>> you are watching daybreak asia, coming to you live. >> we are counting down to the open. >> shares falling with an after our trade. price cuts squeeze margins.

bank of japan officials are said to be wary. the biggest banks on wall street raked in gains last quarter. australia is set to release the findings of a central bank review. >> u.s. futures under pressure. this after we had some sideways trading in the new york session. fluctuating between gains and losses. not to mention corporations in the u.s. the fed's beige book would show the u.s. economy stalled in previous weeks. the previous beige book that came out -- we had treasuries falling across the curve. the 10 year yield around the 360 level. the selloff coming through after

what we saw, given that u.k. headline inflation came in above expectations. there are more bets the boe will continue to tighten. oil below that $80 per level. the oil weekly report in the u.s. showing fuel demand is stalling. morgan stanley rising a little bit. take a look at how tesla is trading after hours. we are seeing a little bit of pressure. profit being squeezed. free cash flow fell to a two-year low. we are continuing to watch how investors are reacting. >> we are very much focused on earnings and what we are hearing from central banks. from the new york fed president,

who is speaking at an event at nyu, some key headlines are banks will tighten credit conditions. they said it is too early to assess the impact of that even though we have seen stabilization coming back into the banking sector. inflation remaining too high and there is the need to bring price stability back into the market. more fed official saying there is need for tightening. we have seen the dollar rising somewhat over the past couple of sessions. in the asian space, on the new zealand dollar, you can see the drop as we have inflation numbers coming through in the last 15 minutes. a slowing, more than had been forecast. perhaps it will not be as aggressive as it has been. other central banks in focus include the rba. we expect the results of the review of how it operates.

the boj, we understand from sources they are likely to keep the settings in place. we have seen the yen trending lower. china's central bank, we will be getting the prime rates later. let's see what we are expecting of the equities space. it is still a mixed picture trending lower. fairly subdued trading. investors are continuing to sit on the sidelines, awaiting more clarity, particularly around earnings in asia. shery: let's delve into earnings. tesla has first quarter profit estimates after a series of price cuts designed to boost demand. let's bring in david. tesla shares continue to be under pressure. how bad was it? david: for a company that was up

18% revenue in this kind of market, it was a bad quarter. you mentioned free cash flow being down, it was. five straight quarters of revenue growth slowing down. that is because upright cuts -- that is because of price cuts. prices are down more than 20% for models this year. that is starting to hit margins. they used to have 25% gross margins, they are now estimated to be around 19%. elon musk said on the call with analysts that he felt it was better to keep pushing sales volume. it sounds like that will be how he runs the company going forward. he has some plants that are still ramping up production so he has even more volume that he needs to sell. you will see the potential for more price cuts and margins will be under pressure going forward.

shery: what about -- haidi: what about deliveries? david: that is on schedule to re-energize growth for the company. you might see a slowdown. it is a powerful brand. there has been a lot of hype around the truck. this should get some sales. he is relying on autonomous vehicles to bring in revenue. when it comes to autonomy and self driving features, it is kind of a prove it to me theme because they have had a lot of problems. >> watching the numbers come out of the earnings continuing to roll in. morgan stanley beating first quarter expectations, even as profits fell from a year ago.

we have the latest. james gorman saying it is nowhere near what we saw in 2008. su: he does see a little volatility ahead and it was a challenging quarter for morgan stanley but they managed to beat expectations. even as traders and bankers exceeded estimates, equity revenue came in short of expectations. the firm's investment bank was able to stave off a drop as the two key divisions beat expectations thanks to fixed income traders and advisors fees. there was a bit of a ride, almost down percent before ending with a gain. return to that fixed income sales and trading being strong.

i should point out that four of the five biggest banks h except. getting back to dealmaking, that is being watched in this whole earnings parade this particular quarter. the company's provisions for credit losses quadrupled to $234 million mainly due to commercial real estate in the macro outlook. you are looking at deals clearly down for all of the big banks. that is a reflection of concerns about recession and the headwinds and the recent turmoil. haidi: let's talk about the turmoil. -- shery: let's talk about the turmoil. what are some of the big themes coming out of these results? su: the smaller banks' pain was the bigger banks' gain. they generated more interest

income. let's drop into the bloomberg. we saw that with the big ones. jp morgan saw net income surge 49%. wells fargo, 45%. citi up 23%. the theme is big banks benefit. those regional banks are doing a little better in the weeks since the big collapses. again, a lot of deposits moved out of these regional banks and into the big banks and that offset a lot of the regular investors because they were seeking higher yields. we also got more insight into how these banks felt about helping bail out some of the troubled banks. >> bloomberg's su keenan with the latest. after this recent banking turmoil, the fed seeing signs

that access to credit is tightening. this could be a drag on the economy. we have the beige book and top fed officials seeing a risk. >> that underscores the theme. we will start with the beige book. it is the fed's anecdotal survey. they put together from each of the banks ahead of their coming policy meetings. that is why we are talking about it today. it is right around the corner. the headline is they see credit access narrowing. they see several districts, probably more than half, noticing banks are tightening lending standards. you make it more expensive to borrow or you do not landed all if someone cannot afford to pay. you also see the rate slowing and commit -- spending slowing.

it might be more of a dovish view. he is seeing it as a bit of a dove. the chicago fed bank president sees tighter credit impact on the economy. . he said we have to be patient and we have to see what it is doing. he sounds like someone who might say we better wait and see how much credit conditioning tightening is making upper rate hikes. the president of the new york fed said this will strain the impact on credit going into the economy and could put pressure on the economy. he thinks banking conditions have stabilized and inflation is too high and the fed has to restore price stability. i think he is more in the middle, leaving the door open to rates hikes. everyone is watching this and trying to figure out the impact in real-time while we might not

know for a while how this plays out. haidi: this one response is really interesting to me. he said monetary policy is not the problem in the recent banking strains. kathleen: that is a very good point to make except that a lot of people think it is. everyone is talking about aggressive rate hikes. the fed was too slow to the party and let inflation go very high and then they had to come in with four basis point hikes in a row. they try to hedge for this or arrange their books, their assets versus liabilities so it would not hit them but it did. it is interesting to me that john williams is going out of its way to say that is not the problem. i think that will be a big debate in years to come. haidi: certainly the bank of japan is concerned. kathleen: they have sound banks, they have very sound regulators.

so far, no sign of this affecting japan's banking system. our east bloomberg bank of japan team in tokyo hatted exclusive and they are saying they are wary of tweaking yield curve control so soon after a banking crisis. we already know the economists we surveyed before this group said nearly 90% would not move until june if they begin to tweak yield curve control. it might be that they are just throwing this in the pot to give more backing to not coming in and dealing with yield curve control which a lot of people think they will have to do to keep the bond market functioning properly. i think it makes it more realistic that we expect messaging from a governor of his first policy meeting. haidi: bloomberg's economics and policy editor kathleen hays. at the forefront of policymaker's minds. let's get you over to vonnie

quinn with the first word news. vonnie: ever brand come under fire for failing to publish its 2021 earnings. the stock exchange took disciplinary action by the sizing the group for the delay. the exchanges said they will notify the regulatory commission to record the disciplinary action. the u.s. supreme court extended a temporary hold on new restrictions posed by a texas judge on a widely used abortion pill. the court is weighing a request by the biden administration and a drugmaker to put the restriction on hold. they argue the curbs will lead to regulatory chaos. italian officials have said to have hinted toward taiwan that they would be willing to pull out of china's belt and road initiative. sources say italy's ministry

discussed plans to boost cooperation on ship production -- chip production during private toxin taipei. -- talks in taipei. global news powered by 2700 journalists in a hundred 20 countries. i am vonnie quinn. this is bloomberg. shery: for the month of march, economists expecting a bigger trade deficit with pressure on exports. up next, we will get analysis from main street asset management that said the earnings season will be want to forget. this is bloomberg. ♪

>> i expect the markets to

remain through the earnings season and for the next several months. any geopolitical surprise in bringing down inflation, i think 2023 is likely to end on a constructive note. >> james gorman on the u.s. economy. our next guest said this earnings season will be a tough one but profits will improve throughout the year. joining us now is erin gibbs. always great to see you. we knew this would be a difficult one. anything that stands out to you? stands out in different sectors you are watching? erin: overall, we are looking at a profit contraction. the communication services, materials, real estate's, those guys are expecting double-digit contractions, we are talking 20% , 30% from last quarter. any positive surprise going forward, that might be an opportunity.

the one thing that is really bright, the one bright spot for q1 is airlines. they are looking at a 74% profit increase. i know these stocks have had a big run-up. delta already came out, those guys really need to hit their numbers. with that kind of positive expectations, we want to see that guidance going forward. shery: we have seen this concentration, especially with valuations being run up with some of these growth stocks. this month it seems value was trying to catch up. do you have a preference? erin: they are trending closely. it has been part of this lower volatility period. we have seen the markets come down. we have seen smaller moves like two basis points. growth and value have been trending very much in line. it is really about finding individual stocks you think will carry through through the end of

the year. i am not nested -- i am not necessarily saying growth or value will change. shery: do you have any assumptions when it comes to the state of the economy or what the fed does? erin: one more hike i think is expected. we know with the last inflation report, we are getting closer to the target. they should stop hiking three months before they hit the target, at least take a pause. i am in the camp where we expect some kind of small recession toward the second half of the year. a recession, especially when we are talking about something small, two quarters and two small points, does not necessarily mean companies have to lose money or contract. gdp growth in the u.s. does not match what you see would large cap stocks.

as much as we talk about that, i want investors to remain aware it is not a perfect correlation and there are still opportunities in the stock market. haidi: does that mean you are looking for stocks that are recession proof? you are looking at stocks like apple because of what you see on their balance sheets and the prospects for growth even to a potential recession? erin: yes. i am looking more at credit tightening. we saw that was some of the reports from the beige book and what kathleen was talking about earlier. we are still looking for rate hikes, credit tightening from the banks is something we should expect. companies that have strong free cash flows do not have to go to the bank, do not have to get new loans, those of the company's attempt to do well in credit tightening environments.

good value and a good free cash flow yield, those are some of the winners that i'm looking for to get us through to the end of the year. haidi: what do you like and the rest of the consumer facing space? erin: one of the high free cash flow areas that i like, surprisingly, is chipotle. it is a little unusual. most fast food restaurants do not have those ratios but that is one of my winners. another consumer space, i like the airlines stocks. i like european airlines stocks. another area is luxury, the high end. that is part of the china reopening. it is part of pent-up demand. at the high end of the spectrum, even in the u.s., as well as europe, the consumer is willing to spend.

haidi: i was going to ask if it was the european luxury names that you prefer. even as they have outperformed this year? erin: i think they still have room to grow. i do not think we have seen the full extent of where they could be. they were doing quite well while the dollar was weakening but they have been outperforming as the dollar came back. even as we might see some tightening through the ecb and rate hikes perhaps even later than when the fed stops in the u.s., i think the luxury brands, because they are so well diversified, they have somebody brands underneath them, i think that is one of the areas where we see more global reopening. they still have room to outperform and their stock

prices have room to increase. haidi: erin gibbs, senior partner at main street asset management. subscribers can find this available in the bloomberg anywhere app. you can customize settings so you get news on the industries and assets that matter to you. this is bloomberg. ♪

>> here is a quick check of the latest business flash headlines. barclays is axing half of its notes a year after revealing a paperwork error. the bank revealed it made a $591 million blunder by selling more structured notes that it registered for.

barclays had stopped issuing after finding the mistake. credit suisse has formally filed its $440 billion lawsuit against softbank. the two has engaged in shadow legal spats in the u.s. and the u.k. this is the first legal move since the deal. one of several major scandals that knocked confidence in the swiss bank. hsbc sent proposals for a minority listing of its asia businesses would destroy shareholder value and means lower dividends. the bank rejected the partial listing of its asian unit. it described the plans as an engineering approach that misunderstood the company. up next, we will hear from deepwater asset management that says tesla is doing a good job

navigating a downturn despite missing profit estimates. this is bloomberg. ♪

>> we are not trying to take breaking actions in order to deliberately undermine competitors. we do not think about competitors that much. we are the only ones making cars that technically we could sell for zero profit for now, and

then yield tremendous economics in the future. haidi: elon musk speaking as we passed those test the numbers, and missed first quarter profit estimates after a series of price cuts designed to boost demand that put the squeeze on margins. joining us to discuss more is the cofounder and managing partner at an asset management company. let me start out with a quick chart that shows you the mess when it comes to margins and the pressure it is coming under as a result of not just a price war tesla started in china but a series of price cuts we have seen in other markets as well. we know he has amped up production. the goal of the strategy is to boost demand. is it working and that what cause? >> it is definitely working, they saw a step up from the current rate of deliveries from a low mid 30% to mid 30% in

march. it was a slight disappointment. someone was when we hoped they reported delivery numbers it would be closer to 40, but the price cuts are having the effect of accelerating growth, but they are also having the effect of having an impact on margins, and to put a finer point on that. it is a key metric for does margins is growth margins excluding regulatory credits. when you year ago it was 29%. in the just reported quarter that was 19% slightly below expectations which were calling for 20%. we have seen a 10% decline over the last four orders. -- quarters. they're having an outsize negative impact on the profitability, which gets to your lead in here. you hit the nail spot on with elon's comment, and that just jumped out at me like a red

flag, and i want to make a quick point to that. margins, and am unsure right now what he was trying to communicate, but i can promise you this. over the next day and weeks and investors will be debating this idea of tesla turning the page on their strategy from a page of high-margin vehicle sales to low-margin, high-volume. a very different approach, but he clearly is laying the groundwork for investors to go there and not worry as much about margins like they have been hyper focused on over the last three years. haidi: the question that you pose is the crux of it, right? if by trying to boost demand, boosting scale, they have not managed to boost profitability. what do they do from here? you talked about the need to reestablish a baseline. what does that mean? >> typically when you increase

scale, there are increase production rates, so each vehicle gets cheaper to make. in a normal environment, that would have a positive impact on margins. one of course, we are lowering price here, so you do not see that normal trade-off. companies will talk about improving profitability as of business scales. now we are scaling the business, and a profit is deteriorating. at the base case is just to get to a point where investors can sleep well knowing whenever marginal results are, in this case they talk about a 20% number going into march. it was 19, and they just need to baseline it. they need to create stability within it. whatever the number is, it investors need to have a sense, because absent of a sense of where it is going investors will get more nervous that margins

start to drift toward more traditional automotive companies. they are in the 8% range, not 19%. let's see some stability on the baseline. we will not get bent over the next three months. i am a big believer and where tesla is going, but the next three months there will be a lot of handwringing for investors. shery: you are a believer of targeting the mass-market, scaling up and targeting volumes. is it a matter of investors having to adjust expectations? >> it is a matter of adjusting expectations and their tolerance to get this model to produce higher margins, because eventually they need to deliver on earnings. i am a believer there is a wholesale change going on in transportation and energy, and tesla has more shots at that

transition than any other company. i believe in the concept of getting as many vehicles out there as possible, and the thought of of selling to full self driving, i believe in that too. i do not know if he was joking, but he thinks it will be out later this year. i think that this is ultimately the right strategy, and the key question is going to be how hard are they going to go after this? we can watch it by price cuts and we will know how hard they are going after that volume growth by looking at what they will do on pricing. they said they review it on a weekly basis. shery: i'm getting the cars out there, and how positive is it that they actually maintain the delivery outlook? >> it was positive. in the midst of what is going on the macro, it was positive. there is a tesla like dynamic to this, which last quarter elon had hinted 2 million vehicles,

and the questions got asked on the earnings calls are the 2 million number still on the table. he was not as confident as he was in the first quarter, so the stock went down. the answer is, yes, they are still talking 35% to 40% delivery growth. it will outpace the broader auto industry by 4x, so that is why i think we can focus in on margins here ultimately this is about a wholesale transformation in autos. shery: good to have you with us. we do have more earnings out in asia as well. let's turn to belle. annabelle: the taiwanese chipmaker will be the big focus for us today, reporting its

earnings around the midpoint in the session in asia. you can see the rally we are seeing in the stock price over the course of this year, up around 18% but not beating what we are seeing in broader gains for the benchmark. 39 of 40 analysts tracking this dog have a buy rating and are broadly optimistic, even though the company is expecting a slower first and some sort of recovery in the second part of the year. the focus today when we get those numbers out to be down to the full year guidance, and ubs is saying the big issue will be whether they revise the downward. one other big point we are focusing on today, what we get in the capex plans. the company says it sees up to $36 billion. we understand from the media that could be revised over to the $32 billion mark. that is down to that slow down

of its taiwanese expansion plans and worse that expected to recover it seeing in the broader ship -- chip industry. the other big focus is all of the news around central banks today and the rb nz very much in focus, because we had inflation data out and we saw it slowing more than forecast coming in it 6.7%. at the estimate was 6.9%. that tells us rbnz may not need to be as aggressive with their tightening and we see the kiwi dollar around a one month type. haidi: let's get vonnie quinn in new york. vonnie: the u.s. economy stalled in recent weeks with hiring slowing and access to credit nehring. at the latest report marks a step down from a tone of the previous one published in early march just before silicon valley bank's family. the beige book reinforces

expectations the fed will cause rate hikes following an increase at the next meeting. a member of the european governing council on central bank says rate hikes will have to continue if their latest macro economic outlook means intact. hernandez says the size of the next move will hinge on incoming data. he adds ecb policy will depend on how risk related to the recent financial sector's rest materialized. >> we are monitoring financial tensions created by these events , and we stand ready to respond when necessary to maintain price stability. vonnie: new data from the united nations shows india as taken -- overtaken china as the world's most populous nation. india's population has surpassed china by 2.9 million. the population boom adds urgency for the prime minister create

jobs for the millions entering the work force. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: thailand's opposition party moved forward surging in opinion polls ahead of next month's election. at the group says they want to reclaim a decade most of military rule. the leader tells bloomberg about the party's ambitious plans for southeast asia's second largest economy. >> i understand this election is about people looking for a new face and new future. people are really thinking about the inequality of the country, whether it is a choice between profit and progress. >> you said before you can secure 100 seats. are you confident, and what is driving that view? >> we have delivered.

we have approved two people our work of having us as members of parliament to speak on behalf of to try and pass progresses -- progressive laws such as marriage inequality, to demilitarized thai politics, and this time we are still trying to challenge the status quo that people have been fed up with. people are thinking about the last decade for the past 10 years. i am definitely more confident more than 100 seats will be possible in this election. >> let's talk priorities. this is an economy that is struggling, lagging behind countries like the philippines growing at 7% when thailand is growing at 3% or even less.

what is your plan to fix the economy? >> we have got to be precise with data. we are number six in terms of gdp growth in foreign direct investment. that is what i meant by the last ticket in thailand, and that is why they need a new face and new future. what we need to do with the thai economy is spread it out, decentralize it instead of having everything concentrated within bangkok. what we needed to do is three things in terms of policies, demilitarized, do you monopolize and decentralize. >> you want to rewrite the constitution, something others have failed to do time and time again. what will help you succeed? >> referendum. what we have the power to do is

we will do a referendum within the first 100 days, ask the people whether they want a new constitution. this time it will be a constitution of the people, by the people, and for the people. 10 or 12 of the amendments are from the military. only one or two by the people. this time need the constitution, the law of the land to be by the people, because we have no other choices. haidi: that was the leader of thailand's move afford polly -- more forward party speaking to our coworker haslinda amin. this is bloomberg. ♪

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>> we have saved the report from a really terrific panel. some very wise recommendations. i will confer with my cabinet colleagues and also confer with the opposition in parliament to get an element of bipartisanship around the reserve bank review. i think it is a good opportunity for australia and the central

bank to see what we can do better. haidi: that was the australian treasurer speaking to bloomberg in washington just last week about what we can expect from the rba review, and today is the day. let's take a look at what we are expecting. a lot of it is well flagged, so pretty big changes to come. >> the biggest overall will be the creation of a monetary policy board, and that would mean we have new board members. we will probably know more about these board members in fact, because the current structure, the board members do not talk, so we do not know what their views or opinions are on interest rates. i think there is likely to be transparency and more information that will come up from the rba in meetings when the changes become legislative. shery: the board's composition

has also received criticism. >> yes, and that is because of the board is largely -- the board has nine members. the governor, deputy governor, and treasury secretary are people with economic backgrounds, but then there are six people on the board who come from a business background, and the criticism is they lack the expertise that is needed to challenge the governor, and given the interest rate setting and commercial monetary policy, the rba got a lot of criticism for that board structure and having a panel that lacked the expertise it is needed in uncertain times. haidi: we won't learn about the fate of the rba governor today, but whether the expectations? because there has been so much public and political pressure.

>> that is true, is not a well-liked person in the world at the moment. haidi: and a searchable bakers around the world. >> any tightening cycle usually becomes very unpopular, so that is part of the reason. it looks like the treasurer and the governor's a good relationship. they were in washington together last week as well. with that the changes that have been flagged, upcoming changes to the rba, it looks like it will be ideal for the governor to get a year or two extension so that there is continuity at the rba, given that the board is changing, the people that constitute the board are changing as well. that is what some economists believe will happen. they believe the governor will get a year or two extension. haidi: we are looking forward to

hearing more from him in these regular press conferences that are part of the changes. we will see how that plays out through the course of the day with a press conference is expected today. lots more to come on "bloomberg daybreak: asia." this is bloomberg. ♪

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29 trillion yen for the month of march. the expectation was for a larger figure, so this is adjusted at ¥1.2 trillion coming in at a smaller trade deficit than what's expected. exports rising or than expected, or .3% year on year. japan's march imports rising 7.3% year on year, which is below expectations. the growth has slowed down a little bit. import numbers also slowing a little bit but also below expectations, which is why you have a trade deficit not as big as was expected but really growing from the previous month. we are talking about a 20th consecutive month of trade deficits in japan. we have seen the country struggled to recover from the impact of covid with weaker yen

and higher oil prices. to the u.s., it has risen 9.4%. haidi: when it comes to what we might see significant policy changes out of the new bank of japan governor, we are learning the boj is in their rush to tweak their monetary policy settings given the uncertain global economic outlook. officials are said to be wary of the lingering banking turmoil that is played out in the u.s. and europe. let's get more to eight chief economics and rates strategist. we see governor ueda progressing conservatively going into his first meeting. the question is can the boj afford not to tweak for now? >> i think from a fundamental perspective there is an argument to tweak. if you look at japan's core

inflation, it has been accelerating every month since last year. the latest number is 3.5, way above the boj inflation target. we saw the trade deficit widening and it could widen further. a stronger yen will help that as well. but of course, it is not just about japan's fundamentals. if you look around the world, there is global banking turmoil that is concerned japan. they did not want japanese banks to face the same issue, so they will take their time to leave the y cc. shery: we have seen the 10 year jgb yield pretty stable at just below the upper limit of .5%, but what are the implications for the bonds? >> last year, remember all of the global yields were surging,

and that is part of the reason why that boj 10-year yield as been up to 0.5. that is when boj is facing the largest pressure. now we are seeing global yields coming off. we know the fed is likely to stop hiking rates after the second quarter and the rest of the world, because the global recession risk. it so that actually gives a lot of leeway and room for the bank of japan to pause for right now and see what they want to do next. especially japan they do not like to do with the market expects. if everyone is looking for the next move to widen, i think the bank of japan will stand for now. haidi: what do you see is the impact on the yen and other fx in asia? >> if the boj does not offer any technical surprise it will support the again. if you look at the dollar-yen it

is always the yield differential and a safe haven story. i never a gap will push down again and we think it will drop to 130. shery: our chief rates strategist in hong kong, and we have the market opens in japan, korea, and asia -- australia as well. this is bloomberg. ♪

shery: this is "bloomberg daybreak: asia." as it investors digest corporate earnings from the likes of morgan stanley, tesla and the fed's beige book that showed the u.s. economy sold at a recent weeks where it -- weeks.

[indiscernible] haidi: we are watching for earnings, because tms see is one of the latest report. what we are watching in terms of central banks come stands -- comes down to the rbnz and rba. haidi: exactly. we are watching fort the result of this rba review. we know there will be that recommendation when it comes to splitting the board and affirming the inflation target. there are some seismic changes. the rba meetings will be cut to aid with the press conference is coming after each one. there will be the establishment of a governor a bunch because board to oversee bank management. the secretary treasury will remain on the board. jim chandler is releasing their review of the reserve bank. they will legislate rba changes beginning on july 1, 2024.

the inflation target of 2% to 3% will be capped and there will be aiming for the midpoint. the board members will publicly discuss policy. it is the decision-making powers granted to the board members and the communication aspect at the crux of this review. they will have an expert monetary policy board. the treasurer and rba have agreed to a monetary policy conduct statement by the end of 2023. let's get more on this without reporter ben wescott. a lot of these changes are quite segment -- seismic for the rba. >> this is obviously the first review of the reserve bank of australia in more than three decades. however, although these changes

may seem dramatic by an australian audience, these are things put in place for a number of years and about the u.s. and u.k., so it is bringing it in line with the major developed country counterparts. the thing this review is made explicit is this is a long-term review. this is not about decisions made by the rba in the past six months or during the pandemic but a longer term view about the future of the reserve bank. shery: tell us about the criticism during the rba's approach during the pandemic, because that really started the conversation and the debate is heating up around the government approached communications. >> absolutely, reserve bank was criticized at both ends of the spectrum. it was criticized as going too slow to start the economy, and once it became clear inflation

was rising invasively criticism for moving far too slow to increase rates to debit down. there has also been criticism of statements by the reserve bank governor that interest rates would remain low into 2024, a statement that proved to be incorrect and led to some people taken on more debt that perhaps they would have otherwise. although the criticisms have been harsh and some of these recommendations to address them, this review has made it clear this is not just about that. this is about the longer-term view of where the rba should be going forward. haidi: of course, a lot of these changes to the rba require legislative changes. does that mean this is a chance for the two which are parties to work together? is there bipartisan support? >> anyone watching the austrian government recently knows there

is not much bipartisan agreement, but this is one area in which there will be that bipartisan stance. the treasury secretary came out today saying he is still examining these and we need to go to his party room, ideas pretty positive there will be bipartisan agreement on many of these legislative changes that will be needed to enact the new rba this review recommends in an effort to push bipartisanship. the reviewer mentioned the treasury secretary be consulted on these changes, so we will be a bold new day of bipartisan agreement after this is released. shery: australian government reporter ben wescott with the latest on the rba. trading markets have just open for trade including japan and south korea. what are you seeing? annabelle: taking a look at what we are seeing in australia and the early moments. no big fluctuations off the rba

headlines, nothing the markets are paying attention to it so much given that the inflation target is staying steady at 2% to 3%. most of the action is in the kiwi dollar given that we had inflation numbers something more than forecast coming in at 6.7%, and that essentially tells us the rbnz may not be needing to be quite as aggressive as it has been over the past year or so. it is not just the rbnz we are focusing on. we have key details coming out regarding the bank of japan meeting next week, and we have a bloomberg school with sources telling us officials are likely to be wary of tweaking or scrubbing their yield control stimulus and also to keep the cap in-place at five point -- 5%. the yen has been trending lower off that, also keeping it i on the nikkei, a little bit weaker

at the start of trading. we are continuing to monitor lines from other central bankers, of course when the fed's williams speaking at an event new york. he says, yes, the banking sector has stabilized, but the issue is around access households and businesses have two credit, and that can be something to focus on a very closely. what that means for the fed is we are seeing the weaker won coming through, it is at its lowest level against the greenback since late november. another story we are tracking in korea is with the kospi. off when four of 1% this morning to a bull market. we are seeing a lot of activity of day traders piling into ev stocks. shery: let's bring in our next guest to continues to see value in asian equities. with us now is the director of asian equity research at

morningstar. how much of a discount are we talking about here? >> we are seeing a 15% discount to our estimates. and that is after we had a nice rise in the first quarter, so the average is still below where they were a year ago. shery: are there any sectors where those bargains can be found anymore? >> the sectors that did really well in the first quarter were basically communication services and technology. those of the two sectors where we continue to see a decent discount. we are looking at a 20% discount to some of our clear value estimates. at this point in time we are advocating selectively buying cheaper companies in those areas. the source can be a mix of both group and value in that space.

shery: you are saying in your notes japan is reasonably attractive. is that also a valuation plate? -- play? >> we are looking at a position where japan is recovered. some exporters will face choppy earnings because of sewer global growth, but we think the japanese companies will also benefit from china's switch to appropriate policy. we are looking at decent values there. we like sony at this stage because we think playstation shipments should start to improve. haidi: we are seeing strength and momentum gathering and it comes to trading in chinese equities. a lot of the data asurise to the upside. the consumer particularly on the higher end for goods has been particularly strong. taking a look at where we had in terms of bullish signals.

we could see that 4300 level support being held, so how much further upside it which names in particular are you liking for the china exposure? >> we are pretty optimistic on china. the switch to progrowth policies will continue for some time. what are we expect to see is the chinese consumer, that confidence will strengthen in the second half, and some of that will be driven by the fact that home prices are stabilizing and moving up. we are expecting to see some housing starts start to improve. it is still very weak in that space, but all of that will drive the consumer sentiment. we think the face of the domestic story is strong. we still like china on the restaurant side. we are seeing some of the tech names providing good a rally --

value. a lot of the big news has been done already. haidi: when you take a look at fx exposure across asian equities, what are your assumptions being made about the u.s. dollar going forward? >> we are actually not making any huge changes. when you look at things from a longer-term perspective, so when we look at the trend of the fx, we are expecting weakening in the u.s. dollar. we do have a view the fed will hike another 25 basis points. that might be got 5, 5 .25. we have a more optimistic view

that we think the fed will start to cut toward year end, perhaps december and more intensive rate cuts in 2024 as the economy slows. we feel that adds pressure to the u.s. dollar? haidi: always good to chat with you, lorraine. let's get you to vonnie quinn. vonnie: evergrande has come under fire from china post two main exchanges were failing to publish its 2021 earnings. the shanghai stock exchange and jen jen about the biggest stock exchange took this very action by criticizing the major mainland unit of evergrande for the delay. the exchanges said they will notify the chinese securities regular trade commission. a member of the european bank of central governing council says rate hikes have to continue if their latest macro economic outlook remains intact. pablo hernandez also heads up

spain's central bank and says the size of the next move will hinge on incoming data and adds ecb policy will depend on how risk related to the recent financial structure -- a of las vegas stress to realize. >> we are monitoring financial situations from these events and we are ready to respond when necessary to maintain price stability. vonnie: officials have vented to taiwan that they may be willing to put out of turn's belt and road initiative. italy's industry discuss plans to boost cooperation on ship construction and export during private toxin taipei. the italian prime minister has not taken a final position on the matter. new data from the united nations show india as overtaken china as the world's most populous nation. according to the world population dashboard india's

population has slightly surpassed china by 2.9 million people. it adds urgency for prime minister narendra modi to create jobs for millions entering the workforce. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am vonnie quinn. this is bloomberg. haidi: let's take a look at some of the early movers. annabelle: just over 12 minutes into the session for japan, korea, and austria. fairly risk off with the board down .5%. one company or sector we are focusing on it in particular is what we are seeing with tests of supplies given we saw the ev makers missing first quarter profit estimates. that comes down to the martin spread with the ev maker issuing a series of price cuts. these are some of the biggest names that supply in tesla in asia. broadly weaker across the board as we see tesla continuing to slip in after hours trade.

shery: still ahead, our guest joins us. up next, tesla says it will continue to tweak pricing after missing first quarter profit estimates. we break down the numbers for you in just a moment. this is bloomberg. ♪

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seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply. >> we are not trying to take pricing actions in order to deliberately undermine competitors. we do not think about competitors that much. we are the only ones making cars that technically we could sell 40 profit -- sell for zero profit and yield tremendous

economics and the future. shery: elon musk's comments there as we had tesla declining and today it was, also under pressure after missing slightly on earnings estimates. we are talking about profit margins taking a hit with aggressive price cuts. earnings per share of $.85 never the miss estimates. elon musk also talking about it being a high time for tesla to sell cars in more global markets. haidi: as you mentioned, missing the first quarter profit estimates. a series of price cuts, a price war intranet all designed to boost demand. let's bring in our guest who leads asia-pacific's transport coverage. we see the pressure on margins. at the question is whether this effort to upscale demand has really paid off? how do they get to profitability from here? >> i think that is the big

question, because the price stop has been dramatic. if you look at the base price of model three, it is below $3000 in the u.s. for the first time in several years. that has been eating into the company's income. tesla's operating margin is 11.4% in the first quarter down from as high as 19 .2% one year ago. people are inclined to provide automotive or the margin -- growth margin, and that is a very closely watched metric. we had a report of results from wells fargo and an analyst there said automatic growth margins came in at around 19%, but that was below a consensus of 21.8%. investors are beginning to get nervous. shery: our guest earlier was

saying this is the change and shift you need to see from tesla targeting as markets, or volume, scaling up, that investors need to recalibrate here. to get think? >> investors are nervous. the shares were done 6% in late trading in new york. the stock is up 47% so far this year through wednesday's close. and the chief financial of at tesla said on the earnings call it the margin shrinkage we are seeing is not crimped tesla's capital expenditure program. it will be ramping up output, and other executives said the company still boasts some of the best operating margins in the business, and that is true. despite this first quarter slump, tesla's margins are still higher than automakers. in 2022 general motors had an

operating margin of six -- 6.6%. significantly lower than the 11.4% tesla was reporting. as it says it is on track to deliver 1.8 vehicles this year. elon musk said there is possibly a shot at 2 million, and elon musk sought to ease concerns about excess inventory the company has. currently tesla has 18,000 cars he has not sold. he dismissed that saying orders are at casing production. shery: katrina nicholas with the latest on tesla, and of course we have earnings from u.s. banks as well. morgan stanley's bank and wealth unit beating first quarter expectations even as profits fell from a year ago. su keenan as the latest. the ceo said it is nowhere near

the 2008 levels. su: he also warned of more relativity i had, in morgan stanley did squeak by beating, but their net income was 20% lower than one year ago. equity trading revenue was short of expectations. wealth management illness -- business a highlight adding $110 billion in assets. there were some highs and lows, the investment bank was able to stave off a steeper drop as the two k division beat expectations thanks to fixed-income trading and merger advisor fees. morgan stanley shares went on a bit of a wild run as a start down almost 4% intraday before ending with again. i mentioned the fixed income sales coming in above. i went to pick out four of the five biggest banks have come in

bigger than morgan stanley, goldman sachs being the exception. there has been a slump across the board. morgan stanley's provision for credit losses quadrupled from a year ago i merrily do to commercial real estate and the deterioration in the macro economic outlook. haidi: what are some of the themes emerging out of these first quarter numbers? we saw three smaller banks fail. su: and the smaller bank's pain was the big bank of las vegas gains -- big bank's gains. jp morgan saw its net interest income surge 49%, and wells fargo was up 49%. big banks benefit when rates rise. we also heard a lot about uncertainty given the collapse

of those three regional banks. of course, those banks have rebounded a bit, but in the thick of the crisis investors were pulling money out of their and putting them in the big banks, and that offset a lot of things. bank of america was one of those and if this year's, and then we also heard the 11 big banks of the end together to help prop up the ailing lender, first republic in an unusual move assisted by the fbi see and the treasury secretary, some say they were pleased to help out. interestingly at the rate hikes that hurt those small banks were a boon to the big bank's traders. haidi: you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can get that on dayb and available on mobile. customize the settings so you get the news on the industries in assets -- and assets that

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shery: higher borrowing costs as the fed continues to hike rates is really being felt in the corporate bond market. we are watching it closely, because we are seen corporate bonds being cut to junk at fastest pace since 2020, and that is when the pandemic got started. in the first quarter of this year, a total of $11.4 billion of bonds were downgraded to high-yield status, about 60% of 2022's full year total according to research from barclays. we are seeing this for your volume on pace to be the highest in almost more than two years when the pandemic started, and

we had a massive wave of downgrades according to barclays estimates. as i mentioned, that is to do with bahrain because rising across the board and corporations seeing their bond ratings go to junk and facing an extra boost in funding as well. haidi: it is perhaps no surprise we are watching for any further red flags when it comes to the corporate bond market. here is when we have not spotted since 2007. it is being called an exhausted carry trade the could spark a correction. the tidal wave could be coming for the biggest portion of the $10 trillion market for corporate bonds. td securities said banks will restrict appetite for high-quality credit, and that could lead to a spike in the premiums. at the heart of that issue are shrinking yields on investment grade bonds relative to effectively the federal funds rate, a proxy for funding cause.

this scary spread sitting at levels we have only seen twice before over the past 27 years. at last time was back in 2007, so that means even i quality corporate bonds might look cheap . market values have plummeted over the lesser. at the higher cost of funding means we could still see the big move for us in spreads. move (announcer)preads. enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo.

shery: dutch chipmaker asml is under pressure after orders fell in the first quarter, raising concerns about its long-term outlook. order bookings during the period were down 46% year on year as its biggest customer tsmc missed sales estimates. shares fell as much as 4.9% on

wednesday in amsterdam, even though the company reported better-than-expected revenue and profits for three months in march. asml still says it has a backlog worth more than $42 billion. haidi: we are getting breaking news when it comes to the response from the rba. we have been responding to the government review of the central bank. the response we are seeing from the rba, the governor welcoming the review panel's support for the framework, really recommending the establishment of separate boards for monetary policy and the governments of the bank. in terms of going through the reviews, the governors saying the panel rightly acknowledged substantial contributions the bank is made to australia's economic success, saying the recommended changes will build on that strong foundation and strengthen the bank's governance and decision-making processes.

we will be hearing more from the relative players at the media conference being held midday today. we are expecting to hear from phil lowe saying the board will consider these issues in the coming meetings at work to develop and implement a new set of these arrangements and saying they will be working constructively with the government, with the treasurer on the conduct of monetary policy given the light of all of these changes here. phil lowe saying this will help the rba deal with the complex world. we will be getting more on that as it is a breaking story, but in the meantime we are in the thick of earnings including teammate was chipmakers. tsmc is supposed to to release a weak quarter. it recently missiles were estimates when it comes to the second consecutive quarter, suggesting the slump in the chip industry has yet to player.

let's bring in the senior vp of equity research at wedbush. thanks for sticking with us as we got through that breaking news. you said the foundries have set a low set of expectations. are they love enough, and that is that with them in a of actively good ways when it comes to managing these investor's expectations? >> i think that is really true. we might see a weaker dive than what we saw before in the sense that they talked about still being able to grow this year. i think at this point, that may be a difficult bar for them to hit, but having said that in a difficult environment, i still expected them to outperform the broader semi conductor industry, and the foundries in general were already talking about sales

being done slightly, which is not necessarily the case for some of their customers. i think they have given themselves an easier target, and if you see any misses they are likely to be less significant than some of the other players. haidi: where do you see the cyclical upside as we get through the trenches of the demand side issues? is the assumption that we do get in a lot of these economies demand destruction with potential recession? where do you see the improvement here? >> i think that there are two things that are struggling with right now. one is a demand destruction. we certainly have seen across a number of markets whether it is cloud companies buying ip equipment, and sentiment,

expectations get lower. their customers have been reducing inventories as we have seen demand destruction. i think from the inventory side of things, we are starting to see inventories normalize. with handsets for instance, things have normalize. pcs will hopefully get there in q2. but i do think we are going to get a better back off, because inventories are not coming off anymore, and i do think once we get into the back of into 2024, you start to see better demand dynamics. chinese handsets have been terrible. they just cannot be this bad for forever, and it is the single largest market for foundries, so

that has to get better. you have new technology, whether it is ev's, self-driving, or ai and data center, i think those will drive incremental demand, and tsmc is a huge beneficiary because they are the only company producing those chips. shery: they have the effective monopoly at the height of the market, so is it surprising that the soft demand is a link heavily on tsmc, and what are you forecasting for the company given as you say they are the big player there? >> i have cut my estimates for this year to flat, so i am a bit more below the company. having said that, what i am valuing 14 times next year's earnings, but traditionally that has been about in line with where it is traded.

when you look at time one semi, -- taiwan semi, they are in a better place than where they were historically. they have better growth margins. when you look at the end markets, there is an argument to be made that once we get out of the economic downturn semi conductor demand will be faster than historically, because you have all of these new technologies driving the need for technology. i would argue my lower numbers, if anything multiple right now is too low because we are in a better place for tsmc then where it was historically. shery: what pricing help going forward? >> it is helping this year. i do not think we will see a repeat of what we saw in 2021-2022 where foundries were able to raise pricing across

nodes, but i do think it is really hard to get those advanced nodes to work, and tsmc will see its benefit as customers continue to migrate toward more advanced nodes. this year i think they have got a mid-single digit bump. next year i do not think to get that type of pump, but i do think they benefit from a shift toward more advanced nodes where they are to make a premium because they are the only company supplying the technology at this point. haidi: great to have you with us, senior vp of equity research at wedbush ahead of these numbers from semi conductors. we continue to watch the rba as we get the reaction from the rba to the government's review of the australian central bank. we are hearing the rba governor making these comments is saying

they will develop a plan to add a chief operating officer to improve communications to implement changes in the best way. they are talking about mulling recommendations on how the board works in the coming meetings and ability to review of the central bank will deal with an increasingly complex world. really any agreement with the point of the review, saying they will work constructively toward a separate board proposal. the rba calling for the expert policy panel as well as fewer meetings down from 11 to 8 and a number of legislative changes beginning in july 2024. at the press conference is key with a recommendation that they do press conferences post monetary policy setting things to more adequately explain the decision for being taken, so we've continued to watch that top story. there are a number of press conferences taking place today, including one with the treasurer and phil lowe as well. let's get you to vonnie quinn.

vonnie: the fed it was because facebook says the u.s. economy stalled in recent weeks with hiring and inflation slowing, and access to credit during. at the latest report remarks a step down from the previous one published in early march just before silicon valley bank's family. at the beige book likely reinforces expectations the fed will pause rate hikes following an increase at the next meeting. the bank of japan is said to be wary of tweaking or scrubbing it sealed control stimulus due to the recent turmoil in the banking sector overseas. sources say official see a need to keep their cap on government bond yields to support the economy. boj hold its policy meeting next week, the first under the new governor. thailand's opposition party move forward is urging an opinion polls ahead of next month las vegas election. the groups as they want to reclaim to military back to role -- rule. it will introduce sweeping

reforms to revitalize asia-pacific a second largest economy. >> what we need to do is three things. demilitarized, demonopolize, and decentralize. vonnie: this is bloomberg. -- global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: catl just to develop its most powerful area that it claims can one day our electric planes. details are next. this is bloomberg. ♪

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annabelle: we are just 45 minutes into the session for japan, korea, and australia, and you can see here looking across the asset landscape, we are looking range bound, not seeing any major moves. trading volumes are looking thin in the session. a lot for investors to consider this morning, including it is lines of from fed officials and the new york president saying there is still a need to print on inflation, and he is looking at tightening credit conditions in particular. the big question is how much of the fed's work will do for it. in terms of what we're watching

in particular, a lot of the action in new zealand this morning because we had inflation data selling, coming in at 6.7%. off that we are seeing the two year yield of flipping into negative territory under the kiwi dollar trading around of one month low the greenback with the signal the rbnz will not need to be quite as aggressive moving forward. equities picture is a little lower this morning. as low one of the key movers we are watching after hours given one of the numbers that came through. speaking of ev's, let's change up now, because we do still see the kospi nearing a technical bull market. what is driving part of that story as by the activity from traders who are piling into any stocks linked to the eb sector in particular, and you can see off of that there has been a bit of confusion and debate amongst investors whether we are looking at a bubble market or not. we have seen shortselling

turnover hitting a record in the month of april. one of the most sordid soft is a korean steelmaker posco. we will see bets hitting a deck at high as the stock has risen 50%. what investors like is collecting a business, a key ingredient for ev batteries. shery: let's talk about those batteries, because china catl on develop the strongest federated eight saying it can one day be used to power electric aircraft. this comes as the company is expected to report strong first revenue growth. let's bring in our guest. let's get started with electric planes, because that would be a game changer. how soon are we expecting this? is this even feasible? >> no one is really sure yet. catl justin nancy's new

batteries yesterday. what they are saying is through a mix of new materials, they can create these microscopic chemical nets within the batteries that can let lithium ions to back and forth faster without compromising safety, and that allows them to deliver more energy into a smaller package, which is important for something like an airplane where weight is a key factor. catl said they will be able to start mass-producing batteries using this technology this year but at a lower level for ev's. there is a working with companies right now to develop this electric aircraft. there is no timetable. they are not saying who they are working with on it, but the fact that they wanted tim make a big announcement at the auto show has analyst saying it is a positive sign that they have a lot of faith in this technology. haidi: what kind of other applications are we expecting this could be used in court if

more -- used in? >> that is one of the big questions we have. obviously if you produce a better rate strong enough to lift an airplane on the ground, that can make market improvements in the race for cars. one of the things we do not know about is because. right now ev's are getting good mileage. an suv announced it could get up to 1000 kilometers on existing batteries, so depending on how much this cost it is unclear whether it will break through into the eb industry in a real way or if it will be a niche product until the electric aircraft of business can gain steam. shery: what are we expecting from earnings results? >> people are expecting possibly up to 860% jump in revenue. ev demand has been great, and lithium carbon prices has been

falling along with other material prices. analysts are pretty bullish on their first quarter earnings coming out later on thursday. haidi: dan murtaugh there now. have a grandest come under fire for failing to publish its 2021 earnings. let's bring in our bloomberg intelligence analyst. what is hindering evergrande from being able to release these results? >> right, so obviously it will take time, because evergrande just changed its listing in january for its three on-call units and in april it changed its onshore unit, but i think at bigger issue for evergrande is potentially the problem in these reports. there are red flags from debts and the deposit plans between evergrande and its two

subsidiaries, and these are issues that would require further investigation into transparency and potential corporate governance issues. shery: what are the implications then for its corporate debt restructuring? >> we are concerned about the risk of delisting from the hong kong stock exchange for its shares by december -- september of this year. it shares will become unlisted and not treatable, and at that point it might be pointless to talk about any debt to equity swap in this restructuring proposal, and that is one of the potential concerns of creditors. shery: kristy with the latest. we have more to come on "dayb reak." this is bloomberg. ♪

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build up a new health care and technology banking practice. hsbc said proposals this week for a minority listing of its asia businesses would destroy shareholder value and demean lower dividends. at the bank rejected the suggestion of a partial listing of its asian unit rate hsbc describe the plans as a financial engineering approach that misunderstood the company. loreal sales have risen more than expected with the cosmetics maker reporting strong demand across most regions and business divisions. sales in the first quarter gained 13%, while analyst had expected a gain of 8.1%. north asia is the only ration to drought market estimates it supply constraints. haidi: alibaba's growth rate is set for an ipo and hong kong.

it is working with several banks to prepare the first time shares sale of the units. let's bring in our guest. should we be more excited about this i feel it then at the logistics and cloud listings that were reported earlier? >> i am definitely more excited about this than logistics, because this is a unique business, and there is the high-tech element behind this supermarket business. it has been doing very well since covid relative to peers. i think this is one to market will definitely be excited about. shery: what about some other ipos or spinoffs from alibaba? who could come next. -- next? >> we have had it from logistics, cloud, now we have the supermarket chain, not

forgetting we still have the global digital site, which includes southeast asian and european platforms. we will hear some rumblings about potential fundraising exercises as they prepare for spinoffs or external fundraising's. shery: catherine lim joining us from singapore with the latest on alibaba. look at how asian markets are trading at the moment. we are seeing the nikkei losing .2 of 1%. topix is also down as much as the japanese yen holds about 134 level against the u.s. dollar. it has been trading within a new arrangement still weaker than the previous week. kospi losing .3 of 1%, this coming after we sought those gains earlier in the week. the korean won had arisen for

the first time in three sessions, but we are seeing downside pressure as the u.s. dollar has shrunk. treasury yields gained ground, and we had investors digesting the proposal to lift the u.s. debt seeing -- debt ceiling. we have been watching everything happening in austria given the review of the central bank. haidi: and watching the dynamics, trading between aussie assets and kiwi assets given that we had softer inflation signaling from new zealand. at this is what we're watching when it comes to fx, the yen is in focus given that there are expectations, bloomberg same the boj will go gently into the meeting. there are concerns of lingering impacts of the overseas banking turmoil, and that is going to create hesitancy when it comes

to mess around with ycc at this point. we are seeing a little bit of movement when it comes to dollar-yen at the moment, also watching the kiwi dollar on the softer inflation or suggesting price pressures have peaked, and of course we are watching the aussie dollar given that we are setting up from press conferences from both the governor and the treasurer. this is bloomberg. ♪

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