shery: welcome to "bloomberg daybreak asia."

we are counting down to asia's major market opens. paul: investors weighing week u.s. factory debt against inflation concerns fueled by the opec-plus plan. treasuries gaining with stock futures little changed. the st. louis fed telling us exclusively it might make their job more difficult. plus it is decision day for the rba. economists are split on whether we will see a pause or an 11th straight hike. a bit of breaking news across the bloomberg at the moment. it is inflation data for korea for the month of march. march in line with estimates at .2% gain year on year, a little weaker than expected. that is a decline from the 4.8% we saw the month previous. there's no change in the korean won at the moment. the last trade against the u.s.

dollar, we did see the won barely brent the selling on the opec decision to pump less oil, but those inflation presses for now which predate the opec decision, are looking as if they are under control. south korean march food prices due to increased 3.4% on the year and transportation contracted. korean inflation eases to keep rates on hold. let's look at other assets trading at the moment. we are a little more than an hour away from the open here in australia. futures are pointing to a flat open. we've seen not a lot of change in the aussie dollar ahead of the reserve bank of australia decision. economists are split on whether or not we will see a pause today or perhaps modest tightening still to come, particularly in

the wake of the shock decision from opec-plcuupplies shery: we have seen market reaction before that. wti unchanged in the asian session. in the new york session, this was the biggest jump in more than a year. that led energy shares higher but it was a mixed picture because the nasdaq 100 underperformed. tesla sinking on data that showed price cuts they implemented nearly boosted delivery. we have the nasdaq 100 still underperforming and we are watching the treasury space as well. we got the u.s. factory activity number, the ism contracting. we were worried about inflationary pressures and perhaps that ism manufacturing gauge helped cool concerns a little bit. it is really about the rba today. set to decide to the liver one more rate or hit pause to gauge

the toll of aggressive policy tightening. our global economics and policy editor kathleen hays is here with the latest. economists are split. reporter: they certainly are and it is understandable. for the reserve bank of australia, they are at a point where inflation has started to come down, but it is still very high. phil lowe back in february struck a hawkish tone and then got the. that's another reason people are kind of offkilter. there's a tilt toward the pause. 11 of the economists we surveyed at bloomberg news do see the rba rate hiking because of the white line. inflation has come down from 7.4% to 6.8%. as the argument for the pause is also pretty strong, because the blue bars, retail sales are

slowing, inflation coming down pretty quickly. you have a lot of australians that will face a reset of adjustable-rate mortgages. we've seen mortgage applications starting to tail off, a sign the housing market is weakening. look course, this other divide and valley that the rba is sitting in. you can see the fed and ecb going ahead with rate hikes even though inflation had clearly peaked. then you look at the bank of korea and bank of canada. they decided to pause to wait and see what's happening in their economies and with inflation after doing summary hiking. where does the rba and up? that's what we will find out. paul: as if it was not complicated enough, opec-plus through another plate in the air on the oil price shock. how does that complicate decisions through the rba and

other decisions? kathleen: if you are watching inflations, you know higher oil prices will be one thing to push oil prices higher and push inflation higher. a lot of traders are saying after cuts in production, look for $100 per barrel oil. no surprise people are wondering , gosh, maybe everyone will have to act more forcefully. the st. louis fed chair was asked about this question. he said it is still open to question what the impact is on inflation and policy. >> this was a surprise, the opec decision. whether it lasts is another question. oil prices have fluctuated so it is hard to track. some of it might feed into inflation. kathleen: oil prices will hit headline inflation, but it is core inflation, taking out food

and energy, guiding central bank decisions. the more general trends like core inflation which is still rising in the eu that really drive decisions. one more thing to think about. it is not just that prices go up and boost inflation. it is that prices go up and your pocketbook shrinks. if you are a consumer and drive a car, you heat your house, that will pick it up. there are also big factors and it is yet to play out. paul: let's bring in vishnu varathan, head of economics and strategy at mizuho bank. i want to start with the wildcard of opec-plus supply cuts. we did hear from jim bullard who was reasonably sanguine. he did say at one point he

anticipated oil prices would rise. we heard from president biden in the last hour saying it is not as bad as you think it is going to be. what are your thoughts in terms of the oil price and impact it will have on inflation and what it means for central banks? >> let's start with what all economists do, and i do rather badly, make assumptions. the take away here is that at $100 per barrel, technically it should not worry us for the first half, because it will still be disinflationary in and of itself. it only turns mildly inflationary in the second half of the year. there are much bigger worries about oil prices because it informs expectations and business pricing. it also has an impact on household consumption. it is inflationary and deflationary in terms of which part of the elephant we are

looking at when we look at oil prices. nevertheless, the immediate effect is immediate cost shop because of expectations built in. it is inconvenient timing because just as we were getting comfortable with peak inflation stories, we might get a bump on the road. maybe we have not done enough yet, just need to push it a little more. the other one says we will see where the volatility is and we can look past this because there are bigger issues around it. firstly, if we can't afford to look past it, it may still be bad news because oil prices may quickly and brutally catch down with demand. paul: on that note, sorry to make you do this after you admitted you are not good at it, but what is your outlook for the

oil price? you mentioned 100 a possibility. could we see potentially some more curveballs from opec-plus down the track? it likes to remind people that it is still boss. >> yes. that i certainly have to agree with you because there are two things here. is the actions of the opec-plus over the last year or more than a year has informed us that they feel uncomfortable whenever oil prices receded quickly below $80. there's always been some kind of a pushback. i think that suggests markets and expectations will need to get used to the idea of oil being pretty bumpy on any declines below 75. i think for the near term at least because of the scare and the idea that they can blindside

and throw a curveball suggests oil places -- prices may end up somewhere between $85 to $95 for a few months. beyond that, the softening demand will begin to eventually dominate and we should see oil well back below $80. we expect the entire year average between 80 to 85. and 2024 in the $65 to $78 range. shery: today despite the opec-plus news, it seems markets felt relief in getting the u.s. factory gauge again contracting and this is coming on the back of our pc numbers -- core pce numbers, and people were relieved that perhaps inflationary pressures are starting to relieve. are we getting a sense there's a trend to easing prices at some point? >> i think the sense in the data

is, and i'm taking a slightly pessimistic view, rather than getting very concurrent and consistent data, i think it remains mixed. so the earlier shock of oil was the worry that central bankers will have to do a lot more inadvertently and and up breaking something whereas the manufacturing watch the silver lining saying central banks have other reasons not to. the restraints elsewhere will help offset the reaction to oil prices. that seems to be the play in data. markets are taking consolation where they can rather than resting easy with a coherent story. shery: which is why we are getting economies split when it comes to the rba decision.

we do have rate decisions from india and pakistan and developing economies, not to mention the rbnz again as well. what will they be looking at? >> by and large when we look at this in a go the woods, the decision is tightly split between -- there are two parts to the tightening angle. one is to reinforce the view that you need to commit to price stability and not back down quickly. india's cases are more pronounced given real rates remain negative. i think the rba has a much more varied amount of factors. the second part about needing to stick with it is even if inflation growth is exactly where you are comfortable with it, as was the discussion earlier, that means in stability

risks for the e.m. world remains alive. we should have to lean against these external forces so that they leave no doubt about the price mandate. it is a very tough choice. there will be a bigger amount of growth trade in the near term just to pursue stability. shery: always good to have you with us. head of economics and strategy at mizuho bank. still ahead, australia targeting its biggest polluters with new laws. we will take a closer look to shake its -- plans to shake its reputation as a climate laggard. next, chinese authorities warning executives that are crackdown in the industry is far

from over. the details, coming up. this is bloomberg. ♪

>> this is "bloomberg daybreak asia." i'm vonnie quinn. donald trump has arrived in new york to face the first-ever criminal indictment filed against a former u.s. president. he's planning to plead not guilty to charges tied to his alleged 2016 hush money payment to a porn star. he has bolstered his legal team by hiring a third high-profile attorney who previously defended paul manafort. the u.s. military says the u.s.

inspected the chinese spy balloon shot down in february and gathered -- it had gathered intelligence from military sites. nbc news earlier reported that china was able to transmit information from the balloon in real time, but the pentagon says the military took actions to ensure china gained little value from it. u.s. factory activity contracted in march by more than expected, with a closely watched gauge dropping to the lowest level since may 2020. the ism manufacturing pmi decreased to 46.3 p or the data suggest that rising interest rates, growing recession fears and tighter lending fears may be weighing on investments. time one has defended -- taiwan has defended the president's plan to meet with u.s. lawmakers. china has vowed to take measures in response. sources tell bloomberg they believe china's reaction may be

more muted than it was last august than it was when nancy pelosi visited. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn and this is bloomberg. shery: china is set to have warned its top banking executives that the corruption crackdown on the industry is not over. the warning came as authorities announced an investigation into former bank of china chairman over so-called serious violations. bloomberg's senior executive joins us. are these more signals that perhaps president xi jinping's anti-draft drive is not really over? >> i think it is trying to send a clear signal. as you said, a crackdown on financial wrongdoing, on potentially bribery and other sorts of corruption in the financial industry is not ending. it's been going on since the end of 2021. we've seen a number of

officials, a former deputy governor, a former chairman of china life, the countries largest insurance carrier, all taken in as part of probes undertaken as president xi jinping has tried to clean up the industry. we are expecting that to continue. that's what banking executives from the six largest trainees banks were told last friday. they were told just as the central commission for disciplinary exception was announcing. the former chairman for the bank of china was being placed under investigation. paul: are there likely to be any consequences here for the chiefs of some of china's big banks? >> i think the chiefs are going to be feeling the spotlight on them hotter than ever. i think -- obviously the government is trying to crackdown on any miss doing. there is a perception in the bureaucracy that a lot of china's bigger efforts be it

semiconductors and reducing debt , trying to get the economy back up and running as quickly as possible, have been undermined by corruption in the financial industry. now is the government is turning its i on the economy to get things returning to a level that we were at pre-pandemic, there will be a greater spotlight on how the financial industry operates. that's with the banking executives were essentially told. paul: bloomberg's greater china senior executive editor john liu. get a run of the stories you need to know. get your day going with today's edition of daybreak on dayb . you can customize your settings so you only get news on the industries and assets you care about. this is bloomberg. ♪

paul:paul: hsbc's senior executives have faced off, pledging to keep up dividend payments and fending off because to -- let's get to our reporter joining us in sydney. that shareholder meeting, 1100 people in attendance. it was not without drama. what were the main points of contentious? >> hsbc is spinning out its asian business. shareholders are saying the rest of underperformance and the company's operations is dragging asia down so they would like that to be split up. asia is at the heart of hsbc's business. hong kong in particular has 28% of profits and one third of shareholders so it is at the core of their business. though shareholders are not --

those shareholders are not happy. the other part of contention is dividends. in the height of covid, regulators asked banks to postpone dividend pays -- payments to postpone capital. the shareholders are saying if the bank had split up asia operations, they would not have to stop payments to asian shareholders and they would not like that. they wantthat to change. shery: what about the purchase of silicon valley bank's u.k. unit? reporter:reporter: they were questioning whether hsbc should have made that purchase. one thing they were worried about was the time to do due diligence. the deal came together quickly as svb collapsed. shareholders worried hsbc did not have enough time to do due diligence and with the loans be paid back? what kind of customers have they taken on?

these are the questions being asked but management was firm in saying this was too good of an opportunity to pass up, and also said actually it will help the bank extend its reach into tech customers in hong kong as well. paul: we have a couple of activist shareholders who want to split up the bank. what are the chances the chances that shareholder resolutions might go through? reporter: they own about 8% of the company so it is the biggest for the hong kong listing. hsbc will put these resolutions to shareholders at the formal agm in birmingham wednesday this week. but they have preferred shareholders to vote things down. hsbc is saying that we are restoring dividends, we will pay a special dividend when we sell the canadian business later this year. they are also committed to lifting dividends to 50% of turtle --total earnings.

they said this year has been the best performance in a decade, so please trust us. shery: joining us from sydney with the latest from hsbc. here's a quick check of the latest business flash headlines. china evergrande has entered into structuring support agreements with a group of its creditors.according to a hong kong exchange filing, the creditor group holds over 55% of the defaulted developers dollar notes. the agreement allows them to swap holdings for new 10 to 12 year notes or a combination of new debt and equity linked instruments. l'oreal has signed a deal to acquire an office australian high-end cosmetics brand. it gives them an enterprise value of $2.5 billion. the firm currently operates around 400 point-of-sale, and posted sales of $537 million last year. earlier reports said chinese investment firm primavera capital also sought to acquire a stake in aesop.

blackstone says clients asked to withdraw $4.5 billion from its $70 billion real estate trust. in a letter, the company said the request came at a time of tremendous market volatility. blackstone has restricted redemptions for five consecutive months, this time allowing just $666 million in withdrawals. that's 15% of what was requested. up next, we get the outlook for em assets with morgan stanley as the opec-plus production cut plans reverberate across developing economies.

shery: bullish emerging market sentiment is coming under pressure after a rough start to the second quarter. opec-plus are throwing another wrench into the works with production cuts.

the biggest losers among emfx are the south korean won and chilean peso. two major oil importers. the colombian peso had a rally against the u.s. dollar on an oil spike. let's see what's ahead with gene otani a kandhari. there has been so much excitement about em's and a little bit has faded as the year has gone through. i want to set up what happened in the first quarter assets and look ahead at what we can expect. >> em has gone through a turbulent quarter. it started with a stellar outperformance because they were more willing to take risks as with china's reopening and the

fed having less aggressive rate hikes, but then it took a hit because of the global banking crisis and investors have turned into a broadly market risk off estimate. the msci equity index has returned only 3.5%, less than half of the develop market and the dollar debt turned less than develop markets. shery: it is interesting because we saw those commodity markets really underperforming, but now with the opec-plus news, could we expect a change? what are your thoughts for the second quarter? >> i think the one thing i would like to say is the last year saw a lot of these commodity markets do well both in the latin american states and even in the gulf and that took a reversal in the first quarter. i do think given my optimistic view on commodities, both the

oil space and also the green metals, i think some of these countries have the tailwinds both from a growth standpoint. politically i feel like they will be less extreme. the markets will punish them if they do anything worse than being more moderate in their approach. also, their currencies that are looking interestingly cheap. it is very interesting to note that despite the dollar debt having underperformed in the first quarter, the local currency debt in e.m. has outperformed the global aggregate bond index. that is an interesting thing to keep in mind. i do say one thing. a drawdown in e.m. is the norm. every year since the inception of this asset class in 1988, the median drawdown on an annual basis is 19%.

you have to stomach the volatility in this asset class. paul: you mentioned debt in em currencies but what about the impact of the u.s. dollar on this story? it's been weakening but it is still very strong. how does this alter the picture for em investing? >> i think the two biggest in a simplistic manner, the two metrics that really work for the asset class relative to the developed markets in the u.s., one is the growth differentials, which is the dollar feeds into that. i believe we are in a weaker dollar cycle because of a couple reasons. one is dollars starting off this decade actually in very competitive metrics, it is

expensive. the other thing is the reserve bank diversification is also happening. there is evidence of that in central banks globally bought the largest amount of gold in the last year, highest on record. all of these alternative payment systems we are hearing, it is just going to dim the dollars dominance over time, and the rate differentials and growth differentials that really drove the dollar relative to most of the em last year, that is reversing. i think the growth differentials and rate differentials will favor the emerging-market asset class. again it is heterogeneous, but that is my view. shery: we have seen wall street pretty risky when it comes to riskier em investments. >> investors and analysts are

quite split on that but of course, their opinion is nuanced. it is very diverse as an asset class. me and my colleagues are hearing that some people would prefer or recommend higher yield and dollar denominated bonds because they want to take advantage of the e.m. selloff. other investors and analysts are flocking to the higher grade because they think it is much safer to park your money. shery: talking about stability and perhaps that fear of uncertainty, how did e.m. banks perform during the banking turmoil we have seen so far, and what are we expecting for the latter part of the year? especially we were thinking all of this will eventually lead to perhaps even a recession, the fact that we might not end up with a soft dish landing here in the u.s. >> interestingly, e.m. banks in

the last quarter were down 140 basis points. european banks were down 15%. there's proof and the putting in terms of the performance of e.m. banks. they are much more better capitalized and they have regulations and rules around government securities and how much you can own and market to market losses. i think that's an important sign. also banks are a good way to play the domestic growth story in emerging markets. we do like the financial sector overall in different pockets of e.m. the one thing different this time compared to the past e.m. risk off periods is the fact that the dollar, the local currency debt which used to be owned by foreigners in many of these emerging markets, that has

come down significantly. so take a market like indonesia and mexico where foreign ownership in the local bonds used to be as high as 40%. that has gone down to sub 20%. what was the original sin? they used to borrow, there was a risk off, money used to get oiled out. interest rate response by the central bank, it clampdown on economic activity and stock markets. at -- i see that being different this time. if they did not expand balance sheets the sovereign level and private level, of course china did that to some extent, but a lot of bad debt is not truly owned by foreigners to the extent that it used to be on. so any risk off globally will

not transmit in the same way like in the past. if there is a recession, yes, everyone will correct, but the important thing is even in 2000, between 2000 and 2002, when the u.s. was having a recession and drawdown, in the second half, em's started out. once the cycle cleared, they were off to a bull run so i'm hoping it is the same this time. paul: just want to get your thoughts about the role inflation had to play in e.m. stories as well. some markets are seeing extremely high inflation. even in india where the rbis expects the rate to hover around 4%. >> another interesting stat, why is this time different? emerging-market inflation for

the first time since the inception of this asset class is lower than u.s. inflation. the starting point in terms of the absolute quantum of inflation is lower. a lot of the inflation in emerging markets is very supply driven and related to energy and food prices which is a lot of cpi compared to the rest of the world. unlike u.s. inflation, which is supplied driven, there's a wage issue and labor issue. i don't see signs of that at the emerging markets space. i see inflation coming down. some hikes are at the margin with india that may be possible, but i don't see the structural inflation issues like icy in some of the developed markets. i know you mentioned pakistan. there are pockets of e.m. like

pakistan, egypt, argentina, ethiopia and sub-saharan africa were sovereign debt is an issue. there is an issue and some of it is manifesting in markets, but these are just around 5% of global gdp. they are small in terms of the overall size to really make -- create a systemic issue here. so i am much more positive the e.m. inflation story is less supply driven and less intrinsic to the issues the developer is facing. shery: just tarry a kandhari -- jitaria kandhari, good to have you with us. we will continue to discuss where emerging markets are going because china is a huge part of the equation. we are seeing perhaps the dominance of the yuan starting to grow a bit.

paul: it was interesting to hear about debts being held in local currencies and being owned locally as well. very interesting story, particularly when it comes to russia. a year ago, you on trading in russia was rarely noticeable. you see it on the yellow bar at the far left of the screen. now look at it. it surpassed the u.s. dollar in terms of transactions. commodity imports from russia into china are at 29%. trading are really really gaining currency, probably to avoid sanctions. shery: that really made a difference when it comes to the yuan dominance in these transactions. what is interesting is we are also seeing it play among other trade partners like brazil starting transactions in yuan. they are making it easier to

transact with china and the chinese currency and of course this is more signs of the growing trade and investment ties between brazil and china. the first latin american bank to sign up as a direct participant in china's cross-border payment settlement system. that will be the cips which is the alternative to the u.s. dominated global system and china and brazil agreeing to settle trades in their own currencies without the need of an intermediary like the u.s. dollar which takes us back to the point jitania was making. dominance of the u.s. dollar in future years will weigh in. for now let's get to the other first word headlines with vonnie quinn. vonnie: thank your the chinese government is said to have warned bankers that a crack down on the $60 trillion industry is far from over.

sources say the message was delivered in a private meeting friday. it coincided with an announcement into the investigation into the former chairman. authorities say he suspected what they call serious violations of discipline. leonardo dicaprio has testified. dicaprio was a witness at the trial of pras michel, charged with using the u.s. government to influence money stolen by low. three locations near taiwan and the fourth close to disputed parts of the south china sea, the u.s. will have access to nine sites in the country. china has territorial disputes with the philippines and has described the plan as an attempt

to contend with beijing. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn and this is bloomberg. paul: still to come, surprise production cut by opec-plus and what it means for the green energy transition. this is bloomberg. ♪

paul: oil has rallied the most in more than a year after opec-plus announced a surprise output clot -- cut. what could this mean for green energy campaigns? >> we are likely going to see a knee-jerk reaction in some corners calling for increase in production by western countries such as canada and the u.s. at the same time, it is unlikely we will see a shift in transition strategies of companies. certainly any additional inflationary impact may result in higher interest rates, hence higher financing costs for green energy products. that would also impact fossil fuel so that would be a wash. what opec-plus latest moves highlights is the need for

independent countries to accelerate a transition to reduce dependence on fossil fuel supply and price volatility. shery: australia has also passed a key claimant policy. how significant is it? >> you are referring to the amendment to the safeguard. australia has had the safeguard mechanism in place since 2016. this mechanism covers high imaging facilities outside of the generation sector. roughly 30% of australia's emissions are covered by the measure. what the measure required was these facilities would have to reduce emissions relative to a baseline either through technology use or by offsetting the uses of australian carbon credit use. previously the baselines were set generously, meaning the result was effectively there was no emission reduction.

as the australian team put it, they needed to go to the dentist to get some teeth and this happened to the amendment last week. baselines have been tightened so there will have to be actually emission reduction. paul: and whopaul: are the potential winners and losing -- losers when it comes to that amendment? >> under the rules and facilities, if the facilities exceed admissions -- reductions, they will be awarded safeguard credits. effectively this creates a new carbon market in australia. at the same time, older facilities would face more pressure to reduce emissions. the amendment does not directly discuss how new facilities for example would be treated, but this is an area of intense negotiations between the labour party and green party in the run-up to the amendments.

ter of climate change and energy put out right before the amendment was approved suggests that effectively any new fossil fuel project would have to be net zero compliant. this does have an impact for example on new gas projects that would be feeding existing lng terminals. shery: our head of green energy impact research. citigroup says although the oil production cuts will mean higher than average prices, the are still a ways off reaching the $100 per barrel level. we were told that supply would need to be much tighter for crude to hit triple figures again. >> we are considering higher prices than we otherwise had. and yes, there is a scenario for $100 per barrel oil but i don't think we are near that yet. to get to that, we would need significantly more oil taken out of the market and have a lot of and certainly -- uncertainty taken out of the market.

we would have no sense because of the domestic situation in those countries of one oil could come back on the market. >> can you frame out how much of a surprise this cut was, which was unexpected, and comes at a time when some are speculating it was politically motivated to send a lot to washington and boost oil prices, meaning more cuts down the road if it doesn't work? >> >> it was definitely >> designed to boost oil prices. they are looking at $60 oil prices straight on. yes, they seen a rally based on a whole bunch of things they consider to be temporary, not permanent. yes, they want higher oil prices. the country said we are looking at saudi arabia which has a significantly higher breakeven than a lot of other countries. they are more comfortable with oil certainly within $80 base and not bad with a $90 base. they can see too much in the way

of damage of the global economy at $90 a barrel last year. i don't think we are staring in the base -- face of $100. certainly we are flirting with a market that could see more demand in spring and summer than we otherwise thought might be, but i think the price will cap that demand. we are looking at a world of around 1.5 million barrel a day demand. opec was at a higher level than that. there was some political factor i think involved in their own very tight supply demand balance even in the last report. this goes against that and says there is something going on. i think it is the defense going on. they want higher oil prices and they needed to reinvest as rapidly as possible. but they have no better interest in $100 oil than most countries do. paul: citigroup's global head of

commodities research speaking with bloomberg's lisa abramowicz. plenty more to come. this is bloomberg ♪.

paul: a quick check of the latest business flash headlines. sources tell bloomberg a group of banks led by goldman sachs has launched a $3.8 billion deal to offload the riskiest debt

from last year's citrix buyout. the bonds are being marketed ahead of heavily discounted price of $.78, bringing the deal to 14%. banks are poised for 1.3 billion dollars in losses on the leveraged buyout. a streaming service drew more than one point four 7 billion views in the opening weekend of the indian premier league. this is the highest ever opening weekend for the annual cricket tournament. the reliance industry hopes the result will vault it to the top level of global streaming services. mcdonald's is reportedly temporarily closing u.s. offices this week while he prepares for corporate layoffs. according to the wall street journal, the company told u.s. employees and some international staff to work from home through wednesday to deliver layoff decisions virtually. this is part of a restructuring plan. shery: these are some of the

stocks we will watch when trade opens in australia, japan, and korea. australian banks and home builders in focus. the rba set to announce its latest interest-rate decision in a few hours with economists split on hike or hold. watch energy stocks, we have the oil rally continuing after the opec-plus production cut announcement. keep your eyes on these defense shares as the u.s. and south korean japan star joint naval drills off the korean peninsula. coming up, invesco explains why the current economic outlook means investors should look to adopt the barbell approach. this is bloomberg. ♪

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shery: this is "bloomberg daybreak asia." we are counting down to asia's

major market opens. we are watching the energy sector as a reaction to wti prices in new york topping $80 per barrel, and jumping by the most in more than a year on the opec-plus announcement. we had inflation concerns tempered a little bit by the u.s. factory contracting a little more than expected. paul: inflation very much front of mind here in australia as well, particularly the role it will play in the reserve bank of a straley is decisions today. we had. 10 consecutive rate hikes. economists are split on whether we get a pause or if the tightening cycle continues. shery: it seems in japan there's no question that easy monetary policy will continue, especially after the low confidence in the business survey we saw yesterday, sending the japanese yen weaker but we are seeing it

a little lower against the u.s. dollar. we are seeing the nikkei and topix pretty muted after two sessions of gains in the japanese market. we are watching jgb's because we saw them drop given today we have an option we are watching closely. take a look at what the kospi is doing because it was under pressure in the previous session. we are coming online and changing them perhaps a little bit. still down 1/10 of 1/10 of 1%. the korean won seeing a little strength but still above the 1300 level. this after it saw its worst day in more than three weeks. of course, confidence has been falling and sentiment has been souring as we continue to see the exports base for korean companies being hit lately as the demand picture doesn't look that great.

of course we know korea is a major oil importer so that also hurt its currency this week. paul: just opened for trade here in australia as well, and we do have a staggered opening in australia so hard to get a beat on things. very slightly weaker right now but not a lot of change for either the 10 year or the currency at the moment as we do await that reserve bank of australia rate decision. the rba opening the door to a pause, economists split on whether or not we will see that. the oil price meanwhile continue to show a fair bit of resilience after the opec-plus decision to cut supply by one million barrels. they really did wrong foot everybody because opec-plus previously said they would keep supplies study. we have heard from president joe biden saying that supply cut perhaps not as bad as everyone

thinks it is going to be. not a lot of movement in the yield on either the u.s. or 10 year the two-year at the moment. shery: let's bring in our next guest, who is positioning for a recovery from overweight on em a peck equities. daniel tabbush -- david chao, from invesco asset management. this adds up in these economies that are very oil dependent. >> i think it is throwing a wrench in the central banks in asia. we saw a pause by some central asian bankers. whether this is just a momentary pause or not, i think it is yet to be seen. i am still in the camp that the tightening of supply is more of a near term shorter-term phenomenon and won't really cause any significant changes to

the fundamental growth story in e.m. asia. shery: we have really talked about the chinese reopening from covid zero and how the revenge spending will help the em space. at the same time, we are seeing china is warning top bankers of deepening crackdowns and it comes to corruption at a time we thought perhaps the crackdowns were done with. how much more room do we have for upside in chinese markets? >> i think there is still meaningful room for upside in chinese markets. the consumption related rebound is just getting started. it might take a little while, more of a u-shaped recovery. initial demand has already played out. i think households are sitting on a pile of cash and savings. they will look to draw that down. regarding the regulatory sector, i'm not thoroughly surprised this is happening given so much

monetary stimulus flowed through the banking system during the pandemic and i think that would have caused problems in the banking industry that the government was looking to work out. paul: the shanghai composite up 7% so far so that rally does seem to have reasonable momentum behind it. i'm wondering what your thoughts are on track as we see alibaba looking to split into six units and other companies following suit. >> i think the split up make sense from a corporate and structural component that the companies can better tackle regulatory risks along the business. i would not say it is out of the regulatory woods yet, but it is clear the government has laid a pathway and i think some of the recent announced measures like jack ma returning to china, i

think these are positive signs. paul: in terms of risks, i know one of your key concerns are the chance of a policy era. we have opec-plus throwing another wildcard in terms of the supply cuts. how much more likely does that make a policy era in your -- error in your view? >> i think the policy is cut low given how quickly central banks have been responding to recent debacles. we are seeing regulators and policymakers move with lightning speed because there able to ensure risk is not spread or contain june risk is not overcome. the policy mistake risk is there but i don't think it's a high probability.

paul: david chao, a peck market strategist in asia, thank you for joining us. let's go to vonnie quinn. vonnie: donald trump has arrived in new york to face the first ever criminal indictment filed against a former u.s. president. he's planning to plead not guilty to charges tied to his alleged funny 16 hush money payment to a porn star. he hired a third high-profile attorney who previously defended his former campaign chairman paul manafort. the u.s. military says the suspected chinese spy balloon shot down in february gathered intelligence from military sites. however, the u.s. is able to limit what it collected. nbc news reported china was able to transmit information from the balloon in real time but the pentagon says the military took actions to ensure china gained little value from it. taiwan has defended their president's plan to meet with u.s. lawmakers led by kevin

mccarthy. the house speaker is set to host a meeting wednesday. china has vowed to take resolute measures in response. sources say that they believed china's reaction may be more muted than it was last august when then house speaker nancy pelosi visited taiwan. nato allies are being urged to pitch in to help provide ukraine with nonlethal aid in the war effort. nato foreign ministers meet in brussels where they are expected to discuss a longer-term program for ukraine. leonardo dicaprio testified at the trial of a grammy-winning rapper. discussing his party fueled relationship with a fugitive financier. jho low is accused of embezzling millions of dollars from 1mdb. dicaprio is a witness in the trial of pras michel who

attempted to influence the u.s. government using money stolen by low. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn and this is bloomberg. paul: thank you. still to come. taiwan defends the president's plan to meet u.s. lawmakers led by house speaker kevin mccarthy. we will have analysis on how beijing might respond. next, the supplies -- surprise oil cut from opec-plus. we take a look at the market in just a moment. this is bloomberg. ♪

>> it was definitely designed to boost oil prices. i don't think we are staring in the face of 100. we are flirting with a market which could see more demand in spring and summer. they got higher oil prices. they needed to revamp and reinvest in their economies as

rapidly as possible. shery: the city global head of commodities and research. that surprise cut from opec and allies have analysts and traders scrambling to adjust and setting the stage for other non-opec producers to vie for a market share in asia. su keenan joins us. what kind of market shifts are we looking at? reporter: it opens the door for other producers including u.s. oil exporters to get a piece of the asian market share and if anything, it puts focus on it right now. since opec-plus started managing supplies more actively in 2017, the member states had favored flows to asia at the expense of countries like the u.s. last year for instance, most of the oil from 70% from the group went to asia, up from 2017. but since 2017, the share of opec-plus oil bounce from the u.s. has fallen. with u.s. oil production on the

rise, there's a view american exporters will look to opec-plus as their opportunity for a land grab, a market share move taking a bigger piece of demand. markets have ramped up ability to process later grades that are more popular in asian countries. the expected cuts to suppliers from opec-plus will start to have an impact here in the u.s. in july and that's the height of the u.s. summer driving. drop into the bloomberg nu will see why nymex traded oil here in new york, the wti contract spiked immediately above $80. in asia trading, we are seeing west texas intermediate and brent crude continue to hold initial gains in the last 24 hours, if not drop back slightly and that's and many of the oil and oil related products. analysts here in the u.s. have scrambled to boost forecasts,

although they are divided as you heard, as to whether it gets to 100. goldman notably believes brent crude will get to 100 by the end of 2024 and 99 by the end of this year. different analysts are saying short-term, clearly there's a push higher. not quite clear with the longer-term impact will be. paul: as we keep describing this, air was at this -- surprise move, opec-plus said they would keep supplies steady and then cut supplies by one million barrels. what was the motivation? reporter: we are told by those close to some decision-makers that it was aimed at short-sellers and many who had a position that oil would move lower and viewing this as a rug poll. it was a real surprise. opec members are known to feel

that sometimes analysts and traders get complacent in their view of what opec will do and almost unanimously they thought opec would stand. opec-plus had promised to maintain their output goals so the cut by almost all of the countries involved came as a huge surprise. many see it as a return of a tactic used by the saudi energy minister in 2020 when he famously said he wants the guys on the trading floors to be as jumpy as possible and vowed, "whoever gambles on this market will be ouching like hell." the anticipated move is an attack on the short seller and being viewed as very successful. when you have a market that is short, you can see huge spikes higher which is what we've seen in the last 24 hours.

there's big concern particularly by the biden administration that this boosting and oil price will affect gas prices and directly ties into inflation which is something the fed is trying to beat here again. many were blindsided by the move by opec-plus and were told by those close to the matter who say it was a last-minute decision and it was intended to be a blindsided move. paul: well, mission accomplished. economists are divided over whether australia's reserve bank will raise interest rates for an 11th consecutive meeting, or will it hit pause after seeing softer inflation data from last week was mark -- from last week? we don't often see this division when it comes to guessing with the rba will do. why are we seeing that this time? reporter: although the economy

is in a situation where we are seeing a cool and prices, we are seeing a cooldown in consumer spending, which calls for a pause in the tightening cycle the rba started in may last year. it has been 10 back to back increases. there should be a time when they stop and assess how the economy is doing. that's the reason why some economists expect the rba will pass today. on the other hand, inflation is still really high around 6.8% which is way above the 2% to 3% target. unemployment is near a 50 year low which is pointing to positive signals for pressures. that is a reason to continue to hike. house prices are also stabilizing from march, which is another reason to keep their

pedal on the accelerator. it will be a difficult decision for them, but they have signaled that they want to pause and go slow. that is why markets are fully pricing in a pause. markets are signaling that the rba is done. shery: you mentioned cooldown's, whether prices or spending. what does that mean in terms of the governor philip lowe being able to engineer a soft landing? reporter: the governor has been one of the rare policymakers globally who is talking about a desire to engineer a soft landing. if we see other central banks including the reserve bank of new zealand, they have been talking about beating inflation at all costs. so in that sense, the governor

philip lowe has been an outlier. it looked like he would be able to engineer a soft landing, because he has moved slowly compared to other counterparts. if you see what the fed and rbnz has done, they have raised interest rates by more than 400 basis points in the tightening cycle. rba has done 350 basis points. it looks like it will be done. even economists who are predicting a hike think it will be the last hike. whether they pause or hike, they are toward the end of the tightening cycle, which is a good reason why economists in general expect australia can avoid recession. paul: the markets suggesting the rba might be done. is the housing market running the rba as well? we've seen those recover also. reporter: it looks like that. especially last month, prices were strong in march and it was the second straight month of

strong prices in sydney. it is set pricing that the housing market is going up after so many interest rate rises in the cash rate is now at a 10 year high almost. a lot of borrowers are facing the heat from rising repayments. there are some who had fixed loans and that is coming up for renewal in april and later this year. they will feel the pressure this time as well. it is quite surprising housing markets prices in australia are rising but economists are looking at the data with some degree of skepticism. shery: a preview of the rba decision to come later today. you can get around above all of

these stories you need to know to get your day going. terminal subscribers go to dayb . it's also available on mobile in the bloomberg anywhere app. customize your settings so you get the news on industries and assets you care about. this is bloomberg. ♪

shery: china warned its top banking executives that the corruption crackdown on the industry is not over. friday, authorities announced an investigation on the former bank of china chairman over so-called serious violations. for more, let's go to our greater china senior executive editor john liu in shanghai. markets were expecting perhaps the crackdowns across china were done with, but what are we hearing when it comes to the banking sector?

reporter: we are hearing that the inspections into potential improprieties when it comes to the banking sector will continue. we've had this crackdown that started in late 2021. that's already seen us encz -- deputy central bank governor and regulator, the former head of china's biggest insurance company, all being taken in and investigated, prosecuted. it has been wide reaching. the latest, the former chairman of the bank of china was removed from his post about a month ago last friday. as the commission was announcing he was coming under investigation, they had also called executives in for a chat from the biggest chinese banks, telling the bankers that this investigation, this probe into wrongdoing would continue, and

the bankers need to make sure their underlings were following the rules and avoiding with the regulators are calling a hedonistic lifestyle. paul: nobody does investigations quite like china. and 2021, we have the former chairman of a bank -- of a company executed. what are the implications for the bank chiefs? reporter: the former chairman, just the sheer magnitude of the bribery and corruption he was convicted of, led or resulted in his execution. i think it's unlikely we will see another situation quite of the same scale. obviously, it is hard to speculate until we get more facts. i think the immediate result will be a chilling effect on the finance industry here in china,

as bankers are looking over their shoulder and making sure that whatever project they are working on, they are being extra careful and not doing anything wrong, running afoul of any rules. paul: bloomberg greater china senior executive editor john liu in shanghai. let's get a quick check of the latest business flash headlines. l'oreal has signed a deal to acquire australian high and cosmetics brand aesop. this gives them a value of $2.5 billion. they had posted sales of $537 million last year. earlier reports say chinese investment firm also sought to acquire a state. bloomberg has learned hbo is close to a deal for a harry potter tv series based on the seven books by j.k. rowling. let's hope the series can bring the matter to a new streaming strategy to be announced next

week by parent company warner bros. discovery. the eight films generated worldwide ticket sales of more than $7.7 billion. plenty more to come on "bloomberg daybreak asia." this is bloomberg. ♪

>> st. louis fed president james bullard says the strategy in dealing with the banking breakdown and inflation is

working. he also told us that higher oil prices might make their job harder. >> i do think the reaction to the banking problems was swift and was appropriate and both here and in the united states and overseas, and the idea that there are macro prudential tools that you can use in this situation to calm things down seems to have worked so far. we can react with macro prudential tools again. on the monetary policy side, we can still proceed to fight inflation and get inflation down . so i think this idea that you can walk and chew gum at the same time, you have the macro

prudential tools for financial stress and monetary policy to fight inflation. we can do both as long as financial stress does not form into something much larger. so far, so good. >> does $100 oil complicate your job? >> of course, oil price is always important. i would have expected somewhat higher oil prices anyway with china coming back sooner than expected during the first half of 2023 and strong date in the united states. all of those are pretty bullish factors for the oil market. this was a surprise the opec decision. whether it will have a less than impact is an open question. >> you are talking about an

effective rate of 5.6 per say -- 5.6%. can you explain why we need to go back to create the terminal rate? >> i think we will need to get over 5%. i think inflation will be stickier and i would look mostly at the core measures of inflation. we are still talking about a lot of inflation, more than double our inflation target. oil prices fluctuate. it is hard to track exactly.

some of that might feed into inflation. >> st. louis fed president james bullard speaking exclusively with bloomberg. let's take a quick look at the asia-pacific. the kospi the best performing index right now. we did have slightly better than expected inflation numbers out of korea. cpi four point 2%, fairly significant decline from the 4.8% from the previous month. the nikkei better by 1/5 of 1%. in terms of sectors in positive territory, it is energy stocks that are performing pretty well again. >> as we head toward the china open, we are watching evergrande which is entering into

restructure and support agreements with the key creditor group. for more details, let's bring in our china expert. what were the key takeaways from last nights announcement? >> when evergrande first defaulted everybody understood this would be one of the biggest restructurings ever in china. nearly $300 billion of liabilities. as more details come out, we're seeing that complexity. there are different classes of creditors that were eligible for different classes of potential recovery. there are two options, one is getting a bounce in 10 or 12 years that would make sure or being able to have the short-term maturity of five or nine years, but you would also get bonds that would be exchangeable into equity of all

three companies. as the details come out, we're seeing the complexity, so many different creditors there are and how long it will take them to get their money back. >> how long will this restructuring take to play out and what are the next key milestones? >> there is a consent vote in april. we will get really indications as to what the support is. in the meantime, the stock trading suspension remains. the company has still not released 2021 results. until the entities released at least 2021 results, creditors want to have a good

understanding of the equity of the three companies have. perhaps in this initial vote throughout april, will not seek too much support. >> bloomberg's coming campaign kings buried there. let's get over to vonnie quinn. >> the chinese government is said to have worn top bankers that a crackdown on the industry is far from over. the message was delivered during a private meeting on friday. it coincided with the announcement of an investigation into the bank of china's former chairman liu liange. he is suspected of serious violations of discipline. u.s. factory activity contracted in march by more than expected.

the data suggest that rising interest rates, growing recession fears may be weighing on business investment. in india a court has suspended a two-year prison sentence for the opposition leader as he appealed his conviction in a criminal defamation case. he was sentenced and disqualified from parliament for allegedly making derogatory remarks about the prime minister in 2019. the philippines is giving the united states military access to an additional four sites. three of the locations are near taiwan and the fourth is in disputed parts of the south china sea. china has territorial disputes in the philippines. 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. >> tensions between the west and

china will form the backdrop of two high-level meetings. emmanuel macron is headed to beijing to meet with as. an upcoming meeting between taiwan's president and the united states has china on edge. let's discuss this further. rebecca, china has promised a response to this visit. what might we anticipate here? >> we do typically see china putting forth some kind of retaliatory measures when we have these high level meetings. china has promised and made its discontent very clear so far. we are expecting a much more muted response. the typical thing we can expect

is more crossings over the median line. but unlikely to go as far as for example the blockade scenario that we saw following nancy pelosi's visit. what can we expect from the other visit happening? president macron and other officials headed to china? >> this high-level visit is of symbolic value. china is pushing to recite its diplomatic ties with europe. the big question is whether this marks the turning point of russia's war in ukraine. this is the big ticket item and the micron has portrayed himself as trying.

he really does need a win coming out of this. we have this geopolitical crisis potentially at stake. we expect to see some sort of deal. we could see a post -- to host of bilateral deals. plenty more ahead. this is bloomberg. ♪ go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson. shery: energy is one of the big

leaders in today's session. industrial stocks also gaining ground. tech is unchanged at the moment. we are watching the price of oil very closely and still above the $80 per barrel after the surprise announcement from opec about supply cuts. paul: hsbc executives have faced off election to keep up dividend payments.

with us now is daniel tabbush, the founder of the tabbush report. plenty to get into from the shareholder meeting. 1100 shareholders in attendance. let's start with the dividend. there are substantial capacity to keep dividends flowing. how does the capacity look to you? >> i would tend to agree that capacity for dividends as high. it is just the concern with what has been happening in the u.s. and switzerland is that banks globally will want to come: -- become much more liquid than they have been, possibly constraining share buybacks and limiting dividends. it may not be by choice. they may be the case that there is greater regulation around the capital ratios, around dividends , so it does not come at a great

time for this pledge. and remember, a lot of these potential risks to buybacks and to dividends be more liquid is all very new and as well potential greater regulations. paul: i want to raise another thing from the shareholder meeting. activist shareholders are trying to persuade hsbc to spin off its asian operations. how much merit is it to the idea and can you see it happening? >> i suppose that is possible. it is not really the character of hsbc holdings. most all of the value in hsbc holdings's asia. it is difficult to see they would want to do this having not

done this in the past with their subsidiaries, but suppose they do do it, i just could imagine that the costs to do this would go unnoticed, especially in the first interim period or the first year, to have the structure completely change. who knows all the regulatory costs associated with spinning off the asian business. i am not sure at the outset that it would be good for profit at all. longer-term, it is unclear because hsbc has never really done this before. historically, hsbc has struggled with containing costs. so this could be an issue with the spinoff. shery: how does hsbc's pivot to asia look right now? >> that is fairly new and there

has been high-growth even well before the announcement. there was growth in the last couple of years in china, especially in corporate banking as opposed to personal banking. so it is probably a better focus point geographically than the united kingdom or north america. but there is a lot more risk now that credit metrics worsen considerably globally as banks tighten credit, as they hold more liquidity, as capital ratios probably have to rise in some way. and who knows how much off balance sheet moves on balance sheet in this environment. this is all very new, these liquidity concerns in the united states. shery: how does the oil shock

and potential rally in prices factor in to those risks? >> it exacerbates the possibility of worsening loans. all of a sudden you have this not on the demand shock in oil prices at a time when there were already concerns in credit metrics. it makes it much more likely that banks will have to take more provisions for certain types of loans, may be specifically in commercial real estate. and this is something that banks probably were not looking at a few days ago with respect to oil prices. remember, liquidity risks for banks are very different than credit and we may now have both. paul: you mentioned earlier about the possibility of more regulation for banks.

in your view, is that what is needed? there is already a lot of regulation. >> that is a good question and i think you are right. i do not know if it is what is needed. maybe it is enforcement and better regulation of existing rules. it is funny because we have a situation where a lot of banks had trouble just from holding safe bonds when there was a bank run. and there is no single model for how to run a bank. but adding more regulations is probably going to happen, whether we think it is necessary or not. shery: how do asian banks compared to the rest of the world, especially as we saw the

banking turmoil in the united states and europe? >> a lot of banks in southeast asia are much more liquid, they have a lot of securities, cash and fairly high deposit ratios. a lot of these banks in indonesia, thailand, philippines are fairly insular in what they do. that is different from some of the big banks in japan and hong kong. there are differences between southeast asia and north asia. shery: daniel tabbush, always good to have you with us. founder of the tabbush report. be sure to tune into bloomberg radio to hear more from the news. listen through the app. plenty more ahead.

stay with us. this is bloomberg. ♪

paul: let's get a quick check of the latest business flash headlines. sources tell us the group of banks has launched up $3.8 billion deal to offload the riskiest debt from last year's

buyout -- citrix by out. wall street banks are poised for $1.3 billion of losses on the leveraged buyout. geo cinema says it is the highest ever opening weekend and bonnie's reliance industries says it helps able lifted to the top level of streaming services. hbo is close to a deal with a harry potter tv series based on the books by j.k. rowling. a new streaming strategy will be announced next week by warner bros. discovery.

blackstone says clients asked to withdraw $4.5 billion from its real estate trust. the requests came at a time of tremendous market volatility. blackstone has restricted redemptions for five months, this time allowing just $66 million in withdrawals. china evergrande has entered into restructuring agreements with the group of its creditors. the agreement allows them to swap their holdings for new 10-12 year notes. shery: take a look at how asian equities are faring at the moment. we are seeing some of the gains in the nikkei reversing and now holding steady.

they are watching the impact of the opec+ output cut in the japanese economy. we are also watching what the kospi is doing, gains about a half a percent. the bok says the slow trend of cpi growth will continue because of the effects they are seeing. we are also seeing the asx 200 extending gains to second session, not suppressing, energy shares leading those gains. paul: let's take a look at the oil price. seems to have stabilized after all of the drama we saw yesterday. brent at $85 per barrel. opec-plus surprising everybody by announcing it was going to cut supply by one million

barrels per day. the motivation for this to remind short-sellers that opec is still a big player in terms of its ability to pull the rug out from under unsuspected markets. we have natural gas prices as well, remaining stable at the moment. that is it from daybreak asia. we look ahead at the start of trade in hong kong. stay tuned for bloomberg markets: china open. this is bloomberg. ♪

i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. >> welcome to bloomberg markets: that and the paycheck.

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