a currency that offers strong carry. as of now, we have a central bank that was very credible. brazil had its own financial crisis. we believe they weathered it well. we are long on them. >> we did hear from j.p. morgan. we have seen the contribution of emerging markets. is this something that worries you? >> i would tend to say that the

driver may not. we have a lot to figure out about the banking situations in the u.s. and in europe. perhaps this time the crisis will not come from emerging markets. even if china has a local government at issue, at this point, there will be a source of serious contagion. it is definitely risk on the horizon. >> you mentioned past crises. does that make valuations a little bit better investing in the market? >> a great question. in terms of em investing, where they live positioned on equities. i would point out that india is looking a lot more attractive at

this stage. india is very well poised to benefit from chinese underwhelming growth. >> thank you very much for joining us. and for all of you that want to follow what is happening in the emerging markets, top em go is your function. get in-depth analysis from the debris team. plenty more ahead. stay with us. ♪

go. go green. go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars.

go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson. >> here is a quick check of the latest business flash headlines. amazon has announced a second round of massive job cuts. the ceo says 9000 more employees will be laid off in the coming weeks as the company seeks to streamline costs. affected workers will must be from the amazon web services, hr, advertising and twitch service groups. the company has cut 18,000 roles since november.

the carmaker has the foremost manufacturers with very high profitability. this is enough to be formally considered blue-chip. jp morgan is said to have all of the london exchange nickel contracts. after discovering irregularities . the news has been met with shock in the meadows world. contracts are generally viewed as beyond question. texas added hsbc to its list of financial firms to boycott the fossil fuel industry setting the bank's recent policy. the list is based on a 2021 state law that limits public

entities from doing business with firms, boycotting oil and gas producers. >> take a look at how futures are trading at the moment. they are remaining a little bit supportive. every sector on the index getting. the nasdaq was underperforming even the biggest weekly search since november of last week. we even had the bank index climbing after last week's 15%

router so. really interesting to mention first republic plunged because they had another credit downgrade. we are watching the treasury space very closely. we are watching the two year yield. training again -- training again in this 20 basis point range. >> the fed is weighing on the u.s. dollar as well. all this as expectations are building that the fed may take on a more cautious policy approach at that wednesday meeting. we are seeing that subsequent reaction across a lot of the dollar trading pairs as well. the greenback was really lower.

this is what we are watching when it comes to the start of trading in the equity session. that future session extended to just about 1% higher after this fell into very volatile trading session on monday. we expect to see a little bit more positivity. particularly as we get that reinforcement to resilience and australian banks. in the next hour, investors are guessing that they will be looking at investor strategies with ministry asset management. that is it for daybreak australia. daybreak: asia is next. this is bloomberg. ♪